Below, we have provided the full transcript of our panel discussion Ensuring International Alignment of National Competition Policy Initiatives. Read below to see the timely discussion where a panel of experts deepened the discussion regarding this topic in the context of the APAC region, and globally.
Hi, this is David Evans. Welcome to the webinar today on international alignment of national competition policy initiatives.
We have really just an incredible panel, and I know everyone says that, but we truly do have an incredible panel today.
We have a Debbie Elms, executive director at the Asian Trade Center who works closely with businesses and governments in the Asia region.
We have Geeta Gouri, who is a former member of the competition authority in India and was previously heavily involved as an economist there.
We have Vivek Ghosal who is a professor of economics at Rensselaer Polytechnic Institute in the US and is actually the head of the department there, has done a lot of work on cartels and along with a number of other topics in antitrust.
We have Arun Sundararajan who is professor of entrepreneurship and technology and operations and statistics at New York University, but I think importantly for this is really a deep expert in everything involving digital, lots of interesting writings on that, including a book a few years ago, The Sharing Economy.
And then last but certainly not least, we have Christopher Yoo who is OG. This is an odd thing for a CPI panel, I think he’s the loan law professor or lawyer on the panel, but is more than equipped to outweigh, or at least equal, the economist on the panel, he’s the John H. Chestnut Professor of Law at University of Pennsylvania with lots of additional topics like computer and information science attached to that title, has done a lot of work in a number of different areas, including antitrust, but a variety of other topics related to the digital world.
With that, let me get this going. Why don’t we begin by just seeing whether there’s actually an interesting topic to talk about today and if not, we can stop and just go off and do other things. Where countries are dealing with with similar issues, are they dealing with them in similar ways? Are we seeing inconsistent results? Do we see this has having gotten better or worse, let’s say in the last decade or so?
Let me start with Vivek; what do you think?
Thanks, David. I think the timing issue is for me a little bit complicated, because I think the major issue of our times is dealing with technology and related areas, and particularly big data; who has it, who doesn’t. Also this business of certain companies potentially giving preferential treatment to their own services, to want their own portals compared to rivals. The timing issue of exact cases is a little bit hard for me to figure out, but I think in the technology area, US typically has had a somewhat different, much more laissez-faire, innovation first approach to give entrepreneurship a good chance.
As we take up names and cases, we are looking at, for example, cases bubbling up against Google, have been for a while in some other jurisdictions, later in the US. If you look at cases against Amazon, for example, other countries that express more serious reservations, the US is likely later than that.
I think if you look at alignment issues, are different jurisdictions treating similar issues same way in the same timeframe? I think I would point to those types of technology, big data platform cases, as having a different time dimension. So that’s my quick take and we can discuss more later on.
Yeah, so let me stop you there and turn to turn to Geeta now.
I personally think that there are certain things which are very peculiar to a country, very culturally peculiar, and this is true when you look at data network effects. I like to make the distinction between normal network effects and data network effects because there’s more complications with regard to data and how responses come to data. And therefore in a country like India, everyone has their own concepts of what they want to do.
But what has happened, and which is what somehow attention is not being drawn to, and rather when they talk about technology, they bring in new concepts, which is what I like to discuss, and we did have a little bit of this discussion earlier on the question of privacy and on the question of contracts. These were not considered as part of competition law at all. So the cases that are coming up before the commission is that. And therefore technology, when you look at it, has the positive effect. It also has the negative effect. And data networks, you have to do a lot more to understand then look at it in terms of the traditional, usual network effects and economies of scale. I’ll just stop here because I think we can build up on this much later.
Your point, Geeta, is that a lot of these issues like the degree of indirect network effects and views on privacy and so forth tend to be jurisdiction or country specific and that’s a reason for countries not taking the same approach and a reason for non-alignment. That’s the fundamental.
We seem to be quite taken in when I say the European Union approach to data, and as a country or people who are willing to give up data for everything, starting with our own identification, unique identification number at that, it then depends on what data you want to share. I can be a little insensitive, or we are more bothered about dimensions of data that do not come on the platform at all, they don’t come on an e-commerce platform. That’s when it becomes very difficult because studies have to be done to understand what is the data that is crucial for each country.
Debbie, what do you think? Let me stop you there. Let me stop you there, Geeta, and let me turn it over to Debbie.
I think this is interesting that we’ve taken a question about whether or not you have regulatory consistency and competition policy and gone straight to some of the specifics in the digital world, and particularly around data, privacy issues, platforms, networks, et cetera. I think that’s interesting. I don’t know why that is the case, but I just want to flag it as, for me, at least interesting.
I think when you ask about whether or not we have consistency, the answer is not really. We have consistency on a certain set of approaches towards competition policy, especially drawn from traditional enterprises dating back to the breaking up of the railroads and Standard Oil, and so forth. What we don’t have is a lot of consistency about how those competition rules or that competition approach should be handled in the digital age.
If we’re going to stay on digital, we have inconsistencies building up in the way that different jurisdictions or different governments manage competition in the digital space, and some of those issues are likely to get much more complicated and make life much more complicated in terms of delivering on the premise of the digital economy, I think, as we have different regulations in different markets, the compliance costs continue to rise, some of those tools may or may not be appropriate for simply sliding it over and saying this applies to the digital economy. I think there’s a lot of issues that need to be unpacked when we ask about the consistency of competition policies by jurisdiction in the digital space.
I was actually hoping to do digital later, but given how it’s a top of mind for everyone around the world, it’s kind of hard not to get into it right away and that appears to be what we’ve done.
Before I move on to it to another question, Christopher, Arun, do either of you want to add anything briefly to this?
