Promoting competition in platform ecosystems

Thorsten Kaeseberg 12 December 2019

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In a mission letter to Competition Commissioner Margrethe Vestager, the new President of the European Commission Ursula von der Leyen gave her the task of “coordinat(ing) the work on upgrading our liability and safety rules for digital platforms, services and products as part of a new Digital Services Act” (von der Leyen 2019). The mission letter also asks her to “to proactively share any relevant general market knowledge within the Commission, notably in the digital sector. This will help ensure new legislative proposals contribute to fair and open competition in the single market and support evidence-based policymaking”.

The opportunities but also the inherent tension in Margrethe Vestager’s new dual role as vice-president – not only holding digital platforms accountable, but also pushing European digital players – have been analysed in a recent Bruegel blog post (Heima 2019). The European Commission’s services are preparing the agendas and roadmaps for the future digital policy at a time when the European and international debate on the responsibilities of platforms has resulted in a string of expert policy analyses and proposals. Jurisdictions where expert analysis has been carried out over the last two years include the EU (Crémer et al. 2019), the UK (HM Treasury 2019), Germany (Federal Ministry for Economic Affairs and Energy 2019), Australia (Australian Competition and Consumer Commission 2019), the US (Committee for the Study of Digital Platforms 2019; see also the results of the Federal Trade Commission “Hearings on Competition and Consumer Protection in the 21st Century”)1 and the BRICS (BRICS Competition Law and Policy Centre 2019).

A potential agenda on digital platforms

There are two potential main policy goals with regards to digital platforms for the incoming European Commission: 

  • First, to increase responsibility of platforms and re-balance the power relationships between platforms, (potential) competitors, customers and users 
  • Second, to foster European platforms, in particular in areas where European companies may leverage their existing strengths into the platform age, such as in the Internet of things and business to business (B2B). 

A menu of different policy instruments could help achieve these goals.

Reform the framework of the e-commerce Directive

One key instrument to upgrade responsibility and accountability would be a recast of the e-commerce Directive, which could be the main element of a Digital Services Act. The Directive on Audiovisual Media Services, the draft Terrorist Content Regulation, the Copyright Directive, the New Deal for Consumers package, and the platform-to-business (P2B) Regulation have all been debated also with the perspective of placing more obligations on digital platforms. With regard to the e-commerce Directive, a leaked document from DG Connect2 mulls a broader scope, more differentiated liability for intermediaries, provision governing algorithms for automated filtering technologies, and regulating content moderation.

The latter could result in binding notice and action rules, which would build on the Recommendation on illegal content as well as the relevant case law. Some academics (Balkin 2016) have even suggested treating digital media platforms as information fiduciaries who have duties of care, confidentiality, and loyalty towards their end users. Another proposal made by the Commission ‘Competition Law 4.0’ to the European legislator is to examine whether dominant online platforms with a certain minimum level of reve¬nues or a minimum number of users should be obliged to introduce an alternative dispute resolution proce¬dure for infringements on platforms (Federal Ministry for Economic Affairs and Energy 2019).

Regulate super-dominant digital platforms

The string of decisions taken by the European Commission (in particular against certain strategies by Google) as well as the Report of the three Special Advisors for the EU Competition Commissioner (Federal Ministry for Economic Affairs and Energy 2019) show the potency and potential of Articles 101 and 102 of the Treaty on the Functioning of the EU in dealing with anti-competitive conduct by digital platforms. At the same time, several of the above-mentioned expert reports have identified regulatory gaps, both with regard to the timeliness of enforcement and the substance of the rules, which currently may not be sufficient for dominant digital platforms with leveraging and regulatory power. The P2B Regulation in its current design – with its horizontal approach irrespective of market power, its applicability to providers of online intermediation services to business users, and its focus on transparency obligations – may not be the right instrument to be expanded.

Therefore, a new EU Platform Regulation with rules of conduct for dominant digital platforms may be needed. If the underlying goal is to foster competition in platform ecosystems, the Regulation should (at least) address digital platforms with paramount importance for competition. The Commis¬sion ‘Competition Law 4.0’ has proposed a Platform Regulation that “both fleshes out and supplements competition law”. According to the Expert Commission’s assessment, such a regulation could be based on Article 103 of the Treaty on the Functioning of the EU  if it specifies the prohibition of abuse of dominance for platforms. Where the rules go beyond Article 102 of the Treaty on the Functioning of the EU case law, Article 114 of the Treaty on the Functioning of the EU could provide a legal basis.

Different proposals have been made for the scope of such platform regulation, including “strategic market status” (HM Treasury 2019) and “undertakings with paramount significance for competition across markets” (in a draft amendment to the German Competition Act).3 There are several options for the factors which may feed into defining such status, including the dominant position in more markets, turnover, user numbers, financial strength, vertical integration and activities on related markets, access to data, importance of activities for third-party access to supply and sales markets, and influence on third parties’ business activities.

