28 SEPTEMBER 2020 - Concurrences
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28 SEPTEMBER 2020
Olivier FRÉGET Anne-Claire HOYNG
Partner Director - Global competition
Fréget & Associés, Paris and consumer law
Booking.com, Amsterdam
Thomas KRAMLER Moderator: Antoine CHAPSAL
Head of Unit - Antitrust Partner
E-commerce and data economy Analysis Group, Brussels/London/Paris
DG COMP, Brussels
Alexandre DE STREEL
Professor, UNamur
Director of CRIDS/Namur Digital Institute
Joint-Academic Director, CERRE
Follow the discussion live on Twitter @CompetitionLaws #PlatformRegulation
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Regulation of platforms: The EU Digital Services Act Introductory remarks Antoine Chapsal – Analysis Group / Sciences Po Monday 28 September BOSTON CHICAGO DALLAS DENVER LOS ANGELES MENLO PARK NEW YORK SAN FRANCISCO WASHINGTON, DC • BEIJING • BRUSSELS • LONDON • MONTREAL • PARIS
Antoine Chapsal
What is a platform?
▪ A platform creates value by connecting two or more groups of customers,
with each group affecting the others’ utility in a specific way
▪ These complex interactions between each side of the platform that define its
multi-sided nature are referred to as “indirect network effects”
A platform “can affect the volume of transactions
by charging more to one side of the market and
reducing the price paid by the other side by an
equal amount; in other words, the price structure
matters, and platforms must design it so as to
bring the both sides on board.”
Rochet & Tirole (2006)
4Antoine Chapsal
Does EU competition law need to be complemented?
▪ Are these specificities likely to harm consumers?
̵ There could be some natural concentration process in multi-sided markets
̵ However, the development of platforms has been extremely beneficial to
consumers:
• Addressing changing needs and an unmet demand
• Introducing new technologies and products
• Solving some market failures
▪ Regulation / Competition policy
̵ Competition policy: Appropriate when it results in efficient resource allocation and
is not hampered by firm behavior
̵ Regulation: Useful when competition yields inefficient resource allocation
▪ Then, either:
̵ These markets clear, and authorities should focus on enforcing competition rules
̵ Or, the market still cannot function efficiently, and authorities should consider the
regulation of the market (e.g. access to essential facilities)
5Antoine Chapsal
The Digital Services Act’s objectives
Objective 1: Frame the responsibilities of digital services to address
the risks faced by their users and to protect their rights
Objective 2: Create a « level playing field » in the digital economy
▪ The Commission plans to create two instruments to guarantee fairness and
constestability
̵ The “Ex-ante regulatory instrument for large online platforms with significant
network effects acting as gate-keepers” targets specifically large platforms
̵ The “New competition tool” (NCT), part of the DSA Package would provide the
Commission with extended powers over all sectors
6Antoine Chapsal
Identify market failures
Some examples: Market power and information asymmetry
▪ Market power
̵ Indirect network effects can lead to market power
̵ However
• Need to understand why a platform may enjoy market power: data? endogenous
entry barriers?
• Many of the industries in which indirect network effects are important do not have a
single monopoly provider and do not seem to be tending toward monopoly
̵ Product differentiation
̵ Multi-homing
▪ Information asymmetry
̵ Platforms can increase/create information asymmetry
̵ Platforms can reduce information asymmetry
7Antoine Chapsal
Identify market failures
When platforms increase information asymmetry: Privacy and protection of
users’ rights
▪ Significant information asymmetry between the individual who offers their data and
the platform that requests it - Salience
▪ Discrepancy between the individuals’ short term tangible benefit and potential long-
term harm
▪ Linked to another market failure: bounded rationality
8Antoine Chapsal
Identify market failures
When platforms reduce information asymmetry
▪ Taxi: Ex-ante regulation protects consumers from “hold up” situations
̵ The rider does not know the driver, the duration of the ride and the price when
hailing a taxi
̵ Without price caps, the driver could charge an unfair price for the ride
̵ This could lead to an under-provision of services
▪ Uber, Lyft and others provide all the information necessary for the
transaction to take place
̵ Price information (no hold up possible)
̵ Information on the characteristics of the good exchanged or purchased
9Antoine Chapsal
Conclusion
Understand the functioning of these markets
Identify market failures
Assess a cost / benefit analysis of an ex-ante regulation
Adapt competition policy to efficiently address anti-competitive behavior
10Gatekeeper platform regulation
Thomas Kramler, DG COMP
The views expressed do not necessarily reflect the Commission’s positionThomas Kramler
Problem Definition
• Many reports point to key characteristics of digital markets:
Economies of scale and scope
Network effects
Importance of data
• This may lead to gatekeeper positions
• Does EU competition law need to be complemented?
