The Common Understanding of G7 Competition Authorities on “Competition and the Digital Economy”

While adopted on 5 June, this communique was embargoed until yesterday. It can now be found here. As it says on the tin, this document reflects the common position that the competition authorities in the G7 countries (namely, the Autoritá Garante della Concorrenza e del Mercato (Italy), the Autorité de la Concurrence (France), the Bundeskartellamt (Germany), the Competition Bureau (Canada), the Competition and Markets Authority (United Kingdom), the Department of Justice (United States of America), the Directorate General for Competition (European Commission), the Federal Trade Commission (United States of America) and the Japan Fair Trade Commission (Japan)) have reached on the digital economy. It may come as no surprise that the level of agreement is relatively thin, and that the document does not go into the most controversial topics addressed in the reports reviewed last week and further below. The common understanding begins with the mandatory section on the benefits of the digital economy. Investment and innovation in the digital…

UK CMA’s Digital Market Strategy

The CMA’s Digital Market Strategy, available here, could be said to be a reaction to the Furman Report reviewed last week,  even if the official reaction took the form of a shorter and earlier letter to Government which can be found here. The paper begins by describing why digital markets are different and how the CMA sees its role in their respect. The underlying features of digital markets include substantial network effects, economies of scale and scope, the role of data and the computing power to use it, scope for personalisation, and market concentration. Most of these are not new individually, but in combination they are novel. Combined with the pace of change, it can be hard for both consumers and public authorities to keep up. Some of these features, or their effects, raise questions, including: firms’ use of people’s data; the market power or ‘gatekeeper’ status of certain platforms; use of increasingly sophisticated technology to target advertising; or the risk of so-called ‘killer acquisitions’. The…

Japan’s Interim Study on Digital Platforms and Fundamental Principles for Improvement of Rules Corresponding to the Rise of Digital Platform Businesses (sic) [Updated with correct link]

Japan published late last year an interim study on digital platforms and a number of Fundamental Principles for Improvement of Rules Corresponding to the Rise of Digital Platform Businesses (sic), both available here. The study, which was produced by a working group, is structured as follows. Section I and II review the characteristics of digital platforms and the legal regime to which they are subject. The study begins by outlining the characteristics of online platforms and the various benefits they bring in terms of innovation, ease of market entry and consumer welfare. The study also notes how digital platforms benefit from direct and indirect network effects and from economies of scale. These features can raise switching costs between different platforms, which would tend to facilitate monopolisation or oligopolisation. Further, once a business model based on using and accumulating data is established data, a virtuous cycle may be created, where the competitive advantage of such business is maintained and strengthened through further…

Italy’s Big Data Report

This is a report published by Italian competition authority, together with the telecommunications regulator and the data protection authority, on how to address big data. It is available here. In my analysis below, I will focus on the elements of the report that touch or focus on competition law. I would also emphasise that this is not the first competition authority in Europe to look at data – the joint Franco-German report in 2016 also looked at the intersection between competition and data. The decision to pursue an interdisciplinary study arose from a recognition that the characteristics of the digital economy are very often such that it touches on the competences of the three authorities. The relationship between competition, privacy and pluralism requires a particularly close coordination between different regulators, not only to ensure effective regulatory action but also to identify and reconcile possible trade-offs between the values protected by different regulatory schemes. Furthermore, joint action will allow a better understanding of…

UK Furman Report – Unlocking digital competition, Report of the Digital Competition Expert Panel,

This Report, which can be found here, follows a review ordered by the UK’s Treasury to make recommendations on changes to competition and pro-competition policy to help unlock the opportunities of the digital economy. The report’s recommendations build on a number of propositions, namely that: the digital economy is creating substantial benefits; that a number of digital markets are prone to tipping and being ‘winner-takes-all’; market concentration in these markets both creates benefits and incurs costs; but government policy and regulation have limitations. In the light of this, the report found that the standard tools of competition policy, evaluating whether mergers can proceed and whether antitrust action is warranted to remedy abuses by companies, could play a role in helping to promote competition and the associated better outcomes for consumers and innovation. To do so, competition policy will need to be updated to address the novel challenges posed by the digital economy. Some of these updates can happen within current powers,…

EU group of experts, ‘Competition Policy for the digital era’

This Report, which can be found here, explores how competition policy should evolve to continue to promote pro-consumer innovation in the digital age. It is structured as follows. Chapter 2 describes the digital world and markets. The report focuses on three key characteristics of the digital economy: extreme returns to scale, networks externalities and role of data. Regarding returns to scale, the cost of production of digital services is disproportionate to the number of customers served. While this aspect is not novel as such (bigger factories or retailers are often more efficient than smaller ones), the digital world pushes it to the extreme and this can result in a significant competitive advantage for incumbents. Concerning network externalities, the convenience of using a technology or a service increases with the number of users that adopt it. Consequently, it is not enough for a new entrant to offer better quality and/or a lower price than the incumbent does; it also has to…

Stigler Center (University of Chicago) Report on Digital Platforms

This Report, which can be found here, was written by a working group who came together to address specific problems arising from the digital platforms’ reach, scale, scope, and use of data. They examined concerns stemming from the market structure contemporary platforms have created, and to investigate their competitive behaviour, including the consequences of network effects that can create barriers to entry for new innovators and entrench incumbents. The theme that runs throughout the report is the difficulty of entry into digital platform businesses once an incumbent is established. Whether the entrant is vertical or horizontal, has succeeded to some degree, is nascent, is a potential entrant, or is a large platform in an adjacent space, market entry improves consumer welfare by either providing more choice, different features, and a chance of higher quality, or creating a threat that spurs the incumbent to provide lower prices, higher quality and innovation, and to do so more quickly. The Report is structured…

Daniel Sokol ‘Reinvigorating Criminal Antitrust?’ (2019) William & Mary Law Review 60 1545

A number of non-cartel antitrust infringements remain crimes under US law, even if they are not prosecuted in practice. This article, available here, deals with the implications of recent claims for increased antitrust enforcement for the application of such provisions.  A natural extension of enforcement would be to advocate the use of criminal sanctions for various antitrust violations outside of collusion which are “on the books” but have not been used in over a generation. The article argues that a return to the criminalisation of non-collusion related antitrust abuses is problematic not only as a matter of optimal deterrence, but also unconstitutional as a matter of law. Section one describes how antitrust criminalisation is a form of achieving deterrence. Antitrust enforcement builds on models of optimal deterrence. Under an optimal deterrence antitrust framework, a firm or individual will be deterred where the expected costs of illegal activity, taking into account the probability of detection and magnitude of the penalties, exceed…

Beatrice Stange on ‘Romano Pisciotti v Bundesrepublik Deutschland: Increased Risk of Extradition for EU Citizens after Involvement in US Cartels’ (2019) Journal of European Competition Law & Practice 10(2) 89

This paper, available here , discusses the first deportation of an EU citizen to the US for competition law infringements. It focuses on a recent judgment by the Court of Justice of the European Union on this matter. A first section outlines the factual background of the case. In 2010, a US arrest warrant was issued for Italian businessman Romano Pisciotti on account of his involvement in the marine hoses cartel. In 2013, the German federal police arrested Mr. Pisciotti at Frankfurt Airport during a stopover of his flight from Nigeria to Italy. He was provisionally detained and, a few months later, the German authorities accepted the US request for extradition despite Mr. Pisciotti’s legal appeals, inter alia before the German Federal Constitutional Court. Other extradition requests from the US authorities had so far been unsuccessful, mainly because most international extradition agreements (including the Treaty between Germany and the US) require that the sanctioned conduct must be a crime in…