What I would say is that I think there’s actually a fair amount of alignment in a lot of areas of law. For example, cartel policy, certain different aspects of a merger policy, really what it is is about single firm conduct, and so I wouldn’t exaggerate the differences across countries to a point. I do think that we have worked out some global consensus on a number of different issues, which isn’t to say that the remaining areas that we’re still working out aren’t significant, but this isn’t a new major sector.
If you look at the top 10 companies by market cap, it’s radically transformed. And the idea that we are still struggling or experimenting with different approaches to this new emerging powerhouse of a sector shouldn’t surprise anybody. I mean, this is something we’ve seen before.
Given that the facts vary across country, it would be odd to have the competition policy lead to the same result independent of the facts.
But let me move on. Arun, unless you were desperate to ask something, let me move on to something else.
Isn’t it a good thing in some ways that authorities are following their own paths and that we have divergence in, in some way? Let me give you one way of thinking about this and get your reaction to it.
If we look at things over a long period of time, did the US really led the way in introducing economics into competition policy? It’s pretty much true wherever you go now, China, India, most of the world, that economics is an important aspect of that. But then the European Union, the European Commission, has really led the way in taking a more aggressive and interventionist approach then than the US has, at least in the last 10, 20 years.
Now, sitting here in the US, we’re considering legislation that’s going to make us even more European. I mean the congressional act may even be written in French for all I know, but we seem to be moving in a more European direction at least in terms of the bills that are in Congress. And then we have China, which is really lots of issues there, but leading the way on regulating big tech and FinTechs and so forth.
In some ways, isn’t that kind of divergence a good thing? Isn’t that like competition and ideas? Christopher.
I think that a certain amount of variation is how we learn. It’s essential to doing things better. You know, I’m struck by the way you framed it, David. Imagine we were having this conversation, say in the 1970s, when economics is really emerging under the leadership as the US as you correctly point out, we could be saying, “Oh, is there a problem with variation here? Shouldn’t we have a consistent approach? We should stick with a populist approach. We’ve dominated everything that we’ve had. In that sense, we’d have consistency across the approaches.” If that were the case, we’d never have made the move. We’d never have learned what we have, and there’s a certain amount of optimal experimentation, which is really positive.
I think what people like Deborah will tell us is though, with the countries that are multinationals, facing a wide array of very inconsistent regimes makes it very difficult sometimes to engage to build out your ideas.
The other problem is we need to have a discourse of what kind of variations we’re talking about. If it’s variations within a consumer welfare standard for a good example, and we’ll talk more about that, you and I know, we have a number of economists here. If you have five economists in a room, you’ll have at least five opinions, probably more because there are different contingencies you deal with, and that’s well-renowned, and that’s considered healthy. There is a different kind of inconsistency which you disagree on the goals, the predictions of the behavior, and the like. And that can be very different.
You mentioned China specifically, they have different commitments to state-owned enterprises, a different vision of the relationship between the individual and the state. Geeta mention data. They don’t really understand the notion of privacy the way we do. There is no separate part where the individuals are distinct from the party. The party actually is dominant over everything. The role of private companies, willingness to interface in stock markets, exchange markets, you name it. There’s a very different perspective there that will be very hard to meld. On certain levels, on a more fundamental level, I do think convergence is more helpful towards coherent policy, but a degree of variation on top of that is inevitable and healthy.
Arun, what do you think?
I agree with Christopher that there’s certainly alignment on cartel behavior policy, maybe less on what we should do with monopoly power and predatory pricing. As Debbie said, we’re still making up the rules for digital, but I think we’ll always live in a world where there’s some divergence in tech policy across countries or regions because they have different domestic tech strengths.
The US and the EU are very different on this front. There are different stages in their evolution of the economy. The US and China are very different in terms of where they are in the economic evolution and countries have different political and social philosophies. The cultural issues that Geeta mentioned earlier, China is certainly different from the US and EU.
Divergence is natural, but what I would hope is that every best of breed approach have at least three characteristics; that would be evidence and fact-based, one. That it consider the unintended consequences of regulation carefully, because poorly designed regulation can deter innovation and create inefficiencies, but could also lead to designs that harm consumers in the long run.
And third, most importantly, as an economist, I mean, I’d hope that these policies rely actively on economic analysis. I think the final point is most critical for tech regulation because our understanding of the economics of digital is still evolving. I can give you an example on that final point with platforms that have network effects and the alignment of competition policy, because one often hears a wide array of companies all characterized as network effects businesses. Sometimes people distinguish direct from indirect, or as Geeta mentioned, data network effects from other indirect network effects.
But a dimension that really has to be critical in my mind is whether the benefits of network effects to consumers and the market power that flows from these network effects is geographically local. With the ride sharing foods delivery services, you do have this locality of both benefits and power. In other cases, the user base in each region adds to consumer benefits and grows market power globally, like operating systems. In other cases like advertising and retail and travel, it’s sort of a mix. So one might argue that the more localized the benefits and power from network effects, the stronger the case for best of breed competition policy, and that alignment is more important when network effects are global.
I think that’s a great point. Indirect network effects and network effects is a very nuanced and a varied subject. Very, very fact intensive.
The one thing, going back to Christopher’s comment on the 1970s, I just want to observe that as someone who has practiced antitrust economics in a number of places, if I just take you back to around 2000. In 2000, the European Union, there basically was no economics being used in antitrust. China didn’t really have much of a well-developed antitrust law at all, and then the US, of course, was very advanced. That is 21 years ago, but on the other hand, it’s not that long ago. We have made a lot of progress in the last 20 years, at least in my view.
Is antitrust now moving towards a more expansive list of goals globally? I’m thinking about the US experience that some of you can talk about. If that’s right, is that going to create divergences simply because the goals, the different countries decide to layer onto antitrust are going to be different and then I guess the related question is if all those things are true, different goals, divergence, is it necessarily a bad thing? So Geeta.
