A while back we started our #CompetitionTalks interview series giving a place for competition policy experts to express their views on today’s hotly debated topics. In the second part of our series, we are proud to present to you Prof. Justus Haucap who heads the Düsseldorf Institute for Competition Economics (DICE) and who is the former Chairman of the German Monopolies Commission. We had the pleasure of interviewing Justus at the fringes of CCIA’s competition conference organized together the Lexxion and the Vrije Universiteit in Brussels. An economist by training, Justus gives his opinion on how well the current competition law framework works in digital markets and explains why the analogy of consumers ‘paying’ with their data is a bad one. Last but certainly not least, he clarifies why data protection and competition law enforcement don’t mix well.
What do haute couture and competition policy have in common? Trends come and go but some things just never go out of fashion. That is most obviously true for haute couture or fashion in general (see, e.g., Oprah’s list of timeless, mistake-proof fashion items) but once in a while some competition policy debates share that very same characteristic. A good example is competition policy and ‘big data’ – a topic that has been à la mode for quite some time and that looks like a strong contender for this year’s main trends.
That at least is the conclusion you could draw when reading a recent Wall Street Journal (WSJ) article referring to Commissioner Vestager’s statements on her having “an open mind” about enforcing competition rules against companies that accumulate large amounts of data. There is of course nothing wrong with keeping an open mind and adapting enforcement to new technological developments, but it’s interesting to see this topic coming on the back of the Commissioner’s previous statements stressing that data is not to be automatically equated with market power. It would probably go too far to take her recent statements as proof for a change of heart but given the Commissioner’s crucial role in enforcement priority-setting, these statements can certainly provide insights into the inner workings of Europe’s highest competition enforcer. MORE »
At the time the new Commission took office, ‘platform regulation’ was one of those concepts most controversially discussed in the Brussels policy community – and far beyond it. While a lot has been written about that concept the Commission ultimately announced that there will be no specific platform regulation. Online platforms are, of course, subject to regulation through various policy-specific, vertical initiatives but a promise has been made to not regulate platforms horizontally.
It seems times have changed and promises could be broken when the Commission will unveil its legislative proposal on ‘fairness in platform-to-business relations’ either at the end of this year or at the beginning of next year. As part of this ongoing initiative the Commission has recently published an Inception Impact Assessment (IIA), a document that describes the various policy options the Commission is considering to address ‘unfair’ platform-to-business (P2B) trading practises by online platforms. The Commission identified these unfair trading practices to include sudden changes to platforms’ terms and conditions, lack of transparency with regard to ranking, lack of access to certain type of data, lack of meaningful redress mechanisms, removal or delisting of products or services and potential situations of discrimination. The IIA provides a more detailed description of these issues. MORE »
How well do current competition rules work in digital markets? How easy or difficult is it to apply established competition law concepts in multi-sided markets? What should we make of relevant cases? Should competition enforcement absorb ever more public policy objectives?
These are just some of the questions that are currently being discussed by the competition policy community around the world. To shed some light on these issues, we are excited to announce the start of our #CompetitionTalks series with competition policy experts.
For the beginning, we are proud to present to you interviews with Professor Pinar Akman from Leeds University, Alfonso Lamadrid de Pablo from law firm Garrigues as well as Pablo Colomo Ibáñez, Professor at the London School of Economics. (Some might say that our friends Alfonso and Pablo are better known for running the Chillin’Competition blog!)
After an investigation that has lasted for more than seven years (we discussed it earlier here), this week the Commission issued its Decision in the Google Shopping case. The verdict: Google abused its dominant position in general search services by favoring its own Google Shopping price comparison product in search results. While the record fine imposed on the company quickly became the headline-grabbing part of the Decision, it’s not even the most important element. What is much more important is what this Decision tells us about how the Commission views the dynamics of competition in digital markets and what it thinks Google should do to remedy the abuse. Let’s walk through some key aspects one-by-one.
