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Archive for January 31st, 2019

Competition Policy in the era of digitization (Post-conference thoughts on balance, the role of the case law and what the debate is really about)

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DG Comp held its much heralded conference about “Competition Policy in the area of digitization” a few days ago. Whilst I unfortunately had to miss the event, I was able to watch part of the recording over the weekend thanks to a new acquisition that admittedly has provoked some laughter and jokes at the office. A good overview of the event is available here.

Some hopefully constructive thoughts follow:

1) The way I see it, it’s a good thing for competition authorities to hold conferences on issues about which they care. These initiatives can show that authorities are willing to listen to different viewpoints. They also publicly expose the thinking that is influencing enforcers. From this perspective (and for all their hard work), the organizers truly deserve credit.

2) The conference was meant to be about “shaping competition policy”. The official line is that the conference showed a consensus on the need for active enforcement. If the real aim was to give an appearance of consensus to put the issue on the table for the next Commission and Parliament, then it probably was a success.

3) The conference did indeed feature multiple viewpoints, all of which nonetheless converged in advocating for stronger enforcement. The problem, however, is a certain impression that the program may have been designed with that in mind. The conference would have benefitted from a greater balance of views, even if (or precisely because) that would have shown that the consensus may not be there at present.

4) The point above is, in my personal view, particularly important in the case of a conference organized by an enforcer. This is, first, because an enforcer must not only be neutral but appear to be neutral; and second, because one learns the most from views that  -right or wrong- challenge one’s own ideas. From that perspective, it would seem ironic to use the conference to discuss “neutrality obligations” and the problem of “echo chambers”.

5) Perhaps the best illustration of what I’m saying lies in this intervention of a representative from the Open Markets Institute focused on Amazon as a Private Government (see around 11.58 h. here). I cannot see the reasons that would justify giving a public enforcer’s microphone (even if a not-always-functioning one 😉 ) to such extreme views. Perhaps because other stuff would seem more reasonable by comparison? On this point there seems to be a real consensus among attendees. The Commission itself must have probably instantly realized about how self-damaging that was for the event and its objectives.

6) In my view, the more-vs-less enforcement debate is pretty Manichean and not so useful. Most, if not all of us, would always support strong enforcement if the law is correctly applied to a proven set of facts. So this is not so much about policy as it is about the law. Stronger enforcement may perhaps be needed, but then the question is “how?” Is it just about doing more cases under the current legal framework, or is it about changing or ignoring the law as refined and incrementally built over decades of experience? Do we need to change the law as applicable only to certain companies/business models/activities? [On the latter point, by the way, the State aid experts at the Commission could explain that selective regulation also constitutes State aid…]

7) Unfortunately, there was not that much discussion about the law. In fact, too often in these debates the law is side-stepped or looms in the background as an uncomfortable obstacle. Unfortunately the conference only featured (3/18) jurists (plus a very good one, Heike, as moderator) and no practitioners (this I can understand) or judges. The academic panelists were surely respected figures, but also the most vocal on the anti-big-tech front (which is absolutely fine, but only represents one side). There was not much of a debate on how the current case law already addresses the issues raised. Btw, Pablo’s contribution to the Commission’s call for ideas was precisely about that.

8) The highlight of the day was probably Jean Tirole’s keynote. Many of us admire his work and consider him to be a very reasonable person. Two messages that caught my attention were (a) his comment that failing to consider the multi-sided nature of some practices leads to absurd results; and (b) the common theme that one “should err on the side of competition policy”. From a legal standpoint, I couldn’t agree more with the first message. From the same standpoint, the second message sounds my alarms, as it did when in a previous interview some months ago (available here) he responded the following to the question “so how should antitrust evolve?”:

First, we need to reconsider our burden of proof in antitrust decisions. This is a delicate matter. Consider the acquisition of WhatsApp and Instagram by Facebook. They were social networks, just like Facebook. They could have become Facebook competitors. But is there any evidence for that? Not really, as this is just a guess on what the future would have looked at in the absence of acquisition. The suppression of competition in the absence of data is hard to prove. My guess is that we should err on the side of competition, while recognizing that we will make mistakes in the process”.

9) Tirole’s comments  have the virtue of putting the spotlight exactly where it belongs. It reveals what the debate is really about in clear terms that others are (understandably) much more reluctant to use. One can perhaps legitimately decide to “err on the side of competition” when it comes to regulation or even merger control. We can have a debate on those areas, and this is perhaps what Mr. Tirole has in mind.  But, in my view, not when it comes to antitrust (i.e. Articles 101 and 102). As repeatedly held by the Courts, this is a quasi-criminal area of law. This is not about regulation nor about seeking optimal results. It is about punishing illegal behavior with potentially very drastic consequences for the company’s finances, reputation and now, seemingly, even structural integrity. And illegal wrongdoing must be established by the authority on the basis of facts, not suppositions to compensate for lack of evidence.  There is probably a consensus among jurists on this point, as we are trained to identify the dangers of such logic and to protect the presumption of innocence. The rule of law is no less important than alleged optimal economic outcomes.

This should not be a problem, and digital businesses should certainly not get a free pass.  There may well be competition problems and anticompetitive practices in these markets, but if the alleged problems are so evident, then proving them is perhaps not so much to ask for.

This is not to say that one should not be cautious or take into consideration factors such as innovation or potential competition. One can perfectly do all that within the current legal framework. What I’m saying is that there’s no reason to reconsider our burden of proof.

10) This is why, interestingly, the policy debate that is taking place in this regard goes in exactly the opposite direction to the legal trends visible in the case law (see most notably Cartes Bancaires and Intel which, as noted by Vice-President Van der Woude, raise questions for which answers “can be found in the burden of proof that rests upon the Commission pursuant to Article 2 of Regulation 1/2003”, or see also the most recent Krka Judgment). One can only speculate about what will happen when these two opposing trends meet each other and clash (although if history tends to repeat itself, look at the 2002 annus horribilis on the merger front). Strong competition policy requires a strong, respected, neutral and confident enforcer. And the Commission can certainly be that, perhaps better than any other authority in the world. But the trick is to step up and meet its burden, not to try to relax it or do away with it.

+1) Some may perhaps think that I’m writing all this because I myself am biased and work for large digital companies affected by this debate (which I do, although I also work for smaller and non-digital companies that might also be affected). But any of you who has ever attended our own events would have realized that we have always done our best to ensure a good balance of views regardless of how convenient or aligned with our own opinions (see e.g. the first panel at our last Chillin’Competition conference). That’s really not it.  For the reasons recently set out by Pablo, we genuinely care about the Commission’s reputation and we believe so much in the Institution that we often subject it to the high standards that it can aspire to meet. In the long term, defending our law-based system is the best way to protect the Commission.

Written by Alfonso Lamadrid

31 January 2019 at 5:02 pm

Posted in Uncategorized