12Thomas Kramler
EVP’s three pillar approach
To ensure the contestability and fair functioning of digital and other markets, EVP Vestager
announced a three-pillar structure of complementary and therefore mutually reinforcing measures:
1. Continued vigorous competition law enforcement (including notably the use of interim
measures and more prescriptive/restorative remedies, where appropriate);
2. As announced in the Communication “Shaping Europe’s Digital Future”, the Commission
will explore, in the context of the Digital Services Act package, ex ante rules to ensure
work streams
that markets characterised by large platforms with significant network effects acting as
Parallel
gatekeepers, remain fair and contestable for innovators, businesses and new market
entrants; and
3. Consider a new competition tool allowing to deal with structural competition problems
that cannot be tackled or addressed in the most effective manner on the basis of Articles
101 and 102 TFEU.
13Thomas Kramler
DSA - ex ante regulation of large online platforms
• Digital Services Act (DSA) package: inter alia review of the E-commerce Directive (DGs
GROW and CNECT).
• A part of the DSA package focuses on “ex ante regulatory instrument for large online
platforms with significant network effects acting as gatekeepers”
• IIA and consultation published on 2 June 2020, consultation deadline 8 September 2020
(Parallel to COMP NCT consultation).
• Two main options:
Option 3.a: ex-ante prohibitions and obligations on large online platforms (“blacklist”);
Option 3.b: additional case-by-case intervention tool with tailored remedies depending on
circumstances.
14Thomas Kramler
Regulatory Models
• Telecom regulation
• Unfair trading practices laws
• Market investigations (CMA)Thomas Kramler
Main steps and timeline
16Regula'on of pla-orms:
The EU Digital Services Act
Alexandre de Streel
University of Namur, CRIDS, CERRE
Concurrences Webinar
28 September 2020
17Alexandre de Streel
18Alexandre de Streel
OUTLINE
1. Characteris'cs of a « good » DSA
2. Objec'ves
3. Criteria for interven'on
4. Remedies: prohibi'ons and obliga'ons
5. Ins'tu'onal design and New Ways of Enforcement
6. Take-ways
19Alexandre de Streel
1. Buono and CaTvo Governo
Characteris'cs of a « Good » DSA
20Alexandre de Streel
Characteris'cs of a « Good » DSA
Network effects + Data + Ecosystems = Need asymmetric rules
Massive market and informa'onal power Focus on Large Gatekeeper
Too big to care and rule Pla>orms
- Efficiency and mulBple trade-offs (short/ New Ways of Enforcement
long term, compeBBon/efficiency, Experimental
innovaBon)
- Rapid and unpredictable innova'on
ParBcipatory
- Informa'on asymmetry Data-based
21Alexandre de Streel
2. Objec'ves
• ProtecBng effecBvely compe''on
• When anBtrust is too slow or unable to act
• PromoBng market contestability and innova'on
• Ensuring B2C and B2B fair relaBonships
• PromoBng the Digital Single Market
• Speeding up an#trust and/or other objec#ves?
• This is key in deciding the possible regulatory models menHoned before
• Telecom regulaHon, Unfair trading pracHces laws, Market invesHgaHons
22Alexandre de Streel
3. Criteria for interven'on
• Size
• Unique users, Bme on site, proporBon of interacBons, …
• Gatekeeper posiBon
• Dependency: large users based which have low ability and incenBve to mulB-home or switch
• Enduring posiBon
• Entry barriers to exis'ng services
• Entry barriers to future services: control of innovaBon capabiliBes (data, key pla>orms elements, risky and
paBent capital, skills)
• Orchestrator ecosystem
• Conglomerate presence enabling consumers’ synergies but also offensive and defensive envelopment
• Should they be cumula#ve, alterna#ve, indica#ve?
• Depend on the risks and the costs of regulatory errors of type 1 (over regulaHon) and type 2 (under
regulaHon)
• Which can be miHgated by experimenta#on and review
23Alexandre de Streel
4. Remedies: Prohibi'ons
To guarantee fair and compe''ve conducts
• List of conducts for which there is enough certainty that they are generally harmful
• Dis-empowering consumers to mulB-home or switch
• E.g. default and nudges, anB-steering, limiBng data portability
• Dis-empowering business users to mulB-home or switch
• E.g. MFN, exclusivity
• Unfair contractual terms and prac'ces, building on P2B list
• E.g. retroacBvity, terminaBon/suspension, bundling
• Some forms of self-preferencing
• E.g. use of data, ranking
• List very precise and/or more open?
