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Archive for June 2021

When did the rule of law come to be seen as an inconvenience?

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Rule of law (2020) - Multimedia Centre

The attitude towards competition law enforcement has changed significantly over the past two years. For a fraction of our community, the focus should be on prohibiting conduct, and this, as fast as possible. This approach is behind proposals to reduce the constraints on administrative authorities (by means, inter alia, of presumptions and the reversal of the burden of proof) and to limit (even do away with) judicial review.

It is an attitude that has had a substantial impact on the way rule of law ideals are perceived. Not so long ago, there was little dispute about the importance of ensuring that the law is clear and can be anticipated by stakeholders, that firms have the means to defend themselves and that there is a robust mechanism for the review of administrative action (if you are curious about the rule of law in competition law, by the way, I very much recommend Ryan Stones‘ PhD thesis).

In the EU legal order, in particular, there was wide consensus about the improvement brought about by the changes which, over the years, infused the competition law system with principles associated with the rule of law. Such ideals were deemed valuable not only in and of themselves, but also insofar as they enhanced the quality of decisions. The perception (at least until recently) was that administrative action had become more robust and less prone to substantive and procedural errors.

Nothing is forever, alas, and many of the tenets we took for granted are questioned these days. We have read, with a great deal of interest, a number of pieces sowing doubts about some core aspects of the system (including the role of advisers). We have also heard claims suggesting that judicial review delays decision-making and frustrates ambitious enforcement.

According to an emerging view, the ideals of the rule of law are little more than a luxury, if not an inconvenience, that the competition law system cannot afford (or that it can only afford at the price of slower, less decisive intervention). For the same reason, it is occasionally suggested that the system would be better-off if some in-built guarantees were curtailed.

I do not intend to discuss here whether or not these views would change the system for the better (any moderately attentive reader of the blog knows where I stand). I am more interested in identifying the moment when these ideas, marginal until not so long ago, reached the mainstream and enriched the intellectual landscape of our field (definitely less uniform than 10 years ago).

I have the impression that there are two crucial factors behind the rising scepticism vis-a-vis rule of law ideals:

  • First, judicial review and procedural guarantees have come to be seen by some as devices to protect the rights of firms subject to competition law investigations. Contrary to this view, however, these mechanisms are there, first and foremost, to advance the public interest.
  • Second, there is a clear shift in the priorities of enforcement. What seems to matter is swift action. Enforcement errors are, if at all, a second or third order concern. What justifies intervention, according to this view, is intervention itself.

Judicial review and procedural guarantees advance the public interest

Judicial review has come to be seen with scepticism (and occasional hostility) by some in our community. I have the impression that this position stems from the perception that the control of administrative action by the independent judiciary (as much as procedural guarantees) is a concession that is made to firms subject to an investigation. From this perspective, judicial review would be about balancing the protection of individual rights and the general interest.

This is an understanding of judicial review that has featured prominently in influential documents, including the Furman Report. The idea that the scope and/or the intensity of the control of administrative action should be revisited has emerged as a relatively popular one. Some have even floated the idea of making some administrative decisions ‘unappealable’ (a proposal which, while definitely interesting, seems at odds with primary EU law and the general principles on which it is based).

If this understanding of judicial review is accepted, it makes sense to limit (even do away with) the control of administrative action. It would also make sense to see legal challenges against decisions as dispensable dilatory tactics that, on balance, do more harm than good. The sacrifice would be minimal where judicial involvement is seen through these lenses: does it really matter that large and powerful corporations are not allowed to protect their rights? Is it not better to intervene swiftly to preserve competition and protect consumers?

The problem is that this interpretation of judicial review does not reflect its purpose and importance for the system (and particularly so in continental legal traditions). It is often forgotten that the primary aim of the control of administrative action is to protect the general interest, not the interest of individual firms (juger l’administration, c’est encore administrer, as the old saying goes).

A judgment annulling a decision for misconstruing, say, the notion of restriction by object, or the SIEC test enshrined in Regulation 139/2004, benefits society as a whole, not just (not even primarily) the firms challenging the decision. Similarly, the error-correction role of judicial review advances the general interest by ensuring that administrative action is predictable and consistent (and thus aligned with the ideals of the rule of law).