You know, I think Arun summed it up very well. He put it very beautifully. The question that you’re asking really stems from what he said, because what happens in many of these things is the competition policy in a country like India, which was gradually moving towards accepting markets, market forces, has now got mixed up with a very strange feeling of nationalist feeling. Our own country, our own gatekeeper, our own commerce. As a result, there seems to be a lot of contradictions that are pervading, but these are our problems. It has to be sorted out. It’s a sort of a political economy question.
I think, Arun, what you said right in the beginning, even in terms of markets, it’s still not accepted. Ss a competition policy and as a competition authority, it is always secondary to government policies and government involvement. Their politics and what they would like to fly high. I think this is where the sort of contradictions that are going to come up will have to get sorted up. This was there even when in traditional arguments on trade and protection. Do we go for trade? Do we go for protection? And if protection, protection for what?
As a result, you have a lot of contradictory, non-competition policies on taxation, for instance. On direct excise duties, which can go completely against competition and allowing for a global convergence. There are inner layers and layers and layers, which makes it more fascinating to study before we can make any objective assessment.
So let me turn to Christopher, but then I want to bring Debbie in after that.
Any comments from you? Any responses to Geeta in particular? Her comment that, well, this is just our problem here in India.
The pattern she’s see in India is actually global. What you’re seeing increasingly is a look for national champions and the attempt to graft on industrial policy and other dimensions to this. What really struck me when ACCC did its digital markets inquiry, they did not only a competition policy industry, but also wanted, how are we going to save domestic media industries? What you’ll find is those two goals are fundamentally in conflict with one another.
It really goes back to the old days. The whole debate over neo-Brandreisian antitrust has for a lot of us has a real Back to the Future feel to it. We had this discussion in the ’60 and the ’70s. We had this multi-variant, multi-dimensional goals of antitrust, and we rejected them for a lot of different reasons. One is you can’t optimize six things at the same time. And the problem is when you try to, it tends to throw into politics in exactly the way that Geeta is describing. And the other thing is there’s a general recognition, not just that its multi-factored tests aren’t great, but individually the different components were questionable.
“Big is bad” has been refuted in antitrust where we recognize that we’ve rejected the structure conduct and performance paradigm. Things such as Stackelberg price leadership says you can exercise market power with smaller market shares. Things like contestable markets say large market shares do not inevitably lead to that sort of conduct. Tthere’s an awareness of the economies of scale that were important back then,that are probably more important now. We’ve also seen the rise of empiricism and the ability to do things that I think have taught us a great deal.
If I were to sum this up in a nutshell, I think about the fight over the Time Warner merger. One of the areas where many people who advocate this multi-variant approach was vertical integration. Well, there were a lot of people who opposed it. The most telling evidence is AT&T spit out Time Warner not four years later. Obviously, it didn’t yield the kind of economic impacts that the critics feared or that AT&T hoped for. So what I find is that when you look at these different things to step back from them, you will realize that we actually have a lot more learning and a lot more fundamentals.
I think the biggest takeaway is we can’t expect one area of law to do all things to all people. People who want to do income redistribution or industrial policy, we have tools to do that. But to build that into antitrust law is essentially to put that on the back of consumers in a non-transparent, non-democratic way that has not been good for individuals that these are supposed to protect. But also, not good for fundamental values such as economic growth and the different things that really drive society forward and become essential for prosperity.
Yeah, on the economic front, I hear what you’re saying. It’s also the case that there is an entry by economists from outside of industrial organization into antitrust, and that’s leading to different points of view being injected, which is a topic definitely for another webinar, and probably not this one.
I would love to have Arun’s three points resonate more with policymakers, especially in and around Asia, because I think it would help crystallize for them some of their slightly muddled thinking. In particular, because they are trying to use competition policy to get, I think as Christopher just said, different objectives. In particular, they’re looking at competition policy as a mechanism to get national champions. Sort of inverting it on its head, but also pulling in pieces of information and particularly pieces of either law or ways of operating or principles from elsewhere and then sort of sticking it into an environment that may or may not be suitable for that outcome.
The net result of that, at least from what I see in Asia, is a bit, frankly, a mess. You have countries that are trying to use different policies, using them badly, or maybe they’re using policies to weigh the outcome they want, but the approach is very muddled.
This leads to the challenge that I see particularly around digital and especially competition in digital, which for me is where this gets really challenging is just the lack of understanding and then sort of trying to pull whatever you can to reinforce an argument that is poorly articulated, often poorly articulated. So, no surprise, you end up with, frankly, a muddled mess. It’s not just big multi-nationals that pay the price for that, it’s also consumers, of course, but it’s also small businesses because small businesses can’t possibly compete when they have such inconsistent rules in different markets that are sort of right next door. I think all of that is creating real challenges and they need to clarify, I don’t know if it’s go back to basic principles, but at least have a better discussion I think is important.
We’ve grounded a lot of the conversations so far in the digital world. Everyone has despite any effort to reign in the discussion on digital, we’ve all really been talking about digital.
But if I could just ask this: if we look at other aspects of antitrust and maybe, Vivek, you might want to respond to this or others could chime in. If we look at other aspects of antitrust competition policy, from the standpoint of a multinational, we have merger policy, we also have monopolization and abusive dominance, rules on predatory pricing, retail price maintenance, and a variety of things, the view towards vertical integration, and so forth. Are we confident that the variety of views and approaches that we’ve seen in digital is really fundamentally different than those other areas or is this just more of the same kind of divergence?