• Possibility of jus#fica#on? Reversal of the burden of proof with high standard
• Trade-off between risks of speed of intervenHon - regulatory errors, adaptability of the rules to technology
and market developments
• Adapta#on of the list as authoriHes learn from experience?
24Alexandre de Streel
Remedies: Obliga'ons
To guarantee market contestability
• Open Pla-orm Provisions
• Data sharing
• Access to other key inputs
• Interoperability
• How those obligaHons should be enforced as they require an
extensive governance system?
• How propor#onality should be implemented as those
obligaHons can be very costly to implement?
25Alexandre de Streel
5. Ins'tu'onal Design
• EU authority
• Possibly the Commission
• In close cooperaBon with exisBng or new naBonal authoriBes
(compeBBon, consumer protecBon, data protecBon, digital …)
• Possible tasks
• Designate Large Gatekeeper Pla>orms
• Control compliance with prohibi'on list
• Ensure governance of obliga'ons
26Alexandre de Streel
New Ways of Enforcement
• Par'cipatory
• Co-regula'on, commitments
• Not self-regulaBon which is oden self serving
• With meaningful remedy as last resort (such as structural separaBon, line of business restricBon) to
increase the bargaining power of the authoriBes
• Experimental
• For remedies design:
• Ex ante evaluaBon – A/B tesBng
• Ex post evaluaBon and sunset clause
• For DSA, esp. on criteria for intervenBon and list of remedies
• Easier to expand than reduce rules
• Data based
• Extensive informa'on gathering power for enforcement authori'es
• Efficient ways to process informaBon with AI tools: SupTech, RegTech
27Alexandre de Streel
6. Take-away
• MulBple objec'ves
• CompeBBon, but also contestability, innovaBon, fairness, internal market
• Asymmetric rules: Large Gatekeeper Conglomerates
• Two types of remedies
• Prohibi'ons to ensure compeBBve and fair conducts
• Obliga'ons to ensure market contestability and innovaBon
• Enforced by an EU authority
• New Ways of Enforcement: parBcipatory, experimental, data-based
28Concurrences Law & Economics Webinar
« Regula'on of Pla-orms: The EU Digital Services Act »
© freget-associes.fr 2020. All Rights
Olivier FRÉGET | Partner, Fréget & Associés, Paris
28 September 2020
Reserved.Points of discussion
Olivier Fréget
1. Taking some distance from the consensus about the need to
regulate the digital pla-orms?
2. Should a need of regula'ng Digital Pla-orms be evidenced,
which model of regula'on to avoid a Type I error?
© freget-associes.fr 2020. All Rights
3. Which counter-power?
Reserved.
301. A consensus… s'll debatable?
Olivier Fréget
• An obvious provoca've ques'on
• but raising such a quesBon should be the first scienBfic reasoning of any person: not to
consider as necessarily true what appears to be a majority consensus
• Three remarks about the consensus about regula'ng the digital pla-orms
1. The number of compeBBon law cases throughout the Union (and now, in the US) does
not give the impression that Digital Pla>orms are in “a blind spot”
2. Such consensus is based on private and public reports/opinions whose results or
opinions cannot be legally challenged … They are all of a poliBcal nature
© freget-associes.fr 2020. All Rights
3. The entanglement in the applicaBon of compeBBon law between poliBcal and legal
enforcement consideraBons has never been so obvious
• Someone from Sirius may even consider that, in some respect, a “digital witch-hunt”
Reserved.
campaign has been launched against online pla-orms
311. A consensus… s'll debatable?
Olivier Fréget
• Solving the issue requires balancing the risk between Error Type I /
Error Type II
• Error Type II = under-regulaBon = alleged current situaBon
• Error Type I = over-regulaBon
• The underlying hypothesis, on which the so-called “consensus” is based,
is
• that even if the Digital Pla>orms were not under-regulated, the risk of
© freget-associes.fr 2020. All Rights
over-regulaBng would not be harmful for Europe
• … as it would be borne by non-EU businesses, i.e. the GAFAM
Reserved.
• is it so obvious ?
