{"id":76075,"date":"2016-11-15T13:39:34","date_gmt":"2016-11-15T13:39:34","guid":{"rendered":"http:\/\/mostafa.openonline.co.uk\/?guid=eab04aa8a0d0dad7b43c3705257da775"},"modified":"2016-11-15T13:39:34","modified_gmt":"2016-11-15T13:39:34","slug":"speech-michael-grenfell-on-antitrust-in-the-digital-age","status":"publish","type":"post","link":"https:\/\/mostafa.openonline.co.uk\/?p=76075","title":{"rendered":"Speech: Michael Grenfell on antitrust in the digital age"},"content":{"rendered":"<div class=\"govspeak\">\n<h2 id=\"overview\">Overview<\/h2>\n<p>The digitalisation of our economy, of our society, of our daily lives is, as we all know, having a huge effect on all aspects of human endeavour. It\u2019s surely not surprising, then, that this should include our own field of endeavour, competition or \u2018antitrust\u2019 law and policy.<\/p>\n<p>At the organisation I work for, the Competition and Markets Authority (<abbr title=\"Competition and Markets Authority\">CMA<\/abbr>), we take a keen interest in digital markets. There are various reasons for this.<\/p>\n<p>First \u2013 but perhaps not foremost \u2013 is that this is what the government has asked us to do. In its <a href=\"https:\/\/www.gov.uk\/government\/consultations\/competition-regime-competition-and-markets-authority-governments-strategic-priorities\">strategic steer<\/a> to us updated last December, the government told us that we should \u201ccontinue to focus on developments in new emerging markets, such as online digital market places and use of data \u2026 [and] \u2026 develop expertise in the impact new emerging markets are having on competition, innovation and consumer choice.\u201d<\/p>\n<p>Rather more fundamentally \u2013 and in line with this \u2013 we care about digital markets:<\/p>\n<ul>\n<li>\n<p>Because the digital sector, in and of itself, is a significant, and growing, part of the country\u2019s economy \u2013 in 2014, it accounted for \u00a3118 billion gross value added (GVA), which is 7% of total GVA across all economic activities in the UK (1).<\/p>\n<\/li>\n<li>\n<p>Because digital services underpin pretty much every other part of the economy. I\u2019ve been trying to think of an area of business activity which doesn\u2019t in some way rely on digital services. It\u2019s not easy. We all do, and usually we\u2019re fairly heavily reliant on them.<\/p>\n<\/li>\n<\/ul>\n<p>And, turning to the particular perspective of most of us in this room, a modern competition agency such as the <abbr title=\"Competition and Markets Authority\">CMA<\/abbr> is bound to be interested in digital sectors because they raise so many new, and difficult, antitrust issues. This is not to say that existing antitrust law is incapable of dealing with them \u2013 thankfully, our competition laws are based on principles that are not merely ephemeral, and can be applied to economies in various different stages of development. Rather, digitalisation raises questions about how we apply competition law to new situations. Let\u2019s take some examples.<\/p>\n<p>Market definition is a staple of competition analysis in a range of contexts: to assess dominance, to assess the impact of mergers, to judge whether an arrangement is de minimis, and so on. Digitalisation raises important questions, particularly in distribution and retail markets. Put simply: are online services in the same markets as traditional services? Should we regard online services as competitive constraints on more traditional services? And is it meaningful to see this in such \u2018binary\u2019 terms? After all, where does \u2018click-and-collect\u2019 purchasing fit in? Or e-readers sold in bookshops? Or browsing on price comparison websites but buying in-store? The reality is that consumers use a mix of traditional and digital channels even in the same single purchase.<\/p>\n<p>A second example of a tricky issue thrown up by digitalisation arises from the fact that markets can be distorted when online services, facing lower costs, \u2018free-ride\u2019 on the investments of traditional services. How should we deal with that \u2013 by allowing restrictions on online services, or by allowing the distortions of such free-riding?<\/p>\n<p>Thirdly, ownership of digital platforms gives market power which can be abused by discriminating against those dependent on the platforms \u2013 that applies whether we are talking about hard platforms (raising issues of access to electronic trading platforms, and access to operating systems such as the work-server interoperability issue in the EU Microsoft case) or \u2018soft\u2019 information bases (alleged discrimination against downstream competitors is at the heart of many of the current Google cases).<\/p>\n<p>In short, the digital economy raises a number of problems for antitrust law and policy. And they\u2019re not easy. But before we get too gloomy, it is important to remember how digitalisation can enhance competition and offer solutions that help markets work better, to the benefit of consumers. Just to take a couple of examples of this:<\/p>\n<p>First, to make a point that is obvious, but nonetheless of critical importance. In many markets, digitalisation offers a cheaper, more innovative, alternative to existing products. That is precisely what competition law and policy have always sought to achieve: choice, innovation, downward pressure on price.