I think it is the same kind of divergence. I think part of what policymakers and others are grappling with is how to define markets in this new era. Because, if you look at these data issues, what’s occurring is that defining the market here: How much data is there? Does it last for one day? Does it have a longer lifespan? Is the data collected from consumers and businesses then more durable? Then the question is how are the companies who are the possessors of the data using it? What kind of behaviors are they demonstrating with it?
For example, Amazon Basics. If you look at retail sector, if you look at pharmacies, they always have store brands and it’s increasing. So every retailer that I see is doing exactly the same thing. But then Amazon, because of its dominant position in the market, is doing this and this is viewed as a problem.
It goes back to really Alcoa, right? If you look at Alcoa and Robert Bork’s critique of Alcoa, the same behavior that Alcoa was demonstrating gets treated differently. Somebody had 1% of the market versus somebody that’s 40% of market. So what you’re really seeing are, I think the issue, if you look at Alcoa’s dominant position and the case against it, it’s not particularly different philosophically than what is going on with Amazon. I think the theories are seriously grappling with how to define markets in the presence of these kind of complex data.
If you look at something completely different, which is cartels, you see a lot of convergence. Cartels are bad, we need to prosecute them. But going back to your earlier point a little bit, if you look at the US and EU, they kind of flipped. The US had pretty strict rules on cartel. They prosecuted lots of cartels. But then EU changed rules and they made the fines more draconian. That is, if you’re a repeat offender, for example, the fines just went up exponentially. The US piggybacked a little bit on that. You see areas where there’s some convergence, but other areas where there is, I think, serious questions about how to deal with this new data-driven market.
Arun, let me ask you this from the standpoint of, I’m sure you’ve worked with a number of businesses in this space, so multinationals for a long time have had to deal with the fact that antitrust rules on distribution agreements and other vertical practices really vary quite a bit across jurisdiction, as do other other rules, and they’ve had to deal with that. There are different rules in different places and you have to comply with them and adjust your business. Is this more, or less, or the same problem for the, let me not call them big tech, the large tech companies?
Well, you know, I think that the issues of alignment that come up when you’re looking at tech companies have certain similarities, as has been pointed out. There’s a lot of common ground in some areas like price fixing and cartel behavior, but predatory pricing and monopoly power alignment might be different, might be more difficult, because of different philosophies on what constitutes a dominant market position and what behavior is unacceptable.
But let me just zero in on the following issue, from the standpoint of a large tech company, is it more or less of a problem that I may face different approaches in different countries?
I think the global span of power of tech companies and the fact that they are naturally operating across a wide variety of jurisdictions can actually lead to some benefits from alignment that you may not have seen, like sort of in the pre-digital era, because as we discussed earlier, although the network effects may be localized, the span of operations of a big tech company is naturally larger. Every tech company, I mean if you put aside the Chinese tech companies, pretty much all of the other large tech companies are global tech companies, and as a consequence, the fact that they may be different, on the one hand, the fact that there may be different competition policies in different jurisdictions can be good for the countries because of the different stage of evolution that the economy might be in. But on the other hand, it can be a challenge for the big tech companies.
David, if I can.
I actually think digital is more multinational, but has greater ability to customize its outputs for individual countries, to build directly to your question.
I remember back, I think it was in the ’70s, Ford tried to make what they call the world car. To economize on production, they’re going to make one model. It turned out that Europeans wanted a different feel in terms of braking, in terms of shifting gears, and the like, and it just didn’t work. They’re actually doing it now, because what they’ve done is they’ve created software that allows you, with programming, you make one car, you change the way it shifts and the way of brakes electronically.
Digital does that on steroids. When you see, particularly in areas that aren’t in competition law, like content moderation, where you have very different country rules, we have nation specific interventions that tend to be rather effective. Does it raise costs? Yes. Does that have impact on, say, SM, small and medium-sized enterprises? We’re learning from CCPA and GDPR, the privacy regulations, yes. But I do think there is some great ability to customize.
I wanted to mention also something about, Vivek, when you’re asking, is this new or is this old? Vivek mentioned private label. Before I went to law school, I went to business school and was working in Procter & Gamble where private label was A: a branded company’s nemesis and B: consumer’s best friend. I mean, it’s really quite interesting how effective they are.
The other literature we’ve lost is on advertising. Aside from Amazon, there’s a whole broadcast advertising literature, which we’ve lost, so this is very familiar. I wrote an article for CPI talking about this a little in a book chapter a while ago. But what is different is the technological context, which creates nuances that are important and that we still don’t understand.
What I keep thinking about is our traditional rule between per se illegality rule of reason. They say don’t make things per se illegal unless you really have experience and you really understand the phenomenon. The irony is the proposals in the Europe and the US are going to make certain things per se illegal without that level of understanding. And what we’re going to need is to grow organizations with technological expertise and experience in cases before we know can say with confidence that interventions will help consumers.
Per se illegal in the sense that there is, in some cases, ex ante regulation which says, this is how things work and you have to do it this way. Per se in that sense, correct?
That’s the way that the legislation about Europe and the US seem to be going. This is an interesting move that we’re moving from competition law, regulatory law, and from a US perspective, that’s a shift from markets to politics, effectively. And to me that carries with it considerable dangers to consumers.
Thank God for courts.
Well, we’ve gone for half an hour. I think it’s actually time for a commercial break. Following up, Christopher, on what you said, I just want to give a plug for something we just launched at CPI, which is the TechReg Chronicle where we’re really trying to focus on really publishing articles concerning how to regulate, how not to regulate, and so forth. One of the points that a number of us have made is that there’s a long history in the US and other places concerning regulation of other industries and the lessons from that, good and bad, I think, Christopher, have also been lost in the current debate. You don’t really see people referring to that literature, applying the principles, and the learning, at least in at least in my view, so.
