Chillin'Competition

The Economist devotes its front page and a feature this week to the question of how data affects competition and competition law. It was not my greatest concern this week, but ok [if this post, written on a Saturday morning, gets published on Monday that’s because Macron won and I have not jumped out of the window]. The newspaper -which we have often echoed on this blog- joins the chorus of those who want “changes” and “new tools” in competition law to deal with this allegedly new phenomenon. In a way, The Economist sides with economic populism on this one (we’ll explain why in a few lines from now).

You already know my views on this topic from the posts and presentations available here, here, etc, essentially summarised in this CPI contribution. Today let me address something fundamentally more important (albeit in a rush, while my kid is miraculously still asleep… )

Creating waves

Step 1. This whole debate was triggered and fuelled by some tech companies who, unlike their rivals, did not operate data intensive businesses, or certainly not to the same scale. For instance, a company whose name we don’t need to mention, appeared to share these views only a couple of years ago, but then -following its acquisition of LinkedIn-  😉 changed views and endorsed these (or at least their spokesperson redirected about 300 different media outlets to this blog, for which we are grateful). This is actually not new (a similar thing happened regarding SEPs) and I actually think it is legitimate, logical, and absolutely not reproachable for private companies to change stance according to their evolving interests. But the origins of the debate are interesting nonetheless.

Step 2. A debate that was part of a business strategy and in its own self-interest finds some well-meaning allies (EDPS and others) who are genuinely concerned about what they see as a problem and a regulatory void and are keen on having their message propelled.

Step 3. Then it’s the turn for us lawyers and conference organisers: since we have little else to talk about these days (and we like to talk, so much that some even pay to do it, a market failure well exploited by others) we make an issue out of this. The result being that the topic is everywhere (to be sure , I myself have contributed to this speaking about it at the European Parliament, ERA, the VUB, Leeds University, the IEB and others, even if to say it is a non issue). This, in turn, eventually reaches academia. And there we see interesting hypotheses and theoretical reflections, but most of which I am not sure correspond to what we actually see in the markets (and which, to the extent I know, have not offered conclusive answers as to how competition should allegedly be changed).

Step 4. The next phase consists in competition authorities showing that they listen and adapt to public debates and to seemingly changing markets, and we end up with joint reports and strange cases (see here for my comments on the German Facebook case). Only the European Commission has kept its cool, although lately there are signs of changing winds there too…

Step 5 is that part of the media -not an ally of many of these data-intensive business models and companies- echoes it and turns it into a wider issue of public policy. This is where we seem to be now. Admittedly, however, what you see in print may only be the tip of the iceberg;  one day someone should write about how the media is shaping competition law these days -both to widen is net (at least that is what other media reports, see here) and to narrow it (see here).

Step 5 is that politics (the most permeable of all, particularly these days) succumbs to the idea.

And this is how change and sausages are made.

Economic Populism?

Contrary to some, I have always accepted that data can give rise to barriers to entry, market power and that it can be used to foreclose competitors. The circumstances under which this can happen are much narrower that many now claim, but still possible, as precedents actually show. My point is nonetheless that we have the tools to deal with those problems whenever they arise. Caution is what is needed, not substantive changes [a different matter being the procedural reform of merger notification thresholds, a point we actually made here before this debate exploded]. If there is one thing that cannot be criticised if competition law is lack of flexibility. A set of wide, common sense (rule of reason) principles and rules that has been able to apply and adapt to every industry for over a century can certainly be applied to data.

To be sure, our economic and legal tools will not always yield conclusive results when applied to data (they often don’t either when it comes to price, including for market definition and others, but it looks somewhat more objective or seemingly mathematical and we are happy to play along. But when do we have conclusive results in social sciences? (Any pollsters have a view?)

And this brings us to the fundamental misconception of these debates. Whenever politicians, respected economists or the media -including the ones with whom I would generally agree-  discuss competition law, they tend to view it as one more took among those available for economic regulation to pursue legitimate goals [admittedly, competition authorities have facilitated that by using enforcement to shape markets and fill in perceived regulatory voids particularly in recent years]. But it’s not. Competition law, rather antitrust (admittedly we can leave mergers and State aid aside), is a sanctioning regime. Dettaching the discipline from its legal nature (remember?) is wrong, and is a bit populist too.

So, yes, its  correct application will (most often) naturally improve the functioning of markets and contribute to a fairer society (more on this here), and yes, enforcement discretion can be exercised to target the greatest perceived social concerns.

But in a sanctioning regime there are limitations inherent to the very rule of law. We don’t get to change the rules in the middle of the game, we don’t (should not) get to strecth the rules to impose sactions nor do (should) we intervene in the face of uncertainty and doubt. Competition law should not prohibit what it does not understand, it should not meddle with ecosystems or with the very core of business models (including those based on data) when the effects of intervention are uncertain. This, until now, was uncontroversial. It all goes back to basics: general principles of law trump or should trump expediency and effectiveness.