CLIP of the month: should agencies focus on the development of private permissioned blockchains?

01.12.2020

Further to our earlier blog posts on the New Competition Tool and the Digital Markets Unit, this month’s CLIP is an OECD discussion paper authored by Chris Pike and Antonio Capobianco, on competition law and blockchain entitled Antitrust and the trust machine. The development of antitrust policy to address any potential concerns arising from the increasing use of blockchain in a variety of settings is likely to be high up the agenda of competition authorities globally over the coming months and years.

Whilst Bitcoin and other cryptocurrencies are the best known variants, blockchain encompasses a host of ‘distributed leger technologies’ which have been implemented across a wide spectrum of industries and uses, including in supply chains. Ostensibly, blockchain is a two-sided platform that relies on an ability to attract users and validators. As with many other platforms, blockchain therefore raises both many advantages to users as well as the potential to raise concerns of anti-competitive behaviour.

The paper advocates competition agencies taking a closer role in the design of private ‘permissioned’ blockchains (those which rely on a smaller number or pre-approved ‘validators’ as opposed to permission-less which relies on a very large number of largely unregulated validators). It also argues that authorities should keep a close eye on the risk of new blockchains, particularly decentralised permissionless technologies, being excluded as a result either of foreclosure or acquisition strategies by incumbents.

There is no doubt that blockchain technology has an exciting future with many potential uses. Some of the concerns identified in the paper resonate with those expressed in respect of so-called ‘killer acquisitions’, whether that be incumbent operators buying up nascent competing technology businesses or acquisitions of early-stage products in the life sciences space. Whilst steps have been taken to try to give authorities new tools to tackle new problems of the digital age (for example the European Commission’s new antitrust tool[1], or the creation of a new Digital Markets Unit in the UK[2] – see our earlier posts here and here respectively), it remains to be seen whether and how they might be deployed to identify and address anti-competitive concerns arising out of blockchain technology.

[1] See the European Commission’s consultation on a possible new competition tool.
[2] See the recommendations made in the Competition & Markets Authority’s market study final report ‘Online platforms and digital advertising’.

Stephen Smith

Author