Chillin'Competition

The digital economy has forced us to re-evaluate the effectiveness of our existing laws, methods, and tools. In this regard, Professor Nicolas Petit’s forthcoming book on Big Tech and the Digital Economy: The Moligopoly Scenario could not be timelier. It engages with these highly complex questions rigorously and with formidable clarity and it advances the argument that competition policy should focus on ex post intervention in tipped markets. Interestingly, this recommendation appears to be in sharp contrast with the Commission’s proposal for a ‘new competition tool’ (NCT) allowing ex ante intervention in tipping markets. Before an attempt is made to reflect on each suggestion, two caveats are necessary. First, the two proposals are at different stages of maturation. Petit’s recommendation is the culmination of many years of research and of a comprehensive and thorough analysis. On the other hand, the exact shape of the NCT is currently under consideration and its details are still to be finalised. Second, each option forms part of a bigger picture. The NCT in particular is one of the three angles of the ‘holistic and comprehensive approach’ favoured by the Commission.  The other two angles are continued vigorous antitrust enforcement in digital markets and ex-ante regulation of digital platforms, especially those with a ‘gatekeeper’ role.

With these caveats in mind, Petit advances a concrete framework for applying the existing rules in digital markets, which calls for certain adjustments but not radical reform. An important contribution of the book lies in the effort to operationalise the policy recommendation. Petit does this by critically assessing current doctrine and alternative options and by identifying possible solutions to methodological problems. This includes the proposed introduction of appropriate proxies for measuring competitive pressure as a substitute to current, often problematic, focus on structural market analysis. However, some aspects of the book lend themselves to criticism. For one, the practical feasibility of the proposed approach hinges on enforcers’ ability to distinguish between ‘tipped’ and ‘untipped’ markets. This task is easier said than done, if anything because there is no clear divide between the two. Rather, as Petit recognises, they are part of the same continuum. While this distinction is conceived of as a mental process for framing the analysis, one’s ability to draw on it remains crucial in the event that it may acquire legal significance. Furthermore, one of the perceived key benefits of  Petit’s proposal is that it avoids ‘the risk of decisional mistakes in unknown environments’, that is, the risk of ‘causing harm from interfering in complex businesses that are both rapidly moving and not fully understood’. One may observe though that doing nothing also entails risks and costs, especially in the case of tipping markets. This is a reasonable concern and, arguably, one of the reasons underpinning the Commission’s NCT proposal.

Indeed, the aim behind the NCT is to enable the Commission to deal with ‘structural risks for competition’ or the ‘structural lack of competition’, where these problems cannot be more effectively addressed through competition enforcement. Amidst concerns that antitrust intervention may come ‘too little, too late’ in digital markets, the NCT will allow the authority to intervene effectively and in time – for instance, by imposing remedies to prevent tipping. That said, if effective and timely intervention is the aim of the NCT, special attention must be paid to its design. Indeed, the experience from jurisdictions with similar mechanisms in place indicates that tools such as market investigations can be slow and burdensome. Therefore, it will be important to draw lessons from existing practice to ensure that the mechanics of its operation do not defeat its purpose. In any event, the triangular approach that the Commission is keen to pursue by combining the NCT with vigorous antitrust enforcement, and ex ante regulation of digital platforms calls for some caution. Much will depend on the exact content and scope of regulation and the NCT. In this respect, it will be important to ensure that the latter will not be used to circumvent the stricter requirements of antitrust enforcement, given the possibility of far-reaching remedies in the absence of ‘wrongdoing’, and that firms’ incentives to innovate will be preserved, especially if the NCT is to be employed against non-dominant undertakings, too.

The issues that both proposals touch on are very complex and uncertain and our understanding thereof is still a work in progress. This does not mean of course that we should wait until we know everything, but it is important to acknowledge that, whether one chooses to intervene ex ante or ex post or not at all, some errors and costs will occur. In light of this, one’s perception of the ‘best’ way forward is often a reflection of three things: one’s understanding about the goals of competition law; one’s beliefs about the role of the state in the market; and one’s attitude towards risk. It is thus unsurprising that views vary vastly. At the same time, there is a hard limit to any approach, and this is the rule of law: an end may well be justified and desirable, but not all means for achieving it may be equally legitimate. Ultimately, Petit’s recommendation and the Commission’s NCT proposal are not necessarily incompatible – rather, they are different. Regardless of one’s personal views on these matters though, Petit’s book makes a significant contribution to the ongoing debate and is a must-read for policymakers and competition academics and lawyers alike.