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Shaping competition policy or regulating the digital economy?

 

The 17th of January we attended the conference organized by Commissioner Vestager -“Shaping competition policy in the era of digitisation”. A significant representation of the European competition community was present at what was supposed to be the kick-off event of a reflection exercise on how competition policy should be applied to the digital world[1]

The scope of the discussions extended well beyond the field of competition law, including all challenges that digitalization is bringing to the economy and society. It is likely that what we actually heard is Commissioner Vestager’s vision, or even European Commission’s vision of the future regulatory environment for the digital economy in Europe.  It is noteworthy that most of the speakers were academics and the technology industry was totally absent at this conference.  In summary, businesses need to be prepared for a much more interventionist stance in Europe on digital issues going forward. 

Whilst there were many issues mentioned at the conference, three main lines of action emerged: refreshing competition law to deal with those issues having a competitive impact, reinforcing data protection laws and a third more fluid category of other issues related to the use of data by firms, which clouded the other two and is not easily assigned to either of the other two categories. This final amorphous category included all issues related to the users’ trust of digital firms, the manipulation of users and their preferences online, the lack of awareness on how data about users is treated, the ethics around AI, etc etc…

Regarding competition law, there was too much discussion on the challenges and very little on the solutions. Only the noted Nobel Laureate Professor Tirole tried to explain in a more structured manner the economic nature of those challenges and proposed a new framework, of “participative antitrust”, some recommendations for an adequate “industrial policy” and several changes in the application of competition law (such as improving processes and promoting innovation at the institutional level). However, as others did, Professor Tirole ended up talking about “industrial policy”, without being very clear on whether this policy should be just about competition law or whether it should include ex ante regulation as well

The diagnosis of the main challenges was shared by all the speakers. The challenges included data monopolisation; gatekeeping role of platforms; blocking of innovation paths; data as the bottleneck for AI, Internet is not giving autonomy to users, but it is controlled by gatekeepers (digital assistant will exacerbate this); asymmetry of information; exclusion of closed ecosystems; tipping; anticompetitive mergers; very strong network effects; impact of default settings or addictive clicking; "state-like" power of dominant platforms: regulatory power defining T&C, discriminatory, tax or surveillance power (data collection)…

We missed a more technical debate on the possible ways to overcome those worries and the specific questions all the competition law community has been facing in the last years:

  • Do we need new rules or just a different application of the old ones?
  • Do we need new guidelines for market definition? Do we need market definition at all?
  • How should market power be measured in the digital economy?
  • What conducts should be considered anti-competitive? Are there new theories of harm to be considered?
  • How merger control regimes can capture pre-emptive digital mergers? Do we need new thresholds? New theories of harm?
  • How can the authorities ensure faster procedures? How to deal with the needed market monitoring in order to increase efficiency?
  • Is there a need for changes in the institutional design?
  • How to tackle the mismatch between national/ regional jurisdictions and global companies or products/services?

The repeated conclusion of speakers that “competition law is not enough” was not supported by a thorough analysis on the possibilities for its evolution. On the contrary, it seemed that these competition experts were leaving the floor to regulators without even trying to play their role and adapt competition law to solve those concerns.

 

In its initial remarks, Commissioner Vestager remarked the importance of more regulation

 

On the ex-ante regulation arena, there was a repeated request for more regulation but again with no clear target or specific proposals. Over-repeated mantras such as “interoperability”, “data access”, “data sharing”…were also raised, but there was not a structured debate on the problems and the correspondent solutions. 

Stronger rules on data protection were also asked for; which is odd when we consider that the GDPR has been viewed as a cross-sectorial success even though it has been in force for less than a year and the Commission is busy exporting it worldwide.  Speakers should have really taken note of the experience of proposals to fragment the GDPR in the telco sector, where “ePrivacy Regulation” is facing a troubled legislative procedure because there is no agreement on the right approach to align it with the GDPR and guarantee an effective level playing field between firms accessing comparable data through regulated and unregulated products.

We find especially worrying the Commission’s vision on these other amorphous issues related to data, where the wrong sort of actions risk making Europe less, rather than more, competitive

Firstly, before acting, authorities and lawmakers should analyse the causes for Europe lagging behind in the digital markets, including the impact of existing regulation – what has worked, what has not – we need to learn from the past?

Secondly, intervening ex-ante in nascent markets is generally anathema to sector regulators – it is unclear why competition enforcers think regulators should change this general principle in the case of the data economy?  Is there still a role for anti-trust enforcement to nudge other players to become more ethical in their behaviour?

Finally, we should learn the lessons of the GDPR.  Europe is currently leading in one aspect of the digital economy – the export of regulation.  We see California and other US states developing their own privacy laws, perhaps encouraging the creation of a federal privacy act to ensure US legal harmonisation.  Specifically in terms of data economy and AI, authorities should think very carefully about how further European regulation will affect international competitiveness, before turning the new European Data Space initiatives into a new GDPR.  If Europe acts alone it risks limiting the scope for future European innovation, just when it is trying to catch up with China and the US in these expanding new technologies.

As Commissioner Vestager pointed out: “It is not for technology to decide our future. It is for us.”  The question remains, by “us” does she mean the users of digital services or the European Commission?

 


[1] The contributions of more than a hundred stakeholders submitted to the Commission (July-September 2018) and the report to be released next March by the three Special Advisers appointed by the Commissioner will also be part of this process (http://ec.europa.eu/competition/scp19/index_en.html).

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