For the third in my series of posts about the Google Android decision, I will delve into the theories of harm identified by the Commission.

Read the full piece here.

In a previous post, I argued that the Commission failed to adequately define the relevant market in its recently published Google Android decision.

Read the full piece here.

The European Commission’s recent Google Android decision will surely go down as one of the most important competition proceedings of the past decade. And yet, an in-depth reading of the 328 page decision should leave attentive readers with a bitter taste.

Read the full piece here.

Abstract

The object of this dissertation is to study the role that innovation occupies – and should occupy – in Antitrust/Competition analysis, and to put forward a coherent framework for the analysis of “innovation defenses” (defined as situations where a restriction of competition is necessary to produce a socially desirable innovation).

The dissertation is separated into two parts.

Part I adopts a positive law and economics approach, and examines how competition law an innovation might overlap. The dissertation separates this issue into three questions: What is innovation; what are the goals of competition laws on both sides of the Atlantic; and where is the enforcement of competition laws most likely to affect innovation? Having answered these questions, the dissertation examines how European Union (“EU”) competition law currently deals with innovation defenses. If this were done in a satisfactory manner, then there would be little need for a revised innovation defense framework. To this end, the dissertation surveys recent European competition cases to determine whether they incorporate economic concepts related to innovation and whether they overtly take defendants’ incentives to innovate into account. The dissertation shows that European competition law currently does not address innovation defenses in a coherent and satisfactory manner.

Part II takes a more normative stance. In order to fill the perceived policy gap, identified in Part I, it puts forward a framework for innovation defenses (“the framework”). The goal of this framework is not so much to be applied directly, but to guide policymakers through the various issues that would arise if they decided to analyze the potential chilling effects that their enforcement activities may exert on innovation.The framework centers on two key questions: is a given innovation desirable from a social welfare standpoint (i.e. do its social benefits outweigh its social costs), and is a restriction of competition necessary in order to achieve the innovation? The framework hinges on the economic concept of appropriability. Key questions include whether firms take the existence of such frameworks into account, even unwittingly, when they make their investment decisions; how the framework should be implemented; and whether it is compatible with the stated goals of competition laws and existing antitrust legislation on both sides of the Atlantic. The dissertation then applies this framework in a number of case studies and discusses its potential implications.

In a submission to the Australian Treasury on 12 September 2019, a group of esteemed international scholars critiqued the recently published Final Report of the Australian Competition and Consumer Commission (ACCC) Digital Platforms Inquiry. 

In its report, the ACCC claims that competition in the media, communications, advertising and other markets it investigated is “not working,”  and that substantial regulatory and legislative changes are necessary to solve—and would solve—the  problems caused by ineffective competition.  

But the premise that competition is not working is not well supported by evidence presented in the report. Meanwhile, the report’s conclusion misses the bigger picture: Government intervention is appropriate only if it produces net social benefits. Yet the ACCC almost entirely omits consideration of the adverse effects of its proposed interventions, which in many cases are likely worse than the alleged problems. As such, the report’s proposals should be treated with great caution.

The submission tackles three “significant oversights”: 

1. The ACCC’s recommendations on “platform neutrality” and the proposed creation of a “digital platforms branch” underestimate the limits of regulators’ ability to identify market failure and the major difficulties that regulators face when attempting to design markets. For instance, the ACCC recommends that Google be forced to introduce browser and search engine choice screens. Yet it is not clear that the introduction of such screens will either accelerate the entry of competitors or improve users’ experience. 
2. The ACCC’s attempts to prop up local media firms (through subsidies and other means) appears to be driven by nostalgia for a bygone, pre-modern era, rather than a rigorous assessment of the costs and benefits of media regulation. The ACCC is quick to assume that its recommendations would produce tangible benefits for consumers, but it overlooks the potential market distortions—and impediments to ongoing innovation—that might be generated in the process.
3. The report’s recommended extension of Australia’s privacy legislation completely ignores the tremendous compliance costs that doing so would impose on firms and, indirectly, on consumers. The recent introduction of privacy legislation in the EU and California suggests that these compliance costs might well outstrip the benefits to users.

The submission notes in conclusion that “The ACCC’s lackadaisical assessment of regulatory costs is all-the-more troubling given that its report focuses on an extremely dynamic industry. What is only a small regulatory cost today could severely hamper competition in the future.”

Click here to read the full submission.

Ursula von der Leyen has just announced the composition of the next European Commission. For tech firms, the headline is that Margrethe Vestager will not only retain her job as the head of DG Competition, she will also oversee the EU’s entire digital markets policy in her new role as Vice-President in charge of digital policy. Her promotion within the Commission as well as her track record at DG Competition both suggest that the digital economy will continue to be the fulcrum of European competition and regulatory intervention for the next five years.

Read the full piece here.

In his latest book, Tyler Cowen calls big business an “American anti-hero”. Cowen argues that the growing animosity towards successful technology firms is to a large extent unwarranted. After all, these companies have generated tremendous prosperity and jobs.

Read the full piece here.

Thousands of patents underpin the technologies that power the digital economy. Coordination among firms developing and implementing these novel technologies has notably been facilitated in large part by Standards Developing Organizations (SDOs). Despite the evident benefits of standardization in general and SDOs in particular, certain aspects of these processes have come under severe scrutiny from scholars, antitrust authorities and courts. These critics argue that the standardization space suffers from two crippling market failures, namely “patent holdup” and “royalty stacking”. They thus conclude that opportunistic firms will squeeze their rivals’ profits, harming consumers and stifling innovation in the process. However, recent empirical scholarship strongly suggests that patent holdup and royalty stacking rarely, if ever, occur in the standardization space.

Against this checkered backdrop, our paper argues that standardization is an emergent phenomenon, where parties have strong incentives to design institutions and contractual relationships that mitigate the scope for opportunistic behavior (including patent holdup and royalty stacking). The paper explores how these incentives have likely enabled firms to avoid severe market failures. We argue that ignoring these complex market dynamics may cause antitrust authorities and courts to do more harm than good (notably by exacerbating patent holdout behavior). The paper then reviews recent regulatory interventions and questions whether this has indeed been the case. Finally, we suggest that antitrust authorities and courts should draw inspiration from acclaimed scholarship regarding both the evolution of cooperation and the management of common-pool resources.