The paper, which can be found here, identifies a number of areas where competition law may intervene in the blockchain sphere, and discusses what the best approach to problems in this area are.
One of the authors spoke at the OECD on the blockchain – you can see the video here.
The paper is structured as follows:
It begins with a short introduction to the blockchain technology. The paper reviewed above provides a much more detailed intro into the topic than this paper, so I am not going to repeat it here.
Section III then looks at the interplay between blockchain and competition law. It starts by recalling that competition law provisions apply to undertakings. From a competition law perspective, the blockchain landscape of today is analogous to that of search engines, e-commerce platforms and algorithms in the 1990s. Ten years ago, no one thought that competition law authorities would focus their enforcement priorities on these applications, triggering investigations and, in certain cases, hefty fines.
The authors identify three potential areas of antitrust scrutiny:
- Information exchange – Blockchain provides a platform that is suitable for various purposes, offering real time records of actions accessible to every user. Hence, if blockchain participants share competitively sensitive information, this may facilitate collusion. The main concerns for enforcers in this regard are likely to be with the creation of price or output monitoring systems.
The paper’s analysis broadly follows and applies existing (EU) competition law; but the authors identify two challenges for competition law that are specific to blockchain technology. First, a blockchain can span the world. The relevant conduct, such as uploading commercially sensitive information, can thus take place anywhere in the world and have effects in various jurisdictions. It follows that global enforcement coordination is an important issue both for competition authorities and investigated companies. Second, it is unclear how competition law should treat the vendor or manager of the relevant distributed ledger network.
- Access questions – While the market for blockchain services is still to be defined and market dynamics are unclear, it is possible that some networks will grow into a bottleneck position as this niche market becomes more mature. The typical competition issues in such a scenario relate to pricing, or other terms that could exclude smaller competitors or be used as a barrier to entry for new ones. Furthermore, “closed” blockchain networks could also raise issues related refusal to access.
- Paid prioritisation – This issue emerges as part of the net neutrality debate. It is relevant for competition mainly as a result of competition authorities increasingly relying on concepts of fairness and neutrality as regards online platforms. Relevant factors for competition analyses of paid prioritisation include: (i) whether paid prioritisation within a blockchain is a problem for consumers or small businesses, (ii) whether there are alternative blockchain networks on which those users can rely, and (iii) whether those on the blockchain network who cause the clearance of transactions to be bottlenecked are easily identifiable.
The article concludes with a discussion of whether regulatory or competition law authorities are better placed to deal with these challenges.
It is not only competition authorities that are likely to have an interest in these aspects of blockchain technology. Telecommunication, network or financial regulators will likely share this interest. Given its affinities with the net neutrality debate, regulators will likely be most interested in paid prioritisation. At the same time, adopting regulation at a very early stage may not be appropriate to a market that is still in flux. Thus, the authors conclude that it is likely that competition law will be deployed as the most suitable tool for dealing with all the matters reviewed above, at least in the immediate future.
This paper takes a practical approach to competition enforcement as regards the blockchain. It is interesting, and it implicitly highlights a number of issues. First, by skating over the problem of how to identify an undertaking as regards blockchain, the authors avoided what I believe is the main conceptual challenge for competition law: how to identify the subject of its investigations in a truly decentralised system.
Then again, the authors’ approach is quite traditional, which points to blockchain not being that different from the current subjects of competition enforcement. This fits with my view, which is broadly sceptical that the blockchain will challenge the foundations of competition law, at least in the short term. The blockchain debate is currently extremely speculative, and, to my mind, somewhat lacking in perspective – I sometimes replace ‘internet’ and ‘intranet’ for ‘permissionless’ and ‘permissioned’ blockchain, and it does not seem to make much difference to the argument. We may have to wait a bit longer until we understand whether the blockchain truly changes the nature of competition law.
It must be said that the most popular paper on SSRN does not share this perspective last year, which I review below.