2020 is likely to see significant regulatory and legal changes in the technology, media and telecommunications industries.
These are some of the issues we think general counsel should be following this year.
- Regulators to ask 'Why not litigate?' - The impact of the Banking Royal Commission will continue to be felt, with regulators such as the ACCC, ACMA and OAIC less likely to accept negotiated outcomes in the context of regulatory breaches in line with ASIC's shift in approach. Penalties for regulatory breaches are also increasing. Last year, penalties for breach of the Australian Consumer Law increased substantially (to A$10 million, three times the value of the benefit received, or 10 percent of annual turnover in the preceding 12 months per contravention), and this year the Commonwealth Government will legislate to mirror these penalties for breach of the Privacy Act. The ACCC is also likely to take enforcement action for privacy related breaches where it thinks it can establish a breach of the Australian Consumer Law.
- Ongoing regulatory scrutiny following the Digital Platforms Inquiry - Digital platform operators will need to get used to ongoing scrutiny from the ACCC following the establishment of a dedicated digital platforms branch. Revenue sharing with media organisations is also on the cards for the digital platforms in 2020. They have been directed to negotiate a voluntary code of conduct with media organisations addressing the use of media content on their platforms or face an ACCC designed mandatory code if sufficient progress is not made in the negotiations by November 2020.
The Australian Government has also empowered the ACCC, ACMA and a number of other bodies to conduct a raft of new reviews and undertake further work relating to digital platforms including an inquiry into adtech markets, harmonisation of regulation between free-to-air television and streaming services and measures addressing disinformation and news quality on digital platforms.
- Harmonisation of privacy laws globally - We appear to be slowly moving toward a harmonisation of global privacy laws. This year, the Australian Government will consider recommendations made by the ACCC to align Australian privacy laws with the EU's General Data Protection Regulation (GDPR). Separately, the Government has announced that it will work to implement a direct right of action for individuals for interference with privacy – similar to the GDPR. Other jurisdictions are also playing catch up with the EU and, in some cases, going further. The new California Consumer Privacy Act creates a right for consumers to know when their personal information is sold or disclosed and to whom, as well as a right for consumers to opt out of the sale of their information to third parties. While this harmonisation takes place, online businesses will have to continue to comply with multiple, conflicting national privacy regimes.
- Consumer Data Right to disrupt the banking industry - The Consumer Data Right (CDR) will apply to the banking industry from July 2020. This will give FinTechs access to consumer data held by the 'Big 4' banks and may drive greater competition. However, experience from the UK suggests that the take up rate by consumers may be slower than hoped for.
The Australian Government will continue to consult with the energy industry regarding the application of the CDR to that sector, and consultations with the telecommunications industry are expected to commence shortly. In addition, the Treasurer may seek to apply the CDR regime to other industries if he considers that access to consumer data will improve competition. There is speculation this could include superannuation, insurance and healthcare sectors.
- Ongoing scrutiny of the FinTech sector - A new Senate Committee will conduct hearings on the FinTech and RegTech sector with a focus on growing the emerging industry in Australia and on the key regulatory priorities for the sector, including the adequacy of R&D tax incentives and the accessibility of the New Payments Platform.
Separately, we expect further action in the regulation of the Buy Now, Pay Later (BNPL) sector. The Government will shortly respond to a 2019 Senate inquiry which recommended changes to the National Consumer Credit Protection Act to cover novel, credit-like products. This may require some BNPL providers to comply with responsible lending obligations such as loan suitability assessments. 2020 will also see the outcome of the RBA review into a 'no-surcharge rule' imposed by BNPL providers that prevents merchants from levying a surcharge on the customer to recover merchant fees charged by BNPL providers.
