CREATe researcher Florence Thepot reports from CLaSF Workshop on Competition and Regulatory trends in Digital Markets, Lisbon Law School, 14 April 2016, where she spoke on ‘The role of digital platforms in the creative industry; Consumer Welfare v. Innovation?’.
On 14th April 2016 I attended a Workshop on Competition and Regulatory trends in Digital Markets organised by the Competition Law Scholars Forum (CLaSF) and Lisbon Law School (in conjunction with its Jean Monnet Chair in Economic Regulation in the EU). The workshop took place at Lisbon Law School.
Created by UK-based competition law scholars Prof Barry Rodger, Prof Angus MacCullogh and Prof Alan Riley, ClaSF workshops take place twice a year (usually every Spring and Autumn) in different cities in Europe. Workshops always feature topical competition policy topics and are a quite unique forum for lively scholarly debate about competition policy, in a friendly atmosphere. Speakers are scholars from institutions all over Europe, and all levels of seniority in academia are represented (including PhD candidates). Launched in 2004, the Competition Law Review (refereed journal) receives paper submission following each workshop as well as any other paper falling within the scope of the particular issue.
The last workshop held in Lisbon raised the very topical questions of competition law and regulation issues associated with digital markets, at a time when the EU is working on achieving a Digital Single Market – which is currently uncompleted compared to other areas.
Following a brief introduction and warm welcome by Prof Barry Rodger and Prof Luis Morais; Prof João Confraria (Católica University, Member of the Board of ANACOM, Electronic Communications Regulatory Authority) delivered the keynote speech on the future of ex ante electronic communications regulation. João Confraria delivered a very thorough and clear overview of the determinant of regulation in the electronic communications sector, in light of the drastic technologic changes associated with the rapid rise of digital markets. His presentation explained how the political goals of EU regulation in the telecoms, such as universal service and net neutrality may affect the efficiency of the intervention in such sectors. The speaker also highlighted the role of ex ante regulation within the Digital Single Market framework launched in 2014. For example, there is room for improved and harmonised regulation to enhance trust in e-commerce transactions, and security in telecoms; areas of growing importance in which there are regulatory gaps at the moment. The speaker then provided a framework enabling discussion of the design and evaluation of future ex ante regulation in a digitised economy. One of the key takeaways is that while access to networks may need deregulation, oligopolistic market structures characterising the telecoms and security issues demand for extra ex ante regulation.
The Workshop was composed of 4 sessions.
In the first session, Dr Konstantina Bania (Robert Schuman Centre, European University Institute, Florence) discussed the role of consumer data in the Enforcement of US and EU Competition Law. Departing from the commonly heard argument that antitrust agencies should not be concerned with issues relating to ‘privacy’, Konstantina Bania demonstrated how the collection, processing and use of consumer data may impact competition analysis. First, she explained, the level of privacy afforded to consumers, which is affected by data gathering and usage, is a parameter of quality of the product or service offered by the data-driven firms under examination. As such, it should be taken into account when attempting to delineate the boundaries of the relevant markets. Konstantina convincingly argued that conducting the market definition exercise by reference to quality considerations is neither revolutionary nor impossible. She did so by illustrating the approach followed by antitrust agencies in several cases in numerous sectors where non-price quality-related features affected the outcome of the decision. Turning to the competitive assessment, she showed that consumer data may also be relevant to the examination of whether the firms under scrutiny engage in exclusionary conduct and illustrated this point by referring to recent cases that concern companies imposing data portability restrictions (e.g. Google preventing advertisers from transferring ad data to rival platforms). Konstantina stressed, however, that not every dominant firm setting restrictions on data portability, including Google, is liable for antitrust infringements; whether switching costs indeed generate lock-in effects is an issue that must be assessed in a diligent manner. It must also be carefully balanced against the incentive to innovate. She then proceeded with the impact of consumer data on merger control, arguing that in recent cases such as Facebook/Whatsapp and Google/Doubleclick competition authorities based clearance decisions on flawed assumptions about the ability and incentive of the merging firms to engage in data-related exclusionary conduct post-merger. Another very relevant question raised in the presentation was that of whether consumer data could constitute an ‘essential facility’. Based on the legal standards set by EU and US courts as well as recent case law on both sides of the Atlantic, Konstantina raised doubts as to whether the law, as it currently stands, could lead to a decision that imposes on the data-keeper the duty to share customer information with their competitors.
In the second session, the speakers presented different competition issues and cases that arise in specific jurisdictions. In a joint presentation Mariya Naulo (University of Michigan) and Gul Sirin Gok (Strathclyde University) delivered a comparative analysis of how the EU and the US laws have approached competition issues arising in digital markets. Drawing from a series of landmark cases in both jurisdictions, the authors concluded that there may be more room in the EU for application of competition rules to digital markets than in the US (for example, the FCC deals with most of the issues in the US telecommunications sector – owing to relevant statutes ). Different avenues are also used to deal with questions of net neutrality and privacy that interface with competition law. Prof Sandra Marco Colino (The Faculty of Law, Chinese University of Hong Kong) discussed the role that the recently introduced competition law regime in Hong-Kong may have in addressing issues associated with digital markets that are, a heterogeneous access to broadband and insufficient consumer protection in the area of internet services. Drawing from other jurisdictions’ approaches (with a particular focus on the EU) to similar regulatory challenges, she provided policy recommendations on how to ensure the effectiveness of Hong-Kong’s competition law in complex areas that are the digital markets.
In the third session, Dr Viktoria Robertson (University of Graz) tackled the difficult question of market definition in digital markets. Based on EU and US case law, she explained the manner in which conventional market definition is challenged by the special characteristics of digital markets. She concluded in stressing the importance of developing a coherent competition law approach – and that in a cross-Atlantic consistent way. Importantly, while it may not be an adequate basis for the measure of market power, market definition in digital markets helps provide an analytical background for developing the theory of harm on which the case narrative can be built. My (Florence Thépot, University of Glasgow) presentation entitled ‘The role of digital platforms in the creative industry; Consumer Welfare v. Innovation?’ discussed the manner in which digital platforms affect the balance of interests between users and IP rights holders. Focusing on the music industry, the presentation reflected on the impact of market power and network effects characterising digital platforms active in that sector on the trade-off between consumer welfare and innovation. The main claim is that both consumer welfare and innovation may be affected positively by market characteristics of digital platforms, if the focus is on longer-run innovation – defined as the creative process and cultural diversity. The conclusion also related to the Digital Single Market. It will be relevant to see how the EU initiatives may promote innovation and consumer welfare – and if there is a necessary trade-off between both objectives.
In the final session, Prof Francisco Marcos (IE Law School, Madrid) discussed the difficulty for competition enforcers to deal with unilateral conduct by dominant firm operating in innovation-intensive industries. In these industries, while companies that do not innovate at a sufficient pace may exit the market, the best innovators are likely to be in a position of dominance – which make their practices being under higher antitrust scrutiny. Francisco Marcos’ presentation provided a framework for integrating innovation into the competitive assessment of unilateral conduct by dominant innovating companies. Dr Miguel Sousa Ferro (Law School, Universidade de Lisboa) discussed the implication for competition assessment of free markets. Gratuity is indeed another key feature of digital markets – since most of the time users do not pay to use online services – which complicates the application of competition law in many ways. Miguel Sousa Ferro provided an overview of recent cases in which abuse of dominance had to be considered in markets where online services are provided for free.