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.
Several decisions this week call into question established precedent on linking and embedding — actions that Internet users engage in on social media and online publishing every day. This threatens the legal certainty online businesses have long relied on, as well as impacting the expectations of their users.
These cases involve legal theories which go beyond allegations of direct or secondary liability. Rather than target the user that posted an allegedly infringing image or other work, or sending a DMCA takedown to the platform where it has been posted, litigants have been pursuing other websites that report on such works, but that don’t host them directly — they merely link to or embed content from another website.
The Competition Commission of India (CCI) opened an investigation into Google focusing on multiple allegations of abuse of dominant position in India. After a six-year-long investigation, CCI concluded that Google had not abused its dominant position in the majority of the fronts investigated by the Commission (OneBoxes, AdWords, online intermediation and distribution agreements); and only fined the search company for supposed anticompetitive practices related to Flight Search and two other long-discontinued search practices.
When analyzing CCI’s decision, some commentators risk falling into the trap of claiming the Indian decision diverges from that of the US FTC. Even worse, these observers might use CCI’s decision to validate the recurring claim that US antitrust authorities grant tech companies a free antitrust pass. Such a view would fail to account for the fact that CCI’s order actually converges with the US approach. In fact, CCI’s decision is evidence-based, informed by economic analysis and decided under the consumer welfare standard.
Furthermore, such analysis would fail to capture the most relevant aspects of the Indian order, namely: (i) the pro-consumer/pro-innovation argumentation included in the decision; and (ii) the consolidation of a pro-consumer welfare enforcement pattern at an international level. MORE »
Amid shrill clamor that Amazon.com Inc. should be broken up because it is vaguely “too powerful,” some retrospection on a continuing narrative that the Seattle company will “kill retailing” is appropriate. Those prophetic warnings were and remain flatly wrong.
Over the 2017 holiday season, Amazon did quite well. But so, too, did Walmart, Target, Best Buy, Costco and a host of other retail companies whose death has been forecast for years by many of those same economic pundits. The reality is that selling consumer products is a tough business, both online and at brick-and-mortar locations. To succeed, a firm has to remain hyper-competitive, committed to customer attraction and fulfillment, and vigorous in pursuit of logistics efficiency and cost reductions.
That is the lesson of Christmas ‘17. To survive in the Internet age, traditional retailers need to evolve and adapt. RadioShack, Toys “R” Us, Payless and Sports Authority could not. Like A&P and Woolworth decades before it, iconic Sears seems destined for oblivion. Macy’s is in big trouble, but has not succumbed, at least not yet. But other traditional retailers have changed in positive ways that enhance their competitiveness, revenues, and profits by offering consumers lower prices, increased “engagement,” and better shopping experiences.
As the Wall Street Journal reported, “This year, Amazon.com didn’t steal retailers’ Christmas.” A few pertinent examples:
Although digital technology has become a ubiquitous presence in society — with the Internet, artificial intelligence (AI), data, and machine learning now underlying how we watch TV, eat, exercise, and more importantly how we floss, brush our hair, and toast bagels — measuring its precise impact on the economy is difficult. However, in spite of this, every year dozens of national agencies and research institutes attempt to capture this metric. Why? Because although quantifying the impact of digital technology on the economy may be challenging, it’s a critical data point, known to have a significant impact on everything from GDP to employment to labor productivity.
Unlike estimating the impact of sectors dominated by physical goods, such as the agriculture, food, or automobile industries, the digital sector is harder to quantify because a large portion of it is not physical. It is also frequently an input providing efficiencies for other sectors, and many digital products are free to the user.
But there’s no question that digital technology is critical to economic activity; one estimate reports that the “Internet sector” was responsible for approximately $966.2 billion, or 6% of real GDP, in 2014 alone. As such, these estimates can inform investments, government policies, and regulations. And, what’s more, understanding digital technology’s current impact on the economy may help predict (and therefore prepare for) its future impact.
Consequently, what has resulted is a multitude of institutions and agencies attempting to quantify the economic impact of digital technology, using a multitude of methods to do so.
Last week, the U.S. Court of Appeals for the Fourth Circuit issued a decision in BMG Rights Management v. Cox Communications that provided some clarity to the complicated state of the law relating to Internet service provider liability. This result emerged from a decision that affirmed the district court’s holding that Cox was not eligible for the DMCA’s safe harbor, but granted Cox a new trial on the jury’s finding of contributory infringement.
Cox provides Internet access to 4.5 million subscribers. Music publisher BMG hired Rightscorp to monitor BitTorrent to detect infringing activity. After detecting infringing activity by Cox subscribers, Rightscorp sent notices to Cox identifying the allegedly infringing activity, and requested that Cox forward these notices to the allegedly infringing subscribers. The notices contained a settlement offer, allowing the subscriber to pay $30 for a release of liability. Cox notified Rightscorp that it would not process any notices that contained settlement language. Rightscorp continued to send Cox notices containing the settlement offer, leading Cox to block all of the millions of notices Rightscorp sent on BMG’s behalf.
BMG sued Cox for contributory copyright infringement. Cox argued that it qualified for the Digital Millennium Copyright Act’s safe harbor for Internet service providers. The district court held that Cox was not eligible for the DMCA’s protection because it had not met the DMCA’s requirement of adopting and reasonably implementing a policy for terminating the accounts of repeat infringers in appropriate circumstances. After a trial, the jury found Cox contributorily liable for copyright infringement, and assessed $25 million in damages. Cox appealed to the Fourth Circuit.
