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.
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:
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 »
Today the Wall Street Journal Editorial Board published an op-ed accusing Google and major hotel chains of undercutting competition to the detriment of consumers seeking to book a hotel room online. It is laudable and kind for the WSJ to care about the millions of Americans travelling during these holidays. However, it is unfortunate that the op-ed lacks rigor and fails to identify one of the real challenges that travelling consumers face when booking a hotel room online: misleading practices by online travel agencies (OTAs).
The WSJ aptly notes that “more than 100 million Americans are expected to travel during the holidays, and many will search for lodging online.” And the truth is that the Internet has brought about extraordinary benefits to travelers. Consumers can now search for hotel rooms online, and benefit from fierce competition online, currently led by Priceline and Travelocity (not Google, as the WSJ seems to imply).
But what the WSJ fails to explain to its readers is that as part of the U.S. Federal Trade Commission (FTC)’s efforts to ensure that consumers can make informed choices when booking online, the FTC filed a complaint against several companies for misleading consumers attempting to book a hotel room through their websites. According to this U.S. consumer protection agency, online reservation counters allegedly led travelers to believe that they were dealing directly with hotels, when in fact they were not.
What is even more surprising is that the well-reputed WSJ’s op-ed ignores that on December 22, just when many Americans were probably beginning to travel to meet with their families and receive Santa’s presents, the defendants in the FTC case decided to settle. MORE »
Yesterday was an interesting day in the history of U.S. antitrust.
Five expert witnesses – Prof. Carl Shapiro, Dr. Diana Moss, Prof. Joshua D. Wright, Prof. Tad Lipsky & Barry Lynn – representing the entire political spectrum testified at the Senate regarding the consumer welfare standard. And, it seems that the majority of the witnesses (left and right) with a single exception agreed upon the fact that the consumer welfare standard is the right antitrust analytical standard.
The takeaway of yesterday’s hearing?
Alternatives to the consumer welfare standard are difficult to reconcile with sound antitrust enforcement free of political interference and corporate capture. Hence, because the consumer welfare standard is widely approved, we can move beyond this discussion. As rightly put by Ranking Member Klobuchar, “we don’t need to move away from the framework of the consumer welfare standard.”
Below we summarize the testimony of the five witnesses.
“Antitrust is sexy again”, says Professor Carl Shapiro from University of California at Berkeley, who also served as a Member of the President’s Council of Economic Advisers during the Obama administration. But as Prof. Shapiro argues in his latest publication, antitrust policy is not, and should not be treated as, an antidote to all political and economic maladies of the day.
Prof. Shapiro asserts that “the role of antitrust in promoting competition could well be undermined if antitrust is called upon or expected to address problems not directly relating to competition.” Under this premise, the author suggests antitrust remedies to address competition-related problems that analyses of economic data prove to exist.
Before detailing his suggestions to revamp competition policy, Prof. Shapiro debunks some of the economic reports that have been used as the basis “of some calls to” change the U.S. antitrust framework. The author agrees that there has been increased concentration in some markets that raise antitrust concerns. However, the author takes issue with the conclusions drawn by the April 2016 report by the Council of Economic Advisers (“CEA Report”), which concluded that there is increasing market concentration. Namely, Prof. Shapiro argues that the CEA Report is widely cited as evidence for increasing concentration across industries despite its carefully worded caveats, but that the metrics don’t show that fact. Simply put, according to the author the numbers used by the CEA say nothing about trends in market concentration in properly defined relevant markets and thus tell us little about market power – which is the core of antitrust analysis.
Prof. Herbert Hovenkamp, who many consider to be the ‘dean of American antitrust law,’ addresses the relationship between competition policy and inequality of wealth in his new article, published in Competition Policy International (CPI)’s Antitrust Chronicle. His new publication is an educational piece explaining how antitrust norms enforced under the consumer welfare standard are already having a positive impact on wealth distribution and employment. As such, Prof. Hovenkamp poses the question: “accepting that competitive markets are conducive to greater wealth equality, hasn’t antitrust already done all it can do?”
To address this question, Prof. Hovenkamp briefly examines the evolution of US antitrust norms, clarifies the reasons why consumer welfare is the appropriate standard, and illustrates how antitrust enforcement contributes to wealth distribution and employment by using Amazon as an example.
Prof. Hovenkamp acknowledges that “antitrust law unquestionably affects wealth distribution.” Furthermore, Prof. Hovenkamp reminds us of the literature suggesting that competitive markets are conducive to more even wealth distribution. Assuming this literature is true, Prof. Hovenkamp argues that rigorous antitrust enforcement aimed at increasing market competition inevitably contributes to wealth distribution. Similarly, antitrust contributes to job creation by promoting increased outputs that demand more labor forces without decreasing efficiency.
But what is rigorous antitrust enforcement? Is harm to consumers enough to invite antitrust restraints or should harm to other players, job creation, etc. be factored into the antitrust analysis? Coming to the more specific question as to what yardstick one should apply to assess if a particular conduct is anticompetitive, Prof. Hovenkamp argues in favor of the consumer welfare standard, and against the general welfare standard that calls for factoring in efficiency gains, benefits to other players, competitors, etc.
As technology journalist Walt Mossberg observed earlier this year in his final regular column, the computer is disappearing. It is poised to “fade into the background,” indistinguishable from other devices. The line between regular devices and “computing devices” is now blurred as software has become ubiquitous.
This transition has been underway for some time now. In a 2016 report on embedded software in consumer devices, the U.S. Copyright Office noted that “[i]n the near future, software will be behind even more innovations, like artificial intelligence and advanced robotics… consumers now routinely use software-enabled products for everything from adjusting the thermostats in their homes, to driving to work, to getting a midnight snack from the fridge.” In short, software is everywhere. But the marketplace is going to change even more.
Technology will soon evolve beyond software-enabled devices, as well as network-connected “Internet of Things” devices. Of course, IoT devices will remain important; the smart thermostat isn’t going anywhere anytime soon. But connected devices are moving toward becoming an infrastructure layer. They will soon provide environments where consumers can access many different types of software — like digital assistants — from different providers.MORE »
In two recent NYT columns , , Farhad Manjoo makes a series of curious arguments that suggest successful tech firms are too competitive, and are not regulated. These arguments are made with respect to what Manjoo refers to as “the Frightful Five,” referring to Google, Apple, Facebook, Amazon, and Microsoft.
(The “Frightful Five” branding effort recently got some traction on NPR’s “Fresh Air”, but it is actually a French import, where successful Internet firms have for some time been referred to as “les GAFA”. In France, Microsoft evidently doesn’t make the cut.)
Manjoo’s arguments — particularly that tech firms (1) compete too aggressively, and (2) are unregulated — both require some examination.