The digital economy forms a central driver to future prosperity—delivering waves of innovation, efficiencies and consumer welfare. It has stimulated a shift in market dynamics, paving the way for the emergence of key platforms, networks and the proliferation of multi-sided markets.
These changes raise questions as to the normative scope of competition enforcement. The question—‘Is this a competition problem?’—has become common in the face of new business strategies, new forms of interaction with consumers, the accumulation of big data and the use of big analytics. Indeed, new market realities and business strategies raise questions as to the optimal use of competition law, its effectiveness and, more broadly, its goals.
While the process of digitalisation is global, its handling by competition enforcers is nationally or regionally oriented. Competition law and its interpretation are path dependant and rooted in ideology. It is accepted that competition law forms an integral part of a polity’s legal, social and political fabric and ‘cannot be pursued in isolation, as an end in itself, without reference to the legal, economic, political and social context.’ (European Commission, XXIInd Report on Competition Policy, 13). Accordingly, answering the question ‘What is a competition problem?’ under EU law, may lead to different answers than in other jurisdictions and may reveal system friction.
With this in mind, the European Consumer Organisation, BEUC, has initiated a discussion and consultation process aimed at exploring the scope and limits of EU competition law and its application to the digital economy. A discussion paper, published in August 2018, provides the basis for the consultation and outlines the scope of EU competition law and possible intervention benchmarks. It notes the pluralism of goals which underpin the EU regime. Among them the protection of: consumer wellbeing and welfare; the interests of competitors and consumers; the efficient allocation of resources; the structure of the market; undistorted competition; and the promotion of European market integration.
This pluralism of goals, unique to the EU, provides much needed flexibility of scope to address many of the challenges raised by the digital economy. It underpins EU competition law’s ability to effectively capture price and non-price effects, both downstream and upstream, which harm direct or indirect users (General Guidelines para 84). It provides a versatile vehicle to appraise network effects, platforms, and data pools. Furthermore, it provides a valuable framework for consideration of possible effects on access, growth, innovation, choice and quality, as well as the use of manipulation and friction.
Competition law may, for example, effectively address one of the hallmarks of the online dystopia—stealth—a feature that pertains to the growing means for targeting unsuspecting users, harvesting their data, and using it to target and manipulate user behaviour (see, eg, Facebook’s business model which enabled Cambridge Analytica to harvest data from users). It may also extend to capture wider considerations, such as fairness, plurality, democratic values and freedoms—the manipulation of the market for ideas and threat to the democratic ideal being notable aspects of the modern digital landscape.
With such a versatile instrument, the focus naturally shifts to the measure of intervention. The extent to which one believes that using competition law could lead to optimal results without chilling competition or innovation. All agree that enforcement should be measured, proportionate and effective. Similarly, it is agreed that competition law cannot be all things to all people: a panacea for every policy concern. So where does one draw the line, looking at the unique scope of EU competition law? What are the limiting principles which safeguard the competition environment?
Often, the most visible restraint on the scope of competition law comes from economic theory which may support a narrower analytical approach. Indeed, the interface between economics and law has been the subject of considerable public and academic debate. In this regard, a broad consensus exists as to the crucial role that economics plays in shaping competition enforcement and intervention. It is widely recognized that the centrality of economic analysis provides a valuable prism which helps ensure the compatibility of decision-making with the overall aims of competition. However, controversy remains about the extent to which economisation may substitute legal norms and lead to the erosion of non-efficiency related objectives.
Should economisation of competition law limit the scope of EU competition law and ignore the scope it was given in legislation and case law? Arguably, as one sets to form a view on the optimal balancing point, one ought to remember that one’s ideology, and any subsequent balancing, should take place within the legal framework set by the EU Treaties in accordance with their interpretation in case law. One should not eradicate the democratic foundations of a regime and replace them with technocratic control. This is particularly so when considering that the EU’s current constitutional framework is the product of modern negotiation and design and provides a detailed account of the norms advanced by the legislator and, by extension, the people of Europe. Under EU competition law, what counts extends beyond what is commonly countable under economic models. Narrow economic perspectives (often imported from across the ocean), which ignore distribution of wealth, and disregard the normative aspects of the EU regime, may provide valuable insight, but should not be mistaken as representing the scope of the EU regime.