I agree, and we’re participating in that TechREG and we’re actually launching a series of thought papers ourselves at the University of Pennsylvania.
Yeah, that’s a great initiative as well.
Okay, so we both got in commercial messages. I’m not sure whether anyone else wants to do that at this point.
Let me move on to a different topic. This is really EU and US, so I’m going to stick with Christopher for now. We have this recent vision of this EU-US technology competition dialogue. Commissioner Vestager and FTC Chair Lina Khan are obviously talking. Is there anything really new here in terms of the interaction between the EU and the US, or are we really just talking about different people running the agencies, at least on the US side?
There’s always been a healthy coordination dialogue between the two, and I think the more simpatico the different enforcement officials are, the better.
I do think a comment Vivek made offhand is actually really important. He said, “Thank God for courts,” and the reality is, courts don’t play the same role in Europe. What you see is administrative decision-making and deferential review.
There’s been a decision from the European Court of Human Rights that says combining an investigatory authority with decision-making authority violates the right to fair trial unless there’s de novo reviews by the courts. Unfortunately, there are a few in the European courts still is extremely deferential to the administrative decision. What you see there is, I think, the kinds of changes we’re talking about are likely to be implemented in Europe. Just structurally the way their law works out there, the agencies will decide, the courts will defer, that’s it. It will only happen in the US if the enforcement officials convince a court, and given the conservative nature of decision-making, Supreme Court precedent still is based, even if there was a seat change in everyone’s perspective today, lower courts remain bound by the Supreme Court decisions until they get reversed. So by definition, those impacts won’t happen here. So it will be information sharing, coordinating theories, and the like, that may be doing something important, but in terms of actual enforcement decisions, I expect US and Europe to take radically different paths, at least for the foreseeable future.
I do agree with Christopher on many points. I think the key questions are similar, but interpretations differ depending on mandate and structure, right? Competition versus competitors, top-down EU versus sort of bottom-up US.
But in this context, I wanted to bring in the proposed EU Digital Markets Act because I find this development of wanting to align, especially interesting in light of the DMA, because it’s placing, or it’s proposing to place many restrictions on integration and expansion on the gatekeepers, these are the matchmakers you wrote about in your book a few years ago, David, and which also takes a stab at defining markets to sort of one of Vivek’s earlier points. It’s interesting because the gatekeepers who are in the crosshairs of this new competition policy, with maybe the exception of Booking.com and Spotify, are US companies, and the question is, is it possible to get greater alignment on tech competition policy between the EU and the US with such an extensive set of restrictions on companies that are primarily from the United States and have just sort of according to that rule, a 10% market share? Because people on one side might argue that it helps smaller competition. It helps smaller competitors when one blocks platforms from integrating services across different verticals, but people on the other side could make the case that impeding integration could hurt consumer value, especially in the digital space, while not really affecting competition. And is competition policy really the lever here?
Can I ask one clarifying question? Because I just want to make sure that I’m not misunderstanding something. I thought it was the case that the Digital Market Act had a size threshold, so it’s not just a market share threshold. Isn’t there also a substantial size threshold that really kind of brings in what we now really think of as big tech, or do I have that wrong?
Oh no, there is. It’s a combination of two thresholds. I think it’s roughly 10% of the population of the EU and a fairly healthy, from what I recall, 6 1/2 billion dollar a year revenue, or a 65 billion market cap. I’m not sure where the six and the five came from there, but I’m sure that there’s a good logic to it.
But by its design, it is naturally including a relatively small set of companies, which are primarily US-based. So the division’s compelling, especially in light of a desire on both sides of the division of the US-EU dialogue. It’s compelling because on both sides of the Atlantic, you want to sort of reinforce the alignment message after the Trump years.
I’m personally all for greater dialogue between economists and policymakers in general, but differing mandates, differing stages of evolution, and differing domestic tech strength, and differing priorities on competition versus competitor, I think are going to limit long-term tech competition policy alignment across the Atlantic.
Vivek, did you want to add something there?
Yeah, very quickly. I worked at DOJ from 1998 to 2001. There was extensive dialogue. I worked on markets such as mail, Deutsche Post, international trade, for example, various things about aircraft, energy, nuclear. This is not new.
What is new here is it’s kind of in the digital world, round up the usual suspects. What has changed in DC is that the new administration came in with a significantly different posture and mandate to essentially figure out, not just national interest issues, but they’re looking at income inequality for example. Income inequality is a huge issue. Then, of course, you have to round up the usual suspects.
If you look at the big tech companies, a lot of money is being made and there’s complaints in the popular press about how they’re fleecing the workers. The way to address income inequality is fiscal policy, but antitrust has been thrown into this mix as trying to fix a problem. I think this dialogue has been going on for a long time. What has changed in DC is who’s in charge of the agencies now and almost a complete regime shift on priorities, and that’s what’s going on.
Does anyone else want to add anything to this topic? Geeta?
You know, I’m unable to understand the contradictions of the European policy on its DMA market and setting a cap to it. How have they arrived at that number? It’s something to me that is just not fitting in because you’re talking about big tech, you’re talking about companies which do group, you’re also talking about things that they’re going to be innovative, and come out with products for consumers to understand, and there they’re going to put a cap on it. It’s a total contradictory approach. It may be fine in law, but when you want to put it into practice as a market opening, I am unable to figure out how they decide what should be an appropriate concentration of data. I don’t know if I made my point clear.