Is rapid administrative action the goal of rapid administrative action?

The scepticism with which the error-correction function of courts is viewed signals a different attitude vis-a-vis administrative action. According to an emerging school of thought, swift and decisive intervention is what really matters, much more than getting it right. Enacting change, more than carefully pondering whether change is warranted, is seen as the priority. And, the argument follows, the institutional setup should adjust to meet this very vision.

Of course, if one accepts that rapid intervention is to be prioritised, even if it comes at the price of enforcement errors, all the institutional mechanisms to correct the said errors (including judicial review and, more generally, rule of law ideals) become superfluous and/or suspect. In itself, this understanding of administrative action is indicative of a reinterpretation of competition law (its objectives, the rationale underpinning decision-making). As such, it deserves to be widely discussed and analysed.

It would seem that enacting change (namely altering market structures, changing business models and redistributing rents) is, according to this view, the very objective of the system. In other words, remedies would not serve a wider goal (such as the protection of the competitive process); remedies are now seen (at least by some) as the goal itself. The moment administrative action is justified by the fact that it takes place, the possibility of an enforcement error disappears (for how administrative action can be erroneous if it is warranted by its very existence?).

Written by Pablo Ibanez Colomo

30 June 2021 at 6:02 pm

Posted in Uncategorized

New podcasts in town: Jammin’Digital and Monopoly Attack

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Jammin’Digital is a new podcast aimed af fostering debate on all things digital in Brussels and beyond. As an exception to a series of excellent interviews conducted by Evelina Kurgonaite, its latest episode features my views about the DMA and competition law enforcement in the digital world. Nothing new to readers of this blog, but in a different format and without typos. It is available here.

There is also a great new entrant in the podcast field: Monopoly Attack (by Kay Jebelli and Friso Bostoen). It focuses specifically on tech antitrust policy. In only its first week, Monopoly Attack has already released 5 episodes, offering an overview of the enforcement landscape in the digital field and discussing the DMA proposal in detail. If you are interested in these topics, make sure to subscribe.

MONOPOLY ATTACK | Podcast on Spotify

Written by Alfonso Lamadrid

22 June 2021 at 4:57 pm

Posted in Uncategorized

Scale Effects – What We Can Learn From National Football Teams (by Stephen Lewis)

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by Stephen Lewis

What determines the quality of a national football team?  Other things being equal, we would expect countries with a large population to produce stronger teams than those with a smaller population.  They have more people to select from. It is therefore quite intuitive that football team quality must, to at least some extent, be positively impacted by population size.

This intuition seems to be borne out if we consider pairs of countries that have markedly different population sizes but are similar along other relevant dimensions.  For example, take Italy and San Marino. Italy has a population of 60 million, while San Marino has a population of less than 50,000.   The countries are otherwise (broadly) similar with respect to other factors that might determine football team quality, such as length of football tradition, the cultural significance of football, the relative popularity of alternative sports, climate, etc.  Italy last played San Marino in 2017 and won 8-0 (having won all previous encounters on record).  Results like this certainly cast doubt on any claim that there is no link between population and football team quality.  There may even be a “minimum efficient scale” below which a national football team cannot credibly compete with leading football nations (and perhaps San Marino is below that scale).

But the question is how strong is the link between population size and football team quality and how small is any minimum efficient scale?  Answer: surprisingly weak and surprisingly small.  This is obvious from a cursory review of the international football landscape.  The two most populous countries on the planet, China and India, have qualified for one world cup between them (China in 2002).  Meanwhile, Croatia has achieved an all time FIFA ranking high of 3rd (in 1999) and reached the World Cup final in 2018.   Croatia’s population is 4 million – smaller than the United Arab Emirates (10 million), which recently beat India 6-0.

Even ignoring the high leverage outliers of India and China and considering clusters of countries in relatively close geographic proximity where football has a similar level of cultural significance, the effect of population on performance seems remarkably weak above a certain size.  Uruguay (population: 3.5 million, FIFA ranking 9), is a match for much larger Argentina (population 45 million, FIFA ranking 8), which in turn is a match for much larger Brazil (population 220 million, FIFA ranking 3).  Similarly, Belgium (population 12 million, FIFA ranking 1) is evenly matched with France (population 65 million, FIFA ranking 2).  Indeed, today’s top 10 ranked teams include four countries with populations under 12 million (Belgium, Portugal, Uruguay and Denmark), while Germany (population 84 million) for the time being languishes in position 12.

