What are the risks which follow from the existence of a limited number of huge e-commerce and technology companies? Which authorities should monitor developments and take action where harm is apparent? And what action is appropriate, taking account of the need not to stifle innovation? These questions were the subject of a debate in the Dutch parliament on 31 January. Platform giants, Google and Facebook, representatives of smaller market players (the associations of Dutch commercial radio and Dutch television broadcasters) and a panel of experts all expressed their views. In this blog we focus on the vision of the Dutch Authority for Consumers and Markets, as expressed during the debate and set out in its position paper.
ACM empowered to tame the Titans?
ACM suggests that it has a role to play. It points out that it is well placed to investigate markets and market power. It has the tools to prohibit the creation of market power through mergers and acquisitions and to sanction abuses by dominant companies of their power. It can also require such companies to amend their behavior if exclusionary or abusive. In its role as champion of consumers, ACM is also empowered to take measures under specific consumer protection laws. It refers to itself as a 'multifunctional supervisory body'.
This is fighting talk. It seems to signal a more proactive role to the supervision of the internet giants. This may be in response to the call to action in the coalition agreement which specifically required the ACM to set up an team for digital competition. It may also result from the growing international recognition that supervision is required and that if competition authorities do not rise to the challenge, other authorities or even the legislator is likely to do so. It will be interesting to see if the ACM finds an opportunity to follows through. This is necessary to silent critics of its perceived inaction in potential abuse cases to date.
Weighing up pro's and cons's
The ACM does not pick up the gauntlet without expressing some reserves. It is at pains to point out the advantages of the internet giants: new products and services and business models which improve consumers' lives. Regulation or intervention could seriously impede innovation. At the same time ACM recognizes the risks which result from the network effects of platforms often leading to a situation where the winner takes all. This means that there is a risk of less consumer choice. The platforms may be in a position to impose potentially unfair terms and conditions. Traditional markets, advertising and media, may be threatened by the online platforms. And the platforms may also have less direct but visible effects on society. For example the popularity of Airbnb purportedly negatively impacts on certain towns and cities.
ACM suggests that it needs to cooperate with other competition authorities in the context of the European Competition Network. The issues raised by the technology giants are indeed not country-specific. The uncoordinated approach to the potential issues raised by the 'most-favoured-nations' clauses applied by hotel booking sites was unfortunate. The different views of various national authorities were not conducive to legal certainty. This was a missed opportunity for the European Commission to take the lead and suggest a harmonized approach.
ACM also suggests that there are advantages in cooperating with other national authorities such as the Dutch Data Protection Authority and the Commission for the Media with which the ACM is currently investigating the effect of mega-platforms on news and media. Platforms do indeed raise multiple issues straddling the domains of various supervisory bodies. There is a risk that if no authority steps up and "owns" a particular issue, no action will be taken to avoid the potential harm. The investigation by the German competition authority of Facebook's general terms and conditions under the data protection and competition rules is a prime example of how supervisory bodies can seek novel solutions to the changing market situation (as discussed in our earlier article).
Challenge: ever evolving markets
The question is whether the ACM is really equipped to rise to the challenge. The ACM considers that one of the most difficult aspects of the supervision of technology markets is market definition. The boundaries of markets are not clear cut and evolving rapidly as a result of the speed of innovation. The development of new products and new business models has an effect on the conditions of competition: which companies compete with each other with which products and services and for which customers? It is therefore essential for a competition authority to study the sector and follow developments in order to be able to react in a timely manner to potential concerns. At the moment there is a big risk that competition authorities cannot make the assessment necessary for a finding of dominance and abuse quickly enough to avoid harm and before the markets themselves have moved on. Such risk is very real given the high standard of proof required by Dutch administrative judges when assessing the decision making practices of the ACM. There is much debate about whether competition law and particularly the prohibition on abuse of dominance can in its current format allow for effective enforcement.
Dominance not the only issue
The ACM has investigated a number of online markets including those for videos and for takeaway food. In both cases it came to the conclusion that there was no question of dominance, in the first case by YouTube, Facebook, Netflix, and Dumpert and in the second case by Thuisbezorgd.
ACM points out in its position paper that the issues are however not always dominance related. The market may be failing in other respects. Consumers may not be sufficiently informed. Platforms may not take account of the effects of their business models on society (living conditions and safety). The ACM suggests that it has a role to play in such cases, again together with other supervisory bodies. Rules on data portability may be a more effective tool to give the consumer back control of its data.and thereby tame the Titans.
Strategy of ACM: action or inaction?
The strategy which the ACM describes in its position paper is comprised of three pillars: investing in market knowledge; timely action; and cooperation with other supervisory bodies. The ACM has been reluctant to take action against online platforms to date. It has considered that the advantages to businesses and consumers outweigh the disadvantages. The question is whether the initiatives currently being taken by the ACM to increase its knowledge will lead to a change in this vision and concrete action or a justification for inaction. The numerous referrals to the need to cooperate with other supervisory authorities suggest that the ACM recognizes the limits of its "multifunctional role".