I mean, typically, if you define it properly, then you only hit American companies, largely, and you ignore European companies. I mean, that’s a simple way to come up with a threshold. But I would say in general to remember that it’s not just about US companies or European companies with a little bit of let’s focus on China, but there are also other, very competitive, increasingly large tech companies that are located globally. There’s a lot of competition policy happening outside of the US and the EU that should be an area of focus as well. We can’t just focus on like what Amazon is doing, because frankly, we have Amazon in Asia, but that’s not the major competitor. So you have to think about, well what is the marketplace look like outside of the US or outside of the Europeans, or I think you end up with skewed discussions about the broader topics and you end up missing some of the, really into my view, more interesting trends in competition, in the digital space, in regulatory responses, et cetera.
I agree Deborah. I think there’s entire BRICS countries, for example. There’s a whole thing of competition policy that’s come up, which is very divergent and on which we have written a lot. So between the EU and the US, they can have their little divergence and their little fights, but it doesn’t matter.
So, Geeta, I can tell you exactly how the DMA thresholds were done, which is actually, Debra, they’ve decided to make sure that at least some European country companies are included for appearances sake. Not because there’s a principle basis behind the numbers, but they need to do it because otherwise it looks like they’re just hitting US companies.
The US statute is getting a lot of criticism because Amy Klobuchar is making sure that the thresholds, which are absolute, not market share thresholds, they don’t have to show dominance, just size. Doesn’t include Target, which is a domestic company for them, and Tom Cotton, who’s sponsoring it, wants to make sure it doesn’t include Walmart. At the day of enactment, even if you grow large enough to pass the threshold, you’re not in.
This is ironic because Amazon perceives Walmart as its biggest competitor. So they’re setting those thresholds through reasons that are arbitrary and more political.
The other thing that’s really striking is a lot of impetus for antitrust reform is coming out of content moderation reform. There’s a statute in the US called Section 230. Everyone agrees it should be changed. Both parties want to change it. They can’t agree on how. They say, well, the one that we hit agree on is maybe antitrust, so if we’re going to hit the tech companies over content moderation, let’s draw the strings on them on antitrust, which is not a good way to make policy. Because if you’re interested in a lever, just hitting a company because you have another cudgel and another arena isn’t helpful.
Whoa, so hold on. Just because there seems to be just a uniformity of opinion on this, I just want to see if I could push back a little bit on the, “this is just hitting American companies.”
I mean, we have China that has adopted an aggressive approach to its national big tech companies. We have the US now, which subject to the qualifications you’ve just given are basically going after the American big tech companies, and we have Europe going after the same set of companies. I mean, is it really surprising that we have the EU and the US both targeting what are basically large, highly successful digital platforms? Is that clearly an anti-American approach?
No, it’s not. I mean, I think it is not, because if you look at what is at stake here, behavior is the thing. So to Geeta’s comment earlier, just to chime in a little bit, yes there are companies elsewhere, but the problem is behavior. What we are seeing is that a lot of the behaviors that are started, being demonstrated, by Google, for example, Amazon’s behavior is being replicated elsewhere. I think what we need to do is to really track these kinds of behaviors and then see whether we are getting uniformity in rules against them.
While it may not be explicitly sort of anti-American by design, alignment’s going to be harder and harder because digital leadership is increasingly central to global power, and techno-politics in many ways is as important as geopolitics today. I think different jurisdictions are sort of balancing what is typically the focus of antitrust policy, consumers and competition, they’re conflating in other issues like, as many of the panelists have brought up, worker considerations, income inequality, content moderation, but they’re also sort of balancing that with the EU’s place, China’s place, the US’s place on the global stage. Perhaps the US is not striking as much of a sort of global versus inward looking balance as some of the other places, because some people might argue that if the US is too heavy handed in its regulation, this could lead to it falling behind China in the race for tech leadership.
I’m sure that there are economists in China who are making a similar argument, to, potentially making a similar argument to the Chinese government the opposite way. I mean, on the other side, there are people who might argue for specific kinds of regulation, looking at just national competitiveness considerations, or thinking about sort of the path dependence of today’s outcomes on tomorrow’s economy without taking sort of the long-term global picture into account.
Whenever I look at this dialogue today, I think about a little over a hundred years ago, people studied the political economy. Taking law, government politics, and the distribution of wealth more actively into account in the sort of the economics field. It was only around 1910 or so that sort of the more focused economics field that any of us are a part of began to dominate. To me, it feels like the confluence of digital power and global leadership might take the economic analysis that’s underlying competition policy, sort of back towards taking into account these broader political economy considerations. But the quest for global leadership in digital is definitely a part of the competition policy formulation outside of the United States. I think it’s a detriment to policy alignment over the next decade.
Can I turn to Geeta and to Debbie on this topic? Because it seems to me that Geeta, from an Indian perspective, and Debbie, from a pan-Asian perspective, this whole issue of protecting national champions is actually something you guys know quite quite a bit about. So Geeta, you talked earlier about the situation in India, but isn’t India a great example of a large economy that really is actively trying to create and protect national champions and actively trying to discourage the global players?
In some ways, yes, that’s true. There’s the recent case that has come up, which the Commission is looking at in terms of Flipkart and WhatsApp and there’s also been a paper on the privacy issue of WhatsApp. But I think there are some things which the global power shifts in a very different way, because when we are talking about platform markets, our entire competition policy is based on what I call as a product market approach in the sense that they’re talking about bigness, they’re talking about size. They define the market, which Vivek mentioned, in a certain framework itself.
But I would like to extend it further and say there are two other markets that come into play. One is that of data markets, and data markets is something that it’ll be new, no doubt. It will be all on the net and it’ll go through. But that’s an advantage a country like India has. It is because data is non-driving, all that is required is that has to be anonymized. This is what the world is looking for because we have all the diversity of all illness in this country.
Who has this data? How is it to be used? We have to look at other markets and with other parts coming. The US could have technology factor, but then we have different other advantages that has to be leveraged on. And then, in an equally important area that is partly technology related is the question of standard essential maintenance.