And even amongst those countries with a very low population there are some standout national football teams, suggesting that if there is a minimum efficient scale, it may be very small indeed.  With a population of around 300,000, Iceland knocked England (population 55 million) out of Euro 2016, and reached an impressive FIFA ranking of 18 in 2018.

Quantitative studies support the view that population has weak explanatory power for football team quality.

A 2010 PWC study performed a statistical analysis in which total World Cup points were regressed against population, average income levels and a count variable based on the number of times a country has hosted the competition (with values 0, 1 or 2).  This included only 52 countries that have played at least 5 World Cup finals matches (so excluded China and India).  Even among this football-playing-country sample, population is insignificant once these other variables are included. 

Gelade (2007) finds that the relationship between FIFA ratings and (linear) total population is “vanishingly small”, finding in a sample of 204 countries that only 1% of variation in FIFA Ratings is explained by total population, and notes that this counterintuitive finding has also been reported by other studies.

The discussion above has focused on the Men’s game but considering the relative performance of teams in Women’s football reinforces the idea that factors other than population size are important for explaining football team quality.  For example, the US is ranked 1st in the Women’s FIFA ranking and 20th in the Men’s, whereas the comparative advantage arising from having a large total population to select from is equivalent for both the Men’s and Women’s teams.

Now imagine a strange parallel universe where the only two countries are Brazil and Australia.  Brazil is 10 times bigger than Australia and consistently wins when they play football.  In this parallel universe, researchers are tempted to conclude that the relationship between population and football team quality is very strong.  Not only are there sound a priori grounds for believing a larger population should translate into better football team quality, but this seems to be borne out by the only two observations available.  But this inference is not valid.  Brazil and Australia differ along various dimensions that are critical determinants of football team quality, such as footballing tradition and competition for athletic talent from other sports (football is the national sport of Brazil but football in Australia has to compete with other ball sports such cricket, Aussie rules, rugby league and rugby union).  Of course, this would be obvious in a world with hundreds of observations available; far less so in our parallel universe with two.

What has this got to do with online search engines?  

I should start by making clear that I make no claim that the apparent weakness of population scale effects in national football has any bearing at all on the strength or otherwise of any scale effects affecting search engine quality.  The lesson from the football analogy is that researchers could be fooled into thinking that they can see a strong scale effect if they compare a small number of subjects that differ in scale and quality and do not take account of other factors that also affect quality.  

My claim is that when it comes to analysing the effect of scale on search quality, competition authorities have not got far beyond the following reasoning:

Query data is used to produce search results (people are used to produce football teams).  More query data is better than less query data (more people to select from is better than fewer people to select from).  Google has many times more queries than Bing (Brazil has many times more people than Australia).  Google has much higher search quality than Bing (Brazil has a much better football team than Australia).  Therefore, query scale is a crucial determinant of search quality (population is a crucial determinant of national football team quality).

Some competition authorities have gone deeper than others, for example, by examining query level datasets to gain a better understanding of differences in the range and volumes of the distinct queries each search engine sees.    But a query level comparison of Google and Bing just confirms the obvious – Google has a scale advantage over Bing.  This, entirely unsurprisingly, implies that for any given distinct query, Google is likely to receive higher query volumes than Bing.  It follows that queries that are rare for Bing are not rare for Google, while the converse tends not to be true.  But this just supports the existence of a scale advantage.  It does not shed light on how this translates to quality and the relative importance of scale compared to other factors.  This would be like a researcher going to some lengths to establishing that not only does England have a higher population than Iceland, but also that for every left-footed person who can run fast (and who would therefore on paper make a good left wing back) in Iceland, there are 100 such individuals in England, and that for every tall agile person (who would on paper make a good goalkeeper) in Iceland, there are 100 in England.  This deeper assessment of the nature of the scale advantage should not be confused with an assessment of the explanatory power of scale for performance.

