Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Playing for the gallery- On the European Parliament’s resolution on the unbundling of Google

with 4 comments

I’m typing on Sunday morning, on my plane back from Stockholm, right after reading the excellent pieces by The Economist on market power in the digital age (the image above comes from it), which summarizes many of the things we have been discussing here for quite a while in relation to the Google case (too many links to cite them here), the Microsoft/Skype Judgment (here), to the practical articulation of the economic theories on two-sided markets (here among others) and the interface between competition law and privacy (here and here). If you haven’t read it yet, we suggest you to do it here.

The Economist pays particular attention to what has been the talk of the town these days, European Parliament’s approval of a resolution that suggests the Commission “to consider proposals with the aim of unbundling search engines from other commercial services”. I’d told myself some time ago that I would reduce my coverage of Google related news (despite the increased number of visits they attract to the site) because I had the impression that it had ceased being about the law (admittedly, I´m not sure it ever was), but since everyone’s taking about it, and since I have been asked for my views on this quite a few times (Reuters actually published some of them in this piece), here you have them:

On the politicization of competition law. I very much like politics, and I very much like competition law, but I don´t like them together, at least when it comes to individual cases. In previous posts I have written about competition law and big politics (see here for “Antitrust and the Political Center” and here for a follow-up CPI interview on it) as well as, more recently, about competition law and “small politics” (see “On Competition Law and Politics”). When the new Commission structure was unveiled, we also wondered whether it meant that competition law would become more permeable to other policy areas (see here). Interestingly, last week I read that Commissioner Vestager had talked to Henry Vane at GCR about how she was concerned about lack of democratic accountability in competition law and believed that “building bridges with European Parliament is key”. I was intrigued by these words, and am curious as to how this will play out in practice.

On separation of powers (and Montesquieu’s death). My initial reaction was of surprised by the superficiality of the exercise; I thought it was remarkable that that 384 MEPs have voted for this resolution without undertaking any prior inquiry and without apparent due reflection on an issue that would require very careful scrutiny (unbundling cannot be taken lighltly; think of the debates about the energy and telecom sectors, where the remedy is far less controversial than it would in a rapidly moving industry). On second thought, I realized that that is not even the real issue: the true problem is that something is wrong with separation of powers (even in the peculiar EU context) when the legislative branch steps into the application of the rules and puts pressure on the executive -acting as quasi judiciary- to interpret and enforce the rules in a given way.

I, for one, am much more comfortable leaving competition law enforcement in the hands of perhaps less accountable, but independent, well trained and specialized DG Comp officials, who are, for good reasons, the ones empowered to apply the rules.

A bias against US companies? We’ve discussed this before in some depth (see here). Aside from the irony in politicians in the US telling politicians here not to politicize the debate (not the first time, though; see here), I find that particular criticism without merit. The EU doesn’t play industrial policy with competition law. If you look at the fines imposed in the EU and the US for antitrust violations, you’ll see that whilst most fines imposed in the EU affect EU firms, those imposed in the US are imposed on non-US firms. In my view, MEPs were certainly sought to protect certain interests, but not those of the EU versus those of the US.

As I told Reuters last week, the investigations don´t have to do with nationality bias but rather relate to the fact that “in most cases U.S. firms are the allegedly dominant players worldwide. I wish more European firms were in a position to be subject to similar investigations in the U.S.” I was glad to see The Economist making the exact same recommendation in their piece (“Europe’s leaders should ask themselves why their continent has not produced a Google or a Facebook.”)

The underlying strategy. Despite the significant media attention, I doubt that many people have taken this “suggestion seriously”. The way to spin it will be to say that even if a break-up seems excessive, the resolution shows that Google’s, sorry, search engines’ dominance has become too much of a problem. This is yet another smart move on the part of Google’s complainants (which, as I’ve always said, have played the game exceptionally well), but I guess I can’t say the same for the Parliament.

Overdoing criticisms might give one visibility, but only at the expense of credibility. The Parliament has always been on a quest for more recognition and powers, and, frankly, these things don’t help.

Written by Alfonso Lamadrid

1 December 2014 at 6:30 pm

4 Responses

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  1. Hello Alfonso, I quite agree on all the above.

    That said.. there is indeed an irony in all that is going on between US companies and EU competition authorities and politicians getting stuck into the debate…

    A few years ago, while searching materials for a research on on-line distribution issues I came across the following statement by former US Senator Herb Kohl, Chairman of the Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights, who actually said (pay attention to the last bit in particular):

    “Complying with the antitrust laws of different countries, which often have differing substantive and procedural rules, is increasingly becoming a burden on U.S. businesses. Over the past several years, foreign and in particular European regulators have been aggressive in their review of American companies’ business practices. Some have argued that these same foreign regulators have unfairly used their power to discriminate and hinder American corporations. On the other hand, many times those bringing complaints regarding the business practices of American companies to foreign antitrust enforcement agencies have been other American companies.” Herb Kohl, 10 March 2011

    Indeed, one should not lose sight of the fact that direct beneficiaries of whatever antitrust action by the European Commission or any other NCAs would be first and foremost other US companies who are often second in line (normally far far in line) from the leaders. I am not so sure EU consumers would be better off with one or the other…

    That said, I have nothing against US companies, rather the contrary, but like you said I would not mind if European firms would have the same kind of troubles with US antitrust authorities or else.

    Gabriele

    2 December 2014 at 3:20 pm

  2. Hi Alfonso,

    Spot on, with brilliant soundbites for the politically minded.

    Since everyone can see past the EP’s (and Tremosa’s and Schwabb’s, in particular) attempts at presenting this as a matter of antitrust policy (the days when that could’ve sounded credible are far gone), it is just fitting that the debate should also consider general democratic and rule of law arguments.

    It is sad to see how the separation of powers is being shattered in the name of democracy — which is precisely what ochlocracy is about.

    Back to the substance, I’m still eager to see a coherent theory of harm in the search case against Google. In fact, I’d like to see any indication of dominance in an actual economic market, or in the correct side of a two-sided market. A case that’s over five years in the making, and the Commission isn’t able to produce a single piece of (convincing) evidence of market foreclosure owed to an exclusionary conduct, or of exploitative behaviour? Well that’s that for the rule of reason, or the “effects-based approach”, this side of the pond…

    Until a regulator satisfies the lowest acceptable standard of proof (will they ever?), we’re likely (and regrettably) going to hear more public/political outcry revolving around the very appealing, but meaningless, concepts of “Internet gatekeeping” and “search neutrality”.

    Miguel

    3 December 2014 at 12:46 pm

  3. […] The good news of this whole story is that the law may now take center stage. I wrote recently that this was a perfect case study to discuss the limits of Article 102 (see the end of this post for my own recent case study on the subject for the Brussels School of Competition), but it is also a perfect case study on the huge importance of non-legal factors in competition cases in which the law is unclear (as it’s arguably always the case, save in -some- cartel cases) (for our previous reflections on this, see here or here). […]

  4. […] cases and against the background of factual and economic evidence. Compare that, for instance, with this example of a thoroughly thought out proposal for public intervention… Against this background, ignoring the lessons that competition law […]


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