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Abuse of Dominance in Digital Markets

Resumé

Digital markets pose fundamental challenges for abuse of dominance enforcement. The raport explores these challenges, and set out some strategies that authorities can consider in their casework. On the one hand, digital markets may be more likely to manifest the kind of harm that abuse of dominance laws were designed to prevent. If competition authorities are unable to apply these prohibitions to digital business models, it may lead to questions about the broader relevance of abuse of dominance as a competition enforcement tool. As a result, some have called for more extensive enforcement in this area. On the other hand, the analysis of this harm can be potentially complex, and give rise to the risk of error (resulting in either over- or under-enforcement). Aggressive enforcement that is not founded in economic theories of harm, or which does not address the risk of over-enforcement, may end up harming the consumers it was meant to protect, and undermine support for competition enforcement more generally. To balance these risks, it seems that both (1) an openness to abuse of dominance theories of harm, and (2) great care in selecting which cases to bring, are needed. Different jurisdictions make different assessments of where the balance of under- and over-enforcement risks lies. These assessments cannot be separated from the underlying legislative, historical, and philosophical context of competition law in each jurisdiction. They may also be updated in response to ex-post assessments of past interventions, evidence about trends in market power. However, there are areas of convergence in terms of the need for effects-based analysis in most cases, and the need to avoid action that creates disincentives for innovation. At the same time, there are cases in which alternative competition policy tools could be either more justified, more timely, or more resource-efficient. Going forward, competition authorities seeking to address abuses of dominance in digital markets would benefit from deeper international co-operation, given the international scope of many digital firms. In addition, there remain significant opportunities for the development of new methodologies that help authorities assess the unique circumstances in digital markets, and identify clearer conditions in which harm will emerge

Myndighed
OECD
Mødedato

Lines of Business Restrictions – Background note

Resumé

Line of business restrictions (LOBRs) are antitrust remedies or regulatory restrictions that limit the activities that a firm can undertake. They include separation restrictions ranging from structural to behavioural separation (accounting, functional or legal). However, there are also alternative behavioural restrictions such as mandating access, non-discrimination obligations and mandatory standards on portability and interoperability. LOBRs are used to address concerns that competition is likely to be prevented, restricted or distorted in a number of different ways. These include concerns that dominance is leveraged to exclude rivals in another downstream market, for example through discriminatory self-preferencing (equivalent to margin squeeze) or refusal-to-deal. The risk of such exclusionary abuses also arises from mergers that might make such conduct likely. Each type of LOBR has enjoyed success in certain circumstances; the challenge is therefore identifying the right LOBR for the specific problem. For example, if the theory of harm is that access is being denied to an essential facility, and a loss of competition as a result of such an explicit refusal-to-deal is established, then the solution will need to focus on allowing access, and applying a duty-to-deal. Hence, the appropriate LOBR might include mandatory access on FRAND terms, or structural separation to achieve the same access. In contrast, if the regulatory or antitrust concern is not that the firm refuses-to-deal, but that it deals on terms that foreclose through raising rival costs or predation (via some form of margin squeeze, or equivalently a merger leading to margin squeeze), then the solution (were one required) would not focus on mandating access. Instead, the response might be a non-discrimination obligation (without necessarily imposing a duty-to-deal on FRAND terms) or to mandate standards for portability and interoperability. Notably, in the case of digital platforms, it would appear that refusal-to-deal is not driving the concerns (thus far), and so imposing a duty-to-deal seems unlikely to be the right answer. Instead, the concerns appear to relate to foreclosure through self-preferencing that raises rivals’ costs, meaning that non-discrimination obligations are the more likely LOBR. Moreover, digital platforms are not natural monopolies in which competition cannot take place. Therefore, the approach should not be to write off the possibility of competition in platform markets and focus solely on preserving the possibility of competition downstream (or upstream) markets (as in regulated infrastructure monopolies). Instead, behavioural LOBRs including standards for portability and interoperability could facilitate competition within these markets (and thereby begin to resolve the foreclosure risk in downstream markets). However, it may nevertheless be sensible to reinforce these with further LOBRs, for example non-discrimination obligations, in these downstream (upstream) markets to preserve competition while competition in these ‘core’ markets is strengthened.

