{"id":2056,"date":"2019-03-21T16:30:26","date_gmt":"2019-03-21T15:30:26","guid":{"rendered":"https:\/\/www.d-kart.de\/?p=2056"},"modified":"2019-03-20T21:10:05","modified_gmt":"2019-03-20T20:10:05","slug":"furman-report-ein-digitales-kartellrecht-ihrer-majestaet","status":"publish","type":"post","link":"https:\/\/www.d-kart.de\/en\/blog\/2019\/03\/21\/furman-report-ein-digitales-kartellrecht-ihrer-majestaet\/","title":{"rendered":"Furman Report: Her Majesty\u2019s New Digital Antitrust Law"},"content":{"rendered":"\n

While the UK is trying to escape a #HardBrexit\nand is making friends with a #Brextension, the\nfinal report of<\/a> the \u201cDigital Competition Expert Panel\u201c led by Jason\nFurman, former chief economist under Barack Obama, was published on March 13,\n2019. The British are thus presenting some far-reaching proposals for a new\ndigital antitrust law. Adrian Deuschle shares his thoughts.<\/em><\/p>\n\n\n\n

So, what\u2019s going on in the\ndigital economy?<\/h2>\n\n\n\n

In the\nfirst chapter, the business model of online platforms is presented, in\nparticular the free nature of services for consumers and the importance of data\nfor this business model. <\/p>\n\n\n\n

This is not\nparticularly new, but it needs to be in there. By the way: The Expert Panel\nresponsible for the report with the nice title of \u201eUnlocking digital\ncompetition\u201d is composed of<\/a> Harvard\u2019s James Furman,\nCambridge\u2019s Diane Coyle, Amelia Fletcher, who is at the University of East\nAnglia, Andrew McAuly, expert for the digital economy from Nottingham, and Philip\nMarsden (CMA, Bank of England, College of Europe), who on Twitter <\/a> calls himself an “Antitrust Marathoner,\nCompetition Flaneur” and who is of course known for his critique of hipster <\/a>antitrust.<\/p>\n\n\n\n

The rising\nconcentration of power in the markets for online search, social media, digital\nadvertising, mobile phone operating systems, and the digital economy in general\nis probably the biggest issue. Responsible for this are economies of scale and\nscope, the advantage of the market leaders through the generated data volumes,\ndirect and indirect network effects, the limited possibility of multi-homing\nand the deep pockets of the large players. Most of these features do not only\noccur in the digital economy, but their combination leads to a concentration on\nsome dominant market players. <\/p>\n\n\n\n

However,\nthe digital economy is also faster and more flexible, so competition for the\nmarket could lead to good quality, low prices and innovation. Just as Facebook\nhad displaced MySpace, Google Yahoo and Apple Nokia at the time, the market\nleaders on the tech markets could be threatened with constant replacement by\ninnovative start-ups.<\/p>\n\n\n\n

So, will MAGAF\u2019s market\nshares soon disappear on their own?<\/h2>\n\n\n\n

The report\nsays that\u2019s unlikely. In contrast to the early market leaders in the tech\nmarket, conditions have changed. The persistence and scale of MAGAF\u2019s supremacy\nspeaks for itself. Nokia did not yet have an AppStore, where they could charge 30\n% of the generated turnover<\/a>. Plus, the companies have allegedly\ncreated a \u201ckill zone\u201d in which all innovative companies whose business model\nthreatens MAGAF are simply bought up or aggressively driven out of the market. <\/p>\n\n\n\n

This has negative\neffects on consumers and downstream businesses. Even if consumers are sometimes\noffered \u201cfree\u201d services, they pay this with the invalid\nconsent<\/a> to the use of all data and with higher prices on other\nmarkets (if companies spend more money on advertising, this is reflected in the\nselling price of their products, which are ultimately paid by consumers). The\neffects on innovation must be considered in a more differentiated way. The\npurchase by the big five may be profitable for many start-ups and encourage\nthem to innovate. However, the \u201ckiller\nacquisitions<\/a>\u201d result in only a certain type of innovation being\npromoted. Namely, innovations that merely complement the status quo. These\nprobably have the highest payoff, while fundamentally disruptive innovations\nare generally bought up and then shut down.<\/p>\n\n\n\n

What should UK antitrust\nlaw look like in the digital economy?<\/h2>\n\n\n\n

The report\nfirst identifies an underenforcement in UK merger control. The \u201cbig five\u201d\n(Microsoft, Apple, Google, Amazon, Facebook) made over 400 acquisitions\nglobally in the last decade, 250 of them in the last five years. None of these\nmergers were notified voluntarily to the CMA. The CMA monitors all unnotified\nmergers and considered a closer review of 30, but approved all of them in phase\n1, most recently the acquisition\nof Waze by Google (Motorola Mobility<\/a>). At any rate, this is not what\neffective prevention of killer acquisition looks like. <\/p>\n\n\n\n

