What do changing business models in the telecoms industry mean for competition law and regulation in the digital era?

Transcription

1 COMPETITION LAW IN THE DIGITAL ERA What do changing business models in the telecoms industry mean for competition law and regulation in the digital era? Tim Cowen 20 September 2017

2 outline Outcomes so far: US data CEA ( Chair: Jason Furman & other economic reports) (all indicate increasing concentration/oligopoly ) Google Amazon Facebook Apple (GAFA problem) Where are we? How did we get here? Multi sided platforms, Big Data & changing business models contribution to these issues? 50% of all productivity gains derived from use of technology: Putting the P back into GDP

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6 increasing mark ups

7 mark ups and dividends

8 nature and structure matters Where are we? Monopoly competition driven by advertising? Oligopoly?

9 monopoly competition?

10 innovation / competition?

11 so where are we? Oligopolistic or monopolistic competition increasing? higher exit, lower entry, less dynamism, older, higher mark ups and dividends. Ad funded business can lead to inefficiency. Innovation rate increases with reduced competition, and reduces with too much (or too little). Market structure affects growth rates & opportunity.

12 Big data and Big Tech

13 price discrimination and maximisation

14 booking.com and MFNs Price matching obligations ( Most Favoured Nation clauses) confer contractual right to be offered the lowest price Wide MFN discourages discounting, because the MFN requires the price to be offered to the MFN beneficiary Switching discouraged, because the same price prevails across market Wide MFNs addressed by remedies packages and legislation across many jurisdictions (see CMA case closure summary, Sept 2015).

15 Coates Framework 1. Consumer welfare (competition law & economics) & Consumer protection ( privacy & personal data protection) can both be addressed in merger control: see Google/Double Click. 2. Transaction risks lowering privacy standards: consumer welfare could be harmed. 3. Privacy affected by horizontal overlaps in activities of entities merging: how do we know consumer preferences for privacy as a non price factor of competition? Raised in GGL/Double click, and Microsoft Yahoo: Ask! but see FB/WhatsApp. 4. Data privacy is a non price factor of competition, reviewed in FB/ WhatsApp

16 sector specific issues? The collection and exploitation of large volumes (Treasure Troves) of data ( Cf Database of intentions unique? PJH in Google/Double Click may raise barriers to entry and be a source of market power. Key inputs may be critical for downstream players: see TomTom/TeleAtlas ( digital maps databases- personal navigation device players complained about vertical integration) Certain components may be high value components: critical components with high value (or 4 corner jigsaw pieces). Economies of scale scope and network effects and structure may affect market transparency which impacts the functioning of the market (eg. firms can more easily collude) Ad funded monopoly may lead to exploitation: user interests and customer interest differ with exploitation of users ( strip mining for data ) valued by customers ( advertisers) but exploiting users (FB/WhatsApp).

17 the database of intentions The Database of Intentions lives in many places, but three or four places in particular hold a massive amount of this data (ie MSN, Google, and Yahoo). This information represents, in aggregate form, a place holder for the intentions of humankind a massive database of desires, needs, wants, and likes that can be discovered, supoenaed, archived, tracked, and exploited to all sorts of ends. Such a beast has never before existed in the history of culture, but is almost guaranteed to grow exponentially from this day forward. This artefact can tell us extraordinary things about who we are and what we want as a culture. And it has the potential to be abused in equally extraordinary fashion. Pamela Jones Harbour ( dissent) FTC Google /Double Click 2007 EU; contractual restriction on use of data issue.

18 strip mining personal data The BKA/ CDC report supports UK CMA: In merger control data privacy might particularly become relevant from a competition standpoint if a given undertaking benefits from a strong market power towards its end users... firms that gain a powerful position through a merger may be able to gain further market power through the collection of more consumer data and privacy degradation...if two horizontal competitors compete on privacy as an aspect of product quality, their merger could be expected to reduce quality. To date, the risk of foreclosure associated with the concentration of data in digital industries has mostly been looked at in the context of merger control. ( post Facebook/WhatsApp pre Microsoft /Linked In )

19 FR/G report FR/G report states: the theories of harm underlying the prohibition of such conducts are premised, for the most part, on the capacity for a firm to derive market power from its ability to sustain a data trove unmatched by its competitors case-specific assessment of the reality and extent of the data advantage.. [needed], consideration should be given at the outset to the features which are particularly found in online markets (network effects, multi-homing, and market dynamics) which may or may not be conducive to market power, before proceeding to determine whether data contributes to the creation or strengthening of market power And when reviewing the contribution that data can make to market power: Two aspects of particular relevance when looking at data s contribution to market power can be identified: the scarcity of data or ease of replicability, on the one hand; whether the scale/scope of data collection matters, on the other.

20 combination of jurisdictions? European data protection supervisor has advocated, in 2014, a shift in policy and a more holistic approach to enforcement, in which a more systematic dialogue is maintained between competition, consumer and data protection authorities, wherever a specific case arises in which consumer welfare and data protection concerns appear to be at stake. Article 167(4) of the Treaty on the Functioning of the European Union provides that, The Union shall take cultural aspects into account in its action under other provisions of the Treaties, in particular in order to respect and to promote the diversity of its cultures. Article 16 of the TFEU, while not explicitly mandating that data protection aspects be considered in all actions conducted by the EU pursuant to the Treaties, does affirm that everyone has the right to the protection of [their] personal data. EU consumer and competition Day 201th Sept 2017 J Laitenberger referenced Alphabet, Amazon, Apple Facebook,Microsoft 463 acquisitions in 10 years over $100bn and ref market structure and innovation: pointing to defects in merger control and control over abuse by acquisition?

21 Google investigations shopping aka products in SERPs abuse by self promotion and self preference. Similar issue in telecoms Adsense, Android,

22 conclusions system failure? political traction..brexit? role of sector specific regulation for all? widespread questioning of consumer welfare alone as a test: look at innovation. combination of jurisdictions inc. other consumer protections such as privacy? reform of merger thresholds, and innovation merger issues likely

23 Tim Cowen Partner, Preiskel & Co LLP