The multitude of goals of EU competition law provide valuable flexibility, vital for the protection of consumer welfare, but may also result in uncertainty as to the threshold of illegality and intervention. Indeed, the controversy that surrounds some of the recent investigations by Member States (for example: German Bundeskartellamt Facebook decision) and the Commission (for example: Google Search (Shopping)) provides an indication of the challenges ahead.
The BEUC consultation process sets out to bring clarity to this ongoing evolution. In a first meeting, hosted in December 2018, consumer organisations, academics and representatives of competition agencies from the EU and the US discussed enforcement approaches to digital markets across the Atlantic. The meeting provided a first step in an attempt to identify workable and predictable intervention benchmarks that competition agencies and courts could take into account when assessing activities in digital markets. In particular, the discussion focused on the application of EU competition laws to:
- excessive data collection;
- product quality degradation (eg, degradation of privacy standards or product functionalities);
- self-favouritism and leveraging of market power;
- refusal to grant access to data;
- behavioural discrimination (eg, personalised pricing, search biases and micro-targeting); and
- upstream exploitation (eg, margin squeeze, scraping and abuse of bargaining power).
The discussion revealed three key themes.
First, there is consensus as to the need to move away from price-centric tools. In particular, it has been suggested that narrow economic thinking may fail to encompass the reality of consumers and digital markets. The effects of digitalisation on many aspects of our society, and the nature of human interaction, imply that it is not always appropriate to think of consumers as economic units or digital firms as efficient actors, immune to enforcement oversight. In line with the growing effects of the digital economy, there is room for greater emphasis on consumer and privacy protection and behavioural sciences.
A second theme concerned rising market power. In the digital economy, market characteristics, network effects, gatekeepers and data-opolies may give rise to market power below traditional levels of dominance. Firms may benefit from significant power due to direct, or third party, data tracking and harvesting, while not triggering traditional antitrust scrutiny (see Ezrachi and Robertson 2018 and Drexl 2018). This may enable key data holders to engage in exclusionary or exploitative behaviour, below the ‘antitrust radar screen.’ The implications of refusal to supply, of possible compulsory data sharing order, were discussed, alongside the concept of ‘vulnerable consumers’ in digital markets (Helberger, Borgesius and Reyna 2017).
A third theme concerned the appropriate nature and scope of consumer-facing remedies (BEUC 2018 and Reyna 2018). An emerging theme concerned the creation of ex-ante measures in the form of erga omnes obligations complementing a case-by-case enforcement approach. A legislative or regulatory solution, may be apt in circumstances where harmful behaviour is systemic and common among several undertakings, where industry incentives are not aligned with consumer interests, or where competition law fails to offer an effective remedy. On this point, it is worthwhile mentioning comments recently made by Nobel laureate Professor Jean Tirole. Professor Tirole discussed the new challenges for regulators in the digital economy noting that: ‘public intervention is unavoidable’ in the form a combination of antitrust enforcement and regulation.
The consultation process continues. Moving forward, the BEUC initiative will seek to foster consensus on the adequate level of intervention, and the balance between regulation and competition enforcement. Evidently, competition policy cannot provide all of the answers; but it can certainly address effectively many of the problems we face today, or help define them, while drawing on a wider toolbox of remedies—such as data protection or privacy regulation (Ezrachi and Stucke 2016).
Ultimately, it is for us—consumers, businesses, enforcers, and policy makers—to work together to design a regulatory and enforcement landscape in which businesses flourish while protecting consumer welfare, in which business interests are aligned with consumer interests, and in which the EU societal and competition goals are advanced to our benefit. And so, when answering the question of whether there is a competition problem, we should not look for the answer under the light of a predominant ideology or ‘Zeitgeist’ but rather by having regard to the legal foundations of EU competition law.
Ariel Ezrachi is Slaughter and May Professor of Competition Law, The University of Oxford and Director, Oxford University Centre for Competition Law and Policy.
Agustin Reyna is Head of Legal and Economic Affairs at the European Consumer Organisation, BEUC.
 C-23/14 Post Danmark A/S v Konkurrencerådet (ECJ, 21 May 2015), Opinion of Advocate General Kokott, para 4.