Yet the reasoning in italics above is clearly faulty. 

Companies, much like countries, differ in their histories, cultures and priorities.  Just as national football team quality may be better explained by length of football tradition, cultural factors and presence of competing sports than by population size, the quality of a company’s search engine may be better explained by length of time trying to make incremental improvements to search algorithms, the importance of experimentation and measurable improvement in a company’s culture, and the general strategic centrality of search to the company as a whole, which impacts among other things investment and hiring priorities.

These factors clearly cannot be assumed to be similar across Google and Microsoft.  This means that the extent to which scale advantages drive quality requires some unpicking.  But no competition authority to date has made a serious attempt to do this unpicking. 

So why is Google better than Bing in a given national market for search, say, Belgium?  Of course, data-scale could in principle be a factor that explains the difference in quality, and it could be an important factor.  But there’s another plausible story: it is about how many engineering hours the company has poured into improving its search engine. 

Google entered Belgium in March 2002, launching a localised version of its search engine with French and Dutch language capabilities.  Bing entered Belgium in October 2013, over 11 years later.  If search engine quality in Belgium is a function of how many Wednesday-morning-meetings search engineers have had to discuss improving search quality in Belgium, then Google might be better than Bing simply because its engineers have had about 600 more Wednesday-morning-meetings than Bing.  

So there are competing theories as to why Google is better than Bing in Belgium – is it data or is it the number of Wednesday-morning-meetings?  Both are consistent with a scale gap (under one theory the scale gap drives a quality difference and under the other it is caused by a quality difference).  Analysis of the extent of the scale advantage, even when based on granular query level data, cannot distinguish between these two competing theories.

Indeed, trying to unpick which theory is more plausible (or how much weight to place on each) is an area where competition authorities have yet to really scratch the surface.  They are still trying to make inferences on the importance of population for football team quality by comparing Brazil and Australia.

Written by Alfonso Lamadrid

21 June 2021 at 4:30 pm

Posted in Uncategorized

2nd Edition of the Rubén Perea Award | How to participate

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We are delighted to announce the Second Edition of the writing award in the memory of Rubén Perea. If you are a young competition lawyer under 30 (whether you work as a practitioner, official, academic or in any other capacity) we very much encourage you to apply. If you are reading this and do not fulfil the criteria: it would be great if you could ensure that your junior colleagues are made aware of the opportunity.

As last year, the winning paper will be published in a Special Issue of the Journal of European Competition Law & Practice, together with a selection of the very best submissions received (see here for the Special Issue and here for the announcement of this year’s winner and finalists).

Who can participate?

You may participate if you have not reached the age of 30 by the submission date (i.e. if you were born after 15 September 1991). Undergraduate and postgraduate students, as well as scholars and practitioners are all invited to participate.

What papers can be submitted?

You may submit a single-author unpublished paper which is not under consideration elsewhere. The paper may be specifically prepared for the award, or one originally drafted as an undergraduate or postgraduate dissertation.

The paper must not exceed 15,000 words (footnotes included; no bibliography needed).

Submissions will have to observe academic conventions. Prior to submission, make sure your paper follows the JECLAP House Style rules, which can be found here. If you do not find exactly what you are looking for, please follow OSCOLA’s rules (see here).

How to submit?

A paper, will have to be submitted via this link: https://mc.manuscriptcentral.com/jeclap.

IMPORTANT: As you go through the submission process, make sure that in Step 5, you answer YES to the question ‘Is this for a special issue’? and indicate it is for the Rubén Perea Award.

What is the deadline?

Papers will have to be submitted by 23.59 (Brussels time) of 15 September 2021.

