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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.