A breath of fresh air in digital competition policy

Diego Zuluaga // 27.10.2015

Let’s say it loud and clear: There is hope for EU competition policy! After months of negative headlines and high-profile probes of the European digital sector, one was delighted to read a decidedly more forward-looking take on the approach competition regulators should have towards online platforms. And this, from one of Europe’s most prominent regulators, Alex Chisholm of the UK’s Competition and Markets Authority (CMA).

In his speech earlier today at the Bundesnetzagentur in Bonn, Germany (whose government of late has been deeply sceptical of U.S. tech companies), Chisholm challenged the notion that competition concerns in the digital economy can best be addressed by applying theoretical models of the past. I could try and paraphrase him, but the CMA chief put it best when he advised competition authorities to:

“[…] acknowledge that there are certain, familiar antitrust concepts which may not take sufficient account of the nature of digital markets and so should not be unthinkingly transposed across to them. The ‘essential facility’ doctrine, for instance, was developed in the context of infrastructure assets that are difficult to replicate. But concepts applying to ports cannot simply be copied and pasted into the digital world, where the potential source of market power for online platforms is generally not derived from big infrastructure requirements and high fixed costs, and nor do planning restrictions intrude.” [Emphasis mine.]

What a breath of fresh air, at a time when policymakers seem to view online platforms with increasing suspicion, transposed into policy via (e.g.) Uber bans in Spain and Belgium, the ECJ’s recent suspension of the Safe Harbour data flow agreement between the EU and the U.S., and the potential for an adverse ruling from the European Commission in its Google probe. I don’t mean to suggest that there aren’t any important questions surrounding competition in the digital economy; however, for a long time, the debate has been one-sided, with only a handful of observers (this modest author among them) arguing for regulatory prudence and for deregulation not to be ruled out – a “levelling down” of the playing field, as Chisholm puts it.

It is therefore refreshing to see one of Europe’s most influential competition bodies come out in favour of an open, innovative and free digital economy. In particular, Chisholm’s acknowledgement of the deep damage that unwarranted regulatory action can cause – known in the antitrust literature as “Type I error costs” – is welcome, as this is a hugely important issue that should concern regulators but has received scant attention in the current debate.

In a forthcoming EPICENTER paper written jointly with Istituto Bruno Leoni, I look at the economics of the Google case in Europe, and whether regulatory action by the European Commission is warranted and – most saliently – likely to improve outcomes for search engine users. Consumer welfare, after all, is the reason why we give competition watchdogs their powers. I very much welcome Mr Chisholm’s market-driven take on the regulatory approach to online platforms, and I look forward to more and more public authorities embracing it across the Union.

Watch this space for additional commentary on this issue.

Diego Zuluaga is Deputy Director of EPICENTER.

EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).


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