\"This
Oh, London, the beautiful.<\/figcaption><\/figure>\n\n\n\n

At least\nthis is not due to the two jurisdictional threshold tests. Firstly, proceedings\nmay be initiated if the target company achieves a certain turnover; secondly,\nif the companies achieve a market share of at least 25 % on the UK market after\nrealising the merger. This \u201cshare of supply test\u201d keeps the merger control flexible\nand dynamic, making the UK one of the few EU Member States that could have\nreviewed Facebook\/Whatsapp<\/em>.\nTherefore, there is no need to introduce a transaction-value based threshold\n(as in Germany and Austria). Rather, the CMA is to prioritize the review of\nmergers in digital markets in the future. In addition, digital companies with a\n\u201cstrategic market status\u201d (more on this below) should be obliged to notify all\nplanned takeovers to the CMA. Furthermore, the Merger Assessment Guidelines,\nlast updated in 2010, ought to be reviewed and adapted to the digital age.<\/p>\n\n\n\n

What about the theories of harm<\/em> in merger control?<\/h2>\n\n\n\n

In order to\nblock a merger, the CMA must identify a \u201csubstantial lessening of competition\u201d.\nSuch a lessening of competition must be more likely than not. This tends to be\nvery difficult to prove in practice. According to the report this test is not\nsuitable to effectively prevent killer acquisitions in the future. The Furman\nReport proposes a new \u201cBalance of Harms Approach\u201d which assesses not only the\nlikelihood, but also the magnitude of the impact of the merger. Thus, if it is\nnot more likely that competition would be lessened, but the lessening, if it\noccurs, would severely restrict competition, a merger could still be blocked. This\napproach would be more restrictive and flexible. <\/p>\n\n\n\n

Using the\nexample of Facebook\/Instagram<\/em>, approved\nat Phase 1<\/a> at the time, the report shows how this new tool could\nwork. (The report does all this, of course, without judging over the decision\nback then and without giving any concrete prediction about how the case would\nbe decided with the new approach.) <\/p>\n\n\n\n

As an\nalternative to the Balance of Harms Approach, the Unit cites the introduction\nof a legal presumption against any merger by the large digital companies. With\nthis rebuttable presumption one would have passed the difficulty of proving a\nlessening of competition to the companies. That would be a complete change in\nsystem \u2013 probably too radical. <\/p>\n\n\n\n

The report\nis not in favour of implementing the SIEC test used by the EU Commission in UK\nlaw, as there is also an underenforcement of digital mergers at the EU level\nand therefore the test has no significant advantage to the current test.<\/p>\n\n\n\n

So much for merger\ncontrol. What happens with abuse and antitrust law?<\/h2>\n\n\n\n

The main\naim here is to\nspeed up antitrust law<\/a>. The aim is to promote interim measures. The\nCMA had the authority to use interim measures for a long time and in 2014 the\npower was even extended. However, this power, just as in Germany and in the EU,\nhas never played a role. The report proposes making more frequent use of this\npower in the future. <\/p>\n\n\n\n

The main\nreason for the lack of application is the legal obligation to disclose files\nrelating to the proposed direction to the parties affected. To end this, the access\nto file should be confined to documents clearly relevant for the interim\nmeasure. If this is not possible under current law, the CMA rules need to\nchange, so the Report says. <\/p>\n\n\n\n

\"The<\/figure>\n\n\n\n

Besides,\nthe rights to appeal antitrust cases ought to be restricted. According to the\nreport, under current law there is an incentive to appeal against decisions of\nthe CMA, as a full-merits review standard is granted which allows to reconsider\nthe legal and economic aspects of the case. This right to appeal is to be\nlimited to ensure that decisions are founded on procedural regularity, avoid\nmaterial errors of fact or law, and are reasonable in their judgement. The\nreport also proposes to continue vigorously enforcing infringements of consumer\nprotection law in digital markets and to monitor the\nuse of algorithms and machine learning<\/a>. Furthermore, a market study\non the digital advertising market is proposed.<\/p>\n\n\n\n

So, will we see a reform\nof antitrust law soon?<\/h2>\n\n\n\n

The report\nis pursuing a different path. It is proposed to introduce a pro-competitive\n\u201cDigital Markets Unit\u201d. The report assumes that traditional antitrust law is\nimportant for competition in the digital economy, but its effects are limited.\nAntitrust law is too slow and refers only to specific cases with an ex-post\nview on the conduct. Therefore, the report proposes this new unit working with\nan ex ante perspective. <\/p>\n\n\n\n