At first sight, the allegation that Google plays unfairly seems attractive. It is the most popular search engine and giving prominence to its own price comparison service will naturally not be to the liking of anyone competing with similar services. But the key aspect of competition law enforcement is that it’s not about a subjective judgment of what is ‘fair’ or ‘unfair’. Competition law is concerned about conduct that is anti-competitive. The question is whether Google behaves anti-competitively with the aim of foreclosing competitors in a given market. Answering that question objectively against the background of applicable law is much more difficult than judging subjectively whether something is fair or not.
Back in January I briefly discussed an extremely interesting investigation conducted by the Australian Competition and Consumer Commission (ACCC) into a request made by some of Australia’s leading banks asking for permission to collectively bargain with Apple as regards access to the iPhone’s Near-field Communication (NFC) controller. The request was made over the desire to control bank customers’ digital wallets, which are increasingly part of the one item most people carry every day: mobile devices. The banks’ ultimate goal was to provide their own digital wallets with embedded NFC on iPhones without relying on Apple Pay for mobile payment processing. The rationale was to make sure Apple would not apply any unreasonable terms and conditions to the distribution of the banks’ digital wallets through the App Store — even though for Apple that request boiled down to an attempt to avoid paying fees associated with using Apple Pay.
Last week the ACCC issued its final verdict, a so-called ‘Final Determination’, firmly denying the banks’ request to collectively negotiate with Apple. In that respect, the Final Determination follows an earlier Draft Determination from November last year. You may ask yourself why is this proceeding from ‘Down Under’ worth discussing? Well, while the issue itself is certainly interesting, the far more interesting aspect relates to the reasons for the ACCC’s dismissal of the banks’ request.
Last week the European Commission announced three separate investigations into anti-competitive practices in e-commerce. These investigations are the first enforcement actions that come on the back of DG COMP’s e-commerce sector inquiry, an initiative that has not even come to its end. The three investigations target consumer electronics manufacturers suspected of having imposed retail pricing restrictions on online retailers, PC video games producers’ geo-blocking practices and hotel price discrimination provisions implemented by Europe’s largest tour operators. The latter case essentially concerns clauses that discriminate between customers based on their nationality or country of residence — a no-go in the EU’s internal market.
The Commission’s preliminary report on the sector inquiry that was published last September has already uncovered various restrictions imposed by companies as regards the online distribution or promotion of their products. Pricing restrictions, geographic restrictions, limitations to advertise online or to use price comparison tools are just some of the practices the Commission is currently looking at. As I have mentioned before, a key issue that deserves far greater scrutiny is the restriction against selling on online marketplaces like eBay, Amazon Marketplace or Allegro. These so-called ‘online marketplace bans’ are often imposed by manufacturers on their authorized resellers prohibiting them from selling their products through a reseller’s shop on an online marketplace.
It goes without saying that resellers suffer from these bans. The most popular online marketplaces have millions of customers who could all be potential clients of resellers, no matter how big or small the reseller is. Marketplaces provide resellers access to consumers at a scale no individual reseller webshop is able to provide — unless resellers were to invest massively into online advertising or search engine optimization which most simply cannot afford. Online marketplaces provide a trusted shopping environment together with secure payment technology that attracts and retains consumers. And importantly, online marketplaces are poised to grow as a sales channel since more and more consumers shop through their mobile devices. Online marketplaces provide a great opportunity for sellers to reach the ‘mobile customer’ through their successful and trusted apps. That is particularly true for smaller sellers since they are more reliant on marketplaces than their bigger competitors — a finding also made by DG COMP’s preliminary report on the sector inquiry. On top of that marketplaces greatly facilitate cross-border trade within the EU as they are often pan-national online platforms. This is not a minor point as one of the Commission’s key policy objective is to increase cross-border sales.
