DesigninganEUInterventionStandardforDigitalPlatforms:BriefComments

CERRE,4March2020

AmeliaFletcherCentreforCompetitionPolicy,UEADigitalCompetitionExpertPanel

Disclaimer:ThesearenotnecessarilytheviewsofanyorganisationwithwhichIamassociated!

Introduction

v Thispaperentersacrowdedlandscape,andindeedprovidesausefullistofrecentpapers:

Ø fromUK,EuropeanCommission,Stigler CenterinUS;andalsoBenelux,Germany,Italy,Netherlands,Portugal,Australia,JapanandUNCTAD.

v Initialreflections:Reallygoodtohaveareportthat:

Ø ismorelegallyfocussed,providing(ascomprehensiveaspossible)legalsupportforviews.

Ø bringsdebateuptodate,withgreatsummaryofkeycaseprecedents/policydevelopments

Ø supportssomeearlierrecommendations,whileintroducingsomenewideas

v Reminderofkeyissue:Weseeseveral platformmarkets:

Ø Whichhave’tipped’tobeinghighlyconcentrated,havecreatedbottleneckpower

Ø Wherethismarketpower hasbeen(orrisksbeing)extendedintorelatedmarkets,andinsomecasescreatingecosystemsoflinkedmarkets

Ø Andthatthisisseeminglylong-term. (‘Creativedestruction’processcan’tbereliedon)

Muchagreementthatdialneedsresetting,buthow?

v UKReportconcludedthatstandardcompetitionlawdoeshaveakeyroletoplay,butthatthisisnotenough.Twomainreasons:

Ø First,some keydriversareinherentintheeconomicsofthesemarkets(Networkeffects,economiesofscaleandscope,androlesofdataandconsumerbiases.Seenelsewherebuttheconfluenceandstrengthofthemindigitalisdifferent).

Ø Thismeancouldseetipping/leverageevenwithoutany’strategic’ firmbehaviourwhichwemightnormallyconsideracontraventionofantitrustlaw.Assuch,weneedtobemoreproactivetopromotecompetitionthanstandardantitrust.

Ø Second,concernsthatexpostantitrust enforcement

Ø takestoolong,toobackwardlookingandtoonarrowlyfocussed

Ø toprovideaneffectiveforward-lookingframeworkforcompetition,evenallowingfordeterrenceeffects,inthesefastmoving&highlytippymarkets,givencomplexityofthesemarketsandpatchworkofdifferentissuesarising.

UKrecommendationfora’DigitalMarketsUnit’– notold-styleutilitybutpro-competitive- withthreekeyobjectives

v Acodeofconductfordesignated‘StrategicMarketStatus’platforms.Codewoulddifferacrossmarkets,giventheirsomewhatdifferentissues,butbasedonafewover-archingcoreprinciples.

Ø [Participativedevelopmentrequired,andcontinuousrevisitingtoensureflexibility.]

Thentwodatarelated.[NBNotingthatdatanotrivalrousinuse,designedtolimitmonopolisationofdata,toenablecompetitiononotherdimensions.]

v Promotionof datamobilityandinteroperability,viaopenstandards, tofacilitate switchingandmulti-homing. Why?

v Promotionof ‘dataopenness’– accesstodatawherethisisrequiredto’train’theAIunderlyingnewandcompetingdigitalproducts,soallowingnewcompetitionandinnovationtoemerge.Obviouslyprotectingprivacy.

NBNottopreventecosystemsbuttopromotecompetitionacross andwithin ecosystems.

EC-commissionedreport(Crémeretal,2019)

v Greaterfocusonwhatcanbedoneunderexistingcompetitionlaw,including:

Ø Allowingfordominancetobefoundatbelow40%marketshareifintermediationpower

Ø Reversingburdenofproofinsomecases,basedonanerror-costframework,tomakeenforcementquickerandeasier.(Self-preferencing”isdiscussedasapossibleexample).

v ECReportdoesnotrecommendthecreationofanexanteregulator,but does suggestacoupleofdutiesthatarguablycomeveryclosetoexanteregulation:

Ø aresponsibilityfordominantplatformstoensuretheirrulesdonotimpedefree,undistortedandvigorouscompetitionamongstplatformuserswithoutobjectivejustification;and

Ø adutyondominantplatformstoensureinteroperability.

v It does recognisethatongoingdataaccessislikelytorequiresector-specificregulation.

v It does recognisethatregulationmaybeneededinthelongerrunwheresimilarissuesarisecontinuouslyandongoinginterventionisneeded.