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Criminalisation of cartels and bid rigging conspiracies: a focus on custodial sentences

Resumé

Notwithstanding the increased adoption of criminal sanctions, there is no international consensus on criminalisation of cartels, and in particular on custodial sentences against individuals. This paper aims at providing guidance on the benefits and challenges of criminal enforcement, focussing on custodial sentences.
It describes the economic deterrence theory and the retribution theory that have emerged in the criminalisation debate and summarises the main concerns raised in relation to each theory. It offers an overview of criminalisation trends across jurisdictions, and it identifies the key institutional and procedural questions to be carefully assessed when a jurisdiction considers the criminalisation of cartels. It also discusses the benefits and main challenges for international co-operation between jurisdictions that pursue criminal enforcement and those that focus on administrative/civil enforcement, and the effects of criminalisation on leniency programmes. A case can be made in favour of criminalisation of antitrust enforcement against cartels and bid rigging offences, in particular in favour of custodial sentences against individuals, to complement sanctions against companies. However, not all enforcement regimes are currently built for successful criminalisation. The paper concludes that jurisdictions should gradually build institutions before introducing criminalisation, and that each jurisdiction should determine the right mix of sanctions, depending – among other factors – on social norms, the existing legal framework, resources of competition agencies and the relationship between the competition agency and prosecution authorities. The introduction of criminal enforcement also requires significant advocacy efforts directed at key institutional stakeholders and the general public.

Mødedato

Digital Disruption in Banking and its Impacton Competition

Resumé

The report, by Professor Xavier Vives (IESE Business School) surveys technological disruption in banking, examining its impact on competition and its potential to increase efficiency and customer welfare. It analyzes the possible strategies of the players involved—incumbents and FinTech and BigTech firms—and the role of regulation. The industry is facing radical transformation and restructuring, as well as a move toward a customer-centric platform-based model. Competition will increase as new players enter the industry, but the long-term impact is more open. Regulation will decisively influence to what extent BigTech will enter the industry and who the dominant players will be. The challenge for regulators will be to keep a level playing field that strikes the right balance between fostering innovation and preserving financial stability. Consumer protection concerns rise to the forefront. This is a revised version of the paper prepared for an OECD Competition Committee roundtable held on 5 June 2019.

Myndighed
OECD
Regel
Rapport
Udfald
Rapport
Mødedato

Merger Control in Dynamic Markets

Resumé

The competition dynamics observed in rapidly-evolving sectors, such as high-technology, consumer services and online retail, is challenging the role of competition authorities in merger control, where enforcement decisions depend on an effects-based analysis of the likely future effects of the merger. As these sectors are typically characterised by high entry and exit rates, as well as innovation that continuously disrupts existing business models, it is increasingly harder for authorities to predict how markets will evolve in order to support merger decisions. This is made worse by the fact that many of the merger tools currently available tend to focus on the recent-past or current state of the market, instead of forwardly looking at how the market might evolve post-merger. This paper discusses the role of merger control in dynamic markets and identifies the main practical proposals that have been made to adapt the different stages of the review process to take into account market dynamics over time: (1) the competitive assessment of the merger, (2) the analysis of efficiency effects and (3) the design of remedies.

Myndighed
OECD
Regel
Fusion
Udfald
Rapport
Mødedato

Competition Concerns in Labour Markets

Resumé

A recent fall in the labour share of income in some countries has stirred a debate on monopsony and the market power of employers to reduce workers’ wages or working conditions below competitive levels. The debate focused attention on the role that competition agencies may have to help ensure efficient labour input markets. This paper sets out the economic drivers and effects of employer monopsony power in labour markets. It analyses when the exercise of monopsony power by employers may infringe competition law and identifies the cases where competition enforcement can effectively address monopsony power in such markets. The paper also looks at how monopsony power is exercised in digital markets, examining how the intermediation power of some big platforms may negatively affect wages and working conditions of self-employed platform workers. The paper finds that, whilst competition law enforcement has been so far limited, it may have an increased role to play in labour input markets, particularly in addressing anticompetitive agreements that artificially creates monopsony power, abuses of monopsony power and merger transactions leading to increased buyer power on the labour demand side. The paper looks at some practical and analytical challenges to the application of the traditional tools of competition enforcement analysis in these markets. It then discusses ways to overcome such challenges and proposed adjustments to these tools suggested in the recent literature, as well as competition advocacy solutions to address monopsony power in these markets. Opfølgende analyse fra 2020.

Myndighed
OECD
Regel
Rapport
Udfald
Rapport
Mødedato

Implications of E-commerce for Competition Policy

Resumé

E-commerce – broadly, buying and selling online – is an expanding distribution mechanism across OECD countries. Although e-commerce is effectively a question of retail competition, the dynamics at play differ significantly from more traditional brickand-mortar retail markets. Notable features include the emergence of leading online platform operators which conduct business across multiple product segments, greater transparency, the increasing importance of data collection and exploitation, and the use of algorithmic competition mechanisms. The growth of e-commerce has the potential to increase competition within retail markets, to greatly enhance consumer choice, and to prompt and facilitate innovation in product distribution. Yet certain dynamics may also prompt or facilitate anticompetitive coordinated and unilateral conduct by economic operators, which is reflected in the increasing levels of antitrust enforcement in ecommerce markets within OECD countries. This background paper provides a wideranging consideration of potential competition law concerns within e-commerce markets. It focuses, in particular, on vertical restraints and abusive dominant conduct, with brief consideration of horizontal collusion and merger control issues. The paper concludes with an examination of possible regulatory solutions beyond the realm of competition law, encompassing sector-specific, consumer protection and data privacy oriented