A while back I wrote about the European Commission’s competition investigation into the Android operating system (OS) and today’s mobile platform competition. The main argument of my previous post was that competition in the mobile economy is best conceived as competition between mobile ecosystems with Android and iOS being by far the two most popular which, in my opinion, stand in clear competition with each other. All mobile OSs have to serve and balance the interests of a variety of parties to keep them attractive (or even alive) — that is the nature of a multi-sided platform like a mobile OS. The ‘Apple factor’ should be part of the Commission’s investigation into Android at the stages of determining dominance as well as potential abuse. It is very hard to imagine that Google can act ‘independently’, in the competition law sense of the word, of Apple in the market for mobile OSs. In that sense the Commission’s market definition of licensable smart mobile operating systems, which leaves Apple’s iOS outside that market, appears peculiar (you can read more on that point in my previous post). MORE »
The European Commission’s competition investigation into Google’s Android mobile operating system (OS) has unsurprisingly raised a lot of attention and commentary. It’s fair to say that so far most comments focused on the ‘abuse part’ of that investigation. That is the part which deals with the question whether certain provisions in the Mobile Application Distribution Agreement (MADA) relating to the bundling of Google apps and the anti-fragmentation agreement (AFA) constitute an abuse under Article 102 TFEU. In fact, the trade association I work for has addressed a letter to Commissioner Vestager explaining why the MADA and the AFA are key to the functioning of the Android ecosystem, spurring innovation and competition.
It goes without saying that readers who are more familiar with the details of competition law will know that the abuse part of any Article 102 investigation formally is the last step competition enforcers take (while arguably being the most interesting). Before one gets to the question of whether a company abused a dominant position, one has to find whether the company actually has a ‘dominant position’. After all, a company can only abuse a dominant position if it has one. This post will discuss this issue in the context of the Android investigation.
But first, let’s continue with competition law basics: how does one find ‘dominance’? Conceptually, a finding of dominance involves a two-stage assessment. First, one has to define the relevant market. While that definition can involve complex economic assessments, it is essentially a matter of substitutability. Where goods or services can be regarded as substitutes or interchangeable by the consumer, they are within the same product market. Second, competition authorities look at whether a given company has a ‘dominant position’ on the relevant market. For economists, companies with a dominant position are companies that have substantial market power. In the often recurring words of the Court of Justice of the EU (CJEU), a dominant position:
“relates to a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers”. (Case 27/76 United Brands v Commission, para. 65)
Importantly, the Commission explains in its Guidance on Article 102 Enforcement Priorities that the notion of ‘independence’ “is related to the degree of competitive constraint exerted on the undertaking in question” and where competitive constraints are ineffective, the “undertaking’s decisions are largely insensitive to the actions and reactions of competitors, customers and, ultimately, consumers” (para. 10).
With this in mind, let’s turn to the ongoing Android investigation. To most people, competition experts and non-experts alike, one aspect of the Commission’s investigation stands out: the market definition. When the Commission announced the Statement of Objections (SO) it sent to Google, it held that the company has a market share of more than 90% in the market for licensable smart mobile operating systems. The word ‘licensable’ is key because it means that Apple’s iOS which powers all iPhones and iPads is outside the scope of the relevant market. So are iPhones really not competing with Android-powered smartphones? (Leaving aside the question of whether tablets should be included in the market definition for now).
Last week the European Commission issued a supplementary Statement of Objections (SSO) to Google. The SSO is intended to support the Commission’s preliminary finding that Google abused a dominant position in the market for general search services by systematically placing its own comparison shopping service at or near the top of its search results. It is the next step in an antitrust investigation which started in 2009 and comes in response to Google’s substantial reply to the Commission’s initial Statement of Objections (SO) from April 2015.
Commissioner Vestager stated that the SSO makes the case stronger by adding new evidence and data. While no one except the parties to the case has access to that new evidence, Vestager’s comments revealed that it relates to both the economic impact of Google’s alleged anti-competitive practice as well as to a clearer definition of markets in the e-commerce space.
Maybe the single most puzzling finding relates to the latter. Put as a short headline, Vestager stated that successful e-commerce companies like Amazon and eBay do not compete with Google Shopping. According to the Commission, merchant platforms compete in a different market than comparison shopping websites. In economic terms, it means that merchant platforms cannot be considered as substitutes for comparison shopping services. It is a curious finding given that there are thousands of merchants on online marketplaces which allow consumers to quickly compare products and prices. It strains credulity to think that consumers who would like to compare product prices would use a comparison shopping service and consciously refrain from comparing offers on other e-commerce websites such as Amazon. There are many routes to compare prices and products on the Internet, and they all clearly compete with one another for consumers’ attention and merchants’ product listings.