The contention that certain digital platforms act as ‘regulators’ within the context of their own business models, and are subject to specific obligations under competition law as a result, is a key basis upon which authors have argued for a wide-ranging duty for dominant platforms to secure competition that is ‘fair, unbiased and pro-users’.
This article, available here, seeks to shed light on this contention, exploring its meaning and the implications for platform operators. Consideration is further given to whether the platforms-as-regulators notion aligns with alternative modes of regulation in the digital sphere.
Section II introduces the idea of platforms-as-regulators.
Increasing emphasis is being placed on the ‘gatekeeper’ role that platforms may play by controlling access to certain market segments or customers groups, thus rendering them an unavoidable fixture within digital ecosystems. By selecting (and enforcing) the platform policies and rules that delimit the parameters of competitive interaction within their own ecosystems, online platforms essentially ‘regulate’ these spheres, and thus themselves can be classed as ‘regulators’. Crucially, the rule-setting function of ‘regulator’ platforms dictates not only the immediate bipartite relationship between the platform and its individual users; it also impacts the wider competitive structure, in particular the once-removed relationship between individual supplier-users and consumer-users that contract across the platform. Unlike in other instances of market power, where platforms act as regulators the rules that they choose have a direct impact on the occurrence and/or terms under which third-party transactions take place.
The role played by the platform in such instances might thus be approximated to that of a public regulator. However, regulation, in this wide understanding of the concept, is an essentially ubiquitous phenomenon and hardly raises unique or particularly acute problems from a competition law perspective. Where things get complicated, however, is in terms of the legal implications of such ‘regulatory power’ for competition assessment.
There are two key questions: the extent to which regulatory power approximates to market dominance and thus triggers the potential application of Article 102 against individual platforms; and whether the platforms-as-regulators approach augments the categories of abusive behaviour and/or harmful effects recognised under that provision. While the answer to the first question is still unclear, as regards the second it seems that the conceptualisation of dominant platforms-as-regulators may increase the extent of their conceivable obligations under competition law. In particular, it has been argued that the duties flowing from platform regulatory power can entail a positive antitrust-derived ‘responsibility to ensure that competition on their platforms is fair, unbiased, and pro-users’. This duty can have several distinctive implications, such as making certain forms of misleading commercial practices (e.g. providing false information to customers about whether a platform’s responses to search queries are influenced by paid commissions) and self-preferencing by dominant platforms infringements of competition law.
Section III interrogates the rationale for the proposed distinctive treatment of platforms under competition law.
Proposals to treat regulatory power as a competition issue have borrowed, at least in Europe, from earlier case law on sports. The regulatory analogy, as it emerges from these cases, provides an unconvincing basis upon which to found any additional duties for dominant digital undertakings.
There are three reasons why it does not hold water in substance. First, that case law on competition law and sports is about anticompetitive agreements – in practice, instances of collective boycotts – not about the abuse of market power. Second, the sport’s case law does not derive a positive antitrust duty to avoid distortions of competition that might follow from the operation of regulatory rules, but instead sets out an exemption from antitrust liability for sports and delineates the limits of this exemption. Thus, the sports’ case law cannot stand for the proposition that regulators have additional obligations with respect to the choice or application of regulatory rules, over and above their ordinary duty to respect competition law insofar as their activities come within its ambit. Thirdly, and perhaps most importantly, that case law is supported by ‘the specificity of sport’, namely ‘the distinctive features setting sport apart from other economic activities’, such as the need to safeguard equal chances for athletes, athletes’ health, the integrity and objectivity of competitive sport, and ethical values in sport’. Certain regulatory activities of sporting organizations may moreover fall outside the definition of economic activity entirely, so that the competition rules have no application.
Section IV dives into established Article 102 TFEU case law to consider how and in what circumstances quasi-regulatory activities by dominant undertakings have previously come within the purview of the prohibition.
Beyond sports, there is wide competition jurisprudence that considers the antitrust obligations of (quasi-)regulatory actors. Four particular strands can be identified from the EU case law.
- First, there are a number of commitment decisions concerning electricity transmission system operators (TSOs) alleged to be limiting cross-border transmission capacity in order to manipulate national energy prices. TSOs have distinctive status in EU law, being regulated but also themselves performing a quasi-regulatory role in allocating capacity between competing electricity suppliers and in ensuring network security. The Commission held that the strategic preferencing of certain producers in allocating capacity could amount to an abuse of each TSO’s dominant position, indicating that bias in the exercise of a regulatory-type function can be abusive.
- Second are those cases involving collection societies that set rules dictating the interactions both between copyright-holders, and between rights-holders and those who license their content. Numerous cases address the question of allegedly excessive prices for collective licences, typically judged by reference to equivalent products provided in neighbouring jurisdictions. The Court has accepted that discriminatory behaviour by a collection society could be abusive where it resulted in demonstrative competitive distortion downstream. These cases demonstrate the scope for applying Article 102 against restrictive, discriminatory, or otherwise unfair practices by quasi-regulatory bodies charged with oversight of a specific market segment.
