10 key themes
The digitised economy
Will 2020 be the year of action?
2019’s reviews and studies – the story so far
2019 saw broad debate across the globe as to whether there should be greater enforcement of antitrust law targeting the business models of digital platforms and especially their use of data and algorithms – practices that have made many of the tech companies so successful.
There has also been an increasingly active discussion on whether existing antitrust laws give authorities sufficient powers to deal with issues raised by digital innovation or whether reform, or even new specialist laws and regulators, should be created.
Numerous reports into competition in the digital era have been looking into these issues, as authorities seek to deepen their understanding of digital markets and determine if they have the requisite ‘tools’ to apply antitrust law to the issues they now face. In 2019 alone:
- the US Federal Trade Commission (FTC) created a permanent Technology Enforcement Division and is currently preparing digital guidelines relating to platforms in conjunction with the Department of Justice (DOJ). Separately, State Attorneys General have individually and collectively launched investigations into digital platforms;
- the European Commission published a report by three academics considering how EU competition policy should evolve to continue to promote pro-consumer innovation in the digital age – the Commission’s response to the report is keenly awaited;
- the UK’s Competition and Markets Authority (CMA) launched a digital markets strategy and opened a market study on online platforms and digital advertising following publication of a report by the digital competition expert panel led by Professor Jason Furman (former economic adviser to President Obama);
- the French and German competition authorities published a joint study addressing the potential risks associated with the use of algorithms (in addition to a previous report they published on Competition Law and Data);
- in Japan, a variety of new laws and guidelines have been introduced (or are imminent) to regulate digital platforms, including new digital transparency legislation, amended merger guidelines and new guidelines on abuse of superior bargaining position in the context of use of personal data; and
- the Australian Competition and Consumer Commission (ACCC) published recommendations following an in-depth digital platforms inquiry, which the government followed with a series of proposed regulatory reforms.
The Japanese antitrust authority has been closely examining the data practices of a number of global and domestic digital platforms. An across-the-board government oversight team is also being created, under the direct supervision of the prime minister, to discuss competition issues arising in digital markets.
Outcome of reviews
These reviews have led to a proliferation of far-reaching – and not always consistent – recommendations, including for legal reform, codes of conduct, greater data mobility and openness, greater focus on data ethics, further regulation, the creation of units for overseeing digital markets, stricter appraisal of mergers and even the unwinding of previously approved past mergers. Exactly what changes, if any, should be adopted remains, nonetheless, controversial and is still being vigorously debated:
- some are calling for closer analysis, and the need for a greater understanding, of digital markets before any changes are introduced;
- others are demanding urgent action. It is far from clear, however, that making sweeping changes to existing legislation, or setting up entirely new regulatory bodies, would be either quick or effective.
At least in Europe, the track record of enforcement appears to belie the underlying theory that existing antitrust laws are insufficient. In 2019, the European Commission:
- imposed a €1.49bn fine on Google for abusive practices in online advertising (the third infringement decision it has taken against Google since 2017, resulting in total fines of €8.25bn);
- imposed a €242m fine on Qualcomm for a predatory pricing abuse; and
- opened proceedings into whether Amazon has used data collected as a platform owner to gain a competitive advantage when competing with sellers using its platform to connect with customers.
Although the correct approach is not necessarily straightforward – as a recent interim decision of the German courts makes clear by setting aside, in critical terms, the remedy order of the German competition authority against Facebook – many are arguing, credibly, that it is not new laws, but rather greater expertise and careful case management within the antitrust agencies themselves that would make the most difference in this area.
Competition agencies across the world are closely scrutinising the landscape and functioning of the digital economy. Many authorities have created special units with a digital focus to investigate and assess competition in digital markets. In the future, closer examination of both single firm conduct and M&A in the digital space can be anticipated.
Will 2020 be the year of action?
If 2019 was a ‘year of reports’, it is clear that agencies around the world are under pressure to make 2020 a ‘year of action’. Margrethe Vestager (newly appointed Executive Vice-President of the European Commission for a Europe Fit for the Digital Age and responsible for the Commission’s competition portfolio) has already signalled bolder action in the next five years compared to her first term as Competition Commissioner.
In the short term, heightened competition scrutiny can be anticipated for:
- mergers where one or more parties have access to potentially valuable data or those involving acquisitions of start-ups – sometimes called ‘killer acquisitions’ by critics (see theme 3);
- business practices of digital platforms, particularly:
how data is gathered from users (its purpose and the protections in place); or
whether any types of data could be considered to confer a competitive advantage or to be an ‘essential facility’ and, if so, how access should be given;
In the UK, we’re likely to see regulators work towards creating general codes of data ethics, with a particular focus on new technologies. Regulators have been looking at various ethical issues that might impact consumers, including algorithmic decision-making, and transparency around data collection. The UK Information Commissioner is due to publish a consultation paper on its proposed ‘AI auditing framework’ in January 2020, and the UK Centre for Data Ethics and Innovation will continue to assess the risks of data-driven tech.
- restrictions in distribution agreements, such as platform ‘most favoured nation’ clauses or exclusivity provisions; and
- price-setting algorithms, to determine whether they are allowing competitors to co-operate unlawfully in violation of antitrust laws prohibiting anti-competitive agreements.
Competition agencies are also likely to make greater use of:
- interim measures: powers to halt potentially anti-competitive conduct pending investigation (as the European Commission did in 2019 in proceedings against Broadcom when it used these ‘cease and desist’ powers for the first time in 18 years);
- intrusive remedies: powers, for example, to mandate the sharing of data (although this will require careful alignment with relevant consumer and data protection agencies to ensure protection of data subjects’ rights); and
- technology-assisted review: technology and algorithms to uncover competition infringements such as electronic screens to test for cartels (see theme 10).
Intensified enforcement in 2020 can be anticipated. Executive Vice-President Vestager will be keen to make an early impact in her new digital role and is under some pressure to show that, in future, digital cases can be managed in a more streamlined and effective manner. At the same time, the UK CMA is due to publish a major digital report in 2020 and will want to prove that it can be among the top agencies globally following Brexit.
More radical changes may lie ahead
In some jurisdictions, preparatory steps may also be taken for more radical, longer-term solutions, through legislative change, especially competition or data protection law reform, and/or regulation. In the US, Senator Warren is even advocating that a new US digital platform regulator should have power to break up companies and impose non-discrimination obligations on platforms. These more dramatic proposals are likely to be fiercely contested throughout the legislative process.
Legislators across the EU are considering whether competition laws are adequate to deal with practices emerging in the digital economy. The Dutch Government has submitted a policy letter to the House of Representatives setting out measures that would allow stricter application of competition rules to digital platforms, and competition law reform is on the way in Germany.
A French parliamentary committee recently joined the chorus of European and other voices calling for merger control to be adapted for the digital economy, and echoes calls elsewhere for all big tech company acquisitions to be notifiable.
Looking ahead in 2020:
Track developments closely: as laws and policies evolve, companies should track the implications carefully to ensure they remain compliant across their businesses.
A wide net: given the rapid pace of digitisation, more businesses will be affected by wide-ranging investigations and will need to consider how their conduct will be viewed as enforcers cast their investigatory nets increasingly broadly.
More cases and faster intervention: driven by pressure to act quickly, competition agencies are likely to open new antitrust cases designed to test the scope of existing laws while considering what future reforms might be needed.
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