Product rankings on marketplace websites run by the likes of Amazon, eBay and Kogan are the latest focus of the consumer watchdog's scrutiny of online algorithms.
The Australian Competition and Consumer Commission is considering whether Australia needs new regulations for digital marketplaces and other platforms.
It has been increasingly concerned about algorithms used by digital platforms and recently secured tens of millions of dollars in penalties against travel site Trivago and rideshare and food delivery app Uber.
Digital marketplaces provide an easy way for sellers to reach potential buyers. However, there are concerns algorithms that rank products could impact consumer choice and the third-party sellers who list their products online, ACCC chair Gina Cass-Gottlieb said on Thursday.
"They should explain to consumers and sellers why their search functions and other tools promote some products over others," she said.
Sites like Gumtree and Facebook Marketplace function like newspaper classifieds and facilitate private sellers dealing mainly in second-hand items.
Websites like Kogan, Catch and Amazon operate hybrid marketplaces, selling products themselves as well as allowing other sellers to list their own items.
This means they could have a conflict of interest and potentially give an advantage to their own products over those from other sellers, Ms Cass-Gottlieb said.
An eBay Australia spokesman told AAP the company shared the ACCC's concerns about hybrid marketplaces potentially leveraging data to preference their own products.
The company submitted these concerns to the ACCC during the inquiry, but does not engage in the practice itself as it is purely a third-party online marketplace that partners with the businesses that sell on its site.
Internationally, Amazon has been accused of ranking its private or exclusive brand versions above the products they copy.
Offers featured on Amazon in Australia are determined by what it thinks customers will prefer, regardless of whether it is sold by Amazon or a seller partner, the company said.
"The vast majority of customers who take the time to compare all of the non-featured offers ultimately select the offer we've featured on the product page, which confirms that we're doing a good job predicting what customers want," Amazon Australia public policy director Michael Cooley told AAP.
Sellers are also given data and analytics tools including the number of customers who view their products and their conversion rate.
The ACCC notes there is no dominant online marketplace in Australia but there is potential the market could tip in favour of one in the future, which would concern the consumer watchdog if it reduces competition.
All online marketplaces are growing compared to traditional retailers that operate online.
Amazon is growing the fastest, almost doubling its sales in the previous financial year.
Catch and Kogan have also been contacted for comment.