Earlier this month the U.S. Court of Appeals for the Ninth Circuit issued an important decision in Oracle v. Rimini that decreases data aggregators’ potential legal exposure for using software tools such as robots and spiders to scrape information from websites.
Rimini is an independent provider of maintenance services to customers of Oracle software. To provide these maintenance services, Rimini needed to download software updates from Oracle’s website. Oracle sued Rimini for infringing its copyrights as well as violating California and Nevada’s computer abuse statutes. The district court ruled in favor of Oracle on all counts. Rimini appealed, and the Ninth Circuit affirmed the copyright infringement claims but reversed the state computer abuse claims.
The copyright claims turned largely on interpretation of Oracle’s license agreements with its customers and thus do not warrant extended discussion. Oracle’s licenses allowed an independent service organization to download and use an update to provide services to a particular Oracle customer (“direct use”), but not to other current or future customers (“cross use”). Rimini, however, used the same downloaded update for multiple customers. Thus, the Ninth Circuit found that Rimini made reproductions beyond the scope of the license.
The Ninth Circuit’s analysis of the state computer abuse claims has more far-reaching implications. California’s Comprehensive Data Access and Fraud Act (“CDAFA”) imposes liability on a person who “knowingly accesses and without permission takes, copies, or makes use of any data from a computer….” Similarly, the Nevada Computer Crime Law (“NCCL”) imposes liability on a person who “knowingly, willfully, and without authorization…uses…or obtains or attempts to obtain access to…a computer….”
With the beginning of a new year comes a new step forward in Europe’s copyright reform. After months of debates on the copyright directive proposal, the new Bulgarian Presidency should ask EU countries for political guidance on the new neighbouring right for publishers (Article 11) and the mandatory filtering mechanisms for users uploads (Article 13).
What does this mean? To simplify, this means that negotiations on both articles carried out in technical meetings are not progressing, due to important questions about the scope and consequences of these articles, as well as strong differences of opinions between Member States. The matter is therefore handed over to a meeting of Member States’ deputy permanent representatives (the “COREPER I”), where political decisions on the direction that negotiations should take will be debated.
The advertising space is undergoing rapid changes as software’s expanding footprint grows ever larger. As the Consumer Electronics Show underscored yet again last week, new platforms and smarter services — phones, speakers, TVs, headsets, home appliances and other devices (even increasingly connected cars) — are bringing innovators new ad formats and new opportunities to disrupt the half-trillion dollar global advertising market. If, indeed, there is a future beyond “the end of advertising,” we can be certain that the business will not look quite the same that it does today.
Despite the accelerating pace of change, the continuing successes of Google’s and Facebook’s advertising businesses have prompted some to question whether the advertising space is still competitive. Critics of this so-called “duopoly” argue that the two Silicon Valley companies are the only viable participants in an industry that is unfriendly to incumbents and new entrants alike. These arguments paint a flawed picture of an industry that is in fact defined by constant reinvention, innovation, and new investment.
Consider today’s reality: advertisers compete to reach the same consumers across multiple mediums. Services that deliver ads digitally to an individual’s mobile device don’t just compete against one another; they compete directly with television, print and outdoor options (e.g., highway billboards, subway stations, Times Square installations). Inter-media competition was particularly evident in last week’s “shakeup” announcement by Adobe and Mediaocean, that the two would partner to join digital ad buying with television, and “converge and automate television and video advertising.”
This competition is fierce, as advertisers continually shift budgets among platforms to maximize the return on their ad spend. What was once a quarterly or monthly re-evaluation of advertising programs has become a weekly and even a daily recalibration of how and where advertisers are reaching their audiences.
Economic research confirms that online and offline advertisements substitute for one another. This is consistent with what one would expect to find. As we’ve discussed here on DisCo before, Internet radio does compete with traditional broadcast radio — aggressively so. It would therefore be strange to suggest that advertising on digital radio doesn’t similarly compete with advertising on broadcast radio.
By using data from the Internet Advertising Bureau , , the Association of National Advertisers, and market research and intelligence provider MAGNA Global, the graphic below illustrates where digital advertising fits into the broader advertising space with the four other major advertising vehicles (radio, outdoor/billboards, print, and television), and represents how this categorization breaks down even further in the digital ad-supported ecosystem.
Using a hypothetical company spending a $100 budget in a fashion representative of the overall ad space, the graphic contextualizes a typical expenditure to illustrate how much ad spend goes where, rounded off to the nearest dollar. Naturally, different advertisers will pursue different strategies; a given advertiser might spend its entire budget on radio. As the graphic shows, however, an average advertiser spending a $100 budget in a representative way would spend $6 on radio.MORE »
As negotiations over the proposed new EU e-Privacy Regulation heat up, European policymakers are considering the broader implications for Europe’s economy. In this blog post Professor Anja Lambrecht of the London Business School presents her new research on the relationship between existing EU e-Privacy frameworks and venture capital investment in the EU. Professor Lambrecht’s study was first presented at the Center for European Policy Studies at the end of last year.
Firms in the digital economy contribute significantly to innovation by creating new products and services for consumers and business at impressive rates. Often, collecting and analyzing data allows firms to offer new and superior services. For example, location data from internet-enabled consumer devices like smartphones can be used to notify consumers of weather changes or emergencies in their area, or suggest restaurants in their vicinity. Consider also the multitude of online streaming services that learn a user’s preferences in order to suggest new artists, films, and books that might be of interest to them. The potential for innovation in the digital economy also means that investment in European technology companies is substantial. According to Atomico’s 2016 “The State of European Tech” report, tech investment in Europe increased to a projected $13.6 billion in 2016, up from $2.8 billion in 2011.