So Geeta, I’m going to stop you there because SEPs, that’s like three more webinars, so let’s hold off on that for this one. Debbie?
Thank you. I was going to talk about a competition change in Korea that just took place. The Korean government said that platforms needed to allow additional payment companies to be listed on platforms, and that they needed to have available lower fees to the platform provider for providing all the services embedded in the platform, and so this sounds great. Everybody said, okay, that makes sense, right? We have high fees, we limited payments, at least through the platform, there were other ways to do it, but it was extra steps.
Except that there was already a Korean company, or a Korean designed company, that provided more payment options and lower fees and had been around since 2012, or I think it was 2012, several years ago, and had made almost no traction until they decided it was a competition issue. Suddenly, guess what? That company actually managed to get itself in all of these other platforms.
Again, you have to be careful in my view about this, because it’s not about competition. We had competition, you could have chosen lots of things if you were a firm and you wanted to choose a platform, there are lots of platforms in Korea, it’s about what is it that you want to be delivering in competition?
Often, at least in Asia, we find that the national champion firm or a well-connected firm, depending on the country, manages for competition reasons to end up with a policy outcome that they find much more favorable to their competition. Again, I think we have to look outside of just the US and the EU where this sort of thing may happen, but I think it is much less common for a variety of reasons, and look at how other governments are using “competition” in quotations as a mechanism for getting kind of outcomes that they want that might or may not be justified.
This is a great point that Debbie makes, because I think it’s sort of drawing the line between competition policy within one’s country and the use of competition policy to be more globally competitive, I think what makes this an even more complex issue is that digital platforms that may be headquartered in one country, or sort of based in one country, are increasingly having government-like roles in society in other countries. They shape information access, IP divisions, they provide ID, they back currency. We look to them to maintain social order, right? Now, I’m not saying that becoming big means that you’ve done something bad, it’s just sort of the reality of life today that platforms have government-like power, but it poses a novel challenge for competition policy and for global competition. Because our original conception of the social contract was a division of rights between the individual and the state, but now we have platforms that in the US, the EU, many parts of South America and Asia sort of set aside the state in many ways and the societal role and power.
I’ve heard the argument made that competition policy alignment across states can be a countervailing force to the global power of platforms. I think it’s a really intriguing idea and I can see some benefits from alignment across nations, but I wonder if the alignment as the countervailing force should be on competition policy or on some of the other facets of digital policy that many of the panelists have sort of brought up because it’s neither realistic nor efficient to design interventions today on any facet of digital policy without platform collaboration and sort of the adversarial stance or the state regulates the platform stance that we’re taking today doesn’t seem pragmatic because there’s a new societal imprint that has already been laid in which platforms have sort of defacto been given a broader societal role.
Christopher, would you like to comment on that?
Sure, I mean, it’s fascinating. Yes, platforms are incredibly influential. I still remember when the EU tried to coordinate spectrum policy to make 4G work in a certain band. Apple designed to phone that didn’t work in that band. Apple dictated what happened, not the EU.
It’s an interesting dialogue that we see here. In many ways, it’s very familiar. I mean, if we were talking about this a hundred years ago, we’d be complaining about newspapers and the influence they have over their thought. We talked about, if you remember back in the day, supermarket chains. AMP in the early days of antitrust was the devil in terms of commerce and wiping out small merchants and all these other things. And AT&T was a monopoly for the better part of a century. It’s an interesting phenomenon.
What we see is a natural, I think, maturation where things happen. But what we’re seeing with the globalization, individual national regulators are having a hard time actually getting traction. We saw this in the old AT&T case where state-level regulators had trouble, where the federal level regulators have more equivalent scope to deal with that.
The thing that really worries me is a lot of the conversation we’ve talked about is the shift of this towards regulation, instead of away from economic and competition law principles, it’s pretty well understood that modern trade wars don’t happen through tariffs; they happen through regulation now. With where we have plausible justifications that may be really about that they have consumers at heart and security or these different other dimensions, but also have a purely protectionist aspect to them. We don’t really have that filter for separating the wheat from the chaff. In the absence of that, the shift to regulation risks really allowing greater ability for governments to promote national champions in ways that we don’t have the tools to check.
Could I turn this to something that’s actually related to this, which is a different aspect of possible protectionism? One of the things that we’ve seen from the history of regulation, not always, but we’ve seen from the history of regulation that sometime it can actually protect incumbents, and that was one of the issues with AT&T.
Is there a risk that as we move towards national and global regulation, that, again, I’ll use the term large tech firms, so we’re not just talking about a particular four or five firms, whether that could actually help preserve their positions? Is that something to be concerned about? That regulation could actually turn out to be protectionist and potentially beneficial to some of the large tech firms? And is that something competition authorities and regulators should do about that? Debbie?
I worry less, frankly, about that at the moment, given the incredible churn in the tech space. It’s relatively easy now, still, for firms to be very successful and then go completely out of business. I’m, at the moment, less fussed about that than about other issues. But perhaps, eventually you’ll entrench a tech firm that will be older than 20 years and then we’ll be able to say something about it more meaningfully.
Well, I’m thinking, Debbie, of policies like limiting the ability of… Well, okay, let’s leave it at that and let me turn it over to Vivek on that.
So, David, when you pose this question, the names that first came to mind were people like Stigler and Sam Peltzman and others about regulatory capture, and political economy. Of course, history is replete with industries, industry regulators, such as in telecommunications, energy, electricity, where there’s regulatory capture, and that determined a lot of what went on.
If you look at AT&T, that’s the case. Eventually AT&T got broken up by an antitrust action. I think I’d be more concerned about this if some of the behaviors went into a technology regulatory body and then that was where the capture was, but I think if it’s based on competition law enforcement and antitrust, I am less concerned about captured protection of incumbents, because as we’ve seen through history antitrust competition law and law enforcement is something that can break the regulatory capture. I think it’s potentially a problem.