<\/p>\n<p>And second, and more specifically, we have in recent years seen how new digital comparison tools such as price comparison websites and apps, can stimulate competition \u2013 in our major recent market investigations into <a href=\"https:\/\/www.gov.uk\/cma-cases\/energy-market-investigation\">energy<\/a> and <a href=\"https:\/\/www.gov.uk\/cma-cases\/review-of-banking-for-small-and-medium-sized-businesses-smes-in-the-uk\">retail banking<\/a>, a key part of the remedies to the adverse effects on competition were digital: in the energy investigation price and service comparison websites, and in the retail banking investigation the proposed \u2018open banking\u2019 app interface to enable bank customers to find the best deal suitable for them. And this autumn we have launched a market study into the role <a href=\"https:\/\/www.gov.uk\/cma-cases\/digital-comparison-tools-market-study\">digital comparison tools<\/a> can play in fostering competition.<\/p>\n<h2 id=\"issue-1--collusion-and-cartel-conduct\">Issue 1 \u2013 collusion and cartel conduct<\/h2>\n<p>First, let\u2019s consider the most basic \u2013 and serious \u2013 kind of antitrust infringement is collusion between competitors to fix prices or carve up markets; cartel conduct in other words.<\/p>\n<p>It should come as no surprise that the temptation to cartelise exists in online selling as much as in traditional markets. And in case there was any doubt, our <a href=\"https:\/\/www.gov.uk\/government\/news\/cma-issues-final-decision-in-online-cartel-case\">infringement decision<\/a> concerning the online selling of posters and frames via Amazon Marketplace in August this year makes clear collusion in online selling will not be tolerated. We found that 2 sellers had agreed not to cut each other\u2019s pricing for online selling, and we imposed a fine. I should emphasise that Amazon was in no way a party to the infringement. We have followed our decision by launching, on 7 November, a programme of <a href=\"https:\/\/www.gov.uk\/government\/news\/cma-warns-online-sellers-about-price-fixing\">competition law compliance advice<\/a> to online sellers, with online marketplace providers helping to disseminate our advice.<\/p>\n<p>The case itself had another digital aspect: it was a digital device \u2013 automated repricing software \u2013 which was the tool for price coordination.<\/p>\n<p>In that case, there was clear agreement between the parties to facilitate price coordination, with communications between them that they aimed not to undercut each other\u2019s prices. But there may be cases in which, as Professor Ariel Ezrachi of Oxford University has pointed out, computing devices automatically and autonomously collude \u2013 because they \u201cdetermine independently the means to optimise profit\u201d (2), ie independently of their human programmers \u2013 and this can raise questions about key concepts relevant to the antitrust notion of an \u2018agreement\u2019 or a \u2018concerted practice\u2019, such as intentionality or a \u2018meeting of minds\u2019 or knowledge.<\/p>\n<h2 id=\"issue-2--resale-price-maintenance\">Issue 2 \u2013 resale price maintenance<\/h2>\n<p>Second, there is the question of resale price maintenance \u2013 that is, the practice where an \u2018upstream\u2019 supplier limits the freedom of downstream resellers, such as distributors or resellers, to discount. As a matter of EU law \u2013 and hence, under present arrangements, UK law \u2013 resale price maintenance is presumed to restrict competition and to infringe the prohibition on anti-competitive agreements (3). Resale price maintenance is also presumed unlikely to merit exemption from the prohibition (4).<\/p>\n<p>But there are many people who argue that resale price maintenance may, in certain circumstances, be justified by efficiencies: for example, by giving retailers an incentive to make investments which increase the demand for the product.<\/p>\n<p>Against this background, after the <abbr title=\"Competition and Markets Authority\">CMA<\/abbr>\u2019s decisions on 2 resale price maintenance cases in our first 18 months \u2013 <a href=\"https:\/\/www.gov.uk\/government\/news\/cma-issues-no-grounds-for-action-decision-in-sports-bras-investigation\">sports bras<\/a> in June 2014, where we decided that there were no grounds for action, and <a href=\"https:\/\/www.gov.uk\/government\/news\/cma-closes-hotel-online-booking-investigation\">hotel online bookings<\/a>, where we closed our investigation in September 2015 on grounds of administrative priorities \u2013 some commentators may have concluded that we are no longer interested in resale price maintenance.<\/p>\n<p>Recent developments should have dispelled this notion. We continue to be interested in resale price maintenance. We will assess each case on its merits, but some of our recent cases make clear that resale price maintenance will not be allowed online any more than it is in retail shops \u2013 in particular our 2 infringement decisions in May this year in the<a href=\"https:\/\/www.gov.uk\/government\/news\/cma-issues-bathroom-fittings-infringement-decision-and-fine\"> bathroom fittings case<\/a>, involving enforced online \u2018recommended\u2019 retail prices, and in the <a href=\"https:\/\/www.gov.uk\/government\/news\/fridge-supplier-fined-22-million-for-restricting-online-discounts\">commercial catering equipment case<\/a>, involving minimum advertised internet prices.<\/p>\n<p>And we are concerned about other means in which suppliers control resale pricing, including in online outlets, such as \u2018most favoured nation\u2019 or \u2018price parity\u2019 provisions, which are the subject of our ongoing <a href=\"https:\/\/www.gov.uk\/government\/news\/monitoring-project-launched-in-online-hotel-booking-sector\">monitoring<\/a> in relation to online travel agents and hotel bookings.<\/p>\n<h2 id=\"issue-3--online-retailers-competing-with-bricks-and-mortar-shops\">Issue 3 \u2013 online retailers competing with \u2018bricks-and-mortar\u2019 shops<\/h2>\n<p>Third, there is an aspect of online competition which raises perhaps the most challenging issues for competition decision-makers, but which is a hugely important implication of the way our economies are developing. This is the way that online retailers increasingly compete with \u2018bricks-and-mortar\u2019 shops.