BEYOND MARKET POWER... ECONOMIC DEPENDENCY AND UNFAIR TRADING PRACTICES AS BLIND SPOTS OF COMPETITION LAW ANALYSISDR. VICTORIA DASKALOVA (GOVERNANCE & TECHNOLOGY FOR SUSTAINABILITY)WHITE & CASEBRUSSELS, 21.11.2019

§ ExploitativeToward consumers (privacy, price discrimination, quality) Toward business users (unfair trading practices, exploitative prices)

§ ExclusionaryToward rivalsToward ‘quasi-rivals’, potential rivals, ‘frenemies’ (Ezrachi and Stucke)

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CONCERNS IN DIGITAL MARKETSCONCERNS OF MARKET REGULATION? CONCERNS OF COMPETITION LAW?

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BLIND SPOTS

WHAT UNFAIR TRADING PRACTICES?IN DIGITAL MARKETS

§ ‘Unilateral and frequently unannounced changes’ § Removal (delisting) or unilateral account suspension§ Lack of transparency (especially related to search and rankings, and

special deals)§ Access to and portability of data for business users – via technology

or contractual limitations on using data gathered (e.g. customer lists; ratings)

§ Fear of commercial retaliation (e.g. deactivation)§ Lack of redress opportunities (jurisdiction, arbitration)(Inception Impact Assessment of the proposed regulation on fairness and transparency for online intermediaries)

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WHAT UNFAIR PRACTICES (ABUSES?) IN DIGITAL MARKETS?

Center for Data Innovations, a think tank, submits to the Commission: ‘Two-sided markets are not new (consider shopping centers or airports), nor are competitive supplier seller relationships (such as those in supermarkets), therefore neither is the awareness of a need for laws to punish unfair and anti-competitive behavior within them. These laws already exist. Companies that breach contracts, mislead their suppliers, or mistreat their workers risk prosecution under the applicable laws.’ Submission by Center for Data Science, p. 3., available via https://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-5222469_en

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NOTHING NEW IN DIGITAL MARKETS?

§ Algorithms§ Online consumer reviews§ The role of data§ Global companies, operating across multiple jurisdictions

§ But back to some ‘old’ issues..What is a competition law problem?What division of labor between competition law and ‘other’ laws?

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MAYBE SOME NEW ELEMENTS..

UNFAIR PRACTICES AND ECONOMIC DEPENDENCY

§ Lack of awareness§ Lack of bargaining ability

§ Lack of other options changed circumstances over time...or a perception of a lack of outside options

An overlap with the concept of ‘economic dependency’

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WHY AGREE TO AN UNFAIR TRADING PRACTICE (UTP)?OR ENTER A MARKET WHERE UTPS ARE PREVALENT..

Source of economic dependency:§ market power (by one company)§ lack of realistic alternatives (lack of competition)§ contracts§ technology§ regulation§ poor business strategy, product, etc.

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EXPLORING THE REASONS FOR LACK OF OUTSIDE OPTIONS...

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ARE UTPS PROBLEMATIC FOR COMPETITION AND EFFICIENCY?

Exclusionary Exploitative

§ Harm to individual traders§ Consolidation of power§ Efficiency?

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WHAT HARM FROM UNFAIR TRADING PRACTICES?

BLIND SPOTS? TO WHAT EXTENT DOES THE COMPETITION LAW FRAMEWORK COVER UTPS AND ECONOMIC DEPENDENCY?

§ Is the scope of the competition rules sufficient to address unfair trading practices arising in a situation of economic dependency?

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SCOPE

Economic dependency is defined from an individual trader’s perspectiveIt seeks to explain a bilateral relationship, not the conditions on the market as a whole.

Market power and economic dependency are not necessarily the same thing......But could be the same thing.

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ECONOMIC DEPENDENCY AND MARKET POWER

§ Merger control§ Article 102 (TFEU)§ Article 101(1) TFEU – vertical restraints

§ However, also some attention to market power beyond dominance thresholds

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COMPETITION LAW: A MARKET-POWER ORIENTED ANALYSIS?

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MARKET POWER AND DEPENDENCE: PARTIAL OVERLAP IN TERMS OF SCOPE

Market share above 30%,

market share above 40%,

market strength in the context of

parallel networks

Dependence, superior

bargaining power

Article 101 and the effects analysis- focus on exclusionary practicesArticle 102 and the concept of abuse- Can cover both exclusionary and exploitative but dominance is a pre-condition

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NOTION OF ANTICOMPETITIVE PRACTICE

Exclusionary Exploitative

EU competition law (Articles 101 and 102 TFEU)

Regulation on fairness transparency/consumer law/sector-specific reg.

§ To what extent is there under-enforcement? What drives enforcement?Public enforcementPrivate enforcement

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ENFORCEMENT

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ARE WE MISSING SOMETHING?

§ National legislation on stricter unilateral conduct§ EU legislation

§ EU Directive on unfair trading practices in food (April, 2019)§ EU Regulation on fairness and transparency for online intermediaries

(July, 2019)

§ Private initiatives

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SIDE-STEPPING THE COMPETITION LAW FRAMEWORK

§ Daskalova, V. I. Oneerlijke platform-to-business-handelspraktijken: oude kwesties, nieuwe regelgeving . SEW : tijdschrift voor Europees en economisch recht, 2018(12)

§ Daskalova, V.I. (2019). ‘The New Directive on Unfair Trading Practices in Food and EU Competition Law: Complementary or Divergent Normative Frameworks?’ Journal of European Competition Law & Practice, 10(5)

THANK YOU.COMMENTS AND QUESTIONS ARE WELCOME!V.I.DASKALOVA@UTWENTE.NL