The European Commission recently issued a formal Statement of Objections (SO) in which it charges Apple with antitrust breach. In a nutshell, the commission argues that Apple prevents app developers—in this case, Spotify—from using alternative in-app purchase systems (IAPs) other than Apple’s own, or steering them towards other, cheaper payment methods on another site. This, the commission says, results in higher prices for consumers in the audio streaming and ebook/audiobook markets.

Read the full piece here.

These proposals threaten to go even further, and run the risk of causing significant harms that the CMA has ignored. It’s now up to the government whether the agency gets these powers. It should stand up for dynamic, competitive markets by saying no.

Read the full piece here.

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 Hidden Rules of a Modern Antitrust, Ramsi Woodcock argues that courts’ systematic use of the rule of reason, which underpins most of contemporary antitrust law, effectively amounts to an unwarranted blanket exemption from liability for potentially egregious practices. According to Woodcock, this is due to the interaction between the exorbitant cost of prosecuting cases under this standard (compared to the cost of enforcing per se rules), the courts’ increasing application of the rule of reason, and the shrinking budgets of antitrust enforcement agencies.

As this Response discusses, Woodcock’s bold claims ignore or misconstrue several critical aspects of the modern antitrust apparatus. Chief among these is the uncertainty that underpins antitrust enforcement, and the rule of reason’s role in decreasing this uncertainty. It takes time and experience for courts to form an opinion about the value of certain forms of business conduct, and rule of reason litigation increases the accuracy of all subsequent litigation—and the ability of both economic actors and antitrust enforcers to predict judicial outcomes and adjust their practices accordingly. This stands in stark contrast to Woodcock’s model, which assumes that courts are unable to differentiate between forms of ambiguous conduct (and yet simultaneously well informed enough about enforcers’ budget constraints to know whether they can “afford” to litigate under the rule of reason).

Winston Churchill famously quipped that “it has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time . . . .”  Much of the same could be said about the rule of reason. While it is certainly not perfect, policymakers have yet to find another standard that provides the same flexibility to accommodate ever-evolving forms of conduct with initially ambiguous effects on consumer welfare. Woodcock’s paper underplays these important virtues, while his more pointed critiques often miss the mark.

Background…

Some U.S. antitrust advocates, including members of Congress, recently have advocated the United States adopt a more European approach to antitrust policy. This comes as the European Commission itself is proposing a Digital Markets Act (DMA) that would impose new regulations on Big Tech platforms and ban many forms of conduct outright.

But…

Europe’s economies are less innovative, less dynamic, and ultimately, significantly poorer than the United States. Europe’s technology markets, in particular, are relatively stagnant. Regulating them directly is likely to make Europe’s problems with innovation worse, and would serve as a poor model for the United States to follow.

Read the full explainer here.

ICLE Senior Fellow of Law & Economics Dirk Auer joined the Institute for Internet & the Just Society’s Just Talking series for a discussion of competition policy and the digital economy. Video of the full event is embedded below.

The U.S. Supreme Court’s just-published unanimous decision in AMG Capital Management LLC  v. FTC—holding that Section 13(b) of the Federal Trade Commission Act does not authorize the commission to obtain court-ordered equitable monetary relief (such as restitution or disgorgement)—is not surprising. Moreover, by dissipating the cloud of litigation uncertainty that has surrounded the FTC’s recent efforts to seek such relief, the court cleared the way for consideration of targeted congressional legislation to address the issue.

Read the full piece here. 

Background…

Apple Inc. and Epic Games are currently locked in a high-stakes antitrust dispute. Epic is challenging Apple’s rules that require apps to use Apple Pay for in-app purchases and that ban alternative app stores from iOS devices like iPhones and iPads. 

The suit is part Epic’s broader strategy, dubbed Project Liberty, to pay lower fees to online platforms. If it succeeds, Epic would be able to steer its users toward lower-priced payment processors. This would increase the competitive constraints that Apple faces when it sets platform fees.

But…

Epic’s proposals would allow large developers and rival payment processors to get the benefit of Apple’s investments in iOS and the App Store without paying for them. It could also undermine other online platforms that rely on commissions to earn a positive return on their upfront investments. This could shrink investments in platform creation and upkeep, hurting users and leading to worse platforms overall.

Read the full explainer here.

Many people hope that data interoperability can increase competition, by making it easier for customers to switch and multi-home across different products. The UK’s Open Banking is the most important example of such a remedy imposed by a competition authority, but the experience demonstrates that such remedies are unlikely to be straightforward. The experience of Open Banking suggests that such remedies should be applied with focus and patience, may require ongoing regulatory oversight to work, and may be best suited to particular kinds of market where, like retail banking, the products are relatively homogeneous. But even then, they may not deliver the outcomes that many hopes for.

Data portability and interoperability tools allow customers to easily move their data between competing services, either on a one-off or an ongoing basis. Some see these tools as offering the potential to strengthen competition in digital markets; customers who feel locked in to services that they have provided data to might be more likely to switch to competitors if they could move that data more easily. This would be particularly true, advocates hope, where network effects grant existing services value that new rivals cannot emulate or where one of the barriers to switching services is the cost of re-entering personal data.

The UK’s Open Banking system is one of the most mature and important examples of this kind of policy in practice. As such, the UK’s experience to date may offer useful clues as to the potential for similar policies in other markets, for which the UK’s Furman Report has cited Open Banking as a model. But fans of interoperability sometimes gloss over the difficulties and limitations that Open Banking has faced, which are just as important as the potential benefits.

In this article, I argue that Open Banking provides lessons that should both give hope to optimists about data portability and interoperability, as well as temper some of the enthusiasm for applying it too broadly and readily.

I draw on my experiences as part of the team that produced the industry review “Open Banking: Preparing For Lift Off” in 2019. That report concluded that Open Banking, though promising, needed several additional reforms to succeed, a few of which I discuss in this piece. I was also the co-author of a white paper that argued for an Open Banking-like remedy in the UK’s retail electricity market, which I discuss briefly below. All views expressed here are my own.

I argue that there are three main lessons to draw from Open Banking for considerations of similar remedies in other markets:

1. Implementation is difficult and iterative, and probably requires de facto regulatory oversight if it is to be implemented effectively, with all the attendant costs and risks that entails.
2. The outcomes that interoperability produces may differ from those policymakers have in mind, and may not mean more switching of core services.
3. If Open Banking does succeed, it will be thanks to features of the UK banking market that may not be present in other markets where similar interoperability is being proposed.

I conclude that Open Banking has not yet led to noticeably stronger competition in the UK banking sector. Implementation challenges suggest that taking an equivalent approach to other markets would require more time, investment and effort than many advocates of interoperability requirements usually concede and may not deliver the anticipated benefits. To the extent that Open Banking is to be a model, it would be best applied as a focused approach in markets that bear particular characteristics and where the costs are outweighed by the benefits, rather than a blanket measure that can be applied to every market where customer data matters.

Read the full white paper here.