ICLE President Geoffrey Manne moderated a Nov. 17 chat with Thibault Schrepel, author of Blockchain + Antitrust: The Decentralization Formula, and Neil Chilson, author of Getting out of Control: Emergent Leadership in a Complex World. The full clip is embedded below.

The Digital Markets Act (“DMA”) is a complex piece of regulation. It includes some great ideas (as tackling predatory innovation) while being surprisingly conservative (defined as “?the wish to resist great or sudden change” by the Oxford Dictionary).

Read the full piece here.

In the episode Blockchain antitrust old wine, new bottles? ICLE Academic Affiliate Thibault Schrepel and Caron Beaton-Wells discuss anti-competition practices (collusions & abuses of dominance). The answer… “Old wine is good.” The full episode is embedded below.

ICLE Affiliate Thibault Schrepel joins host Brian L. Frye to discuss his article “Antitrust Without Romance.” Schrepel begins by explaining the concept of “public choice theory” and how it can help us understand the incentives of antitrust regulators. He describes the data he collected on how the public statements of regulators illuminates how they may be responding to those incentives. And he explains how the purpose of antitrust policy is in tension with many recent developments in antitrust advocacy. He argues that we should make antitrust policy in light of protecting competition, not morality. The full episode is embedded below.

A tripartite conversation between Glen Weyl, Caron Beaton-Wells, and ICLE affiliate Thibault Schrepel about blockchain, but also free markets, state power and the (absence of) need for antitrust laws. Description taken from the Competition Lore podcast below. The full episode is embedded below.

Blockchain technology and smart contracts hold some promise for reinvigorating competition, providing more efficient and secure ways of doing business on the internet, while at the same time lifting the bar in data protection and privacy.

But is this new general purpose technology all that it’s made out to be? Will it challenge the power of the major digital platforms?  And what are the risks that blockchain itself will become concentrated and fall prey to anti-competitive conduct?

ICLE Academic Affiliate Thibault Schrepel joins the Competition Lore Podcast to take on these challenging questions. The full episode is embedded below.

Blockchain is not just bitcoin. It’s a general purpose technology that some say has the potential to revolutionise swathes of the economy, creating a new, more efficient, more secure way to exchange information and value.

But just as was true of the early days of the internet, a real understanding of blockchain technology eludes many of us, making it difficult to think meaningfully about its promise and its pitfalls.

ICLE Academic Affiliate Thibault Schrepels joins this episode of the Competition Lore Podcast. Thibault has made blockchain and its antitrust implications his specialty and in this episode, he walks us through the nuts and bolts of the technology. The full episode is embedded below.

ICLE and a number of its European affiliates have recently responded to the European commission’s public consultation on “shaping competition policy in the era of digitisation.” In our submission, we argue that competition policy in the digital economy should be based on sound, theoretical underpinnings and rigorous, evidence-based analysis, best encapsulated in the “law and economics” approach. Despite many expressed fears to the contrary, digital markets are not inherently prone to anticompetitive behavior, and the weight of economic theory and evidence offer little support for the asserted risk of harm. We thus argue that competition intervention should take into account the uncertainty of harm, the presence of countervailing benefits and the problems of devising an effective remedy.

Our submission notably challenges the idea that leveraging, consumer lock-in, network effects, and data collection necessarily lead to winner-take all situations where digital platforms exclude their rivals and exploit their users. Instead, we show that these phenomena are just as likely (if not more likely) to benefit consumers as they are to be anticompetitive. Leveraging may, for instance, increase market output by enabling firms to offer superior products. Far from monopoly being the constant problem plaguing markets characterized by network effects, fragmentation is often more of an issue, and mandating smaller networks can limit users’ ability to coordinate on a preferred platform.

Of crucial importance in evaluating the conduct of online platforms is the awareness that in such two-sided markets one side of the market may subsidize another or operate under contractual restraints aimed at improving the platform for other participants. These characteristics frequently enable the platform to function effectively—even though, viewed in isolation, they might appear to amount to supracompetitive pricing or anticompetitive restrictions. The interdependent nature of online platforms thus makes it difficult to assert that a price increase or other action that allegedly harms users on only one side of the market represents a harmful course of conduct overall. The only way to assess the propriety of such conduct is to look at its effect on output across the entire market, taking account of the full range of costs and benefits.

Our submission also demonstrates that the advent of the “data economy” does not presumptively alter the balance of competition enforcement. Indeed, the mere fact that an incumbent owns large amounts of data may be an indication of successful competition of precisely the sort competition laws are designed to encourage. It certainly does not inherently constitute a barrier to entry, much less an essential facility, that could trigger antitrust enforcement.

Because the digital economy is built upon tremendous investments in innovation, we also argue that competition enforcement should pay particularly close attention to firms’ incentives to innovate. It is well-established that expected profits are generally a precondition for innovation. Accordingly, competition enforcers must walk a very fine line between punishing anticompetitive conduct that might deter innovation by new entrants, and protecting incumbent innovators’ incentives by avoiding enforcement activity that punishes firms experimenting on the frontiers of their industries.

In the final analysis, we argue that European competition authorities should consider carefully how little certainty we have about digital markets and the effects of challenged conduct within them, and operate with the restraint and regulatory humility appropriate to our ignorance.

Abstract

On July 18, 2018, the European Commission fined Alphabet (Google) 4.34 billion euros. This decision confirms the Commission’s willingness to deter companies from engaging in anticompetitive practices. It also confirms that the European competition authority is missing the big picture by imposing disproportionate fines with regard to the specifics of the digital economy.

According to Article 23(2) of Regulation No 1/2003, the fines imposed by competition authorities cannot exceed 10% of the overall annual turnover of the concerned company. This limit is intended to avoid disproportionate sanctions that would jeopardize the company’s future. In fact, however, while this turnover threshold is useful, it is insufficient. The digital economy requires companies to compete by innovating. R&D investments have become the lifeblood of the digital economy and the very essence of competition. The specific competitive dynamics of the industry should also be taken into account in considering the extent to which fines imposed by competition authorities can disrupt the investment capacity of companies.

This article introduces an empirical study conducted over the period 2004 to 2018 (Android included) on all the fines imposed by the European Commission on the basis of Article 102 TFEU. We show that the European Commission’s decisions may have the effect of slowing down R&D for numerous sanctioned companies. For this reason, an innovation protection mechanism should be incorporated into the calculation of the fine. We propose doing so by introducing a new limit that caps Article 102 fines at a certain percentage of companies’ investment in R&D.

Click here to read the full article.