CERREReport:Somesupportforearlierrecommendations

v Needforgreaterfocusonproblematicdigitalpractices,suchasbundling/envelopmentstrategies,refusaltograntaccess,discrimination/self-preferencing.(CfEC/US)

v PrinciplesforinterventionshouldbebasedonassessmentofTypeI/TypeIIerrorrisk(cfEC/US).

Ø Eg:Refusaltosupplydata shouldfacealowerthresholdthanstandardRTS.(CfEC)

v Standardcompetitionlawdoeshaveakeyroletoplay,butthereisalsoalikelyneedforexanteregulation.’Bottleneckpower’maybeusefulintargetingthis.(cfUK/US– andtosomeextentEC).

v Exante regulationmostlikelytobeneededinrelationtointeroperability,datamobility,dataaccess.(cfUK/US– andtosomeextentEC)

v Dominancemaybefoundwherefirst2proposedcriteriahold.Thatis:

Ø Where(i)marketsarehighlyconcentratedandnon-contestableand(ii)platformsare‘digitalgatekeepers‘whichactasunavoidabletradingpartners.(cfEC– proposesdominancemaybefoundbelow40%shareonbasisof‘intermediationpower’)

CERREReport:Introducingsomenewideas

v Renewedemphasison‘specialresponsibility’,includingthisbeingstrongerfor‘super-dominant’firms.(Cf.UKReportreferencetooldEUdominance-basedmergertest)

v Marketdefinitiontoberetained,butmarketpowertobeassessedbyreferencetoconglomerateeffectsinlinkedmarkets(alittlelikeGermany’UPS’test)

v Potentialforcompetitionassessmentonbasisof‘innovationcapabilities’suchasdata,computingpower,skills,patientcapital(whereinimitable,rare,valuableandnon-substitutable).

v Poorcompliancewithnormativeregulationcouldconstituteabuse.(Interesting.ReP2B?).

v NewA102guidanceneeded(cfNBUKproposalforrewriteofMergerAssessmentGuidelines).

v Agnosticoninstitutions,butDGCompetitionwell-positioned,withadditionalpowers(CfUK/US)

v Inparticular,(asalternativetospecificdigitalregulation),DGCompetitioncouldbegivenUK-likemarketinvestigationpower,withanabilitytoimposebehaviouralremedies.

v Alsosupportparticipatoryremedydesign.(cfUK,whichalsorecommendspowertoimpose)

CERREReport:Othercomments

v Reportdoesopposesomeearlierrecommendations:

Ø Noneedforchangeinburden/legalstandards(includinginterimmeasures).(CfEC/US)

Ø Regulatorythresholdtestshouldbeonerous,likeSMP.(CfUK)

v AfewareaswhereCERREReportnotasclearasmightbe(atleasttothiseconomist):

Ø Unclearaboutdistinctionbetweengreateruseof‘specialresponsibility’andreversingburdensofproof.(Also,aredigitalplatformstobetreateddifferently?)

Ø UnclearaboutimplicationsofgivinggreaterweighttoTypeI/TypeIIerrors(beyondSRandrefusaltosupplydata)

Ø Howdoesspecialresponsibilityfitwith‘competitiononthemerits’andtheAECtest?

Ø HowwouldCriteria3applywhereeffectivenessofcompetitionlawislimitedbytimeliness/narrowness/retrospectiveness/remedymonitoring,notapplicability?(CfUK)

Finalthoughts

v Overall,though,thisisareallynicecontribution,whichprovidesavaluablereferencepoint,buildsonpastreportsandtakesthedebateforwardveryusefully.

v UKReporthighlightedneedforaglobaldiscussionaroundtheseissues,andforactiontobecoordinatedonastrans-nationalabasisaspossible.

Ø CERREandthisreportcanclearlycontribute

Ø ItwillbeveryinterestingtoseetheforthcomingEUconsultationonits“DigitalServicesAct”.

v Ialsolookforwardtotherestofthisafternoon’sdiscussion.

DesigninganEUInterventionStandardforDigitalPlatforms:BriefComments

CERRE,4March2020

AmeliaFletcherCentreforCompetitionPolicy,UEADigitalCompetitionExpertPanel

Disclaimer:ThesearenotnecessarilytheviewsofanyorganisationwithwhichIamassociated!