Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

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)

with 8 comments

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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

8 Responses

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  1. A good summary of the event and the lessons to be drawn from it.

  2. I totally agree with the point that the conference itself seems has picked a side. I feel that the problem is probably the blur between the concept ‘Policy’ and ‘Law’. Although the word ‘competition policy’ is commonly used to refer to the competition law legal framework, the law is different from public policy – although many times they are connected. I read the EC’s wish to thrive European digital markets by antitrust legal enforcement, but that is perhaps too ambitious. Whether the market is prosperous depends on many factors, and more legal enforcement and more regulation can hardly become the decisive factor.

    Liran Pang

    31 January 2019 at 5:53 pm

  3. I’m fascinated by the idea that competition law is not “about seeking optimal results”. Surely all law, including criminal law, is about seeking optimal results, including striking a socially optimal balance between the risk of false positives and the risk of false negatives? That’s what sits behind things like the laws of evidence, statutes of limitation, etc.

    Martinned

    31 January 2019 at 6:20 pm

    • The competition rules may well be informed by the desire to seek socially optimal results. But I guess Alfonso’s point is that, when dealing with quasi-criminal rules, the cost-benefit analysis should be done when formulating the rule and not at the enforcement stage. I’m not sure how accurately this describes the state of EU competition law as a whole, but judgments like Krka reveal that the Court is very aware of this issue. It’s also pretty evident that enforcement is headed in the opposite direction…

      HK47

      1 February 2019 at 1:18 pm

  4. I would posit that the rule of law is far more important than alleged optimal economic outcomes.

    Excellent round-up, as always!

    Miguel

    31 January 2019 at 7:38 pm

  5. It is really a fascinating debate and I support Alfonso´s view that cuasi-criminal law can not rely on political judments. From that perspective I will come back to Tirole´s idea proposing other ways to solve digital economy challenges by for example widening the range of instruments at disposal of the Authorities to solve market failures (behavioral biases, for example) In this respect it seems more appropiate to use a negotiated proceeding ( commitments) than a sanctioning file when trying to fix certain problems.

    Nonetheless taking into account our (hughe) ignorance of the functioning of digital business models and the potential threats that they could pose to our society, I do not disagree with the idea of being more cautious when judging mergers by requiring a more severe standar of prove on the adquiring side in digital companies in comparisson with mergers in better known traditional markets. “err on the side of competition”

    Eduardo

    1 February 2019 at 3:16 pm

  6. Alfonso, you will have difficulties convincing me and, I suspect, many others, that your current client base does not inform, consciously or not, your views in this post. It is entirely understandable, and forgivable, but it would be more candid to admit it, instead of hiding behind a thin do-gooder veil.

    Your complaint that the panels were skewed against your main clients is probably legitimate (although, perhaps, the organisers tried and could not find contrarian views outside Big Tech law firms and economic consultants? just wondering, honestly I don’t know). It does not however justify the vitriolic (and frankly, unwarranted) attack on Sandeep Vahessan’s intervention. I listened distractedly to it and nothing justifies your contempt. Particularly when compared to your respectful treatment (and subtle tuning down) of Jean Tirole’s not so dissimilar views. But I suppose it’s much more scary to assault a Nobel laureate, isn’t it?. Here, it looks to me like you cross the line from poor form to embrace the ugly strategy of disparaging and ridiculing somebody’s views to subtly intimidate opposition, or others who would be tempted to take them seriously. We saw that recently with the reactions dismissing Lina Khan’s article on Amazon as “hipster antitrust”, treating the concerns expressed in her article as some kind of joke, unworthy of being listened to. This takes me by surprise. I did not expect it from this blog, where I usually find foot for thought and good humour, not bullyish patronizing.

    A side note on your comment at point 9 (the supposed “consensus among jurists” that it would be unacceptable to “err on the side of competition” when applying articles 101 and 102). This is a more delicate issue than you make it look. We should not fall prey to the “presumption of innocence fallacy”, the misguided notion that substantive criminal law must be interpreted in a way most favourable to the accused. This is just not true. The presumtion of innocence is not an issue of substantive law. Substantive law can define the offences in many different ways; it can be designed, for example, to protect only competition and open markets irrespective of any consideration of expected welfare effects; thus an authority would prove its case by proving that the conduct tends to reduce competition or discourage entry. That’s the end of its job, if that’s how the substantive offence is defined. This would not be contrary to any principle of law.

    PepitoGrillo

    12 March 2019 at 11:41 am

  7. Thanks for the forthright comment (with friends like you, who needs enemies!) 😉 Just kidding; I appreciate you raising the issue and the opportunity to explain it better:

    I wouldn’t want to convince anyone that my views on this or any other post are unaffected by my background and work. They surely are. The fact that I spend a lot of my time on these issues does make me more sensitive to them, and also contributes to shaping my views.

    If you were, let’s suppose, a Commission laywer, your views would probably also be informed by your past and current experiences. Which is absolutely fine. The Open Markets Institute speaker you refer to was also probably influenced by the views of whoever funds that organization. In my view that’s all fine, provided that due disclosures are made.

    When we write here we openly expose our ideas to public criticism. I am very well aware that there may be a natural reflex to think that they are influenced by our work. It is healthy for people to keep that possible bias in mind: that’s a reason to more carefully scrutinize the merits of what we say, and that’s always good.

    In this particular post there was no intention to hide this behind any thin veil. In the last paragraph of the post (which I guess is what you have in mind), I do say that I work for large companies affected by the debate. What I meant is that, despite that “bias”, when we organize events we always do our best to also have people with different views. And this is something you know for a fact we do. I used the example of our most recent conference, where we invited many speakers who expressed views that are contrary to the interests of the clients you have in mind. We do that precisely because we acknowledge our views are not the only possible ones and believe that people should be exposed to others.

    In other words, I was not criticizing the Commission’s views (partial or not, in line with mine or not), but the lack of diversity of views. If you ask around, you will see that many of your own colleagues share this opinion (which is actually what prompted me to write the post in the first place).

    My point is that if we do that being lawyers/academics (not yet subject to neutrality obligations), there are all the more reasons for a public authority to do the same and ensure a balanced representation of views.

    The suggestion that perhaps the organizers “could not find contrarian views outside Big Tech law firms and economic consultants” is a bit puzzling, particularly if you read the much more balanced responses to the call for contributions (including, for example, Pablo’s). And even if we assume that ensuring balance would have required inviting lawyers, consultants or companies, would that really have been a problem?

    Your side note on subtstance does make a valid point. I was criticizing the proposal to shift burdens of proof (i.e. the first part of Tirole’s quote rather than the last). I read the reference to “erring on the side of competiiton” as a complement to that proposal). For the avoidance of doubt, even if it was a Nobel Prize winner who tentatively discussed it, my (biased) view is that, from a legal standpoint, that could be quite problematic.

    Alfonso Lamadrid

    12 March 2019 at 6:50 pm


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