<\/p>\n<p>One obvious issue raised by this is market definition. Should online retailers be regarded as a competitive constraint on bricks-and-mortar shops, or as being in a separate market? That question may depend whether we block or clear a merger, whether we find dominance for the purpose of the prohibition on abuse of a dominant position, whether we see agreements as appreciably restrictive of competition.<\/p>\n<p>There is no single answer. As with all questions of market definition, it depends on the actual economic circumstances of the market at any one time. And the \u2018at any one time\u2019 qualification is important: these markets are fast-developing, and whereas in one year a critical mass of consumers might not consider buying online as a substitute for going shopping in a real physical store, that can change within just a few years (and it can be a very few years).<\/p>\n<p>So we, and other competition authorities, will answer this question without dogma or preconceptions, according to the actual evidence, case by case, and from time to time. For example, in recent UK merger cases, we have found that:<\/p>\n<ul>\n<li>\n<p>for betting shops, in 2016, the constraint from the online channel on the retail channel is not sufficiently strong for these channels to form part of the same relevant product market (5);  but<\/p>\n<\/li>\n<li>\n<p>for video games sales, in 2008 bricks-and-mortar retailers and internet selling did not constitute separate markets (6).<\/p>\n<\/li>\n<\/ul>\n<p>And, under the prohibitions, in our recent decision finding an anti-competitive agreement in advertising estate agents\u2019 services, we concluded that traditional bricks-and-mortar estate agents were a separate market and that online estate agents exercised \u201conly relatively weak competitive pressure\u201d (7).<\/p>\n<p>But, more important than market definition, is the substance of the matter. What does online retailing do for competition \u2013 and for the benefits that competition is supposed to yield: choice, innovation, better value for money?<\/p>\n<p>Most obviously \u2013 and importantly \u2013 online retailing offers real competitive choice. If we want to buy a book, or a radio, or a watch; if we want to place a bet on the horses; if we want to book a package holiday \u2013 all normal things we were doing before the internet came along \u2013 we no longer have to go to the high street or the shopping mall. We have a choice: we can go out shopping, but alternatively in the comfort of our homes we can buy, and we can shop around. So our choices are wider. And because there is more potential competitive choice, there are greater competitive pressures on price, quality, efficiency, innovation. More than that: online selling \u2013 because it does not require physical stores \u2013 is typically lower cost, which augments the downward pressure on price and the spur to efficiency. Of course, if you just buy online, you can\u2019t so easily browse or \u2018feel the quality\u2019, and you can\u2019t ask a nice shop assistant to advise you before you make your purchase. And that\u2019s the beauty of choice and competition: you can choose the low-cost option online, or the \u2018full-service\u2019 option in-store.<\/p>\n<p>But \u2013 and there is a \u2018but\u2019 \u2013 it\u2019s not clear that this situation is sustainable, and there are risks that this new entry by online retailing takes away some of the choices we value. This arises from the \u2018free-riding\u2019 problem, or I should say the alleged free-riding problem, because many commentators think it\u2019s overstated.<\/p>\n<p>We\u2019re all familiar with the phenomenon of browsing in a bookshop, finding a book that appeals (perhaps after taking advice from the shop assistant), and then going out and buying it on Amazon for a lower price. Back in 2009 there was that famous, and controversial, advert for the online electronics reseller Dixons.co.uk that appeared on railway platforms across Britain:<\/p>\n<blockquote>\n<p class=\"last-child\">Step into middle England\u2019s best loved department store \u2026 where an awfully well brought up young man will bend over backwards to find the right TV for you. Then go to Dixons.co.uk \u2013 the last place you want to go.<\/p>\n<\/blockquote>\n<p>This is what people have in mind when they talk about \u2018free-riding\u2019: the online retailer \u2013 be it Dixons.co.uk or Amazon or whoever \u2013 gets the sale, because it has lower costs as a result of not having to operate physical retail premises and employ shop assistants who give advice etc. But the consumer made the purchase only after having browsed in the bricks-and-mortar store and received the shop assistant\u2019s advice \u2013 so the online retailer has \u2018free-ridden\u2019 on the physical retailer\u2019s investment in premises and staff, while the physical retailer hasn\u2019t reaped the rewards of its investment because it has lost the sale to the online seller.<\/p>\n<p>A survey conducted in the course of the European Commission\u2019s current competition sector inquiry into e-commerce found that \u201c45% of manufacturers indicate that free-riding, whereby customers benefit from services offered by brick and mortar shops to make their choice, but then purchase the product online, is common or very common\u201d (8).<\/p>\n<p>That is clearly not sustainable. If this kind of free-riding persists, competition and consumers lose out \u2013 it becomes loss-making to provide service in stores such as the shop assistant\u2019s advice or indeed the facility to browse, stores then go out of business \u2013 we\u2019ve all heard about the decline of the high street \u2013 and the bricks-and-mortar stores, and the services which were provided to consumers and valued by consumers, are lost. Consumer choice, and the quality of the retail experience, suffer. That is not what competition policy seeks to achieve.