Myndighed
OECD
Regel
Rapport
Udfald
Rapport
Mødedato

Quality considerations in digital zero-price markets

Resumé

Most consumers are offered products at a price of zero on a daily basis. Business models centred around the zero-price products are not new. However, in the digital economy, new zero-price markets have arisen with their own unique characteristics and vast scope. This paper sets out the potential dimensions of quality competition in zero-price markets and the business models associated with them, including privacy and data security, advertising content, ease of switching, and choice in complement markets, among others. While there is a conceptual basis for identifying competition problems in zero-price markets, there are numerous practical analytical and legal challenges that may arise. However, these challenges may be surmountable by competition authorities in many cases. When competition may not be functioning as expected in a zero-price market but competition enforcement tools cannot remedy the situation, there are numerous opportunities for consumer or data protection authorities to act. In any event, competition, data, and consumer protection authorities have a complementary role in promoting competitive zero-price markets, and so cooperation between them i essential, particularly with respect to advocacy and regulatory solutions.

Myndighed
OECD
Regel
Rapport
Udfald
Rapport
Mødedato

Rethinking Antitrust Tools for Multi-Sided Platforms

Resumé

Platforms are not a new business model, but rather an old one that has been rejuvenated by the sheer scale and scope of the participants in digital economy. The complexity this creates has renewed the need for, and the value in having a simple meeting place where those interested in trading particular products and services can find one another, and perhaps be entertained while doing so. It appears that users are not looking for a particular seller, or someone that carefully selects and assures the quality of suppliers, instead they crowdsource recommendations and ask only that they be able to search for, or introduced by algorithm to, the best possible match. Many digital marketplaces remain free to consumers, the market-makers having decided against charging for entrance or use of their platform services, and instead to use the available technology to monetise the information conveyed by users. While this was not possible in the past, it is now, largely as a result of the ability to digitalise what we know (the customer relationship), and the low value that users attach to the sharing of this information. This does not mean competition is necessarily working effectively, however nor does it mean that there is undetected anticompetitive conduct by firms. More likely, the answer lies in consumers having greater awareness of the surplus that is generated, and more effective tools to extract it from the market when prices hit zero. To investigate whether the antitrust toolkit remains fit-for-purpose the OECD Competition Committee held a Hearing in June 2017. This asked whether the tools traditionally used to define markets, to assess market power and efficiencies, and to assess the effects of exclusionary conduct and vertical restraints, remain sufficient to address those questions in the context of these multi-sided platform markets. At the hearing a range of expert economists from agencies, academia, and private practice were invited to make practical methodological proposals on how these tools might need to be re-designed or re-interpreted in order to equip competition agencies with the analytical tools they require when analysing multi-sided platform markets. This report features each of the contributions made by those experts (and their co-authors) along with an opening synthesis chapter by the OECD.

Myndighed
OECD
Regel
Rapport
Udfald
Rapport
Mødedato

Algorithms and Collusion - Background Note by the Secretariat

Resumé

The combination of big data with technologically advanced tools, such as pricing algorithms, is increasingly diffused in today everyone’s life, and it is changing the competitive landscape in which many companies operate and the way in which they make commercial and strategic decisions. While the size of this phenomenon is to a large extent unknown, there are a growing number of firms using computer algorithms to improve their pricing models, customise services and predict market trends. This phenomenon is undoubtedly associated to important efficiencies, which benefit firms as well as consumers in terms of new, better and more tailored products and services. However, a widespread use of algorithms has also raised concerns of possible anti-competitive behaviour as they can make it easier for firms to achieve and sustain collusion without any formal agreement or human interaction. In particular, this paper focuses on the question of whether algorithms can make tacit collusion easier not only in oligopolistic markets, but also in markets which do not manifest the structural features that are usually associated with the risk of collusion. This OECD note discusses some of the challenges of algorithms for both competition law enforcement and market regulation. In particular, the paper addresses the question of whether antitrust agencies should revise the traditional concepts of agreement and tacit collusion for antitrust purposes, and discusses how traditional antitrust tools might be used to tackle some forms of algorithmic collusion. Recognising the multiple risks of algorithms and machine learning for society, the paper also raises the question of whether there is need to regulate algorithms and the possible consequences that such a policy choice may have on competition and innovation.