321. A consensus… s'll debatable?
Olivier Fréget
• Risk / costs of over-regula'ng Digital Pla-orms would not only be borne by non-EU
players
Over-regula'ng one sector could lead to losing sight of other issues
• i.e. is the EU’s problem the size of Google/Facebook/Apple and others OR the non-
scalability of EU business due to the obsolescence of the various regulaBons which lock
the “old Europe”
• Structural inefficiencies of the “tradiBonal” economy
Debates and passions around Digital pla-orms are drawing all the available staff resources of
© freget-associes.fr 2020. All Rights
the various na'onal regulatory and compe''on law agencies to the detriment of other issues
• Bringing a case which is not related to pla>orms but concerns the behaviour of tradiBonal
players is becoming more and more challenging for new entrants
Inadequate alloca'on of limited public resources entails a risk of under-enforcement of
Reserved.
compe''on law in other sectors
331. A consensus… s'll debatable?
Olivier Fréget
Risk of regulatory capture by EU companies, which:
Either do not wish to adapt to the digital transi'on
• Example: the French CompeBBon Authority (FCA) interpreted a new IP law
provision to impose upon Google a purchase obliga'on of a product/service it
did not want
• The FCA used compeBBon rules as a value sharing tool to sancBon Google for
having frustrated the State’s will => subsidiza'on of editors by a private actor
© freget-associes.fr 2020. All Rights
Or wish to be free-riders of new types of pla-orms
• Example: debates about access to data in the automoBve industry
Reserved.
342. Which regula'on model to address Type I
error?
Olivier Fréget
Three models available
The telecommunica'on ex-ante regula'on model to accompany the liberalizaBon of
the telecommunicaBon sector:
Temporary asymmetrical regulaBon based on an idenBfied structural market
failure on a specific market
Which cannot be solved by the mere applicaBon of compeBBon law
But could be solved by tailored remedies, proporBonate to the issues idenBfied
Prohibi'on of restric've prac'ces = the (very, very) old way of regulaBng markets,
© freget-associes.fr 2020. All Rights
which has produced huge harm to the economy (such as the prohibiBon of resale at
loss)
Black / white list of clauses (Do/Don’t) = the (very, very) old EU way of regulaBng
Reserved.
(former block exempBon regulaBon / arBcle 85-3 Rome Treaty / RegulaBon 17/62)
352. Which regula'on model to address Type I
error?
Olivier Fréget
The only model which may be transposable and would limit the risk of over-regula'on is the
telecommunica'on model BUT
The “over-regulaBon” was ulBmately monitored by the EU Commission (at least in theory)
The EU Commission was not acBng as legislator AND prosecutor + judge
All the steps of the reasoning (such as the idenBficaBon of the market and the non-
transitory, non-solvable market failure, the design of the remedies failure) require the
adopBon of decisions which then may be challenged before naBonal Courts, remotely
controlled by the ECJ
© freget-associes.fr 2020. All Rights
The interplay with Compe''on Law is s'll unclear 20 years later
Does the breach of a remedy involve a violaBon of arBcle 102 TFEU ?
Reserved.
363. Which counter-power?
Olivier Fréget
If the Commission enacts a directly applicable regula'on (such as the merger control rules), who will
counterbalance the power of the Commission when applying the new regula'on ?
A disBnct agency ?
A joint unit between the EU single market division and the DG Comp ? How to avoid the interplay
between compeBBon and regulaBon ?
Example : Facebook issue in Germany where the breach of GDPR may be seen as a violaBon of
compeBBon rules
Can we have sufficient trust in the ability of the ECJ to effec'vely and thoroughly control the EU
Commission?
© freget-associes.fr 2020. All Rights
If the Commission enacts a rule which will be applied by Member States
Human resources : trained people capable of handling such complex mauers are scarce resources
Overlapping with other naBonal regulaBons
Reserved.
37Conclusion: innova'on in technology is outside
Europe, but innova'on in regula'on is in Europe
Olivier Fréget
There is a risk of adding a new layer of regula'on instead of neutralising all the other
“sedimented” layers of tradi'onal regula'ons which are actually impeding EU business to
grow
Regulated tariffs, special rights of former incumbents
Social law rules….
Reestablishment of a separa'on of powers at the Commission level is a prerequisite before
giving it any addi'onal preroga'ves
Policy funcBon should be exercised independently from jurisdicBonal powers
Any new regulaBon should be set as temporary and the assessment of its effects should already be
planned
© freget-associes.fr 2020. All Rights
Possible overlaps between this new regula'on and the current (mis?)use of compe''on law
rules should be carefully assessed in order to avoid “non bis in idem” situa'on
CompeBBon law rules are currently used to design rather new “ex ante prohibiBons” sancBoned ex
post, which should not be possible
CompeBBon authoriBes should stop dedicaBng all their scarce resources to Digital actors...
Reserved.
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