<\/p>\n<p>In all this, there is a dilemma for competition authorities.<\/p>\n<p>On the one hand, we should facilitate competitive pressure from online sales by taking action against restrictions on online selling that protect traditional bricks-and-mortar sales channels.<\/p>\n<p>But on the other hand, as we\u2019ve seen, free-riding by online sellers on the investment made by bricks-and-mortar stores can lead to loss of consumer choice and quality. That said, competition authorities and policymakers need to take an evidence-based approach to that assertion, as to everything else we do; in any situation, we can\u2019t just accept such claims, and allow restrictions on competition, without real evidence that this is likely to happen.<\/p>\n<p>In any event, as well as the \u2018free-riding\u2019 argument, there is an argument that, unless the supplier has market power, restrictions on online selling of the same products \u2013 ie restrictions on intra-brand competition \u2013 do not matter if there is sufficient inter-brand competition (which of course won\u2019t always be the case).<\/p>\n<p>EU competition law, which has been the basis of our own competition law for many years now, has dealt with this dilemma with an uneasy compromise, reflected in the EU\u2019s vertical agreements \u2018block exemption\u2019 regulation and guidelines (9). The EU\u2019s Competition Commissioner, Margarethe Vestager, recognised this in a speech on publication of the preliminary report of the Commission\u2019s sector inquiry into e-commerce, acknowledging that \u201cpricing restrictions can help to stop physical shops from disappearing\u201d but insisting that it\u2019s important that \u201cconsumers\u2019 choice isn\u2019t unnecessarily limited\u201d (10).<\/p>\n<p>Under this compromise in EU law, in the context of agreements between suppliers and resellers, many arrangements that discriminate against online selling are strictly prohibited as being \u2018hardcore\u2019 restrictions. These include obligations on a reseller or distributor:<\/p>\n<ul>\n<li>to prevent customers in other territories viewing its website<\/li>\n<li>to terminate consumer transactions on the internet once credit card data show addresses outside the distributor\u2019s exclusive territory<\/li>\n<li>to make no online sales \u2013 this is what people call an \u2018online sales ban\u2019, which I\u2019ll talk about in a moment<\/li>\n<li>to limit the proportions of their sales that they make online<\/li>\n<li>to pay to the upstream supplier a higher price for products being resold online than for products being resold in bricks-and-mortar<\/li>\n<\/ul>\n<p>But, on the other hand, EU law provides that it is permissible for a supplier:<\/p>\n<ul>\n<li>to limit a reseller distributor from online advertising that is specifically addressed to customers in other distributors\u2019 exclusive territories<\/li>\n<li>to oblige a reseller to sell a minimum absolute amount (whether by value or volume) in bricks-and-mortar stores<\/li>\n<li>to oblige a reseller to observe certain quality standards for resale over the internet \u2013 for example, that the reseller must have one or more bricks-and-mortar shops or showrooms as a condition for being a member of selective distribution system<\/li>\n<\/ul>\n<p>I have said that online sales bans are strictly prohibited. These are provisions that prevent distributors from selling online at all, or place restrictions which have that effect. In June this year we at the <abbr title=\"Competition and Markets Authority\">CMA<\/abbr> issued a Statement of Objections in a case setting out our <a href=\"https:\/\/www.gov.uk\/government\/news\/cma-alleges-breach-of-competition-law-by-ping\">provisional finding<\/a> that a provision by a supplier of golf equipment preventing its retailers from selling its golf clubs online is an infringement of the prohibition on anti-competitive agreements. We will naturally consider all representations before reaching a final decision on this.<\/p>\n<p>These kinds of \u2018online sales bans\u2019 are to be contrasted with \u2018online platform bans\u2019, which are provisions that prevent distributors from selling through certain specified platforms (Amazon Marketplace, for example, or eBay). The European Commission and various national competition authorities see such online platform bans just as a restriction on how a product is sold, but without closing off an outlet \u2013 and therefore as not being an \u2018object\u2019 restriction, but rather one to be assessed case by case according to its effects. And the European Commission has recently said that it doesn\u2019t regard them as \u2018hardcore\u2019 restrictions which lose the benefit of the block exemption (11). By contrast, Germany\u2019s competition authority, the Bundeskartellamt, has viewed an online platform ban as likely to be an \u2018object\u2019 restriction in the running shoes case (12), but German courts have been uncertain on the point; it should be resolved in the context of a case called Coty, concerning the sale of cosmetics on Amazon, which has been the subject of a reference in April this year from a German court to the EU Court of Justice.<\/p>\n<p>How then to solve the free-riding dilemma? For businesses, there are alternative means to influence resale channels that comply more easily with competition law, such as through exclusive or selective distribution arrangements, in line with established competition law. In reality, major bricks-and-mortar retailers have mitigated the risk of online competitors free-riding on their investment by commercial strategies of themselves entering the digital market but with multi-channel propositions where consumers use both \u2013 like \u2018click-and-collect\u2019. Which I think counts as an example of competition working.