Institutionally and procedurally, it would be preferable to make use of DG COMP’s expertise, and of proven competition methodologies, procedures and instruments, to keep the enforcement as pro-competitive and economically sound and integrated into the overall competition framework as possible. Therefore, a specific unit in DG COMP could be dedicated to enforcing such Regulation.

The Regulation would need to control the power of dominant digital platforms both as gatekeepers and quasi-regulators. Therefore, it would have to prohibit such platforms from favouring their own services in relation to third-party providers unless the preferencing is objectively justified. The burden of proof for the objective justification of such behaviour could be reversed. This has been suggested by the Report of the Special Advisers for Commissioner Vestager for certain scenarios under Article 102 of the Treaty on the Functioning of the EU. The current draft amendment of the German Competition Act follows this approach. Furthermore, online platforms could be required to offer their users portability of user and usage data in real time and in an interoperable data format, and to ensure interoperability with complementary services.

Achieving other goals in addition to competition – such as the provision of information on, or the intermediation of, high-quality news or of sustainable mobility solutions – may require additional sector-specific governance rules to safeguard public interests in the platform economy (Frenken et al. 2018).

Facilitate data intermediaries as counter-balancing actors

To rebalance the power asymmetry with regard to data beyond the General Data Protection Regulation, some have been advocating the introduction of trusted data intermediaries for some time. A trusted data intermediary could act in the interest of and on behalf of data subjects, with greater negotiating power with digital service providers. It could also provide pooled access to data of the data subjects according to the preferences of the data subjects. 

This idea of trusted data intermediaries has gained traction beyond academic circles. The Commission ‘Competition Law 4.0’ recommended studying the feasibility of the establishment of such data trustees and introducing instruments at the European level to promote the emergence of trusted data intermediaries.

Facilitate the rise of European platforms

European industrial players, including in the automotive, chemical and steel sectors, have set up B2B platforms or are in the process of launching platforms – in some cases unilaterally, in others in the form of a cooperation. The European Commission should signal that those efforts are welcome. There are horizontal and vertical competition law issues, such as questions on the limitations on data exchange and contractual limitations. Firms need legal certainty on these aspects.

The European Commission could issue guidelines on these questions. Furthermore, it could devote additional resources to providing legal certainty on an individual case-by-case basis. In addition, the Commission ‘Competition Law 4.0’ advocates the introduction of a voluntary notification procedure.

Push blockchain

The blockchain technology has emerged as a potential decentralised substitute for some platform models. The technology might be used, for example, to set up a social media network owned by its users who rate each other and are automatically rewarded for their contributions, or for ride-sharing apps where drivers also co-own and manage the daily operations. The European Commission should push such efforts. 

Author’s note: The views expressed here are those of the author and do not necessarily represent those of the institutions with which he is affiliated.

References

Australian Competition and Consumer Commission (2019), Digital Platforms Inquiry. Final Report.

Balkin, J M (2016), “Information Fiduciaries and the First Amendment”, UC Davis Law Review 49(4).

BRICS Competition Law and Policy Centre (2019), Digital Era Competition: A BRICS View.

Committee for the Study of Digital Platforms (2019), Final Report by the Market Structure and Antitrust Subcommittee, George J. Stigler Center for the Study of the Economy and the State.

Crémer, J, Y-A de Montjoye and H Schweitzer (2019), Competition policy for the digital era, Publications Office of the European Union.

Federal Ministry for Economic Affairs and Energy (2019), A new competition framework for the digital economy. Report by the Commission ‘Competition Law 4.0’.

Frenken, K, A van Waes, M Smink and R van Est (2018), “Safeguarding public interests in the platform economy”, VoxEU.org, 3 April. 

Heim, M (2019), “Questions to the Competition Commissioner-designate”, Bruegel blog post, 27 September.

HM Treasury (2019), Unlocking digital competition, Report of the Digital Competition Expert Panel.

von der Leyen, U (2019), Mission letter to Margrethe Vestager, Executive Vice-President-designate for a Europe fit for the Digital Age, 10 September. 

Endnotes

[1] See https://www.ftc.gov/policy/hearings-competition-consumer-protection.

[2] See https://cdn.netzpolitik.org/wp-upload/2019/07/Digital-Services-Act-note-DG-Connect-June-2019.pdf

[3] See https://www.d-kart.de/wp-content/uploads/2019/11/RefE-GWB10-dt-engl-%C3%9Cbersicht-2019-11-15.pdf.

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Topics:  Competition policy EU institutions EU policies

Tags:  European Commission, regulation, disgital services, digital platforms, competition, anti-competitive conduct

Head of competition law policy, German Federal Ministry for Economic Affairs and Energy

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