5. Platforms in the antitrust spotlight

All eyes on the disruptors

As digital platforms continue to grow in social and economic importance, there can be no doubt about the ever brighter global spotlight directed at their practices. Given the scale of industrial change in the digital era, the challenge facing antitrust authorities in 2018 is whether their competition tools are sufficient to protect consumers and maintain competitive markets, or whether more regulation is needed.

In Europe, Commissioner Vestager’s focus on fairness and trust, while recognising the limits of antitrust to meet broader policy objectives, has heightened the international debate on the roles of antitrust and regulation in markets. As more authorities launch investigations into online platforms and their impact on competition and choice, key areas of divergence in approach are likely to emerge.

Inquiries and investigations

Since publishing their joint paper on big data in 2015, the French Autorité de la Concurrence (FCA) and the German Bundeskartellamt (BKA) have continued to take the lead in seeking to develop big data-driven theories of harm that target the business practices of online digital platforms. This includes the FCA’s ongoing sector inquiry into online advertising and the BKA’s controversial antitrust investigation into Facebook’s user privacy terms, which has reached the preliminary assessment that these violate data protection law and are an abuse of dominance.

And they are not alone. Data protection authorities have also been seeking some of the limelight. Authorities in France, Spain and the Netherlands have all concluded individual investigations into Facebook’s privacy terms. In some instances these authorities have combined forces with competition authorities and communications bodies to unpick further the circumstances in which big data translates to a restriction of competition for online digital platforms – for example in Italy where the current three-agency sector inquiry on big data was initiated by the Italian Antitrust Authority along with the telecom and data privacy regulators.

While authorities are well aware of the fact that online platforms have brought many benefits to today’s society, they have also observed that online industries where big data plays a key role often show a high degree of market concentration and, in certain circumstances, that big data might be the source of market power, potentially raising barriers to entry. Agencies are concerned that today’s disruptors might hinder the development of tomorrow’s disruptors.

Gian Luca Zampa, Antitrust Partner, Rome

Authorities worldwide are replicating these developments, with Asian authorities particularly prominent in taking enforcement action aimed at the business models of global platform businesses. Following the European Commission’s record-breaking €2.42bn fine on Google, the Korea Fair Trade Commission (KFTC) and Japan Fair Trade Commission (JFTC) continue to develop plans to regulate technology companies with the aim of preventing the monopolisation of data collection and/or any hindrances to market entry.

The JFTC appears to be particularly interested in the potential impact of data accumulation. Its 2017 report recognises the innovative and pro-competitive benefits that flow from accumulating large amounts of data, but warns against potential anticompetitive consequences through market foreclosure.

The JFTC has not conclusively stated that any particular types of behaviour are a clear risk area, but the authority is definitely mapping out a path for future enforcement action in this space.

Kaori Yamada, Antitrust Partner, Tokyo

Structural and regulatory changes

The KFTC and the JFTC plans are only part of a wider web of interrelated global regulatory changes affecting digital platforms anticipated in 2018. The provisions of the EU General Data Protection Regulation (GDPR), which come into force in May 2018, will introduce stricter rules on the transfer of personal data, among a number of other changes.

Just as the GDPR is giving huge new powers to privacy regulators, businesses are also having to prepare for their data use attracting the attention of competition regulators.

Klaus Beucher, IP Partner, Düsseldorf

And that is just a flavour of what may follow: as well as being mindful of relevant sector-specific regulation, which may be a poor fit for new business models but nevertheless cannot be disregarded, DG CONNECT is currently considering proposals for specific EU regulation of digital platforms to better protect consumers. Its policy proposals include the stimulation of industry-led action, with the hope that this will lead to the creation and adoption of voluntary platform standards. Also under consideration is targeted legislation, in addition to current competition laws, which would include banning problematic business-to-platform commercial practices, or – the most obtrusive option – introducing a detailed regulatory framework accompanied by an EU-level regulator.

The agencies are beginning to upskill their approach to data and technology so companies may face more far-reaching probes than in the past.

Deirdre Trapp, Antitrust Partner, London

The 2016 French Digital Republic Act – which came into force despite the reservations of the FCA – includes personal rights for consumers to recover all posted content and data, control and monitor the use of personal data, and request the removal of all data collected before the age of 18. The extent to which other EU member states and the world at large may be inspired by this and follow suit, either ahead of, alongside or following any further action by the European Commission, remains to be seen.

It is already widely suggested that this approach is anti-American, targeting US West Coast, highly successful firms with innovative products and business models. In the run-up to the Commission’s fine on Google, a letter published without signatures showed Washington lobbyists rallying support from members of Congress against the EU’s perceived ‘aggressive and heavy-handed antitrust enforcement action against American companies’. Later in 2017, newly confirmed Assistant Attorney General for the DOJ’s Antitrust Division, Makan Delrahim, spoke out about the importance of non-discrimination and expressed concerns that competition agencies in some countries may have used antitrust to ‘favour domestic companies or discriminate against foreign firms’. 2018 will be a key year for international enforcement, particularly in these areas as policy and political dynamics play out in practice.

In an increasingly interconnected world, and with potentially large commercial rewards expected from the internet of things, digital platforms and technology companies face ever-increasing scrutiny from antitrust authorities competing among themselves to develop novel enforcement strategies and the likelihood of an increased use of antitrust law as part of litigation strategies in commercial disputes.

James Aitken, Antitrust Partner, London

Looking ahead in 2018

Businesses – not only digital platforms but also those affected by their business practices – have much to think about in 2018. Whatever combination of tools (antitrust or antitrust combined with data protection and/or consumer protection) or form (investigations, regulation and/or litigation) is chosen, we expect the following to feature prominently in the year ahead:

  • Increased use of merger control – facilitated through the introduction of deal value-based thresholds in Austria and Germany (and potentially to follow at EU level and elsewhere) – as authorities seek to scrutinise the business rationale of mergers between platform businesses.
  • Narrow market definitions and a focus on broader conglomerate effects, both in mergers and behavioural investigations – as seen in the Commission’s decision in Microsoft/LinkedIn, which focused on ‘professional social networks’ (excluding less targeted providers) and ‘online social advertising’
  • A need to get ahead through pro-active engagement with the competition authorities and to intertwine legal and economic considerations more closely – particularly in relation to engagement with new ‘expert’ teams from the regulators. In particular, note Commissioner Vestager’s September 2017 announcement of the creation of a ‘body of experts’ to advise the Commission on big data cases and the UK CMA’s November 2017 announcement of a new ‘technology team’ comprising data scientists, computer experts and economists.
  • A greater willingness by platforms to challenge novel and controversial theories being developed by the agencies and to seek validation of their business practices in court. For example, Agents Mutual was successful before the UK Competition Appeal Tribunal in July 2017 in demonstrating that its terms and conditions, restricting suppliers from using other platforms, were in fact pro-competitive on the basis that they helped a new platform break into a concentrated market featuring a number of well-established platforms.
  • More consumer class actions and strategic litigation from competitors, particularly following the EU Antitrust Damages Directive – which shifts the balance in favour of claimants by requiring the consideration of final decisions from competition authorities as evidence of an infringement. We anticipate a number of claims against Google following the Commission’s recent decision, with more expected to ensue in relation to the pending AdSense and Android investigations. These cases will likely spur claimants to pursue litigation based on ‘abuse of dominance’ theories in future.
Pricing, the internet and other restrictions
Deirdre Trapp discusses the increased scrutiny for e-commerce in 2018.