Let me, again, push back on this a little bit and go back to a point that Arun made before. Arun, you were suggesting that well, really the public regulators need to be working more closely with the private regulators in effect the governance system, for these platforms in order to be really effective. If you kind of fast forward the dynamics of regulation, you then have the regulator’s public kind of working very closely with the subjects of that regulation, much as we’ve seen in banking.
I’m simply posing the question of whether as you kind of fast forward this interest in regulation, there’s at least a risk that as we go in that direction versus instead focusing competition policy, one runs the risk of maybe too much collaboration, coordination, between the regulated firm and the regulators. It’s not an unusual question to ask I don’t think.
Absolutely not. I think that it’s a very valid concern to have at this point, but I’m glad we’re looking at the history of regulation because you do see this pattern recurring. I’m all for the focus of competition policy being, as I mentioned earlier, evidence and fact based, avoiding unintended consequences, economic analysis, but I also think it’s critical that we approach it with pragmatism.
In an extremely fast moving digital landscape, I think it is hard to imagine regulation and the formulation of effective policy, whether it be competition policy or other dimensions of digital policy, being developed without the active involvement of platforms given the broad role that they have in society, and given that they are in fact going to be the enforcers of a lot of the regulation. Because we often focus on the platforms as the entities to be regulated without also realizing that they’re not always the protagonist. They are also sort of mediating, they are the gatekeepers for a whole host of other companies that are connecting to consumers where they may in fact have to be the entity that is doing the regulating rather than the entity that is being regulated. So it’s a risk, David, but I think pragmatically, it’s hard to imagine policy being formulated effectively without active collaboration.
I’m going to close this out by letting each of you just give final words on any topic you want so long as it’s brief. So let me start with Debbie.
I think this has been a fascinating conversation and I do wish that we have this kind of discussion more frequently in more places. Because I think there’s benefits for remembering history and thinking about these kinds of policies for the precedents for law, economics, et cetera. I think that is very valuable.
I think there has to be a lot more discussion, and I agree with Deborah that we share more of these policies, but I am not comfortable because competition authorities do have a tendency to intervene at wrong times and at the wrong places. There has to be a process of having stakeholder meetings. In India, we’ve not had a competition policy. We went in straight for competition law. The one of the good points, which I didn’t realize earlier, but I do go for, is the aspect of advocacy. You know, going out, meeting people, having discussions, because that becomes important because you have to get the stakeholders in and understand what is it that’s worrying and what is it that they want on the ground, and therefore, the competition law has to be very, very active and very upbeat on a lot of matters.
I think there are two issues that are complicating things a lot in terms of the regulatory and the antitrust interface. Increasingly, I think issues about national security are popping up because of where the data is stored, how they’re stored, interaction, and the other thing is privacy rules. Given that these can realistically vary across all kinds of jurisdictions and countries, I think this is a big issue facing regulators and authorities and then competition policy is left in a bind as to what to do with it.
Well, I agree with Debbie that the fears of innovation being suppressed may be overblown. We’ve seen a ton of giants emerge and agree completely with Geeta on the fact that policy should precede the law. To me, the central questions of the debate that have come up seem to be in thinking about alignment. How central is digital power to global leadership? With digital platforms, second point, what is the nature of network effects? We really need to use economic analysis to unpack them before moving forward with competition policy.
And finally, given the breadth of issues that are connected to big tech, is competition policy the right lever to align? Or are there other facets of digital policy where global synchronization matters more?
What I think, you see these companies are going through these enormous growing pains. They began literally as garage innovators, as Debra pointed out, some 10 years ago, some 20. The idea that they are now the establishment with those responsibilities is something they’ve been slow to grow into, but it’s something we’ve seen in other contexts. Unfortunately, I wish it could happen faster, but it’s part of what’s going on.
What concerns me a lot in this space is the tendency to reduce our things to slogans. For example, network effects is thrown around a lot, but the idea that network effects for a business like Amazon’s versus Google’s verus Facebook would be the same is just not likely. They must be pressing, we have to measure the size, the effects, the alternative institutional forms.
We hear things like GAFA lumping companies with radically different business models into a group, or big tech or these other things. That’s an excuse to skip analysis, a detailed analysis of the type Arun talks about.
The last thing I’ll emphasize, David, is the theme that you’ve raised about regulation, which we’re both talking about. There is a wonderful set of studies from the FTC in the 1980s about how incumbents used regulation to protect themselves, and using things like environmental regulation or other mantles to wrap themselves up in it, and we’re seeing that in privacy right now. The problem is, is that that’s a real issue.
I agree with Arun, having industry involved in these discussions is inevitable. At the same time, we’ve tried this through things such as content- negotiated rulemaking and public-private partnerships, which have tended to be struggling with what starts in the way that the privates run the publics and it’s not really been the kind of balance we’re looking for. So figuring out exactly the nature of that engagement and from a US perspective also, making sure the cure isn’t worse than the disease, particularly in speech markets, because the one danger we have is substituting government editors for private editors. The perception here is there are certain circumstances where the risks are just too great and they outweigh the other direction.
Okay. This has been really just a fascinating discussion. We could probably go on for another hour, but no one would listening to us for that long. I really appreciate all the really insightful comments that all of you have made. I agree that we need to do more of these. There needs to be more discussion recognizing, of course, that there’s a little bit of a race towards coming up with good approaches before others take it out of the hands of a discussion and actually implement things that might be suboptimal. We should have more discussion, but it would be great to get them more consensus around the solutions for some of these issues, so thanks to you all.