Ariel Ezrachi

“All you need to do is say,” a recent article proclaimed, “‘I want a beer’ and Alexa will oblige. The future is now.” Advances in technology have seemingly increased consumers’ choices and opened markets to competition. As sales migrate from brick–and–mortar shops to online sites, consumers seemingly are getting more of what they desire, including better prices and quality. And yet, looking beyond the ease of online shopping, several emerging threats arise, including algorithmic collusion, behavioral discrimination and abuses by dominant super–platforms. Thus, a more complex reality exists. To see why, this Article examines the emerging frontier of personal digital assistants. These helpers are being developed by the leading online platforms: Google Assistant, Apple’s Siri, Facebook’s M, and Amazon’s Alexa–powered Echo. These super–platforms are heavily investing to improve their digital assistant offerings. We show how network effects, big data and big analytics will likely undermine attempts to curtail the digital assistant’s power, and will likely allow it to operate below the regulatory and antitrust radar screens. As a result, rather than advance overall welfare, these digital assistants—if left to their own devices—can undermine our collective welfare. But the harm is not just economic. The potential anticompetitive consequences from these assistants will likely take a toll on privacy, well–being and democracy. For those who grew up watching The Jetsons, the prospect of a personal helper might seem marvelous. Many already rely on Google’s search engine to find relevant results, Facebook to identify relevant news stories, Amazon for book recommendations, and Siri to place phone calls, send text messages, and find a good restaurant nearby. Many also already benefit from basic digital assistants. Apple iPhones users may instruct Siri to call their family members on speakerphone. Siri can “predict” what app users might want to use, which music they would like to listen to. Navigation apps can anticipate where the individual is heading throughout the day and provide traffic updates and time estimates. Even one’s favorite coffee outlet may send a notification and prepare the loyalty card on one’s device whenever one is near an outlet. Now personal digital assistants—or “digital assistants”—are seeking to interact with users in a human–like way. With its increasing sophistication, a digital assistant promises to transform how individuals access information, communicate, shop, are entertained, control smart household appliances, and raise their children. The digital assistant will also undertake mundane tasks and free our time. Amazon’s voice recognition personal assistant, Alexa, for example, can already perform many tasks. Alexa can shop for its users (knowing everything its user previously bought through Amazon); plan one’s mornings, including accounting for upcoming meetings, traffic, and weather; entertain one with music; suggest movies, shows, or audiobooks; and control one’s house’s smart appliances. In 2016, Google showed a video of a suburban family undergoing its morning wakeup routine: “The dad made French press coffee while telling Google to turn on the lights and start playing music in his kids’ rooms. The mom asked if ‘my package’ had shipped. It did, Google said. The daughter asked for help with her Spanish homework.” As the digital assistant—powered by sophisticated algorithms—learns more about its users, their routine, desires, and communications, it can excel in its role. In a human–like manner, it can be funny—at just the appropriate level—and trustworthy. These digital assistants can provide more than information and services; they can anticipate one’s needs and requests. After all, being privy to so many of its users’ activities, the assistant will become their digital shadow. As Alphabet’s CEO noted, “[y]our phone should proactively bring up the right documents, schedule and map your meetings, let people know if you are late, suggest responses to messages, handle your payments and expenses, etc.” The digital assistant, with their users’ trust and consent, will likely become the key gateway to the World Wide Web. Consumers will happily relinquish other less personal and useful interfaces, and increasingly rely on their digital assistant to anticipate and fulfill their needs. With this unique position of power, the digital assistant will act as a gatekeeper in a multi–sided market. And yet, despite their promise, can digital assistants actually reduce one’s welfare? Might their rise reduce the number of gateways to the digital world, increase a few firms’ market power, and limit competition? And if so, what are the potential social, political, and economic concerns? Our Article seeks to address these questions. Part II discusses the current race among Google, Apple, and Amazon to control as many aspects of the online interface and reap the associated benefits. The stakes are high, given several data–driven network effects, that will likely lead to one or two digital assistants that primarily undertake most people’s tasks and make the majority of decisions. So what are the implications of this winner–take–all contest to be the chief digital assistant? Part III considers the toll a dominant digital assistant can have on competition, democracy, and privacy. Given these risks, one would expect and hope for a “virtuous assistant”—a class of independent assistants, developed by independent firms with the users’ personal interests paramount. Part IV identifies several factors that favor one of the four super-platforms (Google, Apple, Amazon, and Facebook) capturing the digital assistant market, and disfavoring the independent virtuous assistant. As market forces will not necessarily prevent and correct the harms we identify, Part V outlines several issues and challenges confronting antitrust enforcers. Part VI concludes.

