Article by Ivelin Kirchev, Head of Law, Patents and Compliance at Bayer, Country Group Romania, Bulgaria & Moldova
Policy makers and competition authorities pay special attention to Big Data and other digital topics in keeping pace with the development of real economy. Competition authorities have increased determination to address the competitive effects of companies’ activities in collecting and using data (including pushing the boundaries between competition law and data protection law in specific cases).
I. Big Data
Big Data is defined by the so called 4 “Vs” – Volume, Velocity, Variety, Veracity. It is also defined as the ability to collect and analyse a large volume of data which contains a variety of information in a timely manner[1], although competition authorities refrain from defining Big Data. There can be a number of gains from data-driven innovation, mainly in creating value for consumers and society.
1.1. Big Data and relevant markets
Digital markets are often characterised by multi-sided features that make market definition considerably complex, in particular as a result of the many different players involved that may take multiple roles, as well as the complex relations that link them. In order to identify a multi-side market, it is not enough to look for monetary transactions; it is equally important to search for any data flows that may be observed in the market.[2]
1.2. Big Data and market power
Market power is difficult to assess when companies provide zero-price services to consumers in exchange for data, in which case the degree of market power may be underestimated, or even ignored, by enforcers[3]. Even if products are free, the possession of Big Data might be an important source of market power, especially when the data can be used as a barrier to entry[4].
When facing digital markets, it can be observed that there are ‘winner takes all’ outcomes as companies compete for the market instead of competing in the market[5]. Market power is dependent on the availability of the data and the scale/scope of data.
1.3. Big Data and market transparency
The increasing collection and use of digital data is often associated with greater online market transparency. On the one hand: consumers may benefit from greater market transparency if it allows them to compare more easily prices or characteristics of competing goods or services. On the other hand: availability of data can distort competition by increasing market transparency. Market transparency can enhance the stability of a (tacit or explicit) collusion.
1.4. Big Data and anticompetitive conduct
There are a number of examples where Big Data could lead to anticompetitive conduct:
- Exclusionary conduct, i.e. refusal to give access if the data is an “essential facility”, or discriminatory access, or entering into exclusive contracts with customers, or tied sales etc.
- Price discrimination – setting different prices based on the purchasing abilities of customers.
- Merger control – mainly related to the ability of rivals to replicate datasets.
1.5. Big Data and privacy policies
In circumstances where privacy violations by companies take place through the exercise of market power, it has been argued that there may be a legitimate justification for competition authorities to address privacy as a competition concern[6].
II. E-commerce[7]
Sector inquiry by the European Commission[8]. The EU Commission launched the inquiry on 6 May 2015 as part of the Digital Single Market strategy[9]. Sector inquiry covered digital content and consumer goods in different product categories. Preliminary Report was published in 2016, and the final report[10] in May 2017.
Competition concerns of the Commission as a result of the inquiry:
- Selective distribution systems: There has been an increase in selective distribution systems over the last years. According to the Commission, the use of certain clauses in selective distribution agreements may go beyond what is necessary to achieve the goals of selective distribution. The Commission mentions the requirement for retailers to operate at least one brick and mortar shop in certain cases as an example.
- Restrictions on cross border sales: 12 % of retailers reported that they have contractual cross-border sales restrictions in at least one of their product categories. These restrictions require them to use geo-blocking[11] and limits their ability to serve customers in other member states. Geo-blocking measures based on unilateral decisions by non-dominant companies fall outside the scope of Article 101 TFEU, whereas geo-blocking measures based on agreements or concerted practices between distinct undertakings may be caught under Article 101 TFEU.
- Restrictions on the use of online marketplaces: 18 % of retailers reported to have marketplace restrictions in their agreements with their suppliers. According to the Commission, the findings do not show that marketplace bans would generally amount to a de facto prohibition to sell online[12]. The Commission believes that the differences between Member States, product categories and sizes of retailers confirm that the potential impact of marketplace restrictions on competition needs to be assessed on a case-by-case basis.
- Restrictions on the use of price comparison tools: 9 % of retailers reported that they have agreements with manufacturers which contain some form of restriction in their ability to use price comparison tools. According to the Commission, absolute price comparison tool restrictions, i.e. restrictions which are not linked to quality criteria may exclude an effective method for retailers to generate traffic to their website.
- Pricing restrictions (Resale price maintenance): Pricing restrictions/recommendations are by far the most widespread restrictions reported by retailers. There is also an increased use of pricing software.
- Digital content copyright licensing agreements: Concerns mainly related to the availability of the relevant rights and their scope.
III. Takeaways
Given the importance of Big Data, E-commerce and other digital topics for todays’ business, it could be observed that those topics bring a number of competition law concerns. Some of them place challenges both to business and regulators alike and it will take time for all stakeholders to accommodate to the specifics of the digital world while working towards innovative solutions.
[1] Boutin, Xavier and Clemens, Georg, Defining ‘Big Data’ in Antitrust (March 21, 2017). Comptition Policy International: Antitrust Chronicle 2017, Summer 2017, Volume 1, Number 2, pp.22-28.. Available at SSRN: https://ssrn.com/abstract=2938397 or http://dx.doi.org/10.2139/ssrn.2938397
[2] OECD, Big Data: Bringing Competition Policy to the Digital Era, DAF/COMP(2016)14, 2016, p. 15
[3] Ibid., p. 16
[4] See for example DoJ blocking the merger of Bazaarvoice and Power-Reviews in 2014 or the German Cartel Office investigation into Facebook’s potential abuse of dominance with regards to its terms of use.
[5] OECD, Big Data: Bringing Competition Policy to the Digital Era, DAF/COMP(2016)14, 2016, p. 17
[6] See the German Federal Cartel Office case against Facebook for possible abuse of a dominant position by providing unfair terms and conditions to customers.
[7] E-commerce could be defined as electronic commerce of goods and services, including digital content.
[8] http://ec.europa.eu/competition/antitrust/sector_inquiries_e_commerce.html
[9] https://ec.europa.eu/commission/priorities/digital-single-market_en
[10] http://ec.europa.eu/competition/antitrust/sector_inquiry_final_report_en.pdf
[11] See also Issues Paper on Geo-Blocking: http://ec.europa.eu/competition/antitrust/ecommerce_swd_en.pdf
[12] See also ECJ case C-230/16 “Coty” on the issue of marketplace restrictions: In Case C-230/16 Coty Germany GmbH v Parfümerie Akzente GmbH (‘Coty Germany’), the Higher Regional Court of Frankfurt am Main has essentially asked the Court of Justice whether a ban on using third party platforms in a selective distribution agreement may be compatible with Article 101(1) TFEU and whether such a restriction constitutes a hardcore restriction within the meaning of Article 4(b) and/or Article 4(c) of the Vertical Agreements Block Exemption Regulation. In circumstances such as those at issue in the main proceedings, the prohibition imposed on the members of a selective distribution system for luxury goods, which operate as distributors at the retail level of trade, of making use, in a discernible manner, of third-party undertakings for internet sales does not constitute a restriction of customers, within the meaning of Article 4(b) of that regulation, or a restriction of passive sales to end users, within the meaning of Article 4(c) of that regulation.