<\/p>\n<h2 id=\"developing-law\">Developing law<\/h2>\n<p>Consideration of some of these issues is in flux with lively debate across the competition community worldwide.<\/p>\n<p>The <abbr title=\"Competition and Markets Authority\">CMA<\/abbr> is of course largely bound by EU precedent \u2013 by virtue of EU Regulation 1\/2003 article 3, and, in our own domestic legislation, section 60 of the Competition Act 1998.<\/p>\n<p>But, depending on the eventual arrangements on our exit from the EU, there might in future be more scope for the <abbr title=\"Competition and Markets Authority\">CMA<\/abbr> to develop policy and thinking itself, reflecting current thinking \u2013 although we need always to recognise that there are real advantages, all other things being equal, in international consistency between competition laws.<\/p>\n<h2 id=\"the-problem-of-speed\">The problem of speed<\/h2>\n<p>It is a commonplace that digital markets are fast-moving.<\/p>\n<p>Products and services that were once unthinkable become the norm.  And previously staple products become obsolete. Who now can say \u2018the cheque\u2019s been lost in the post\u2019?<\/p>\n<p>The same is true of competitive structures: only a few years ago, the technological giants were IBM, Microsoft, Yahoo. It\u2019s not only that Google has largely eclipsed Yahoo, but that we have new companies offering new services \u2013 such as Amazon, Facebook, Twitter. Who now remembers Friends Reunited?<\/p>\n<p>The implications for competition policy of fast-moving markets are hard to gauge.<\/p>\n<p>On the one hand, they might suggest that competition authorities should be hesitant about intervening in digital markets:<\/p>\n<ul>\n<li>\n<p>Apparently dominant players are quickly superseded in ever-changing dynamic markets.<\/p>\n<\/li>\n<li>\n<p>In any case, there is the reality that competition processes are necessarily painstaking and time-consuming \u2013 involving detailed reviews of voluminous evidence, protecting the procedural rights of all parties through access to the file, respect for business secrets, and so on. As a result, by the time competition authorities intervene to address the problem, it might well be too late. The markets concerned will have moved on.<\/p>\n<\/li>\n<\/ul>\n<p>But, on the other hand, a consequence of digital markets being fast-moving is that anti-competitive practices can create damaging barriers to innovation that would otherwise flourish \u2013 repressing and retarding the dynamism that can hugely benefit consumers.<\/p>\n<p>This may occur, for example, where an incumbent refuses to grant potential new entrants access to \u2018essential\u2019 platforms, or where there has been discrimination by operators of search engines against competitors in respect of the prominence of displays on the search page (an issue that has arisen in various investigations into Google), or where the arrangements underlying competition price comparison websites and other digital comparison tools limit competition either between suppliers or between the comparison tools themselves. That means that, unless competition authorities act quickly to prevent such practices, we deny consumers the potential benefits of these new and flourishing markets and are left with players with significant market power \u2013 and often also power to control information, and, indeed, the way we live (many people say that about Google and Facebook, for example, and one can see the point).<\/p>\n<p>There is no easy solution. Direct \u2018ex ante\u2019 regulation is often too blunt a tool, failing to anticipate and keep up with developments in fast-moving markets. Competition law measures \u2013 ex post \u2013 have the risks that I\u2019ve identified. But where we at the <abbr title=\"Competition and Markets Authority\">CMA<\/abbr> become aware of practices and arrangements that risk stifling new entry and innovation in these all-important sectors, and we think that there is scope for remedying them, then we will do so. I have talked about some of the measures we have taken so far \u2013 and, where speed is critical, it is open to us to use our interim measures powers, and we will do so where appropriate.<\/p>\n<h2 id=\"other-competition-law-tools\">Other competition law tools<\/h2>\n<p>I have focused so far on \u2018antitrust\u2019 prohibitions on anti-competitive agreements and abuse of dominance, in our UK Competition Act 1998 and the EU equivalents.<\/p>\n<p>But at the <abbr title=\"Competition and Markets Authority\">CMA<\/abbr> we also have other tools to help ensure that our society enjoys the full competition and consumer benefits of digital markets \u2013 including our functions to conduct market studies and investigations, our merger control role of scrutinising mergers and acquisitions for their effects on competition, our powers to enforce consumer protection laws, and what we call our \u2018advocacy\u2019 role in public debate where competition and consumer issues are at stake.<\/p>\n<p>I will say something about each of these in turn.<\/p>\n<h3 id=\"market-studies-and-investigations\">Market studies and investigations<\/h3>\n<p>Digitalisation was key to our analysis and remedies in the 2 major market investigations the <abbr title=\"Competition and Markets Authority\">CMA<\/abbr> has conducted \u2013 both into significant, but traditional and non-digital, industries: energy and retail banking.