When government officials argue for purity, one would expect raised eyebrows. But few question competition officials who, in speeches in foreign lands, praise the “purity” of competition law. They warn the hosts of polluting competition policy with social, ethical, and moral concerns. They warn of industrial policy, regulation, and rent-seeking. After the hosts provide dinner, the competition officials leave for the airport, where they prepare the same speech for another audience. The hosts will politely agree on the key objectives that competition policy should promote, but beneath this veneer, ill-defined terminology, open-ended goals and differences in enforcement philosophy remain. Differences, in one’s understanding of the ends of competition law often transform into a ‘purity battle’ – the claim that competition analysis has been polluted by some, and that a pure approach, as propagated by others, would deliver better, optimal results. Often, these claims accompany large transactions, state aid, and foreign jurisdictions, possibly threatening the domination of national champions through enforcement of their competition laws. Sometimes these claims will be made by the competition agency. Sometimes by politicians or leading corporations. At times, the true source of the claim – politics, business, law or economics – may be hard to ascertain. This is not to say that purity arguments are without merit. A consensus exists that competition law cannot be all things to all people: a panacea for every policy concern, ranging from labour to the protection of national champions. And yet, the pretence of purity may be misleading as it propagates a mirage of objectivity, clarity and analytical superiority – traits that are not always present. Indeed, competition law is often perceived as a stable discipline. In fact, one is often reminded that competition law must be based on economic considerations and reject external social, or political objectives. This paper argues that this appealing view – which embodies a sense of purity – is merely an illusion. It ignores the ‘sponge-like’ characteristics of the law – its susceptibility to national peculiarities originating in its design and evident in its application and its exposure to intellectual and regulatory capture. While the idea of a stable, predictable and economically-based antitrust discipline is in all of our interests, these traits are not inherent to the law. They are forced onto the sponge in an attempt to ‘discipline’ its natural tendencies, and propagated as reality, to support its legitimacy.

Technological advancements, big data and big analytics have changed, and will continue to change, the dynamics of virtual competition. Notably, they have significantly affected pricing strategies, including the stealth-mode use of dynamic personalized pricing. Retailers and service providers can approximate consumers’ reservation price and engage in “almost perfect” price discrimination. Among the key market conditions necessary for successful online discrimination are access to personal data, ability to predict the consumer’s willingness to pay, and ability to monitor and limit available outside options. When observing discrimination in our modern online environment, notable is the shift from third-degree, imperfect price discrimination to near perfect, or first-degree, price discrimination. Online sellers, in tracking us, collecting data about us, and segmenting us into smaller groups can better identify our reservation price—our willingness to pay.

Winner of the 2016 ‘Concurences’ prize for best article on collusion.

The strive for tighter control of distribution, quality and price - has led an increasing number of producers to include restrictions on the use of online marketplaces in their selective distribution agreements. This paper considers the effects of such restrictions and the legal approach they call for. While acknowledging the legitimacy of proportionate restrictions on distribution, the article illustrates how an absolute ban on the use of online marketplaces may have a detrimental effect on market transparency, price competition, entry and expansion. The discussion illustrates how the legitimate interests of producers may be protected through less onerous means, without the increase in consumers’ search costs and the dampening of price competition. With that in mind, it is argued that these restrictions should be analysed on a case-by-case basis and should not benefit from the Vertical Block Exemption. Furthermore, the article considers whether absent proportionality and objective justification, the harmful effect of online marketplace bans, justifies their condemnation as anticompetitive by object.

“This is a groundbreaking, critical work—a major contribution to the field of competition law.”—Frank Pasquale, author of The Black Box Society “Ezrachi and Stucke provide a compelling analysis challenging the orthodoxy that modern technology empowers consumers. Their findings will send a shiver down the spine of consumers, businesses, public policy makers and anyone working in the competition field. Virtual Competition is a fast-paced, mind-boggling thriller that you can’t put down; a thriller in which we are all set to be the victim.”—Alan Giles, Saïd Business School, University of Oxford “Virtual Competition provides an intriguing and provocative look at the potential dark side of big data and big analytics. The debate over digital competition is just beginning, and Ezrachi and Stucke have laid down a marker that is likely to capture wide attention.”—Jonathan Levin, Stanford Graduate School of Business “Ezrachi and Stucke’s insights into data-driven opportunities, collusion scenarios, discrimination, and ‘frenemies’ will help authorities distinguish between true efficiencies and anti-competitive problems, and ensure that most enforcement at least keeps up with technological developments. Forward-thinking competition authorities can use these insights proactively to help craft government policies that ensure that innovation and competition are real, while problems are addressed quickly and thus—hopefully—remain virtual.”—Philip Marsden, Inquiry Chair, Competition and Markets Authority “A thought-provoking, clearly written examination of the coming effects on markets and competition of computer algorithms, big data, big analytics, and ‘super-platforms,’ drawing on real-life examples, on neoclassical and behavioral economics, and on the authors’ deep understanding of U.S. and EU competition law.”—Harry First, New York University School of Law