WEBINAR #3: DIGITAL: WHAT REGULATORY MODEL FOR PLATFORMS?

11th New Frontiers of Antitrust Conference

WEBINAR #3: DIGITAL: WHAT REGULATORY MODEL FOR
PLATFORMS?

5 November 2020 – 16:00 CET

Nicolas Petit:

Thank you very much, Edouard, and good afternoon to everyone here. We are very pleased to
be here. Let me say a few words about the process that led to the organisation of this conference
today and some words about the panellists before we move on to the discussion. So, when we
prepared the conference last year in Paris, on the 19th of November with Professor Laurence
Idot, Frédéric Jenny, Nicolas, the coronavirus crisis was very distant and almost inexistence.
Hence, the working title we had was something like, what regulatory model for platforms? And
our intuition was the European Commission and other agencies would still be making their
minds by the time of the conference on whether to adopt regulation or reform the antitrust. And
if regulation was the way to go, what kind of model should be followed? Something like
customer protection, natural monopoly regulation, or supply retail type of regulation. And so,
we expected the conference to contribute to the thinking on these issues.

Now, fast forward to today, in the agency world, these questions seem to have reached a level
of uncertainty. And at very fast speeds, agency who had been working on cases in the preceding
years, appear quite certain to want a reformed antitrust or new regulation for digital industries.
And many of these agencies are seeming to converge on a model of targeted regulation where
there the symmetric regulation on platforms denominated as gatekeeper, systemic firms, or “too
big to care” businesses. And there's a sense today that some form of new regulation is inevitable,
and agencies mostly are toiling with operationalisation questions.

What's left to discuss on a panel of this kind, today? This is the hard question for us. And, as I
often like to say, if there's uncertainty in some areas in the community, it's open to question in
general. Where there are any ideas mature enough to be taken for granted. So, there is indeed a
discussion to have if I need to revalidate what we believe in. Also, many courts today are still
yet to deal with the antitrust cases that were started by the agencies and their voice has not, for
some of them, have been heard. Besides, the models of regulation and antitrust reform that are
pushed forwards in various member states are not entirely similar. There is also competition in
that space and these differences are instinct to investigate.

And last but not least, agencies and regulators have not always expressed fairly clearly what
they really want to achieve beyond the sort of formulaic statement that we want to promote
competition in digital industries. Few days ago, Mark Scott, a journalist with Politico, wrote “if
regulators and lawmakers really want to reinvent the business model for the internet, one not
fuelled by personal information and an industry not dominated by a few global giants, someone

Webinar #3 Digital: What regulatory model for platforms?
Concurrences 11th New Frontiers of Antitrust - 5 November 2020
Verbatim transcript of oral presentations provided by Concurrences without prior vetting by the speakers. The
views and opinions expressed in this Document do not necessarily represent those of the speakers’ institution or
clients.

needs to spell out what this alternative might be”. Saying that market failures exist is the first
step. But devising and promoting an alternative model is another one. And we're still in
uncertainty here.

So, to help us discuss these issues and gain clarity on the means and purposes of this exercise,
we are joined today by Isabelle de Silva, first, who is “Présidente de l’Autorité de la
concurrence” in Paris. Andreas Mundt, Chairman of the Bundeskartellamt. Simeon Thornton,
Director at the UK CMA, Séverine Schramek, Partner with Cleary Gottlieb, Paris. And Antoine
Chapsal Managing Principal at Analysis Group. Their full biography is available in
Concurrences website. And in the interest of starting the discussion and kicking off, I will direct
you to their curriculums that are available online.

Now, what is going to happen is the following, we'll have a discussion for about an hour, and
we will move along with four main questions. And then that will be 25 minutes also for the
Q&A with the audience. So, the four questions will be dealt with as we go. And so, to start, the
first question that we decided we would ask the panellists, is the following. The question is, if
existing antitrust is insufficient, do we really need to replace it with regulation? And why don't
we just start by improving existing antitrust tools? Isabelle will go first followed by Andreas,
Antoine and Simeon. Isabelle, always an honour to be with you on a panel. You have the floor.

Isabelle de Silva:

Merci Nicolas, merci à tous, je suis ravie d’avoir cette occasion de partager avec vous mes
réflexions et bravo à la revue Concurrences de maintenir l’usage du français pour cette
conférence, qui traditionnellement se réunit à Paris. La question que vient de poser Nicolas me
parait très bonne : y-a-t-il en réalité un choix entre d’une part rénover des outils du droit de la
concurrence et d’autre part considérer la nécessité d’une réglementation des plateformes. Je
crois vraiment qu’aujourd’hui les deux chantiers sont engagés en parallèle. Je crois que
l’amélioration des outils du droit de la concurrence fait l’objet d’un constat partagé par tous, à
l’heure où on se demande quels nouveaux outils règlementaires pourraient être adoptés,
notamment par la Commission européenne, mais aussi dans plusieurs pays de l’Union
européenne et au-delà.