<\/p>\n<h4 id=\"energy-market-investigation\">Energy market investigation<\/h4>\n<p>We launched our energy market investigation in the earliest days of the <abbr title=\"Competition and Markets Authority\">CMA<\/abbr> acquiring its functions, and issued our <a href=\"https:\/\/www.gov.uk\/cma-cases\/energy-market-investigation#final-report\">final report<\/a> and conclusions in June this year.<\/p>\n<p>We regarded this work as central to our mission to promote competition for the protection of consumers. In the poorest households in the country, household spending on gas and electricity represents 10% of overall spending. And in the decade to 2014, domestic energy prices rose 75% in real terms.<\/p>\n<p>Our investigation found low levels of \u2018shopping around\u2019 between energy suppliers. If consumers don\u2019t shop around much, that weakens competitive pressures, to the detriment of consumers.<\/p>\n<p>Digitalisation was highly relevant to the investigation\u2019s analysis: for example, the planned roll-out of smart meters by 2020 can improve customer engagement, making people more aware of their energy costs and so perhaps more willing to shop around.<\/p>\n<p>Digitalisation was also essential to the remedies \u2013 ie the measures that the investigation concluded were necessary to remedy the adverse effects on competition that had been found in the way the market operates. These remedies included: the establishment of a database of customers who have been on the standard tariff for at least 3 years, accessible to competing suppliers, coupled with an enhanced role for \u2018brokers\u2019 in the energy market, removing restrictions on their access to data.<\/p>\n<h4 id=\"retail-banking-market-investigation\">Retail banking market investigation<\/h4>\n<p>In August, we published the <a href=\"https:\/\/www.gov.uk\/cma-cases\/review-of-banking-for-small-and-medium-sized-businesses-smes-in-the-uk#final-report\">final report<\/a> and conclusions of our other major market investigation \u2013 into the supply of retail banking services to personal customers and to small and medium-sized enterprises.<\/p>\n<p>This investigation also found the market to be characterised by low levels of shopping around \u2013 in any year, only 3% of personal customers and 4% of business customers switch their bank.<\/p>\n<p>As with energy, so with retail banking: digitalisation was highly relevant both to the analysis and the remedies proposed in the investigation.<\/p>\n<p>For example, in respect of the analysis, careful consideration was given to the extent to which digitalised bank services \u2013 online and mobile banking \u2013 reduces the need for competitors to have extensive bricks-and-mortar branch networks, which had traditionally been viewed as a significant barrier to entry and expansion. As for remedies, digital services were at their core, by way of the \u2018open banking\u2019 remedy: an \u2018application programming interface\u2019 standard through which banks are to be required to allow their customers to share their own bank data securely with competing banks using an open banking standard &#8211; to help customers find better-value services, and to enable new entrants and small providers to compete on a more level playing field. The idea is that, with open banking, apps can provide customers, on the basis of transactional information, with details of the current account that suits them best while authorised brokers and price comparison websites will have access to such information through the open banking interface.<\/p>\n<h4 id=\"digital-comparison-tools-market-study\">Digital comparison tools market study<\/h4>\n<p>Price comparison websites \u2013 which are perhaps better described as \u2018digital comparison tools\u2019 (<abbr title=\"digital comparison tools\">DCTs<\/abbr>) because they relate to service quality as well as price \u2013 were also key to remedies proposed in the <abbr title=\"Competition and Markets Authority\">CMA<\/abbr>\u2019s market investigation report on <a href=\"https:\/\/www.gov.uk\/cma-cases\/payday-lending-market-investigation\">payday loans<\/a>, published in February 2015. Our current <a href=\"https:\/\/www.gov.uk\/cma-cases\/legal-services-market-study\">legal services market study<\/a> is considering increased use of digital comparison tools to enable customers to compare offerings by providers of legal services.<\/p>\n<p>Such tools are of potentially huge benefit to competition and to consumers. They make it easier for people to shop around between suppliers of goods and services, and to make informed choices. Because of this, suppliers need to be ever more competitive on price and quality if they are to thrive. In short, they sharpen competitive pressures, which is normally very much in the interest of consumers.<\/p>\n<p>But these digital solutions to encourage switching can create problems. By way of example, concerns about \u2018most favoured nation\u2019 provisions, under which a supplier agrees with a price comparison website that it will not make its products available more cheaply on other online platforms, were a feature of our market investigation into <a href=\"https:\/\/www.gov.uk\/cma-cases\/private-motor-insurance-market-investigation\">private motor insurance<\/a> on which we published our report in March 2015, and of our work, and the work of other competition authorities, concerning <a href=\"https:\/\/www.gov.uk\/cma-cases\/hotel-online-booking-sector-investigation\">hotel online booking<\/a>.