Political pressure builds for reform of EU competition policy

Governments and regulators are actively considering how competition policy should respond to the growth of the digital economy. A forthcoming report from the European Parliament provides an insight into the state of the debate in Brussels.

Across the world, companies in the digital economy are experiencing many new policy initiatives aimed at bringing them it into existing regulatory frameworks. Ranging from the modernisation of consumer protection rules, taxation, data privacy and the monitoring of online content, these new regulatory approaches touch upon almost all aspects of the digital economy. However, one area which has not changed significantly has been competition policy, and how long established legal and economic principles developed for the offline world are applied in the online world.

This is starting to change, with competition policy for the digital economy becoming an increasingly prominent issue for policymakers.

European Commission initiatives

The high profile nature of the Juncker Commission’s competition enforcement programme has been well documented, with high profile antitrust rulings against Google, initial investigations against Amazon, and countless merger control cases led by the charismatic European Competition Commissioner Margrethe Vestager. Reflections on the back of these cases have centred around a clear question: how and to what extent should EU competition rules be revised to reflect the realities of the digital economy? 

While these cases have led to discussions on the need to reform competition policy, to date most of this work has gone on behind closed doors in the European Commission. This is largely because the work being carried out is preparatory, as any revision of competition policy will need to be proposed and implemented by the next European Commission, which will be installed in autumn 2019.

The main area of work was kicked off in March 2018 by Commissioner Vestager announcing the appointment of three special advisors to examine “the future challenges of digitisation for competition policy”. In order to support the European Commission’s evaluation of its approach, these advisers were tasked to deliver a report in March 2019 with recommendations on how policy could be changed. Ahead of this deadline, the Commission will host a public conference in January 2019 to allow stakeholders to discuss three main topics:

• Competition, Data and Artificial Intelligence
• Digital Platforms' Market Power
• Preserving Digital Innovation

The speakers for this conference come from the law, economics and academia, but there is little insight into the political drivers for changes to competition policy. Given that 2019 is an EU election year and the new European Commissioners will have to go through confirmation hearings in the European Parliament, the political agenda is particularly important when considering the priorities for any new approach to competition policy.

Concerns being raised in the European Parliament

To get a clearer picture of the key political concerns around competition rules, we can turn to a little-known annual report produced by the European Parliament, which gives an indication of the main concerns amongst MEPs. This own initiative report is the Parliament’s response to the European Commission’s own annual report on competition policy. This non-legislative report and does not oblige the European Commission to act, but it does serve as a feedback mechanism on the issues troubling MEPs and their constituents.

The report is drafted by the Economic and Monetary Affairs (ECON) Committee, before going to a vote of the full Parliament in a plenary session.  It is notable that the report’s  Rapporteur Michel Reimon MEP (Greens/EFA, Austria) and other MEPs have tabled a number of amendments to the report relating to how competition policy should develop. Specifically, these amendments call for:

• Co-decision powers for the European Parliament in competition policy.
• Policy frameworks for the algorithm and data driven economy to account for potential cartel activity.
• Consideration of data as a proxy for market power in antitrust investigations.
• Thresholds for merger investigations to include the number of users impacted by a merger.
• Theory of harm principles to include non-price centric approaches such as impacts on users’ privacy.
• The European Commission to report in its next annual report on competition policy on the use of pricing caps by platforms.

Some of these proposals are seeking to raise an issue rather than make practical suggestions, but they nonetheless serve as a useful guide to the debates going on in Brussels. The report will be adopted by the European Parliament ahead of the European Commission’s conference in January, and it will be interesting to see how much these issues highlighted by MEPs inform the debate at the event and discussions in confirmation hearings later in 2019.

Action is likely, but the direction remains uncertain

It is clear that political momentum is building towards a new approach to regulating competition in digital markets, but there is still no consensus between politicians, economists, lawyers and academics about what this new approach should be. While competition policy often develops slowly, it is likely that any new approach that is adopted in the EU will have a significant impact for large digital businesses and those which aspire to be large.

At EU level, as the implementation of any changes to competition policy will take place after the EU elections in 2019, three key political factors that will inform any new approach to competition policy:

• Who will be the next European Competition Commissioner? Will Commissioner Vestager get a second term or will her successor take the same approach with the digital economy?
• What will be the outcome of the next European elections? Will there be a strong mandate for more ‘Europe’ and a powerful Commission or an increase in conservative sentiments and Euroscepticism?
• How will competition policy develop in other key markets? Will third party countries such as the USA (and the UK after Brexit) use potential trade barriers as disincentives against a more ambitious EU competition policy in the digital economy?

If you would like to be kept informed of developments in EU competition policy and how the answers to these questions will start to emerge, then please get in touch.