Il est intéressant de se rappeler quelle est la part spécifique du droit de la concurrence, qu’est
ce qui fait son avantage et quels sont peut-être ces inconvénients, ou les points sur lesquels il
peut être amélioré. Cela me parait utile de rappeler en quoi le droit de la concurrence est bien
adapté, de façon générale, mais aussi pour traiter les enjeux numériques. D’abord, un premier
point est que le droit de la concurrence s’applique en fonction d’un marché, et donc il n’y a pas
tout le débat que nous avons dans d’autres domaines de réglementation des plateformes sur le
pays d’origine, puisque là où un acteur de type plateforme est actif sur un marché, le droit de la
concurrence pourra intervenir.

Un deuxième atout très fort du droit de la concurrence tel qu’il est pratiqué en France et en
Europe, est qu’il ne connait pas de barrières sectorielles. Il est d’application extrêmement large.
En France, la seule limite serait peut-être l’exercice des prérogatives de puissance publique par

Webinar #3 Digital: What regulatory model for platforms?
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views and opinions expressed in this Document do not necessarily represent those of the speakers’ institution or
clients.

l’Etat ou par des organismes publics, mais sinon, quel que soit le secteur il peut intervenir. Or,
on voit bien que l’une des difficultés de l’économie numérique c’est qu’elle remet en cause
beaucoup de barrières sectorielles. Donc c’est un atout qu’il faut conserver.

Enfin, troisième avantage, nous avons aujourd’hui une boîte à outils très vaste, avec des
remèdes comportementaux, des procédures d’engagement, des procédures de sanction, des
remèdes qui peuvent être structurels et aussi un atout capital l’intervention rapide par les
mesures conservatoires. Le dernier avantage qui me parait nécessaire à mettre en avant est ce
réseau intégré qui fonctionne en Europe, avec cette articulation entre le niveau national et le
niveau européen.

Je crois pour autant que la rénovation du droit de la concurrence est indispensable et elle est
déjà largement engagée. Quelques exemples, tout d’abord, l’adoption de la directive ECN+, qui
date de l’année dernière avec du point de vue français un atout qui nous sera donné très vite,
qui sera la possibilité de s’autosaisir, en mesures conservatoires, ce qui n’était pas possible
jusqu’à présent et ce qui est extrêmement utile, notamment pour répondre à des problématiques
de plateformes et, par ailleurs, la possibilité qui sera désormais clarifiée d’adresser des
injonctions structurelles, en cas d’infraction au droit de la concurrence.

Donc il s’agit d’un outil relativement récent, puisque nous sommes en train de discuter au
Parlement français de la transposition de cette directive, qui va devenir une réalité concrète
dans les toutes prochaines semaines. D’autres chantiers ont été engagés et doivent être
poursuivis. Tout d’abord un usage plus large des mesures conservatoires, c’était déjà le cas
assez largement en France mais la Commission européenne, par exemple, a emboité le pas et a
montré par une action très volontaire à cet égard qu’elle entendait maintenant utiliser beaucoup
plus que par le passé cet outil, que sont les mesures conservatoires.

Finalement, face à ce tableau, il y a encore des progrès à faire, je crois d’abord que la durée des
procédures reste un point sur lequel toutes les autorités doivent progresser, que ce soit au niveau
national ou en Europe, cela a été dit mille fois, des procédures qui durent des années, c’est
évidemment trop long. Il faut aller à un rythme beaucoup resserré. Cela concerne aussi les
tribunaux, qui doivent également faire en sorte que les décisions sur les recours interviennent
plus rapidement. On connait, par exemple, ces trois cas très importants de la Commission,
Google Shopping, Google Android et Google AdSense, pour lesquels nous n’avons pas encore
la réponse.

Finalement, est-ce qu’une régulation est nécessaire ? Beaucoup d’intervenants dans le débat
considèrent qu’aujourd’hui c’est mettre la charrue avant les bœufs ou adresser une mauvaise
réponse que de considérer des réglementations comme celles qui sont débattues en Europe,
plutôt que de conserver le droit de la concurrence, tel que nous le connaissons. Dans ma vision
des choses, je crois vraiment qu’il faut chercher une complémentarité, la réglementation ex-
ante, par exemple, n’est pas une alternative ou une critique en soi du droit de la concurrence tel
qu’il existe, ce qu’il faut rechercher c’est l’effectivité. Et on voit bien avec le débat sur le Digital
Services Act ou Digital Markets Act que ce que l’on recherche, ce sont finalement des choses
complémentaires à ce qu’on peut faire par les outils du droit de la concurrence.

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views and opinions expressed in this Document do not necessarily represent those of the speakers’ institution or
clients.