- Will Australia join the global AI 'arms race'? - Australia is arguably lagging behind other comparable nations in terms of AI software development. This could result in a lost opportunity to grow a new sector and improve national productivity. A lack of investment in AI research is a chief concern. Strikingly, the French Government currently spends 500 times more than Australia on AI research while its economy is only twice the size of ours. There are other impediments. We are hindered by a shortage in AI-skilled professionals and a lack of access to 'big data'. Australian businesses don't tend to have access to the types of deep data sets usually held by global digital platforms and technology companies. This means that Australian businesses will need to enter into data sharing arrangements to obtain the benefits that AI offers.
- Protecting human rights as technology evolves - There is increasing concern from governments and human rights organisations about the impact that technology is having on individual rights. In particular, the potential for AI to unlawfully discriminate, influence human decision-making in ways that are not transparent, cloud institutional accountability and invade privacy. There are a number of global and local processes underway to define ethical frameworks for AI. In the long term, these frameworks may form the basis for prescriptive regulation, but for now they tend to be confined to high level statements of principle. In 2019 the OECD released its Principles on AI. In 2020, the Australian Human Rights Commission will conduct an inquiry into the relationship between individual rights and technology, with a particular focus on AI. Technology companies are well advised to engage in the processes to develop these frameworks and public reports to ensure that any future regulation of AI is workable.
- Data will be a key issue in M&A transactions - Buyers are attributing increasing value to the data assets of businesses, including in the context of deals where the targets have not traditionally been seen as technology or data services businesses. Prospective buyers will need to spend more time focussed on data due diligence. This includes ensuring that consumer data sets have been compiled in accordance with privacy laws, ensuring the adequacy of the target's cyber security framework, as well as exploring the unrealised commercial value that the data may have.
From a regulatory perspective, the ACCC is concerned about the potential adverse impacts upon competition of mergers involving data rich businesses. The ACCC recommended in its DPI Final Report that competition laws be amended to require the express consideration of the data and technology assets in merger analysis. For foreign purchases of Australian businesses, the Foreign Investment Review Board has indicated that it considers sensitive data as 'critical infrastructure' and will closely review the data aspects of foreign acquisitions.
- 5G mobile networks to enable the Internet of Things - 5G network deployments will accelerate this year enabling the long awaited benefits of the internet of things (IoT) to be realised. IoT will affect all industries, but is predicted to be particularly impactful in industrial tech, the healthcare sector, the resource industry and in the development of autonomous vehicles and associated infrastructure. This presents new risks. The introduction of these devices into mobile telecommunications networks increases the attack surface and will need to be managed carefully from a security perspective. Telecommunications companies will need to be mindful of their obligations under the Telecommunications Sector Security Reforms (TSSR) to protect their networks from attack in this new environment. We also expect to see more regulation of IoT devices. Already, the Department of Home Affairs has released a Code of Practice: 'Securing the Internet of Things for Consumers'.
- Agile software development methodologies continue to gain favour - Agile methodologies will continue to be favoured over Waterfall methodology in software development, allowing developers to respond to changing business priorities and market environments. When done well, Agile helps businesses bring products to market faster and with lower risk.
While there are benefits, the use of Agile presents legal challenges, particularly where an Agile project is outsourced to a service provider. Many service providers are reluctant to accept accountability for Agile development projects given that the detailed user requirements are not known at the start of the project. This can mean that customers are left with no legal recourse where the project fails. Lawyers involved in these projects will need to build appropriate risk allocation mechanisms into their contracts.
- Global consensus on a digital tax? - Discussions on whether old taxation models which focus on taxing profits generated in a jurisdiction are still relevant in the digital age will continue in 2020. Many developed counties, including Australia, have started advocating for a global approach to taxing technology companies to rebalance tax rights and allocation rules to the source of revenue. Reaching a global consensus in the short term is unlikely, increasing the risk of the imposition of unilateral digital services taxes and retaliatory actions.
Significantly, France has already considered imposing a levy on revenue of global tech companies, but backed down after the US announced it would respond by imposing tariffs on French imports. The US doesn't support a global approach since cuts to its corporate tax rate and pressure from the Trump Administration has resulted in tech companies being more likely to recognise profits in the US.
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