A new Antitrust paradigm in view of the digital economy

I’ve had the opportunity to watch a debate held by the Competition Policy International on antitrust and the digital economy where knowledgeable people took part.

It provided me with a clear picture on the most relevant points that are currently under “hot” discussion:

1.- Paradigm change: The need for a quick intervention

There was no substantial disagreement on the need for a quicker intervention in the market by competition authorities. I believe all participants in the discussion are well aware of the possibility that digital markets may “tip” in favor of one specific undertaken and that it is understandable that antitrust bodies should intervene to make sure that such tipping only occurs because of its own merits.

The Catalan Competition Authority just submitted a feedback on the consultation regarding a “new complementary tool to strengthen competition enforcement” issued by the European Commission pointing out that in fact the discipline requires not just a new tool but a paradigm change in the sense that competition authorities should intervene to guarantee the markets well functioning (not to prove a theory of harm to consumers/users).

2.- When and how to intervene

While the need of a quick intervention is assumed, there is quite strong disagreement as to when and how to intervene.

2.1. When to intervene

The basis for the intervention is mainly associated with barriers to entry in terms of data (even though there could be others such as “ avoiding self-preferential behaviors” by gatekeepers).

However, both representatives from Facebook and Google considered that this basis should be revisited since (i) data accumulation is not a good prediction in terms of market success — and so its relevance is dubious — and (ii) data is “only” an ingredient but to have a good meal a good recipe is also key.

(i) On the contrary, some may think that data accumulation from different sources (wide data scope) is significant since it makes it possible to extract valuable information from that process and that an evidence of such value is that many terms and conditions include precisely the combination of data from different sources.

(ii) As per being an ingredient, while certainly data is by itself not enough for providing a good service (it requires significant capacity to process data and many times the application of AI) if it is an essential ingredient for a meal, to allow competition in such meals it is also indispensable to grant that potential competitors may have access to such ingredient. It is also noticeable that this “ingredient” is quite particular as frequently loses part of its value as times go by so access should be granted timely and to undertakings active in different markets since its value is no market specific (oblique). It should neither be forgotten that control over data should remain in the hands of users. To that end, I find particularly interesting the possibilities that provide the Personal information management systems.

2.2. How to intervene

But even if the intervention may be sometimes needed it is not exempt from negative effects that put the competition authorities before a dilemma (“Trade off”). To be more specific even less aggressive interventions (such as making some services fully interoperable) may also imply introducing some homogeneity in the market, which will negatively affect variety.

And interoperability may also erode the merits of undertakings: For example, if an antitrust authority was to impose interoperability among all social networks (facebook and similar) so that when a user looks for a friend such query is launched towards all such social networks irrespective of which social network the user is associated with, it may erode the merits of having been able to have a big number of users.

Besides, there is no a “fits all” intervention as it has to be very much dependan on every single undertaken as it has to take into consideration its business model (different business models create different risks and so require a specific intervention). I must admit that I believe that regulation should not be specific but just provide the possibility of an intervention by antitrust authorities and they should assess when and how to implement such tool.

All in all, even when the intervention is “needed” (in the examples mentioned to break networks effects that may become unavoidable barriers to entry) and being “soft” (interoperability) it presents a significant complexity.

Perhaps the best approach would even be an evolving remedy over time. A couple of years ago I published a short paper on the need for a “Modern Regulation” (a regulation that should be responsive to the subject, the location and the time). The same applies for interventions.

In fact, interventions against Covid-19 are very much what I believe should be made in relation to all interventions (changing over time, location dependan and also dependan on the person -whether you have been in close contact or not with one person with the virus-).

3.- What’s next

• A wider consent on the need for a new antitrust approach that will lead to more intervention.
• Relevant studies intended at solving the main questions that still remain unsolved in relation to such interventions.

The CMA , to me the best antitrust authority worldwide (even though the Bundeskartellamt also deserves a mention for their “facebook case”), not only has issued their final report on Online platforms and digital advertising , but Mr. Thornton already announced that his Unit will be working on another study on digital platforms not based on digital advertising (for example, Apple, Amazon, etc).

• New administration structures and, hopefully, with all necessary human and material resources.

It is crucial that antitrust bodies start working hand in hand with data protection authorities so that they all take a better approach towards the digital economy.

Mr. Buttarelli, who was a visionary, set out the Digital Clearinghouse more than 3 years ago (the Catalan Competition Authority being a member from the outset). And, should there be a new digital authority, it would be advisable to include them in the Digital Clearinghouse. It is time to stop working in silos.

It is also of upmost importance that these administrative bodies are well equipped and so the ECN+ Directive is effectively implemented.

• New regulation.

There is no doubt that the Digital Service Act Package consultation aims at introducing new and relevant regulation in relation to the digital scenario.

Also I expect the regulation will be updated in a double sense: (a) to regulate a new -digital- reality (changing the notion of permanent establishment -tax-, breaking up the supposed correlation between monetary expenditure and procurement relevance, considering self-employed more a flexible employer rather than an undertaken, etc.) and (b) to take the benefit of the possibilities that the AI brings to pass “modern regulation” as already mentioned.

Happy (and safe) holidays everyone; we will need to rest as it seems we will all have to swim.

“Come gather ‘round people Wherever you roam And admit that the waters Around you have grown And accept it that soon Or you’ll be drenched to the bone If your time to you Is worth savin’ Then you better start swimmin’ Or you’ll sink like a stone For the times they are a-changin’.”

The Times They Are A-Changin’. Bob Dylan1 . 13 January 1964

This excerpt was used to introduce the paper issued by the Catalan Competition Authority “The Data-Driven Economy. Challenges for competition” nearly 4 years ago.

Disclaimer: all opinions expressed in this article are personal. I work by the Catalan Competition Authority but this text does not imply any position by such antitrust body.