Defending competition in a digitised world

These European Consumer and Competition Days are an important moment in the year. They give us the chance to come together and discuss an agenda that’s driven by the needs and experiences of consumers in each EU country.

And it’s no surprise that the first issue on today’s agenda is how to protect consumers in a digital world. Because of all the changes that are going on around us, few have such potential to change our lives as the digital revolution we’re going through right now.

We can still talk today about “digital markets” – still think of our economy as being divided into parts that are digital, and others that aren’t.

But that won’t be true for much longer. New ways of connecting us, of collecting and storing and making sense of data, are working their way into every part of our economy. And very soon, there will be no such thing as digital markets – just a digital world.

A digital world that works for Europeans

That can offer enormous opportunities for consumers. But it also means we face new types of power. Huge businesses that have hundreds of millions, even billions of users; companies that gather data which means that they sometimes know more about us than we do about ourselves.

In the face of all that power, we need to know, as consumers, that the companies we deal with are listening to us. That despite all the power they have, they won’t lose their focus on serving the needs of consumers. And that, of course, is where competition comes in.

In the last few years, we’ve seen, through our cases, how digital technology can affect competition. We’ve dealt with digital platforms in our three decisions against Google. And Amazon has agreed to put a stop to contracts that made it hard for other e-book retailers to compete with innovative ideas.

We’ve looked at whether mergers, like Microsoft’s takeover of LinkedIn, might let companies monopolise the data that you need to compete. And in e-commerce markets, we’ve found that suppliers have used digital tools to make familiar restrictions more effective  – like controls on the prices that retailers can charge.

And we’ve also gone beyond individual cases. Nearly two years ago, we published the report of our investigation into e-commerce markets, based on evidence from nearly 2000 companies. In January, we held a conference in Brussels with more than 500 people, discussing the future of digital competition with some of the world’s leading experts. And in preparation for that conference, we collected more than a hundred written contributions, from all sides of the debate.

And today, one more piece of the puzzle is in place – the report on competition policy in the digital age, which our three special advisers have been working on over the past year.

I want to extend my very warm thanks to those advisers – Heike Schweitzer, Jacques Crémer and Yves-Alexandre de Montjoye. Their report is full of important insights into the way markets are changing – and full of valuable ideas on how competition policy can respond.

That report was only published today. So we’ll need to take some time to think about those ideas and to discuss and debate before conclusions are reached.

But there are already a few key points we can identify – points that fit very well with the work we’ve been doing in recent years.

The challenges to competition in a digital age

The report makes clear that, despite all the changes that digital technology has brought to our markets, the basic principles of competition policy are as relevant as ever.  The trouble is that some of those changes have made it harder than ever to keep competition working the way it should.

Big companies have always relied on economies of scale. But digital technology can take that to a new level. Because information infrastructure might be expensive to produce – but once you’ve done that, you can process millions of pieces of information almost as cheaply as you can with just a few.

Meanwhile, as data becomes the key to success, the huge quantities of information that some big businesses have can give them an edge that smaller rivals can’t match. And the importance of network effects can mean that it’s hard for smaller firms to compete, even with a better product, if they don’t have a critical mass of users.

And so competition can be fragile, in this digital age. Opportunities to challenge powerful companies can be few. And as the special advisers make clear in their report, that means authorities need to be especially vigilant, to make sure those companies don’t misuse their power to shut down opportunities for innovators to the detriment of consumers who will want the choice.

Keeping theories of harm up to date

That means that authorities need to stay alert for new ways that companies could use their power to drive out competition.

Even in this new, digital world, many of the ways that companies try to keep rivals out of the market would be very familiar to previous generations of enforcers.

For decades, companies have tried to protect their dominance by locking customers into exclusive deals. In the seventies, that might mean pharmaceutical companies making customers agree not to buy vitamins from anyone else. These days, in our Android case, we found Google paying phonemakers and operators not to pre-install other search apps.

And in cases like that, we can show how that behaviour is bad for consumers, by pointing to theories of harm that have been there for years – even decades.

But digital technology can also create new ways for companies to harm competition, as the special advisers have also pointed out-

They point out, for instance, that it can help new platforms to break into the market, if consumers can try out those new services while still also using the old ones. So what’s called “multi-homing” – the ability to use more than one platform – can be vital to keep competition open. And the report suggests that we may need to step in, if we find powerful platforms trying to make it harder for users to multi-home.

So we need to keep our theories of harm – our understanding of the sorts of behaviour that can hurt consumers –  up to date for the digital world.

We’ve done that, for example, when we look at digital mergers, and assess how they might harm competition, by bringing together large sets of data. And the special advisers rightly point out in their report that we need to keep developing the analysis we use, so we stay on top of the changes in our markets.

Remedies to fix competition problems

But even if we do that, digital markets change quickly. So by the time we step in, we may find that it’s not easy to fix the damage that’s been done.

It can be as though a football team spent the first half of a match making bad tackles, which left their opponents too bruised and battered to compete. You can try to make things right, by clamping down on that bad behaviour in the second half - but that won’t be enough to make the other team competitive again.

And neutralising the harm that’s been done to competition may not be as simple as ordering a company to stop breaking the rules. Those companies may need to take positive action, to deliver a competitive market for consumers.

Two years ago, if you searched Google for a product that you wanted to buy, every single offer at the top of the page would have come from Google Shopping. Today, three-quarters of those search result pages have at least one offer from Google’s rivals in the box at the top – and about 40% of the clicks in those boxes go to one of those rivals.

But getting to that point has taken time. It helped that we outlined a guiding principle in our decision – the principle of equal treatment. But – as the special advisers point out – it’s worth looking at whether we could get faster results by giving companies more explicit instructions about what they need to do, to neutralise the damage they’ve done to competition.

That doesn’t have to mean changing our rules. We already have the power to order a company to do whatever’s necessary to bring its infringement to an effective end. And we need to be ready to use those powers to the full, when the situation demands it.

Access to data

And one thing we may need to do, to open up competition, is to require companies to give rivals access to their data. Because in this digital age, having the right data can be one of the keys to being able to compete.

In the last few years, we’ve been thinking about how that sort of data access could work. And we’ve seen that there are some hurdles to overcome.

Very often, the data you need to compete is data about particular individuals. So any access to data would need to  be in line with the data protection rules.

And collecting data also takes effort and time. So if we insist that companies share it with others, without proper compensation, we could discourage others from putting in those efforts in the future.

And we need to work out how to deal with these issues. Because, as data becomes increasingly important for competition, it may not be long before the Commission has to tackle cases where giving access to data is the best way to restore competition. So I’m glad that the special advisers have provided some ideas about how data access could work.

Conclusion

In fact, today’s report has valuable ideas in many areas. Today, I’ve only had time to touch on a few – but there are other things we could have talked about and will talk about in the months to come. How to deal with the power of platforms, for instance, or how to make sure big companies don’t harm competition when they buy startups.

But in the end, I think the most important message from the report is simple.

It’s that the markets we deal with, and the threats to competition, are constantly changing – and we need to make sure we keep up with that change.

We need to be able to act quickly enough to  tackle threats to competition before it’s too late. We need to carry on taking  an active role, to keep competition working well in our markets.

In the last few years, we’ve done a lot to bring competition rules into the digital age. And we need to keep that up, in the years ahead. So our markets keep working well for consumers and citizens.