Pour donner une illustration d’une application horizontale beaucoup plus rapide de règles dont
on aurait estimé qu’elles sont pertinentes, parmi les thèmes qui sont en débat dans le DSA, il y
a, par exemple, l’interdiction du self-preferencing ou l’accès à certaines données. Si l’on
considère, peut-être à partir d’un cas contentieux, que ces obligations sont nécessaires, l’idée
du DSA ou du DMA pourrait être finalement de répandre beaucoup plus vite ces règles à
d’autres entreprises que celle qui fait l’objet d’une procédure pour infraction au droit de la
concurrence.

Pour conclure à ce stade sur la question qui était posée, je pense qu’aujourd’hui on a des
réponses qui sont en train d’être apportées sur les carences du droit de la concurrence. À mon
avis, l’un des domaines d’attention qu’il faut vraiment conserver est le contrôle des
concentrations. Il n’y a pas que l’antitrust qui nécessite une remise à niveau, et finalement une
revitalisation, je crois qu’en matière de contrôle des concentrations il faut aller plus loin sur
l’analyse concurrentielle des acquisitions faites par des plateformes, par exemple pour aller au-
delà de ces délimitations de marché qui conduisent peut-être parfois à des visions trop
restrictives des risques pour la concurrence, qui sont liés à des acquisitions. Je me référais à
l’acquisition Facebook/WhatsApp à cet égard. Un autre domaine qui pose problème est le vide
des opérations d’acquisition qui ne sont soumises à aucun contrôle.

A cet égard, nous venons d’avoir une avancée très significative, avec l’annonce par la
Commission européenne de reconsidérer de façon beaucoup plus ouverte que par le passé des
renvois qui pourraient être faits par l’article 22 du Règlement 2004, sur demande d’autorité
nationale. Pour autant, il y a aussi des choses qui doivent être faites à droit constant, il ne faut
pas l’oublier. C’est le réexamen des notions traditionnelles comme la position dominante. Il y
a un vrai travail de réflexion à faire sur ce qu’est le critère d’une position dominante. Nous
avons fait des propositions à ce sujet dans notre document de Policy Paper sur concurrence et
numérique, par exemple en considérant qu’il faudrait prendre en compte beaucoup plus
aujourd’hui non pas simplement une part de marché sur un marché déterminé mais la possibilité
de mobiliser une communauté d’utilisateurs sur différents marchés, qui peuvent être liés.

Un autre exemple de travail très concret et important, qui va nous occuper encore sur 2021,
c’est la révision de la notice sur les marchés pertinents. C’est un travail qui a été bien engagé à
présent entre la Commission européenne et les autorités nationales et qui va nous permettre de
prendre en compte des évolutions nécessaires comme la prise en compte de la concurrence
potentielle des acteurs plateformes, par exemple.

Pour conclure, le travail de modernisation et de mise à jour du droit de la concurrence est très
largement engagé. Je crois qu’avec tous les chantiers que j’ai indiqués, nous avons quasiment
tout ce que nous pourrions souhaiter, même si nous aurions souhaité aller encore plus loin sur
le contrôle des concentrations, en soumettant certaines plateformes à des obligations
d’information sur toutes leurs opérations d’acquisition.

Nous verrons si une fois que le DSA/DMA aura été un peu stabilisé au niveau européen, il sera
possible de le compléter sur ce point ou de prendre des initiatives législatives nationales. Par

Webinar #3 Digital: What regulatory model for platforms?
Concurrences 11th New Frontiers of Antitrust - 5 November 2020
Verbatim transcript of oral presentations provided by Concurrences without prior vetting by the speakers. The
views and opinions expressed in this Document do not necessarily represent those of the speakers’ institution or
clients.

ailleurs, je crois que sur le plan de la jurisprudence, et finalement de la pratique décisionnelle,
on est aussi dans une phase de vitalité des décisions prises par les autorités nationales de
concurrence : la décision Facebook du Bundeskartellamt est un exemple de décision qui montre
comment les autorités peuvent prendre en compte de façon large les pratiques des plateformes
pour remédier à toutes les mises en danger possibles du droit de la concurrence d’un nouveau
type.

Nicolas Petit:

Merci beaucoup Isabelle. Handing over immediately to Andreas.

Andreas Mundt:

Thank you very much, Nicolas. It is always an honour and a pleasure to be at one of Nicolas'
conferences. I am very happy to be here today. I would very much have preferred to be in Paris
right now, but this is an excellent substitute. I think the question how this should go
forward/what road to take is the subject of intense debate worldwide. Do we continue with
competition law enforcement or do we opt for regulation? I think there is agreement around the
globe to a certain extent that there is need for more and stricter enforcement. So far, we have
tried to get by with competition enforcement and I think we have really made good use of the
tools that we have at hand. We have imposed behavioural remedies and we have tried to work
with structural remedies where possible. But there is one thing that we have to take into account.