<\/p>\n<p>In September, we launched a wholly new market study which is entirely focused on <a href=\"https:\/\/www.gov.uk\/cma-cases\/digital-comparison-tools-market-study\">digital comparison tools<\/a> including price comparison websites. This recognises the huge benefits that digital comparison tools can bring for the competitive process and for consumers, but will examine concerns that have been expressed that they could work even more effectively, including (among other issues) about whether consumers would benefit from being made more aware of how <abbr title=\"digital comparison tools\">DCTs<\/abbr> earn money, and about whether arrangements between <abbr title=\"digital comparison tools\">DCTs<\/abbr> and the suppliers that sell through them might restrict competition.<\/p>\n<h3 id=\"merger-control\">Merger control<\/h3>\n<p>We have already seen how, in assessing whether a merger might substantially lessen competition, a key factor in many sectors is the extent to which digital services act as a competitive constraint on traditional services.<\/p>\n<p>But I also want to mention another issue, which arises from the way that digital companies are so fast-growing. The issue is whether merger control regimes are able to capture many potentially anti-competitive mergers and acquisitions in digital sectors.<\/p>\n<p>This arises particularly in merger control regimes which rely purely on turnover-based jurisdictional thresholds \u2013 which is not true of the UK domestic merger control regime, but is true for those mergers affecting UK markets that are subject to the exclusive competence of the European Commission under the EU Merger Regulation (currently at least).<\/p>\n<p>The risk is where major tech companies, like Google or Facebook, acquire innovative, emerging companies with currently quite low turnover but which are the in the midst of, or have the potential for, rapid growth. In those circumstances, the acquisition may not come within the jurisdiction of the merger control regime \u2013 because the target\u2019s turnover is too low \u2013 but it is potentially a matter of concern that it should escape merger control scrutiny where, as often happens in digital sectors, the target is liable to grow quickly and the acquisition thus stymies the competitive challenge from an independent new entrant.<\/p>\n<p>In October the European Commission began a public consultation on whether to address this by revising its jurisdictional thresholds for digital mergers, so as to involve a criterion based on transaction value (13).<\/p>\n<h3 id=\"consumer-protection\">Consumer protection<\/h3>\n<p>The enforcement of consumer protection laws is one aspect of the <abbr title=\"Competition and Markets Authority\">CMA<\/abbr>\u2019s work (and indeed of my portfolio) that is \u2018off the radar screen\u2019 for most competition lawyers! (I know \u2013 I was one.)<\/p>\n<p>The <abbr title=\"Competition and Markets Authority\">CMA<\/abbr> is just one of a number of consumer enforcement agencies in the UK under the new \u2018consumer landscape\u2019 in place since 2013\/14, along with local authorities\u2019 trading standards services, the National Trading Standards Board, Citizens Advice, and so on.<\/p>\n<p>In this new landscape, the remit of the <abbr title=\"Competition and Markets Authority\">CMA<\/abbr>, in particular, is to use consumer protection to support competition. The government, when setting out its plans for the new landscape, said that the <abbr title=\"Competition and Markets Authority\">CMA<\/abbr> should \u201cretain consumer enforcement powers as remedies for use in markets where competition is not working appropriately due to practices and market conditions that make it difficult for consumers to exercise choice\u201d (14).<\/p>\n<p>A key aspect of this has been our work on <a href=\"https:\/\/www.gov.uk\/government\/collections\/online-reviews-and-endorsements-information-for-businesses\">online reviews and endorsements<\/a>, in which we have secured public commitments from providers to prevent online reviews being misleading \u2013 eg through (i) fake positive reviews, (ii) suppression of negative or critical reviews, or (iii) undisclosed paid-for advertising that is indistinguishable from genuine reviews or endorsements.<\/p>\n<p>Online reviews are a fantastic tool for consumers to exercise informed choice, and therefore sharpen and stimulate competitive pressures.<\/p>\n<p>But that only works if they are honest, and consumers can rely on them.<\/p>\n<p>Our work was designed to ensure this by rooting out \u2013 and deterring \u2013 dishonest and misleading practices.<\/p>\n<p>Our work was critical to the effectiveness of this major digital stimulus to competition and to markets working better. And much of our other recent consumer protection work has been in digital markets: children\u2019s online games, cloud storage, online car hire bookings, online purchases of tickets for events, online gambling.<\/p>\n<h3 id=\"advocacy-in-public-debate\">Advocacy in public debate<\/h3>\n<p>A classic example of digital technologies challenging traditional service suppliers is in \u2018private hire vehicle\u2019 services \u2013 what you and I know as taxi and minicab services.<\/p>\n<p>Companies such as Uber relying on mobile apps to serve customers obviously present a competitive challenge to traditional regulated taxi services.<\/p>\n<p>A lack of regulation potentially has adverse effects for consumer protection, eg passenger safety.<\/p>\n<p>Public authorities worldwide have been uncertain how to draw the balance.<\/p>\n<p>In late 2015, Transport for London (<abbr title=\"Transport for London\">TfL<\/abbr>) consulted on proposed new regulations designed to protect consumer interests from exploitation, but which would also have made much harder new entrance like Uber to compete.