Professor Pablo Ibáñez Colomo of the London School of Economics shares his views on what competition authorities should consider before taking on abuse of dominance cases in digital markets. He will be an expert panellist at a roundtable on this subject at the 2020 OECD Global Forum on Competition .
Digital markets have become a priority for competition authorities around the world. This brings up the question of whether – and if so, how much – abuse of dominance cases in digital markets differ from the relevant precedents in the offline world. Observers are divided: where some see an uneventful application of well-established categories of conduct (tying, refusal to deal, exclusivity and so on), others see a new landscape that requires the adjustment of existing doctrines.
On close examination, abuse of dominance cases in the digital arena appear to stand apart from other categories in one important respect. Competition law, as traditionally understood and applied, has always focused on how products are sold and has not ventured, apart from exceptional circumstances, into the ‘black box’ that is the firm.
Traditionally for example, exclusive dealing and tying have typically interfered with a firm’s interactions with third parties, namely suppliers and customers. Similarly, remedial intervention in these same cases has simply altered the interaction of the firm with these third parties, in particular by banning certain contractual clauses.
Abuse of dominance cases in digital markets, however, deal with how products are made which means that competition authorities venture into the ‘black box’. As such, competition authorities may interfere with the design of products and with the business models used by firms to monetise their investments. In the same vein, they may alter the structure of markets by introducing additional layers of modularity across the supply chain (for instance, a vertically-integrated firm may be required to open a level of the supply chain to third parties).
The difference between cases dealing with how products are sold and made becomes more apparent at the remedy stage. The latter, insofar as they venture into the ‘black box’, require a competition authority to impose remedies that, directly or indirectly, amount to redesigning a product or altering the core of a firm’s business model.
Intervention along these lines is by definition more complex and more prone to errors and unintended outcomes. It is not surprising that remedies in the abovementioned cases have proven controversial and that, several years following the adoption of a decision, the question of whether the infringement has been brought to an end is still being discussed. This is an inevitable consequence of ambitious interventions going beyond how products are sold. The issue is twofold from a legal and a policy standpoint. How often should competition authorities interfere with the design of products and/or with business models? Should the limits to interventions of this nature be hardwired into the law (for instance by introducing legal filters such as indispensability)?
Competition authorities attending the OECD Global Forum for Competition on 8 December 2020 will explore the challenges associated with abuse of dominance cases in digital markets.
The opinions expressed and arguments employed herein are exclusively those of the author and do not necessarily reflect the official views of the OECD or of the governments of its member countries..
2020 OECD Global Forum on Competition Blog Series
Blog 1: How can competition law tackle misconduct in digital markets?
Blog 2: Can market studies be a more effective tool for tackling emerging competition issues?
Blog 3: Are digital markets bringing new challenges in abuse of dominance cases?
Blog 4: Economising economic analysis for mergers in smaller markets
Blog 5: How does the UK use market studies to tackle emerging competition issues?
Blog 6: How is Mexico using market studies to tackle emerging competition issues?
Blog 7: Economics in merger control: an invaluable tool at every step of the process