- Thirdly, there is a series of cases that involve abusive behaviour by holders of standard essential patents (SEPs) following participation in industry-wide standard-setting processes, either involving failure to negotiate in FRAND terms or by engaging in patent ambushes. These abusive unilateral conducts are intrinsically tied to this prior regulatory activity, with great emphasis being placed on the ‘exceptional circumstances’ of the particular regulatory context. The main proposition that can be extracted from this case law is that undertakings that participate in a self-regulation exercise cannot subsequently opt out to further their own interests.
- Finally, there is jurisprudence on abusive refusals to deal, pursuant to which the owner of an ‘indispensable’ input may be required to grant access to competitors, although again in ‘exceptional circumstances. The mandatory duty to contract that arises under Article 102 functions as a form of de facto utility regulation. This strand of case law undoubtedly supports the argument that Article 102 TFEU may constrain the choice of ‘regulatory’ rules that a dominant vertically integrated undertaking can implement, insofar as these choices restrict effective competition in a relevant market.
These cases have in common that the defendant undertaking was not merely dominant but held a ‘monopoly’ position in a more literal sense. This suggests a conceptualisation of regulatory power that is all-encompassing, whereby the defendant undertaking is not merely free of effective competitive constraints, but essentially controls the regulated sector outright. This case law suggests that, to qualify for scrutiny qua regulator under Article 102 TFEU, the undertaking concerned must have equivalent ability to set out and implement market-wide rules. These cases demonstrate a range of circumstances in which dominant undertakings that exercise regulatory-type (or ‘rule-setting’) functions may be obliged to desist from conduct that is either inherently unfair or which in some way ‘unlevels the playing field’ administered by the dominant firm. At the same time, the need for anticompetitive effects is difficult to square with ‘special constraints’ on digital platforms-as-regulators’, at least to the extent that this implies unique or particularised obligations for such entities.
Section V offers an alternative perspective on the underlying concerns.
The difficulty with the language of regulation is that, at its core, the concept is simply too broad and imprecise to be useful here. Characterising the functions of digital platforms as akin to those of a ‘regulator’ fails to distinguish them from other companies subject to competition law. More importantly, our particular unease about digital platforms is not merely that their actions are regulatory in nature. Instead, there is greater contemporary awareness of the broader role that platforms play as digital gatekeepers, namely as ‘market makers’.
Instead of focusing on platforms as regulators, it will be more straightforward to think about the obligations of dominant platforms-as-regulators through the lens of the special responsibility concept that applies to all dominant undertakings under Article 102 TFEU. The special responsibility of dominant companies, coupled with the specific status of platforms as digital gatekeepers, can serve to undergird a duty on digital platforms to keep markets working well for consumers in a broader sense. The most immediate practical implication for dominant firms is that a subset of market activities, while permissible in the absence of market power, becomes off-limits. The doctrine accordingly implies that dominant firms cannot merely act as self-interested profit-maximising actors, but must consider in tandem the effect of their actions on the presumed proper functioning of the market. The precise scope of the special responsibility of any dominant undertaking is determined by the actual market conditions and degree of market strength it possesses: it is thus a relative rather than fixed construct. Accordingly, the harmful effects that may stem from an anticompetitive exercise of gatekeeping activities are a relevant consideration in assessing the lawfulness of such conduct – allowing one to conclude, e.g., that a gatekeeper platform need not set platform access policies that best advantage its competitors but should not take deliberate steps to disadvantage them.
Section VI concludes.
Traditional competition enforcement is not the only game in town in terms of ‘regulating the regulators’. Acknowledging the limitations inherent in restricting the positive obligations of platforms-as-regulators to only those with a dominant the possible application of ‘general conduct rules’ to delimit the acceptable use of digital regulatory powers has been increasingly explored. First, there is the co-regulatory approach encapsulated in the P2B Regulation, which imposes obligations on providers of online intermediation services specifically in respect of interactions with business users. There have been multiple calls for ex ante codes of conduct to regulate the behaviour of digital platforms, currently taking form in the context of proposals such as the EU’s Digital Markets Act.
What all these regulatory tools share is an inversion of the perspective on digital platforms developed in this paper: from regulator to regulated. To the extent that one is persuaded by the platforms-as-regulators contention, each of these efforts would therefore represent the substitution of private regulatory choices with top-down public regulation. Ultimately, perhaps the principal objection to the platforms-as-regulators approach is simply that it is not helpful. It fails to pinpoint what is distinctive or particularly problematic about digital platforms. Moreover, given the abundance of alternative public regulatory efforts occurring in tandem within this sphere, such an approach risks conflation and confusion.
This note addresses the proposals in the European Commission Expert’s Report, but I think that, as shown by the review above, it deals with wider questions regarding how best to address the ‘regulatory’ role that platforms can play within their ecosystem.
As always with this author, I really enjoyed the paper. I am constantly in awe at the author’s ability to bring different stands of case law together and of her ability to develop useful categories. The typology of quasi-regulatory practices amounting to abuses in particular, and the identification of commonalities between them, is very useful and impressive.
Given all this, I was expecting the author to develop a proposal on how to approach platform conduct that falls outside the traditional scope of competition law and amounts to forms of ecosystem ‘governance’. I was thus a bit disappointed that the proposed solution revolves around a loose reading of a famously loose standard, as is the case with ‘special responsibility’. True, this concept can provide cover for EU competition law to be used against ‘governance’ practices; what it fails to provide, however, is any practical guidance as to which conduct should be deemed unlawful. This is something that I think will require more work in the future.