The new body\nwill keep a list of all companies with a \u201cstrategic market status\u201d. These\ninclude dominant platforms which have control over the access to the platform\nand demand particularly high margins due to their market power. The unit should\nmaintain three functions. First, it should develop a code of conduct for\ncompanies with a \u201cstrategic market status\u201d. This code should be developed in\ncooperation with the platform companies and all other stakeholders. The\npenalties for a violation of these rules should be \u201cextremely high\u201d. This will\nbe the only possibility to influence the behaviour of the large platforms.\nCompliance of the code of conduct should be monitored and enforced by the new\nmarket unit. Based on a case study using the European Commission\u2019s Google Shopping\ncase<\/a>, the report shows how the entity would implement the code of\nconduct.<\/p>\n\n\n\n

What are the other\nfunctions of the unit?<\/h2>\n\n\n\n

The unit\nshould ensure that the portability of personal data is guaranteed by the\nplatforms \u2013 from the Facebook profile through the Whatsapp Chat to the Amazon\npurchase history. However, it is hardly imaginable that the large platforms\nwould voluntarily make their valuable data available to users. This may go\nbeyond the obligations in the GDPR (which probably benefits the large platform\ncompanies anyway, as small innovative start ups now must abide by rules that had\nnot been in force when the large platforms were born and raised. This would\nalso explain why even in California a regulation like the GDPR, the CCPA<\/a>, is now\nbeing introduced.) <\/p>\n\n\n\n

Moreover,\nthe technical implementation of data mobility in compliance with highest\nsecurity standards and the legislation could pose difficulties. The government\nshould promote voluntary projects such as the Data Transfer Project<\/a>\nfrom Google, Microsoft and Twitter. At the same time, it should implement\ncomparable or even faster and more ambitious actions in other areas. The\nOpen Banking System<\/a> introduced by the CMA is cited as a positive\nexample of such actions. <\/p>\n\n\n\n

In\naddition, the digital merger unit should be able to prescribe the use of Open\nStandards if necessary, for the competitive outcome in the concrete situation.\nThe unit will also be given a tool to open the data treasures of large\nincumbents to third parties. This should attack the market entry barriers and\nthe bottleneck position of the market leaders. This intervention should only be\nused as a last remedy by the authorities, if other methods are not likely to\nwork.<\/p>\n\n\n\n

How should the unit be\nincorporated in the institutional body?<\/h2>\n\n\n\n

In order to\nfully perform the above-mentioned functions, the unit must be newly established\nand equipped with its own powers. Different possibilities are proposed for the\ninstitutional framework. First, a completely new independent authority, with\nown rights, maximum independence and focus on the digital economy. Secondly, a\nunit with own powers within either Ofcom or CMA. Finally, a legally independent\nsubsidiary of CMA or Ofcom with its own Board of Directors and CEO. The\ndecision should be made by the government. Every 3-5 years, the unit should\nprepare a status report on the markets and companies with strategic market\nposition.<\/p>\n\n\n\n

Is the report just focused\non the UK?<\/h2>\n\n\n\n

No. The\nconcentration of market shares in the digital economy is a global phenomenon.\nThat is why we also need an international agenda. Therefore, the government\nshould participate in global initiatives where competition authorities exchange\nbest practices and develop a common approach. The different jurisdictions\nshould be compared, evaluated, and if necessary, adapted to the digital\neconomy. The UK should promote its existing tools including its market studies\nand investigation powers, so that other countries can benefit from the\nintroduction of these powers. <\/p>\n\n\n\n

Furthermore,\nthe UK should engage to make sure that patent rights are not extended to areas\nof the digital economy where they were previously not applicable. The impending\n\u201cpatent thicket\u201d could foreclose\nmarkets and hamper innovation in the digital economy<\/a>. The Digital\nMarkets Unit should be used to share pro-competitive ex ante measures to\npromote competition internationally.<\/p>\n","protected":false},"excerpt":{"rendered":"

While the UK is trying to escape a #HardBrexit and is making friends with a #Brextension, the final report of the \u201cDigital Competition Expert Panel\u201c led by Jason Furman, former chief economist under Barack Obama, was published on March 13, 2019. The British are thus presenting some far-reaching proposals for a new digital antitrust law. Adrian Deuschle shares his thoughts. So, what\u2019s going on in the digital economy? In the first chapter, the business model of online platforms is presented,…<\/p>\n

Read More Read More<\/span><\/a><\/p>\n","protected":false},"author":9,"featured_media":2057,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[101,255],"class_list":["post-2056","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-allgemein","tag-digitale-oekonomie","tag-grossbritannien"],"translation":{"provider":"WPGlobus","version":"3.0.0","language":"en","enabled_languages":["de","en"],"languages":{"de":{"title":true,"content":true,"excerpt":false},"en":{"title":true,"content":true,"excerpt":false}}},"_links":{"self":[{"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/posts\/2056","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/comments?post=2056"}],"version-history":[{"count":3,"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/posts\/2056\/revisions"}],"predecessor-version":[{"id":2063,"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/posts\/2056\/revisions\/2063"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/media\/2057"}],"wp:attachment":[{"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/media?parent=2056"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/categories?post=2056"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/tags?post=2056"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}