Policymakers at any rate think that we need to take further steps and that we need to do more.
And now everything is being debated. The first step is to strengthen the existing tools of
competition law. The second one is to regulate certain types of companies or businesses, in
particular ‘ecosystems’. And some areas of the world even call for a third step, that is breaking
up the tech giants in order to restore competition in certain digital sectors. The joint paper
recently published by France and the Netherlands clearly states that we should not leave a
possible break up of companies aside. You could also look at the US and the youngest lawsuit
that is brought against Google by the Department of Justice and state prosecutors. According
to the media, there are considerations whether to force Google to sell at least parts of the
company, for example Google’s Chrome browser.

Of course, breaking up a company is always the very last resort. Less severe alternatives should
always be tried first, especially since, compared to the EU, we have so far seen little
enforcement activity in the US with regard to digital markets. In Europe, we take a very
evolutionary approach and I think that is a good thing. Competition law has been enforced in a
rather strict manner, just think of many major cases in France, Paris, Brussels and also here in
Bonn brought against the big tech companies Amazon, Google and Facebook. Isabelle has
already mentioned the Facebook decision by the Bundeskartellamt, where we imposed
behavioural remedies prohibiting Facebook from combining user data from different sources.
Personally, I always describe that as an « internal divestiture » or rather unbundling of
Facebook’s data. This case is a good example that in some complex abuse cases it might be
sufficient to unbundle individual parts, services or processes within a company.

Webinar #3 Digital: What regulatory model for platforms?
Concurrences 11th New Frontiers of Antitrust - 5 November 2020
Verbatim transcript of oral presentations provided by Concurrences without prior vetting by the speakers. The
views and opinions expressed in this Document do not necessarily represent those of the speakers’ institution or
clients.

Policymakers, however, are of the opinion that we need more and stricter enforcement
measures, which also have to be implemented more rapidly. It is true that proceedings are not
as fast as they should be since the need for speed on the one hand is opposed by the need for a
thorough legal and economic assessment of the matter in question on the other hand, also with
regard to possible court proceedings. So, it is not surprising that this demand for more and
stricter enforcement has been taken up by legislators in Europe.

The European Commission is working on two legislative proposals: The Digital Services Act,
which will update the e-Commerce Directive, and the Digital Markets Act. The DMA will
include two main pillars: The first one is a certain type of ex-ante regulation, a list of dos and
don'ts for big digital gatekeepers. And secondly, there will be a market investigation
framework, formerly known as the ‘new competition tool’. All this is still quite abstract and
many parameters are still vague. But from what we know so far, the DMA outlines promising
regulatory approaches. And I am quite confident that the Commission is determined to avoid
overregulation with chilling effects on competition.

When we turn to a national level, we can see that the same is happening with regard to the
member states. EU Commissioner Thierry Breton has just said that member states are very close
in their approach regarding gatekeeper tools. And I have a strong feeling that there is a lot of
consensus among member states and among competition agencies of the member states. As can
be seen here in Germany, where the 10th Amendment to the German Competition Actis
currently going through the legislative process, This proposal bridges the divide between
competition law and more traditional regulation. I always refer to that as « competition law
plus » with « regulation » coherently integrated into the existing toolkit. We are going to
introduce a new provision, Section 19a, which to a certain extent may be even revolutionary.

This provision will focus on undertakings of paramount significance for competition across
markets. We will assess not only competition or dominance on one market but also the interplay
between and integration across markets. The provision is going to focus on ‘ecosystems’. There
will be a clear list of conduct that the Bundeskartellamt can prohibit based on theories of harm
manifested in the law. If we deem a company to be of paramount significance we can prohibit
certain behaviour in the future even on markets where this company is not yet dominant. One
example are envelopment strategies. However, there will be the possibility of objective
justification on a case by case basis with a reversed burden of proof. In my view, our approach
really develops traditional competition law in an innovative way to adjust it to the digital
economy.

I also hope that we will make our proceedings faster than they have been in the past, because
we will have many clarifications in the law. We have manifested theories of harm in the law,
and we have clearly designated the companies to which this new provision is going to apply. I
think this is very important. This is an approach that really complements our traditional toolbox
with regard to the abuse of dominance in digital markets.

Webinar #3 Digital: What regulatory model for platforms?
Concurrences 11th New Frontiers of Antitrust - 5 November 2020
Verbatim transcript of oral presentations provided by Concurrences without prior vetting by the speakers. The
views and opinions expressed in this Document do not necessarily represent those of the speakers’ institution or
clients.

