Relaxing whilst doing Competition Law is not an Oxymoron

Moligopoly as the Coexistence of Structural Monopoly with Cognitive Oligopoly or An Inquiry into the Theory of the Apologetic Com(Petit)ion (by Oles Andriychuk)

For a decade or so, we all are observing how quickly competition policy is moving from the technical expert niche to the headlines of the general media, and we all understand that the main reason for such transformation is the expansive growth of the digital economy and the digital society more generally. Such a metamorphosis requires good storytellers – those authoritative figures who while being recognised experts in antitrust technicalities are yet able to redesign and recreate the narrative, making it more approachable and embedded harmoniously into the broader societal discussions. Competition policy requires interpreters for the broader audience, and we see several attempts by established antitrust scholars of telling such a nice, catching, clear and contextual story about economic competition. Nicolas Petit’s book succeeded in this genre and also went beyond.

The central message of the book is placed in its very introduction – if not in the title: the current obsession with the problem of monopolisation of the digital markets is obviously not absolutely groundless, but, definitely, highly overstated; Big Tech are easy targets for sensationist media headlines, and our permanent engagement into the digital life makes everybody a bit of an expert on how to rearrange the structure of these markets. For Nicolas Petit such an approach is myopic. His overarching idea is that while narrowly defined digital markets are indeed far from being perfect, they are in fact very dynamic and innovative as all Big Tech companies compete with their local narrowly defined competitors, but mainly they compete with each other – both by penetrating into each other’s key markets but also by seeking Internet users’ attention, often making the choice being a zero-sum game.

I will be clear from the very outset: I disagree with the overarching normative message of the book while agreeing with many of its particular observations and arguments and while enjoying how it develops its ideas.

The book’s central proposition is the concept of moligopoly qua “the coexistence of structural monopoly with cognitive oligopoly”. The hypothesis is shaped in the Schumpeterian tradition considering monopolies as part and parcel of the economic competitive game. An attractive market will always have the doors open for newcomers. It is just a matter of time and luck. Theoretically speaking, this perception of the competitive process appears to be attractive indeed.

But economic competition is not only about microeconomic theory. It is also about macroeconomic policy. And it is also about politics. However sound and however appealing the Schumpeterian vision may be in theory, it is only a vision, the vision benefiting some and harming others. Put it bluntly, arguably, such a ‘survival of the fittest’ reasoning justifies mutatis mutandis virtually any monopoly and any dominance – be it economic, social, political or any other.

It is not to say that the problem of Big Tech omnipotence is not overrated. In some sense it is overrated, and the book depicts most of such instances skilfully and eloquently. But the power of Big Tech is overrated only in some sense. In other senses it constitutes a real challenge. So, the idea of moligopoly is useful in the sense of disproving various ‘scientific’ antitrust fallacies, which tend to infer a monopoly problem in almost all (digital) markets. Yet the proposed alternative in some sense mirrors the shortcomings of the vis-à-vis: the former can find a monopoly problem pretty much everywhere, and the latter can find a justification for the status quo pretty much everywhere too. Both are methodologically correct and theoretically sound, and both implicitly indicate the futility of searching for the right answers inside the theory of economic competition. My navigator out of this labyrinth is simple: the right answer in hard antitrust cases should be searched for externally, in the domain of politics, not in the domain of science. It is not to say that the contemporary antitrust policy should be political; it is to say that it is and has always been inherently political.

The next chapter argues that Big Tech are not only an indispensable sign of Schumpeterian innovation and market dynamics, but that they also tolerable from the neoclassical perspective. The central point of the detailed and economics-oriented considerations in this chapter is that there is no or minimal accidental discoveries. All digital business models are well-known and are operated by many competitors. Yet for some it works magically, while for others it is just works okay. In other words, what distinguishes a Big Tech company from tens and hundreds of its smaller- and micro-competitors is nothing but the right combination of a number of quite well-known factors – the factors which are neither secret nor hidden. Big Tech companies are not sitting on any secret knowledge, know-how or essential facility; they’ve emerged out of nowhere and can go to the abyss of the digital history as quickly if not faster; there is nothing, which cannot be replicated and improved by the newcomers.

Again, theoretically speaking, this could be the case. But the practice tells us that the power of the current Big Tech players is growing exponentially, and the polities which feel particularly affected by this unprecedented growth are not prepared to wait for the paradigmatic shift. Particularly if even in the best-case scenario such a shift would bring nothing but a new name. The concerns of most of the nations (which do not have national digital champions) is impersonal: if tomorrow we will be beginning our mornings not with googling but duckduckgoing for something, the attention would shift from Google to DuckDuckGo.