Written by Pablo Ibanez Colomo

17 June 2021 at 10:16 am

Posted in Uncategorized

Why the DMA is much more than competition law (and should not be treated as such), by Agustín Reyna

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[Chillin’Competition is publishing a series of posts featuring the views of various experts and stakeholders in relation to the European Commission’s proposal for a Digital Markets Act. We have received several contributions and will also be inviting some experts to ensure a plurality of informed views from a variety of perspectives. For our previous posts on the DMA see here (by Pablo), here (by me), here (by Cani Fernández, originally published in JECLAP), and here (by Tim Lamb, Facebook). Today we bring you some reflections by Agustín Reyna, Director of Legal and Economic Affairs at BEUC, The European Consumer Organisation)]

Following a non-football(istic) exchange via twitter (see here), Alfonso invited me to share some thoughts about why I think it is neither necessary nor desirable for the Digital Markets Act (DMA) to allow for an efficiency defence in the compliance process with the do’s and don’ts included in Articles 5 and 6 of the Commission’s proposal. However, before sharing our reasons, I think it is important to briefly reflect about three elements closely related to this discussion: the nature and objective of the DMA; its legal basis and, its interplay with competition law.

Nature and objectives of the DMA                                                                                                                                               

The DMA’s objective is to ensure contestable and fair markets in the digital sector by laying down a list of obligations and prohibitions that would apply to designated gatekeepers in relation to a list of core platform services (CPSs). While it is possible to argue  – especially amongst those who consider that EU competition law is much more than allocative efficiency (see our thoughts on this issue here) – that the DMA shares the similar objectives as competition law, the way of achieving these objectives is different. Competition law addresses, case-by-case, business conduct that disrupts competition in the internal market by applying the rules laid down in Articles 101 and 102 TEFU whereas the DMA seeks to pre-empt certain practices or impose specific obligations with a view to increasing market contestability, reducing entry barriers, stimulating innovation from rivals and companies who depend on the gatekeeper to reach consumers and, ultimately, to ensure consumers enjoy a healthy digital environment (we wrote more about this here and here). Whether a company designated as a gatekeeper could have breached Article 102 TFEU, or not, is simply irrelevant for the DMA because, by its very essence and nature, the DMA is not competition law.

The DMA is (pre-emptive) regulation under Article 114 TFEU

Article 114 TFEU has allowed the EU to intervene by means of approximation of laws in multiple sectors and areas of law from horizontal consumer protection law to energy, telecom and pharmaceutical legislation. As such, the choice of Article 114 TFEU as a legal basis does not depend on the sector that is regulated but on whether the measure is necessary to achieve the objective of “establishing or ensuring the functioning of the internal market” in the terms of Article 26 TFEU. Even if one could argue that the use of Article 114 TFEU can be at times arbitrary due to the broad scope of intervention of Article 26 TFEU, I think there is a clear case for 114 TFEU as the legal basis of the DMA for three good reasons. First, the companies to be designated as gatekeepers are providing cross-border services and as such are likely to impact the functioning of the internal market. Second, the proposal introduces proxies in the designation of gatekeepers that would exclude purely domestic scenarios (i.e. requiring presence in at least 3 Member States) therefore ensuring to capture cross-border practices. And third, all parties concerned namely the gatekeepers, business users and end-users would benefit from a set of common rules regulating the provision of services to consumers in different countries contributing to the well-functioning of the internal market by on one side facilitating cross-border operations and, on the other side, reducing risks of fragmentation. 

Interplay with EU competition law

The DMA does not replace competition law. It rather complements it by pre-empting certain practices by companies some of which might also be prohibited under Article 101 or 102 TFEU. Furthermore, as mentioned above, dominance in the competition law sense is not a requirement for the application of the DMA, which follows a different path to designate gatekeepers (based on the combination of pre-established quantitative and qualitative criteria). It is, however, known that many of the companies to be designated gatekeepers have been, or are currently, subject to competition law proceedings. While it could be considered that there is a risk of friction between the two regimes, one needs to be mindful of the fact that once the DMA comes into force, competition agencies would have to take into account the DMA as part of the legal context in each specific case, thus reducing the risk of inconsistent outcomes.  

Why should efficiency defence not be allowed under the DMA?