So, it is not so much a question of what we need and more a question of whether to reshape
traditional competition law or establish a regulatory approach. I think you can implement the
necessary steps to better regulate these companies under competition law by developing it
further with regard to digital markets, taking into account all the new phenomena which did not
exist when most of our competition laws were drafted and passed the legislative process. In
Germany, back in 1958, nobody spoke of network effects or data-driven business models, and
this is going to be adapted further now. Thank you.

Nicolas Petit:

Thank you very much, Andreas. You and Isabel are almost within the 9’30, 10 minutes talk.
There might be some tested collision around your score on timing. Now, probably it's the right
time to move on to Antoine Chapsal. You have some slides if I'm not mistaken?

Antoine Chapsal:

Yes, indeed. So, thank you, Nicolas. This is a great pleasure to be here and to have the
opportunity to sponsor this conference with Cleary. So well, I have to say that I do agree with
what I heard so far, and what I am going to give you is some economic perspective on what we
said. So, the first question we should ask, next slide, please, is what is a platform? So, I think
everybody knows what it is now. It's a firm that creates value connecting two or more groups
of users, with each group affecting the other's utility. Okay. And this interaction between the
various sides of the platform is characterised by what we call indirect network effect, and this
was what has been just mentioned. So, what we need to know is that there are many different
kinds of platforms and there is a large variety of business models. So next slide please. So,
what's interesting is that commentators have raised a number of potential antitrust issue that
may arise from platforms. So, one is platforms are prone to tipping.

So indeed, some people argue that we are in a situation where the winners take it all, so there
may be competition for the market, which by the way, it's important. But once the winner is in,
the market is no longer contestable. We also might face new kinds of practices, such as self-
preferencing, platform envelopment, which is a form of bundling between platforms. One also
very important argument is one that has been just mentioned, is the idea that speed is of the
essence. Okay, so of course successful platforms can grow very quickly, and antitrust processes
may be too slow to efficiently address anti-competitive behaviour. So, the key question is do
these potential challenges provide justification for ex-ante regulation of platform? Next slide,
please. So of course, I think we need to adapt our antitrust framework, and I do believe also
that ex-ante regulation can be, in some instances, a solution. So, what we need to keep in mind,
however, is that the development of platform has been extremely beneficial to consumers, and
they are beneficial to consumers because they address changing needs, they introduce new
technology and products, and they reduce certain production cost.

Anyway, we could regulate this market if they have some structural fixture that prevent them
from being efficient, and to be more specific, from a pure economic perspective, competition
policy is appropriate when competition can result in efficient resource allocation. So, we need

Webinar #3 Digital: What regulatory model for platforms?
Concurrences 11th New Frontiers of Antitrust - 5 November 2020
Verbatim transcript of oral presentations provided by Concurrences without prior vetting by the speakers. The
views and opinions expressed in this Document do not necessarily represent those of the speakers’ institution or
clients.

to make sure that competition is not mitigated by firm behaviour and competition agencies
should have the resources to quickly punish such behaviour. And if speed is of the essence,
which is something that I do believe, impose interim measures, and Isabelle de Silva just
mentioned this, power and opportunity. On the other end, regulation is very useful and adequate
when competition yields inefficient resource allocation, and when we have significant market
failure. Next slide, please. So, the question is what should we do? And here, I cannot agree
more with what Isabelle de Silva has presented. I think we need to adapt our competition policy
framework. We need to analyse the sources of competition pressure.

So far, we are doing this using the definition of relevant markets, the concept of dominance,
but we need to face the fact that these tools are binary, either you are belonging to the relevant
market or you don't, they are static, and they are not well adapted to platforms. Okay, they do
not fully capture the source of competitive pressure and, for instance, the fact that the
competitive position of one platform can change very quickly. So, another thing that we need
probably to specify, specific theory of harm, but as Isabelle de Silva just said, Article 102 is
flexible enough to take into account these different kinds of practices that platforms may
implement. One very important point also mentioned by Isabelle de Silva is killer acquisition,
so I think that this is a very important issue, and this is something that is discussed in France,
and this is something that has already been addressed by some competition agencies. So, the
question we should ask then is are these change enough? This is a question we have to tackle
now. So next slide please.

So, well the first thing that, if we want ex-ante regulation, as could be the case, we are going to
face some challenges. One is that we should regulate if we have a clear view of the market
failure we want correct and the role played by platform generating them. So, one example I
have here is, of course, market power, but we can also discuss, for instance, information
asymmetry, which is another big market failure, and my interpretation of the reason why we
should, for instance, regulate the use of personal data, why privacy is a good example, is that
mostly because there is a significant information asymmetry between the individual who offer
their data and the platform that requests data. So, this is what we call a salience issue. And there
is a huge discrepancy between the individual short-term, tangible benefit from providing the
platform with data and potential long-term harm. So here, the idea is that we have a clear marker
failure, and so regulation makes sense. Next slide.