But even if we accept all these meticulous arguments, what would be the implications for the enforcement, if the liability threshold for unilateral conduct is much lower than the one discussed and (possibly) disproved by the book? Most of EU cases against Big Tech companies (perhaps with an exception of Android) concern rather peripheral aspects of their business models (apropos, I am writing this note literarily at the minute when the new Commission probe on Amazon is being announced). Nobody seriously thinks that Google or Amazon would endanger their market status of the default generic search / e-marketplace for self-prioritising some products or services more than would be minimally tolerated by the customers. Not consumers. Customers. Yes, they engage in self-preferencing indeed (who would not and how not to) but it is peripheral. And it is a potential cannibalising Pandora’s box. My crystal ball predicts the next troubles on the market of video-sharing as the self-prioritisation is getting a bit too disproportionate there indeed.

Even if new entries are perfectly possible, enforcers intervene not because Big Tech companies do not compete with each other, but because occasionally they abuse their dominance – the situation, which is absolutely plausible under the moligopolistic scenario. In most of the cases, they address only peripheral activities of Big Tech  – but in this tough race game between gatekeepers and regulators you stuck your neck out – you get your punch.

If the book’s normative objective is limited to defending Big Tech against the ‘guillotine’ of structural separation (which in any meaningful liberal democracy should indeed be seen as an instance comparable to corporate capital punishment) – this would be a timely objective indeed. Arguably, having this option on the table is a helpful bargaining tool, but using it in real life would be out of kilter. If, however, the normative objective is forward- rather than backward looking, and the theory of moligopoly is an apology for the digital M&As, then the standard of proof of the procompetitiveness of such mergers in my view is much higher than the book is ready to acknowledge.

In some sense, the book tends to reduce the problem of bigness to the problem of structure and develops its apologetic arguments against really radical claims of ‘the bigness as a curse’. The book correctly disproves these rhetorical arguments. Yet disproving such propositions does not eliminate the problem, perhaps only a specific angle of it: yes, the bigness as such is not a vice as long as the markets remain dynamic, but the key question remains: cui prodest? Who benefit from such markets design? Obviously, I am attempting to move the discussion from methodologically purified, context-neutral, abstract theoretical considerations to the real-life digital race. The race has nations and regions who are clearly net-beneficiaries and those who are rather net-contributors. The gap between them is increasing and using the vocabulary of the proponents of the idea of the Forth Industrial Revolution, nations’ position in the race today may well define their destiny for years and decades to come. The book meets its objective: it defends the merits of the current format of the global digital race (offering meaningful but incremental improvements), showing why the race is normatively compatible with the traditional antitrust metrics. But the global digital race is not about a neutral, technical antitrust as such. If stakes are high and expert teams are strong, both parties can meet the threshold of truthfulness. The economic and legal truths is not any longer the absolute criterion of legitimacy – they are being downgraded to a mere conditio sine qua non: only truthfully sound arguments can be accepted by decisionmakers; but not all truthfully sound arguments will be. In hard cases, if parties change their legal and economic teams – the teams change their ways for discovering the truth and their normative beliefs.

Finally, I agree with the book’s observation of the Sisyphean task of trying to change the systemic features of the digital economy by introducing measures of separation or interoperability. The rhetoric of separation is acceptable only as a rhetoric: one side knows that they can change the outcomes of elections with one click, another side knows that they can change the structure of the company with one click. Nobody should think about it; nobody should talk about it; but having such remedies deep under the carpet equates the flexing the muscles game. As far as interoperability concerns, it is a less controversial tool, though its effectiveness is rather limited too, and the beliefs in interoperability as the main remedy for restoring competition these days are likely to end up in disappointments. A meaningful interoperability is barely achievable in practice. The incumbents know thousand and one behavioural trick and default setting of how to make user interoperability experience worse than the status quo ante; even such an obvious binary option as cookies policy consent generates tremendous user fatigue; the laborious interoperability options can be easily buried under the endless interface of multiple choices. It is not to say that the initiatives are not timely. In my view they are. But they will not change the game substantively. Structurally, the issue of interoperability is similar to the issue of privacy paradox: everybody wants it, but nobody actually cares. In this respect, in my view all the interoperability attempts are akin to various boycotting campaigns: benevolent incentives of passionate enthusiasts lasting days or weeks with no measurable long-term implications for the targeted company…

Being enjoyable and highly recommended reading, the book captures our time. The time of transition from the modernist inward-looking, mathematised, self-centred scientific competition policy to the postmodern competition policy as a political chessboard. We are still somewhere in-between, and the book is somehow in-between too. Its salient methodological message is that the traditional antitrust metrics tells us only a part of the story, and that we have to search for a complementary toolkit – perhaps, we could find it in the business studies literature. For me however the issue is not in the futility of the neoclassical microeconomic – or for this matter any other – metrics as such. The issue is rather with our inclination to absolutize it. In hard competition cases any meaningful political reason to execute or to pardon is underpinned by some metrics, and it outweighs any other alternative more-or-less equally appealing metrics. The political choice predetermines the metrics – not the other way around.

Written by Pablo Ibanez Colomo

26 November 2020 at 9:53 am

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