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TL;DR The European Union has unveiled draft legislation that seeks to tame so-called “gatekeeper” Big Tech firms. If passed into law, this Digital Markets Act (“DMA”) would create a list of “dos and don’ts” by which the platforms must abide, such as allowing interoperability with third parties and sharing data with rivals.
The European Union has unveiled draft legislation that seeks to tame so-called “gatekeeper” Big Tech firms. If passed into law, this Digital Markets Act (“DMA”) would create a list of “dos and don’ts” by which the platforms must abide, such as allowing interoperability with third parties and sharing data with rivals. In short, the DMA would give the European Commission significant powers to tell tech companies how to run their businesses.
The DMA essentially shifts competition enforcement against gatekeeper platforms away from an “effects” analysis that weighs costs and benefits to a “blacklist” approach that proscribes all listed practices as harmful. This will constrain platforms’ ability to experiment with new products and make changes to existing ones, limiting their ability to innovate and compete.
Read the full explainer here.
TOTM Pai’s tenure at the FCC was marked by an abiding appreciation for the importance of competition, both as a guiding principle for new regulations and as a touchstone to determine when to challenge existing ones. Perhaps his greatest contribution to bringing competition to the forefront of the FCC’s mandate came in his work on media modernization.
I’m delighted to add my comments to the chorus of voices honoring Ajit Pai’s remarkable tenure at the Federal Communications Commission. I’ve known Ajit longer than most. We were classmates in law school … let’s just say “many” years ago. Among the other symposium contributors I know of only one—fellow classmate, Tom Nachbar—who can make a similar claim. I wish I could say this gives me special insight into his motivations, his actions, and the significance of his accomplishments, but really it means only that I have endured his dad jokes and interminable pop-culture references longer than most.
Read the full piece here.
TL;DR The European Commission has released its draft Digital Services Act (“DSA”), which seeks to make the internet safer for European citizens. If passed into law, this regulation will shape digital markets in the European Union for years to come.
The European Commission has released its draft Digital Services Act (“DSA”), which seeks to make the internet safer for European citizens. If passed into law, this regulation will shape digital markets in the European Union for years to come.
While some provisions of the draft DSA could bring needed changes to the regulation of online markets, the law will on balance make it more costly for online firms to do business in Europe. This is particularly true for smaller platforms with less capacity to shoulder significant compliance costs. Like many other regulations, the DSA also might further entrench incumbents.
TOTM Ajit Pai will step down from his position as chairman of the Federal Communications Commission (FCC) effective Jan. 20. Beginning Jan. 15, Truth on the Market will host a symposium exploring Pai’s tenure, with contributions from a range of scholars and practitioners.
Ajit Pai will step down from his position as chairman of the Federal Communications Commission (FCC) effective Jan. 20. Beginning Jan. 15, Truth on the Market will host a symposium exploring Pai’s tenure, with contributions from a range of scholars and practitioners.
TOTM Texas Attorney General Ken Paxton’s complaint against Google’s advertising business, joined by the attorneys general of nine other states, continues a long tradition of narrowing market definition to shoehorn market dominance where it may not exist.
U.S. antitrust regulators have a history of narrowly defining relevant markets—often to the point of absurdity—in order to create market power out of thin air. The Federal Trade Commission (FTC) famously declared that Whole Foods and Wild Oats operated in the “premium natural and organic supermarkets market”—a narrowly defined market designed to exclude other supermarkets carrying premium natural and organic foods, such as Walmart and Kroger. Similarly, for the Staples-Office Depot merger, the FTC narrowly defined the relevant market as “office superstore” chains, which excluded general merchandisers such as Walmart, K-Mart and Target, who at the time accounted for 80% of office supply sales.
TOTM The European Court of Justice issued its long-awaited ruling Dec. 9 in the Groupe Canal+ case. The case centered on licensing agreements in which Paramount Pictures granted . . .
The European Court of Justice issued its long-awaited ruling Dec. 9 in the Groupe Canal+ case. The case centered on licensing agreements in which Paramount Pictures granted absolute territorial exclusivity to several European broadcasters, including Canal+.
Regulatory Comments In order to maximize the benefits of broadband to society, including through the provision of public safety communications and services, public policy must promote the . . .
In order to maximize the benefits of broadband to society, including through the provision of public safety communications and services, public policy must promote the proper incentives for broadband buildout. Both the 2015 Title II Open Internet Order (the “OIO”) and the 2017 Restoring Internet Freedom Order (the “RIFO”) were premised on this. But each adopted a different approach to accomplishing this objective.
The OIO premised its rules on the theory that ISPs are “gatekeepers,” poised to kill the golden goose of demand for broadband by adopting business practices that could reduce edge innovation.