So maybe now I can tackle the second challenge I see in ex-ante regulation, which is the
practical consideration that is raised by the DSA and NCT. So, the first question we can ask is
when doing prohibition of some practices makes sense for a policy design perspective? And
well, here we know that blanket prohibition makes sense where there is a clear harm arising
from a well-defined practice, otherwise it can be welfare reducing. One question is what kind
of practice should we blacklist? Okay, and there are some efficiencies should they be
blacklisted. One area that is often discussed is banning expansion of a platform in an adjustment
market. And while this is also an interesting tool, I think this is something that should be, of
course, considered carefully, but on the other end, a big platform can challenge another big
platform entering an adjacent market. And yesterday, Apple announced that it is getting into
search, and I think that makes not much economic sense from preventing Apple from doing so.

Webinar #3 Digital: What regulatory model for platforms?
Concurrences 11th New Frontiers of Antitrust - 5 November 2020
Verbatim transcript of oral presentations provided by Concurrences without prior vetting by the speakers. The
views and opinions expressed in this Document do not necessarily represent those of the speakers’ institution or
clients.

So, we need to understand that this kind of ex-ante regulation are tools that can structure very
easily markets.

So, then we have the trade-off between clarity and certainty on the one end before a more
flexible approach. So here are clearly the basic trade-off economists have in mind when they
have to compare different regulation models. So of course, we have prescriptive rules that may
miss certain angles and capture conduct that is not harmful, but we have also high-level
principle on the other end that could easily be too lax, or too tight, or inappropriate. One
question also is do we want a rigid and symmetric regulatory tool? The question, as I already
mentioned, is that platforms are very different, so maybe we will need something that is flexible.
There are some issues about innovation and incentives to invest. And so far, the main platforms
are investing in research very, very significant amount of money. I think GAFAM’s investment
in 2018 was around €70 billion euros, so it's a significant amount of money. So, the question is
how actually regulation may affect such incentive to invest.

One question is also what kind of welfare we are trying to look after. And what I understand is
that we are putting greater emphasis on supplier and competitors than on user and consumers.
So, this is something that we need also to have in mind. And my last question is what is a
gatekeeper? I don't care about the word itself; I care about what it really means and whether
there is some definition that can be used for all kinds of platforms. So again, I'm not saying that
we should not regulate, I think regulation can be a very efficient tool. I think, as Isabelle de
Silva mentioned, that it can be complementary to some adapted policy framework, so I really
do believe this. The question is that my position is that we have still some work to do before
launching such a regulatory framework. Thank you so much.

Nicolas Petit:

Thank you, Antoine. And handing over immediately to Simeon. We are already quite late on
the timing, so Simeon has his fair share, but in the next rounds, we'll have to be shorter. Simeon
go ahead.

Simeon Thornton:

Thank you, Nicolas. I'll do my best to be brief. At CMA, we recently published a market study
into online platforms and digital advertising, and that had a specific focus on Google and
Facebook. And that study did indeed, to answer your question, advocate a new pro-competition
regulatory regime for online platforms. It's based around the idea of an enforceable code of
conduct for platforms that have significant market power, and also what we called a set of pro-
competition interventions, which are really designed to tackle the sources of market power,
such as data related interventions, means of increasing interoperability, etc. Why did we reach
that conclusion? And why did we think that solely relying on existing antitrust powers was not
sufficient?

Well in the study, we found that both Google and Facebook were largely insulated from
competition by a number of barriers to entry and expansion, and those include factors such as

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economies of scale, network effects, the power of defaults on consumer behaviour, unequal
access to user data, which is a really important input into serving targeted digital advertising, a
lack of transparency and asymmetric information, which restricts the ability of the demand side
to impose a sufficient disciplining influence on the behaviour of the platforms, and, of course,
the increasing importance of ecosystems, which yes, we certainly recognise have benefits for
consumers, but also afford the big platforms the opportunity to leverage market power from a
core market to an adjacent market. And in short, these factors have to both Google and
Facebook having entrenched market power. If you look at the data Google's had over 90% of
UK searches and search advertising revenue over the last 10 years. We were able to do a bit of
analysis, comparing the prices of Google and Bing, and we found that Google's prices were
about 30 to 40% higher than Bing's on a like-for-like basis.

When you look at Facebook, a similar position. It's had over 50% of display advertising
revenues, and its average revenue per user has gone up astronomically over the last nine years
or so by a factor of about 10. So given this context, I think there are probably four key reasons
why we reached our headline conclusion that a new regulatory regime is required, and this does
pick up some of the points made by previous speakers. The first of those is that those barriers
to entry and expansion that I highlighted; they are self-reinforcing. And what that means is that
if you are to tackle competition concerns in these sectors, you need to act on several fronts
simultaneously in parallel, and that requires a regulatory regime rather than the single-issue
focus of a typical antitrust case. So that's the first point. Secondly, again a point that's been
made already, the markets are fast-moving and the technology underpinning them moves very
quickly.