While assessing compliance with competition law an efficiency defence is relevant, I do not think the same should apply to the DMA for the following reasons:

  • The DMA, unlike Article 102 TFEU, provides for well-defined obligations which would apply to well-defined gatekeepers in clearly identified services or markets (CPSs) to deal with clearly identified problems. Any possible trade-offs between efficiencies and the DMA objectives would have to be taken into account by the European legislation when designing the obligations of Articles 5 and 6.  This means that each obligation would have already internalised such efficiencies. Therefore, there is no reason why further flexibility should be introduced.
  • Since the DMA is not competition law and has a different legal basis (Article 114 TFEU), there is no need to apply competition law principles in terms of either substance or procedure. Think for example of consumer protection rules, which have been harmonised at EU level on the basis of Article 114 TEFU. The enforcement of these rules does not give any scope to companies to argue why a certain unfair term or practice is beneficial (or efficient) for consumers.
  • In the hypothetical scenario where there would be a competition case involving one of the designated gatekeepers on the basis of Articles 101 or 102 TFEU (or the national equivalent), the scope to bring efficiency defences would be framed by whether the concerned practices were covered or not by the DMA. This is something that would have to be taken into account in any case even before the opening of proceedings by the competition authority.
  • More practically, not allowing efficiency defences will make the DMA swiftly applicable and therefore operational as soon as the parties are designated as gatekeepers – or shortly thereafter – subject to specifications if needed for those obligations included in Article 6. Permitting gatekeepers to claim efficiencies would imply delaying the application of the rules when, as said before, this is simply not needed because any possible efficiencies would have been considered by the legislator when defining the scope of each obligation.  

To conclude, I do not see the legal or procedural need to add a new layer of complexities in the DMA by allowing efficiency defences. The DMA is much more than competition law. It is (and should become once adopted by the legislator) regulation precisely defining the limits of what gatekeepers can or cannot do when operating their CPSs in the internal market, in the same old-fashioned way other pieces of EU law in other sectors have defined the boundaries of private initiatives to safeguard clearly defined public policy goals. Competition law will continue to apply in tandem with the DMA. However, taking into account that competition law cannot provide all the answers (e.g. regarding scope of intervention) in the most optimal timeframe (e.g. the Android case is a good example, the case started in March 2013, the decision was adopted in July 2018 and only last week the remedies were amended in a positive manner), there are good reasons for the legislator to step in.

The DMA has the potential to become a blueprint for regulating digital markets, but its success will depend on its swift and effective application and enforcement. The very same companies that would be regulated by the DMA have asked for many years for legal certainty about what they can or cannot do. And this is exactly what the DMA is aiming at.

Written by Alfonso Lamadrid

16 June 2021 at 4:31 pm

Posted in Uncategorized

The Legal Question(s) That All Platform Competition Cases Have In Common

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Previous posts –mostly by Pablo– have already discussed many of the recent or ongoing platform-related cases (including Apple’s Epic lawsuit, the Commission’s investigations into App Store rules for music streaming apps and Amazon’s marketplace, the Google Shopping and Android decisions, the Italian Android Auto decision or the German Booking.com case). We have also discussed cases involving non-digital platforms, like Amex, Cartes Bancaires, Mastercard or Budapest Bank.

When you read the information that is publicly available about these cases or, even better, Pablo’s comments, you immediately realize that they share many commonalities. That might explain why Pablo’s views on all those cases are consistent, regardless of the companies affected by each investigation (and for that reason, somewhat of an anomaly among antitrust influencers).

Now, the usual disclosure: I am involved in several of the cases identified in the first paragraph, which is why I do not comment about them on the blog. In this post I will try to show that there is a fundamental legal debate that cuts across all of these various cases, and on which my position is also the same regardless of whether they may affect my clients, their competitors, or other parties.

Within the non-legal community, attention often focuses on questions on market definition and competitive relationships. This is understandable given (i) the very narrow market definitions in these cases, and (ii) that most commentators have a more defined view on the competitive relationship between many of these companies whereas they do not have a view on competition between, say, chemical by-products. This question is certainly of great interest, but it is a very context and fact-dependent one. The relevance of market definition questions in all these cases is no doubt a commonality, but it is one not exclusive to platform cases and, despite technical challenges (e.g. market definition in multi-sided or zero-price markets, multi-homing, etc), it is more an economic than a legal one.