The key insight of the virtuous cycle is that broadband providers have both the incentive and the ability to act as gatekeepers standing between edge providers and consumers. As gatekeepers, they can block access altogether; they can target competitors, including competitors to their own video services; and they can extract unfair tolls. Such conductwould, as the Commission concluded in 2010, “reduce the rate of innovation at the edge and, in turn, the likely rate of improvements to network infrastructure.” In other words, when a broadband provider acts as a gatekeeper, it actually chokes consumer demand for the very broadband product it can supply.
The RIFO, on the other hand, properly conceives of ISPs as intermediaries in a two-sided market that aim to maximize the value of the market by adopting practices, like pricing structures and infrastructure investment, that increase the value for both sides of the market.
We find it essential to take a holistic view of the market(s) supplied by ISPs. ISPs, as well as edge providers, are important drivers of the virtuous cycle, and regulation must be evaluated accounting for its impact on ISPs’ capacity to drive that cycle, as well as that of edge providers. The underlying economic model of the virtuous cycle is that of a two- sided market. In a two-sided market, intermediaries—ISPs in our case—act as platforms facilitating interactions between two different customer groups, or sides of the market— edge providers and end users. . . . The key characteristic of a two-sided market, however, is that participants on each side of the market value a platform service more as the number and/or quality of participants on the platform’s other side increases. (The benefits subscribers on one side of the market bring to the subscribers on the other, and vice versa, are called positive externalities.) Thus, rather than a single side driving the market, both sides generate network externalities, and the platform provider profits by inducing both sides of the market to use its platform. In maximizing profit, a platform provider sets prices and invests in network extension and innovation, subject to costs and competitive conditions, to maximize the gain both sides of the market obtain from interacting across the platform. The more competitive the market, the larger the net gains to subscribers and edge providers. Any analysis of such a market must account for each side of the market and the platform provider.
In other words, the fundamental difference of approach between the two Orders turns on whether it is edge innovation, pushing against ISP incentives to expropriate value from edge providers, that primarily drives network demand and thus encourages investment, or whether optimization decisions by both ISPs and the edge are drivers of network value. The RIFO rightly understands that ISPs have sharp incentives both to innovate as platforms (and thus continue to attract and retain end users), as well as to continue to make their services useful to edge providers (and, by extension, the consumers of those edge providers’ services).
The D.C. Circuit upheld RIFO’s fundamental rationale as a supportable basis for the FCC’s rules in Mozilla v. FCC. But it also accepted that three specific concerns were insufficiently examined in the RIFO, and remanded the case to the FCC to address them. Among these was the question of the RIFO’s implications for public safety. In its Public Notice seeking to refresh the record on the remanded issues, the Wireline Competition Bureau asks (among other things):
These are the questions to which this comment is primarily addressed.
In Part I, we discuss how the RIFO fosters investment in broadband buildout, in particular by enabling prioritization and by reducing the effects of policy uncertainty. In Part II, we describe how that network investment benefits public safety both in both direct and indirect ways. In Part III, we highlight the benefits to public safety from prioritization, in particular, which is facilitated by the RIFO.
Read the full comments here.
Regulatory Comments The purpose of this submission is to highlight some of the findings of the relevant scholarship to help to inform the ACCC’s work, and to highlight some of the problems that may arise during the course of the study, given the misconceptions about competition between advertising-funded digital platforms that are common in the media and popular debate today.
The International Center for Law and Economics (ICLE) welcomes the opportunity to make a submission to the Australian Competition and Consumer Commission’s (ACCC) Digital Advertising Services Inquiry. As a nonprofit, nonpartisan research center, ICLE works with academics around the world to promote scholarship into the intersection of law and economics.
The purpose of this submission is to highlight some of the findings of the relevant scholarship to help to inform the ACCC’s work, and to highlight some of the problems that may arise during the course of the study, given the misconceptions about competition between advertising-funded digital platforms that are common in the media and popular debate today.
This submission will focus on three areas raised by the Issues Paper: concentration of market power in digital advertising, unequal access to data acting as a potentially anti-competitive barrier to entry, and the effect of vertical integration on competition and innovation.
Click here to read the submission.
Regulatory Comments ICLE submitted comments to the FCC on the First Amendment implications of the leased access rules. Associate Director, Legal Research Ben Sperry argued the changes in the video marketplace towards competition undercut the justification for subjecting regulation of cable operators' speech to only intermediate scrutiny.
ICLE submitted comments to the FCC on the First Amendment implications of the leased access rules. Associate Director, Legal Research Ben Sperry argued the changes in the video marketplace towards competition undercut the justification for subjecting regulation of cable operators’ speech to only intermediate scrutiny. As a result, the leased access rules should be reviewed as compelled speech under strict scrutiny. The leased access rules are not narrowly tailored to a compelling government interest and therefore would fail under the strict scrutiny standard.
Click here to read the full comments.