And what that means is that where you do have some form of regulatory intervention in place,
you need to have the power to monitor it, to revisit it, to assess that it remains fit for purpose,
and, if necessary, to change it. And again, you need a regulatory regime in place to do that
rather than our existing tools. The third point is that I think we all recognise on the panel that
competition in these markets can be undermined very quickly. That's particularly the case where
APIs can be shut off literally overnight, turning off someone's business model. Given that, you
need a tool that can act very rapidly, and we all know that the big celebrated antitrust cases that
have been brought at a European level have taken many years to prosecute. And that is too
slow, given the propensity for harm to happen very rapidly.

And then the final point I wanted to make is that the markets themselves, I can say this having
looked into the details of digital advertising, they are pretty complex. And I think there is a
merit in having a body that builds up regulatory expertise over time, so it can be a source of
expertise. And that's another reason for an ex-ante regulatory regime. So, in short, we don't
think what is required is an incremental tweak to our existing powers. We do think we need a
fundamental reform of sorts, but just to pick up a point that Andreas made, we do agree that
this is a complement to our existing panels. It's not a substitute for them. There are still cases
in which you'd want to bring a traditional antitrust case where the behaviour is particularly
egregious or what you think there's strong merit in the deterrence effect of a big fine, but we do
think this is a necessary complement to our existing panels.

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Nicolas Petit:

Thank you, that's very helpful to get a sense of your experience at the CMA with these
investigations too. Now, I want to move us directly to the next question, since we're a bit over
time, and the next question is way more pointed. And it could be a yes or no question actually,
so think about a yes or no answer, and maybe a short justification. The question is about the
NCT, which is very close to the concept of the NCA, but it means something different. The
question is should the new competition tool, so this emulation of the market inquiry regime in
the United Kingdom that the European Commission would like to adopt, which would entitle
the Commission to go after certain types of market failures which fall short of the thresholds
found in Article 101 and Article 102, should the NCT be targeted at digital markets or should
it be broader? And we had a survey on that. So, I'd like to pick up your views. We'll start with
Séverine.

Séverine Schrameck:

Yes, thank you very much, Nicolas. So, the survey, interestingly, gives as a result 55% of no
and 45% between yes and I don't know, if I picked that correctly. And so, my personal position
to what you were saying to give a yes or no, is no. So, it looks like I'm targeting 45% of the
audience right now, and I don't know if we're going to do another survey at the end of this,
would be no or not. Maybe it's better if we don't, but maybe we give you a bit of background if
I can have my first slide on. Yes, well the second one, actually. The next slide, yes. So, the New
Competition Tool, as it was presented in the consultation of the European Commission, was
split into four potential options, and these options were crossing two criteria. The first criteria
were should the scope of the tool be based on dominance or not? And again, I'll leave this one
aside because your question is really about a scenario where there is no dominance-based test,
but a scenario where there is a market structure-based test.

And if we are there, the question is do we want to have a horizontal scope covering all markets
or more limited scope? And the way the NCT was conceived at the very beginning was it was
presented, and the Commission consultation was two-fold, either we had a tool applicable to
every single sector or we had the tool that would be sector limited but we'd still have a pretty
broad scope targeting two types of markets, either markets which would have characteristic
pointing to risk for competition or to a structural lack of competition. And I think they were
more or less the same reasoning between these two concepts. One was maybe more preventive,
structural risk, the other more intervening after the risk has materialised, a structural lack
competition. But it was to address markets with certain characteristics which made fear some
kind of market deficiency.

And so now there seems that there is a trend or rumours about the fact that the New Competition
Tool would not even be targeted to market with specific characteristics but to the digital sector.
And well, I think it makes sense to understand why you don't want to have a very, very broad
scope targeting each and every single market, carrying out a market investigation has a cost.
There is some economic reason why competition authorities want to have some priority in terms
of sectors that they want to address, and that they would address the sectors in which they are

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at a higher risk. So, you would see some reason to claim for what on the slide is a feature that
is option four, and what was featured as option four by the Commission. Now, if we now restrict
that to even narrower scope, which will be just digital, I think this is another story, and this is a
major departure from the initial proposal, and maybe from the essence of what competition law
has been historically.

And I think President de Silva said very well at the very beginning, within the first minute of
this webinar, that one of the characteristics of competition law is that there is no sectorial
barrier. Competition rule by essence is supposed to be neutral, and that's what makes the
difference between regulation and competition. And so yes, we are looking at tools that would
bridge the division between competition and regulation, and it would be somewhere in the
middle. I think President Mundt said that before as well, and I think that's very right, but I think
if we are limiting the scope of this New Competition Tool to digital, then I'm not sure we're
really keeping the link to competition, and I think we are really shifting to the regulation of the
scope.