<\/p>\n<p>We very publicly <a href=\"https:\/\/www.gov.uk\/government\/publications\/cmas-response-to-tfls-private-hire-regulations-proposals\">responded<\/a> in December 2015 saying:<\/p>\n<blockquote>\n<p class=\"last-child\">We recognise that private hire vehicle passengers need the protection of appropriate regulation. But consumers also benefit from effective competition exerting downward pressure on prices and upward pressure on service quality and standards. Clearly there is a balance to be struck, but the general principle is usually that, in the interest of consumers, competition should only be compromised or restricted by regulatory rules to the extent that doing so is necessary for consumer protection. We are concerned that some of the proposals on which <abbr title=\"Transport for London\">TfL<\/abbr> is consulting would go significantly beyond this, it would impose regulation that excessively and unnecessarily weakens competition, to the overall detriment of users of taxi and private hire services in London.<\/p>\n<\/blockquote>\n<p><abbr title=\"Transport for London\">TfL<\/abbr> significantly scaled back its proposals \u2013 leaving London as one of the world\u2019s major capital cities most open to digital competition in taxi and minicab services.<\/p>\n<p>Similar challenges are arising in other cities, and we are responding appropriately, most recently, in September, in relation to the city of <a href=\"https:\/\/www.gov.uk\/government\/publications\/taxi-and-private-hire-regulation-cma-letter-to-city-of-sheffield\">Sheffield<\/a>.<\/p>\n<h2 id=\"some-conclusions\">Some conclusions<\/h2>\n<p>Digitalisation is here, whether we like it or not.<\/p>\n<p>We do like it, on the whole. Digitalisation can bring huge benefits, including in offering greater choice, innovation, spurs to efficiency and downward pressure on price \u2013 exactly the kinds of objective that competition policy seeks.<\/p>\n<p>It is growing, and no antitrust authority can ignore it. Indeed we use digital tools in our own work \u2013 in evidence and intelligence gathering; in monitoring social media, for example to hear about consumer experiences of an issue that we have identified as being of potential concern; and in communicating our work through social media, complementing more traditional channels such as press releases.<\/p>\n<p>Digitalisation presents real challenges \u2013 eg on market definition \u2013 and real potential problems, about the balance between allowing online competition and avoiding free-riding, operators of \u2018essential\u2019 digital platforms abusing market power to squeeze out competition, etc.<\/p>\n<p>But it also offers real opportunities \u2013 challenging existing structures, sharpening competitive pressures and offering new increased and innovative choice.<\/p>\n<p>The opportunities are there for the taking. The challenge for competition authorities is to help society make the most of them.<\/p>\n<h3 id=\"footnotes\">Footnotes<\/h3>\n<ol>\n<li>House of Commons Library Briefing Paper CBP 7610, Digital economy: statistics and policy, 2 June 2016, p3.<\/li>\n<li>Ariel Ezrachi and Maurice E. Stucke, \u2018Artificial intelligence and collusion: when computers inhibit competition\u2019, The University of Oxford Centre for Competition Law and Policy Working Paper CCLP (L) 40, April 2016.<\/li>\n<li>European Commission Notice \u2013 Guidelines on vertical restraints (2010\/C130\/01), May 2010, paragraph 2.<\/li>\n<li>EU guidelines on vertical agreements paragraph 3.<\/li>\n<li>\n<abbr title=\"Competition and Markets Authority\">CMA<\/abbr>, <a href=\"https:\/\/www.gov.uk\/cma-cases\/ladbrokes-coral-group-merger-inquiry#final-report\">A report on the anticipated merger between<br \/>\nLadbrokes plc and certain businesses of<br \/>\nGala Coral Group Limited<\/a>, 26 July 2016.<\/li>\n<li>Competition Commission, <a href=\"https:\/\/www.gov.uk\/cma-cases\/game-group-plc-game-station-ltd-merger-inquiry-cc\">A report on the completed acquisition by Game Group PLC of Games Station Limited<\/a>, January 2008.<\/li>\n<li>\n<a href=\"https:\/\/www.gov.uk\/cma-cases\/investigation-into-property-sales-and-lettings-and-their-advertising\">Three Counties<\/a>, Case CE\/9827\/13, May 2015, Annex C, paragraph 23.<\/li>\n<li>European Commission staff working document, \u2018Preliminary report on the e-commerce sector inquiry\u2019, 15 September 2016, paragraph 286.<\/li>\n<li>Paragraphs 52 to 54 of the guidelines (European Commission Notice \u2013 Guidelines on vertical restraints (2010\/C130\/01), May 2010).<\/li>\n<li>Speech by Margarethe Vestager, \u2018Competition and the digital single market\u2019, Forum for EU-US Legal-Economic Affairs, Paris, 15 September 2016.<\/li>\n<li>European Commission staff working document, \u2018Preliminary report on the e-commerce sector inquiry\u2019, 15 September 2016, paragraph 472.<\/li>\n<li>ASICS running shoes: Unlawful restrictions of online sales of ASICS running shoes, Bundeskartellamt (Germany), August 2015.<\/li>\n<li>European Commission DG COMP, Consultation on Evaluation of procedural and jurisdictional aspects of EU merger control, 7 October 2016.<\/li>\n<li>Department for Business, Innovation and Skills, Empowering and protecting consumers, April 2012, paragraph 57.<\/li>\n<\/ol>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Lecture given by Michael Grenfell, CMA Executive Director \u2013 Enforcement, at the Competition Law Forum.<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"_links":{"self":[{"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/76075"}],"collection":[{"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=76075"}],"version-history":[{"count":0,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/76075\/revisions"}],"wp:attachment":[{"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=76075"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=76075"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mostafa.openonline.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=76075"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}