The rise of powerful digital platforms like Google, Facebook, and Amazon in the new global economy has sparked an increasingly public debate worldwide. Politicians across the political spectrum have for the first time brought calls for enforcement and regulation of digital platforms into regular discourse in popular politics. Although some continue to caution against interference that could chill innovation, there is an increasing sentiment consistent with broader enforcement trends that more must be done from an antitrust perspective to address the ability of these established platforms to reduce competition. Despite a history of enforcement around innovative technologies, some have questioned whether the unique features of digital platform markets require a corresponding revolution in the established antitrust enforcement framework.
Within a broader global trend toward more proactive antitrust enforcement, antitrust authorities around the world have begun to focus particularly on the potential for these platforms to entrench their positions by effectively excluding or buying up potential new competitors to the detriment of consumers. The European Commission and member states in Europe have arguably taken the lead in heightened antitrust enforcement, but other regions are following suit with the recent ramp up of enforcement in North America. These developments are also being closely watched across Asia-Pacific, including signs of enforcement in China, where the authorities have traditionally supported the development of strong domestic platform providers.
To date, most of the efforts invested in targeting digital platforms have been at the policy level to understand the key features of digital platforms and the existing enforcement framework. Several antitrust enforcers have actively conducted policy studies on these issues, including holding hearings and issuing policy reports with their findings. In the United States, antitrust enforcers at the Federal Trade Commission (FTC) and Department of Justice (DOJ) have hosted a series of workshops to give a range of stakeholders an opportunity to be heard. The Congressional committees tasked with oversight of antitrust enforcement have also held hearings and taken testimony from the providers. Australia has recently completed a broad market study on the direction of the government on digital platforms, focusing on media, journalism, and advertising services. Several European member states have also conducted similar initiatives, including the Digital Markets Strategy by the UK Competition & Markets Authority (CMA) and a two-year inquiry into online advertising by the French Competition Authority. Authorities in other jurisdictions have hired third-party thought leaders from major universities to prepare reports on digital platform markets, including, for example, the European Commission and the UK Parliament. Competition authorities in Asia, particularly Japan and Korea, have also clearly taken notice and announced their own policy initiatives.
Although each of these policy initiatives has a distinct focus and market context, there are several key themes that have arisen which the authorities are working through:
- How should market power be assessed for dynamic platform markets where services are usually offered for free to many user groups?
- How does a platform’s collection, use, and storage of user data impact competition? When does a platform’s stockpile of data create a barrier to entry of new platforms?
- When is a platform’s leveraging of its own service offerings and exclusion of potential competitors sufficient to sustain an antitrust challenge?
- Does traditional merger analysis underestimate the competitive significance of startups and technology innovators acquired by more established competitors?
- How should antitrust enforcement standards balance potential risks of over- versus under-enforcement? What are the relative harms for competition and innovation?
Although a recurring theme is that traditional antitrust principles are sufficient to address the unique features of the digital platform markets, these initiatives have given the authorities an opportunity to develop more detailed frameworks for assessing issues that will be tested in enforcement. These efforts have also given rise to recommendations on regulatory or legislative changes that could help promote competition and facilitate more effective enforcement going forward.
Following these initiatives, there is an inevitable pressure on competition authorities to put their learning to work. The European authorities have been most active in their enforcement measures so far, in part due to enforcement standards perceived to be more favorable than their counterparts in the United States. The European Commission, for example, has imposed a series of high-profile fines on Google over the past three years for abuse of dominance based on exclusionary practices involving its Android operating system, comparison shopping services, and online search advertising intermediation platform AdSense. The European Commission has recently opened up a high-profile formal investigation into Amazon’s use of sales data to compete with third parties. The European member states have also been active in expanding their enforcement role in these markets, including the German competition authority’s high-profile challenge to Facebook’s data privacy terms, which continues to tests the bounds of traditional antitrust law on appeal after being overturned by an initial appellate decision in Germany. In the United States, enforcement efforts are just beginning to show signs of ramping up. In February, the FTC announced a Technology Task Force to focus on special enforcement efforts targeted at technology markets. More recently, the DOJ has announced a wide-ranging investigation into market-leading online platforms for search, social media, and some retail services online. Both still appear to be in the relatively early fact-gathering stages of their investigations and are actively working with market participants to better assess potential theories of harm under U.S. laws.
Merger enforcement is likely to be an initial enforcement focus, particularly in the United States. Although there have been no significant challenges to date, statements by the authorities have considered the issues identified in the policy initiatives in extended reviews of several high-profile transactions. Investigations going forward will likely place a greater focus the importance of different types of data, the assessment of nonprice competition on innovation and privacy terms, and the competitive position of nascent competitors. The authorities are also expected to revisit consummated transactions that may have previously avoided scrutiny, including deals such as Facebook/Instagram and Google/Waze identified in the UK Digital Markets Strategy. To circumvent the traditional evidentiary challenges of proving competitive harm, the DOJ has outlined a new approach to challenging patterns of prior acquisitions of small potential competitors that may have been used to create or strengthen a platform provider’s monopoly.
Another area of continued enforcement focus globally will be on different forms of exclusionary conduct by dominant or monopolistic platforms. Explicit exclusivity arrangements, loyalty discounts, and other de facto exclusionary vertical arrangements aimed at blocking competitors from the market are likely to come into particular focus in the United States. Global enforcers are also likely to delve into other forms of self-preferencing or leveraging conduct similar to the conduct underpinning the investigations into Google, Amazon, and Apple in Europe, particularly conduct intended to expand market power into related markets or defend existing positions. Given that many platform providers are funded primarily with advertising revenues, digital advertising is becoming an increasing priority. For example, concerns have been raised about how platforms preference their own advertising services above those of rivals (e.g., on search results or social media feeds), exclude rival advertisers from other products or access to data, or introduce technical specifications that favor their own advertising services to the detriment of competitors. Jurisdictions in Europe may also be receptive to more novel remedies to the challenged harm, including, for example, mandating nondiscriminatory access to certain forms of data.
Regulation and Legislation
In addition to these enforcement initiatives, a range of regulatory and legislative measures may be implemented to address the challenges identified. Proposals span a range of issues with varying degrees of intervention, from transparency measures supporting enforcement to direct regulation. Proposals offered by politicians and regulators worldwide include, for example:
- requiring new reporting obligations for certain acquisitions by digital platform providers;
- shifting burdens in favor of competition authorities to allow for more effective enforcement where legal or evidentiary standards have posed challenges for enforcement;
- requiring providers to allow access to competing platforms, in some cases with data portability between different platforms to reduce barriers to customers switching; and
- mandating break-up of the existing large platform providers and direct regulation of certain functions as a public utility, similar to historical regulation of the telecom sector.
Although the more transformative proposals would have been unlikely to get traction historically, support appears to be growing across the political spectrum.
A true revolution in competition enforcement involving digital platforms is unlikely, but a further evolution of antitrust enforcement to meet the challenges of the digital economy is virtually assured. Even though much of the enforcement rhetoric is focused on a small number of platform providers, the impact will clearly be felt more broadly in the business community. Businesses should at a minimum be mindful of the potential for heightened scrutiny by authorities anytime transactions or investments implicate digital platforms or other sensitive technology markets, recognizing the unique issues that may arise and the importance of internal documents in assessing competitive effects. Businesses impacted by the conduct of large digital platform providers should also be conscious of the opportunity to be heard in ongoing investigations and market studies into these markets, where the authorities are proactively seeking the input of all stakeholders. Finally, there is a common thread of assessment of these global markets across jurisdictions that must be managed carefully where issues do arise.