How to Regulate BigTech: The Contribution of the French Competition Authority
Who can say they have never come into contact with the notorious GAFA? Or have never come into contact with new market disruptors such as e-commerce sites, cloud systems and even blockchain technology?
Such technology and companies have now become as ubiquitous as oxygen. As a result, the European Commission and competition regulators are finding themselves in a constantly evolving playing field; one that requires its players — legislation, courts and authorities — to evolve at the same pace.
The Autorité de la Concurrence, France’s competition authority (the “Authority”), has contributed to the debate on competition policy required to tackle the challenges posed by the digital sector. The Authority’s contribution focuses on the efficacy of anti-competitive measures in regulating those operating in the digital sector, the emergence of new competitors and the issues surrounding merger control.
What is the Current Situation?
The Authority has indeed highlighted that competition law is a particularly effective tool in regulating and managing the problems of a market that has a strong characteristic of innovation. This is due to the “flexibility” of competition law, as its concepts can adapt to new practices without always requiring legislative intervention.
In this way, this area of law is perhaps better equipped to deal with the problems posed by the digital sector in comparison to data protection and privacy legislation for example, whose provisions do not always align well with tasks such as the collection and use of data for testing machine learning platforms.
As a result, competition authorities have already demonstrated that they are not afraid to use innovative reasoning to apply well-established principles to new players. European regulators have a strong track record of sanctioning anti-competitive activity in the digital arena and Google and Facebook have been a big focus of these efforts.
Recent Cases
Such measures have applied to all areas of the digital market.
For example, in relation to operational systems, the European Commission fined Google €4.34 billion for illegal practices in relation to Android mobile services being used to strengthen the dominance of Google’s search engine.
In the field of online advertising, Google was once again called out for its anti-competitive practices in the Google AdSense Case where the Commission handed out a fine in the sum of €1.49 billion.
Here, Google was found to have abused its market dominance by imposing a number of restrictive clauses in contracts with third-party websites which consequently prevented Google’s rivals from placing their search adverts on these websites.
Additionally, in the Google Gibmedia decision from the French Autorité de la concurrence, Google were found to have been mistreating buyers of ads based on keywords.
Furthermore, Google promoted its own “vertical” search engine (a term employed for search engines operating in one niche area), by abusing its dominance to give an unlawful advantage to its own shopping comparison service, for which the EC handed out a fine of €2.42 billion.
Even in the area of social networks and data collection, the German Bundeskartellamt prohibited Facebook from combining user data from different sources.
The Authority’s Suggestions
In its recent guidance, the Authority has suggested a number of reforms in order to adapt competition law so that it can effectively regulate activity in the digital market. Suggestions include:
1. Modification of the concept of dominant position
The Authority has suggested broadening the definition of dominant position in order to include those market participants who are in a position of quasi-dominance or are on the verge of disproportionately rocking the market.
2. Redefinition of the doctrine of essential facilities
The concept of essential facilities refers to ownership of a facility that is necessary for reaching customers and/or enabling competitors to carry on their business and is impossible or extremely difficult to duplicate. By virtue of such ownership, the entity might be in a dominant position. The Authority has suggested that this concept should take into consideration the unavoidable need for certain databases, user communities, platforms and ecosystems in the digital sector.
3. Introduction of protective measures and commitments
The Authority has suggested the introduction of protective measures and commitment procedures specifically tailored to the digital market in order to ensure that rapid and proportionate intervention can be effectuated where necessary.
4. Modification of the applicable legal standard and provisional measures
The Authority supports the idea of greater use of provisional measures at a European level. This will require a modification of the current applicable legal standard, and depending on the reforms agreed by all Member States, could have a significant effect on the regulatory obligations of all businesses operating in this area.
All whilst ensuring a preservation of a framework that is favourable to innovation…
Despite the call for more restrictive monitoring of competition in the digital sector, the Authority was keen to highlight that the innovation that has been seen in this market is the key to its success and that any modifications should not impede on the current framework that has allowed such innovation to bloom.
However, their most interesting suggestion is in relation to the introduction of a completely new category of competitors, les opérateurs structurants.
New Players: les Opérateurs Structurants
Opérateurs structurants refers to “digital structuring platforms” or more specifically, entities that not only hold considerable power in the market in which they operate, but also neighbouring markets, because of their status as “gatekeepers”.
The Authority has suggested that such entities should be considered, as a matter of national and European law, a new form of dominant position, as well as the introduction of a mechanism for control. The regulation of these operators is important as they can affect competition beyond their own markets. This is because of their development and projection capabilities, access to capital, and benefit of significant networks due to their large community of users or access to large pools of data.
Some examples of problematic behaviour linked to these entities includes discrimination of competing products or services, hindering access to markets, using data on a dominated market to make access even more difficult, or creating obstacles to the interoperability of systems or to the portability of data. In light of the current regime, such actions can be hard to characterise as an abuse of a dominant position, but they are nonetheless harming competition.
Therefore, the suggested definition for such operators is as follows:
a company which provides online intermediary services, with a view to exchanging, buying or selling goods (such as marketplaces or apps);
who has a structuring market power, due to the importance of its size, its financial capacity, its community of users and/or the data it holds, allowing it to control access or significantly affect the functioning of the market or markets in which it operates;
with regard to its competitors, its users and/or third-party companies which depend on access to the services it offers for their economic activity.
Merger Control
The Authority also highlighted the existence of a legal vacuum in the area of merger control for certain transactions that are below the current threshold but can nonetheless raise competition concerns. This is most likely the case when mergers involve emerging innovative players.
As a result, the Authority has stated that it could be useful to adapt competitive analysis to digital challenges by taking in to account potential and future competition, the analysis of conglomerate effects, and the importance of data and large user communities. Therefore, it has suggested a better use of the existing tools:
the use of behavioural commitments in the digital economy and the use of Article 22 of the 2004 EU Merger Regulation which would allow national competition authorities to refer concentrated operations that are likely to affect competition in the national territory to the EU Commission.
the introduction of merger control mechanisms that are specific to the digital sector and in particular to digital structuring platforms. For the latter, the Authority advocates the use of a systematic information mechanism for all merger operations carried out by these platforms.
In Conclusion…
The digital sector is booming, and this is challenging regulators in all areas of law. Competition authorities seem to have taken a proactive approach in ensuring that they keep up with the rate of innovation.
Across the Channel, the UK’s Competition and Markets Authority has also launched a digital markets strategy in response to the report of an expert panel on behalf of the HM Treasury. In light of the exponential growth of the digital sector due to the current global pandemic, seen with the rapid rise of platforms such as Disney+ and Zoom, it will be interesting to see which elements of the French Authority’s guidance will be implemented on the European stage.
Article by Komal Shemar @ Gerrish Legal, first published on Medium in May 2020 / Cover photo by Charles Deluvio on Unsplash