On Friday 9 September 2016, I attended the International Conference on Competition and Regulation in Digital Markets, a smoothly-run conference hosted by the University of Leeds School of Law. It featured a host of well-informed speakers from a variety of backgrounds.
The keynote speech was given by Dr Andrea Coscelli acting Chief Executive of the CMA (the full text of which is available here). He flagged the CMA’s interest in digital tools, both as an aid to the investigative processes and also as part of any remedial actions, referencing the remedies proposed following the recent CMA investigations into the UK energy and retail banking markets.
The speakers raised a number of interesting questions faced by courts and regulators in the fast-moving world of digital technology. For example:
- How can a static market definition be successfully applied to markets filled with constantly changing products?
- How can regulators know when to act in markets that are still developing so quickly?
- Is there a real risk that dominant digital companies will be discouraged from innovating further due to antitrust fears?
- What will the impact be of automatic algorithms capable of doing shopping on behalf of consumers?
Another feature of the event was the frequent differences between the perspectives of the economists and lawyers present. For example, there was some debate about the relevance of price substitution to market definition (the conclusion was that the focus should be on competitive restraints) and the extent to which vertical restraints are capable of restricting competition.
A development that nicely encapsulates some of the issues identified above is the Commission’s recently proposed overhaul of telecoms regulations (which we reported on here).
Some of the new rules apply to web communications services such as WhatsApp and Skype, thus extending the regulatory burden beyond its previous parameters. One of the speakers at the conference, James Waterworth, pointed out that services like WhatsApp aren’t limited by the bottleneck of requiring a physical telephone line in the same way that traditional telecoms providers are. They operate in a completely different way, so why should they be regulated in the same way?
After all, what happens if the services develop in the same way as the instant messaging service WeChat has in China, by including additional functionality such as video games and the ability to transfer money to other users within the app? Is that still a communications service that should be regulated in the same way as a company providing a landline? Or is it a banking service that will fall within financial regulation? Is adding layers of regulation consistent with the Commission’s exhortations to EU Member States to “aim to relieve operators from unnecessary regulatory burden, regardless of the business model adopted”? (See the Communication on the “collaborative economy” published in June 2016.)
There are many questions here, and not so many answers (yet…). We’ll be keeping a close eye on how developments in this area play out.