I was reflecting this week on what I heard at the Ministerial Programme in MWC 19 Barcelona. Platform regulation is now firmly on the radar of policy makers – and the US emphatically announced the time for self-regulation is over as it embarks on drafting a federal privacy law. This brought me to stop and try to summarise my thoughts on where we are today with competition policy in digital markets. Three key moments for me in the past six months identify the change in the current mood and will in my view be remembered as turning points for competition policy in Europe going forward.
First, in December, at Charles River Associates’ annual gathering in Brussels of the competition policy intelligentsia, we heard many calls for more rigorous scrutiny of how the sprawling galaxies that gravitate around the “superstar” digital platforms are formed. Many argued that the way mergers and acquisitions by “superstar” digital firms have been scrutinised in the past 10 years has come up short. The EC’s Chief Economist, Tommaso Valletti, remarked how, out of 260 acquisitions by Google from 2001 to date, only one (Google/DoubleClick) was reviewed, and subsequently cleared. Given the dominance of these firms today, proper regulatory scrutiny has been lacking. Even erring on the side of caution, reviewing only one (!) acquisition out of 260 seems incredible. By way of comparison, he highlighted the pharma sector, where recent studies show that c.ca 95% of acquisitions by big pharma companies were genuine business moves (new products were launched or tested), but that 5% seemed to be motivated purely to protect the company from emerging competition.
Second, at a DG Competition conference in January 2019, experts and enforcers discussed whether the existing competition toolbox used to regulate digital markets is fit for purpose, or whether it needs an overhaul. It was very interesting to note that, for the first time in my memory, all stakeholders present agreed that there is a need to find new ways to regulate platforms. The interplay of competition policy and privacy, large scale business models, and practices based on extracting personal data from users in exchange for free services, having dramatically shifted the nature of innovation and competition. In turn, this has created huge network effects, barriers to entry, with the resulting market power of platforms. It was a shame, however, that at times the conference felt like a trial of platforms and that there were no representatives from the likes of Google, Facebook or Amazon to put forward counter arguments.
Third, and also in January, we had the opportunity to play out the GSMA’s vision for future networks and services – and what we see as the key competition policy issues associated with it – to more than 50 of DG competition’s officials in Brussels. We delivered clear messages on how competition enforcement needs to ensure that, for future digital markets to be more competitive, emerging AI and IoT ecosystems cannot be dominated by few internet giants, and therefore emerging competition and competitors need protecting. It was also heartening to note that all agreed how important these types of dialogues are in providing enforcers with an up to date view of technological and competitive developments in digital markets.
So what does it all mean? Is competition policy about to change?
I think new concepts and approaches will be developed and tested to control the market power of platforms. Many people I have met in the past months have remarked for example how the 2017 review of the competition framework in Germany – and similar reviews in other EU countries – have introduced key elements to modernise the competition policy toolbox. At the same time, all this could also play out at a different level. The next European Parliament could well take a more strict view of things, and demand the introduction of new laws and powers to regulate the big digital platforms.
What is clear is that competition enforcers and regulators are starting to take a much closer look at the digital giants of our age and how they serve the public interest. What we need to address is whether there is fair competition and whether users’ interest are treated fairly.