What I have in mind now is a different commonality, or rather set of related commonalities:

First, all of the platform-cases identified in the first paragraph of this post concern vertical intra-platform rules. We know from our experience with vertical restraints that these are generally deemed not restrictive of competition when they enhance inter-brand (in this case inter-platform competition). This argument, of course, only works when we define a market in which platforms compete amongst themselves, which is not the fashionable thing to do and, as explained above, may or may not be the right thing to do depending on the case. This explains why, dominance thresholds aside, market definition is pivotal in these cases, but this is only part of what I wanted to discuss.

Second, while the platform-cases identified in the first paragraph of this post concern different practices/rules and different business models, all of them are about platform rules that restrain freedom of action on at least one side of the platform, generally to protect or maximize the value of the platform itself (think, for instance, of the justifications based on combating free riding common to all the MFN, app store, and payment system cases identified in the first paragraph of this post). This is unsurprising, as the very role of any platform sponsor is precisely to create value by harnessing positive externalities and preventing negative externalities via the design of platform rules.

This commonality also has a great impact on the legal analysis. As the Court has consistently emphasized in recent years, the question of whether a restriction exists in the first place, or whether such restriction is justified is independent of market definition, and it is also not one that can be addressed (one way or another) in the abstract. Answering this question in each case requires a comprehensive and context-dependent and multi-sided analysis, because very often the same practices will restrain competition on one side and will stimulate competition on the other. It is generally understood that practices enhancing a platform’s value may, depending on the circumstances, benefit not only the platform’s sponsor, but also consumers and business users in the aggregate. But sorting out and balancing the direct effects of a practice on multiple interdependent markets is complicated in practice. The recurring question then is how the legal arguments are framed  who needs to prove what, and at what stage? That was the key question in the US Amex case, it was the key question in the EU payment system cases (Cartes Bancaires, Mastercard, Budapest Bank), and, for the reasons recently explained by Pablo here and here, it arguably should have been the key question in other platform cases including ISU and the German Booking.com case. Concerns about carrying this burden are precisely what explains the remarkable proposals to shift the burden of proof in platform cases, which have now made it to the DMA proposal. Like in the case of market definition, this is a question that will systematically arise in these cases, so it is certainly a meaningful legal commonality but, again, this is only part of what I had in mind.

The observation that triggers this post has to do with the very meaning of the notion of anticompetitive effects:

Third, if you think about it, all of the cases identified in the first paragraph of this post seek to fine-tune (sometimes second-guessing) different platform arrangements in situations where there is no apparent risk of anticompetitive foreclosure. Few would argue, for example (and I will leave my cases aside, because my belief that they are the best examples might not be objective) that Amex, Visa or Mastercard foreclosed anyone, that Amazon is likely to exclude or marginalize merchants or that Apple will ever have the hope of driving Epic or Spotify out of the market.

Most business users benefit from the opportunities offered by these platforms (otherwise platforms would not prosper), but would like to enjoy better conditions (can’t blame them; who wouldn’t?). This is why the concern in these cases is often about competitive (dis)advantages, fairness, or about the situation of specific business users, and not so much about actual or potential foreclosure (as understood in the case law). This is also why, as observed by the DMA’s Impact Assessment Report, some Member States wish to address these situations via laws on abuse of economic dependency. And this is also why the DMA Explanatory Memorandum (p.8) argues that competition law “is not sufficient to deal with all the problems associated with gatekeepers, given that [practices will not be captured] if there is no demonstrable effect on competition within clearly defined relevant markets”.

At the end of the day, regardless of market definition, regardless of business models, and regardless of the specific theory of harm, all of the platform-cases identified in the first paragraph are mostly about the optimal distribution of rents (or, as Pablo put it here, a fight for a larger slice of the pie). Commentators that strongly support some of these cases, and who observe that these have been transplanted into the DMA’s proposed obligations, have also identified the reallocation of rents as one of the DMA’s key goals (which necessarily means that the same applies to the cases from which these obligations originate). Depending on your views and perhaps also on your business interests this may be a positive or a negative development (we can leave that debate for another day), but it does mark an important paradigm shift in competition law. This question appears to have featured prominently and very explicitly in the Epic v Apple trial, but perhaps has not received enough attention and reflection in the EU. Hence this post.

Written by Alfonso Lamadrid

7 June 2021 at 6:03 pm

Posted in Uncategorized