And this has other consequences, and maybe we can move to my next slide. When we were
looking at the characteristic of the two types of market that were targeted by this option four,
they were market which presented some risk or some lack of competition because they had
some specific features that were characterised by network and scale effects, lack of multi-
homing, lock-in effect, barrier to entry, lock-in effect again for lack of competition, data
accumulation. And I think these characteristics are not typical or are not something that
distinguishes the digital world from other industries. I think these are all things that you can
find in other sectors, be it telecom, be it electricity, and it's interesting to see that the marketing
investigation capacity that the CMA has is actually targeting that kind of market and not focused
on the digital sectors only. So that's my first reflection. My second thought about that is that
there is a lot of heterogenic in the digital world. So, we would apply this tool to a world that
includes some products or services, however, you want to call it, that have more connection to
the real economy than to some other platforms. So, if you think about, let's say the website, La
Fourchette, which would be in the digital world, I think it has more to do with [inaudible] than
WhatsApp, for example. And so, it's a bit difficult to see why this digital as such, is a relevant
criterion for the application of the tool or not.

Maybe just to conclude, if I have 30 seconds left. I think what is really, really important is that
we're looking at the tool that is disruptive from any other tool that competition authorities had
so far. And I agree with a lot of what has been said earlier in particular by a professional. And
I think what is very important is that this tool is applied in a differentiated manner on a case-
by-case basis. Either if it is applicable in digital, because as I've said, there is a lot of
heterogeneity in the digital world, or if it's applicated in a broader scope.

Nicolas Petit:

Okay. Thank you, Séverine. That was very helpful to kick us off on this question. So, I'm
turning now to Isabelle with a very straightforward question, should the NCT be exclusively
targeted towards digital markets, yes or no?

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Isabelle de Silva :

Merci Nicolas. Je pense que le champ du NCT devrait ou aurait vocation à être général et à
couvrir tous les secteurs de l’économie, sans distinction. Je crois cela parce que, comme
Séverine l’a très bien expliqué, le NCT peut s’avérer extrêmement utile pour tous les secteurs
de l’économie et la meilleure façon de le démontrer c’est de considérer que la CMA, qui a un
pouvoir similaire depuis plusieurs années, l’a essentiellement appliqué dans des secteurs de
l’économie traditionnels. A quel type de problèmes cela peut répondre ? Par exemple des
problèmes qui ont été constitués par des acquisitions par un opérateur dominant - on retrouve
la problématique du contrôle de concentration sous les seuils - ou encore des problèmes liés à
des structures de marché oligopolistiques, où l’on a un marché qui ne fonctionne pas bien, sans
pour autant avoir un abus.

Il y a toute une variété de situations dans lesquelles le droit de la concurrence tel qu’il est, avec
ses outils répressifs, n’a pas véritablement de réponse. Un autre avantage du NCT avec un
champ d’application large est qu’il peut déboucher sur toute une série d’issues, pas seulement
des séparations structurelles très massives et considérables comme on peut les imaginer, mais
parfois sur des remèdes de type règlementaire, peut-être juste des remèdes qui interviennent sur
un mode de commercialisation ou une transparence du marché sur telle ou telle catégorie
d’informations.

Pour autant, on a pu le voir dans les dernières annonces qui ont été faites, mais qui devront
encore être confirmées début décembre, que le champ large du NCT n’était pas forcément à
l’ordre du jour. Cela peut être lié à un sujet un peu technique qui est que dans la proposition
initiale de la Commission, il y avait, d’un côté, un DSA avec des règles générales et des
applications spécifiques et, de l’autre côté, un NCT avec des applications faisant suite à une
étude de marché. On voit bien que dans la nouvelle proposition de la Commission, elle a un peu
rationnalisé tout cela avec ce qui sera maintenant le Digital Markets Act, qui pourrait avoir deux
branches : des règles générales d’interdiction ou d’obligation et un outil plus ciblé. Bien sûr, si
on commence avec un outil qui est ciblé sur le numérique, il y a un inconvénient majeur que
j’avais pointé précédemment, le fait que l’on risque d’avoir des débats sur ce qui est numérique.
Je ne crois pas que le numérique soit un secteur, je crois qu’il peut affecter tous les secteurs de
l’économie.

On aura un problème un peu juridique, qui sera que des entreprises pourront invoquer cette
limite sectorielle pour dire « on n’est pas dans le champ et vous ne pouvez pas intervenir. »
Cela peut peut-être se résoudre avec une rédaction suffisamment large et même, à supposer que
l’on commence qu’avec le secteur numérique, pour autant, ce n’est pas une raison de ne pas le
faire, parce que cela pourra ultérieurement être élargi, si on a l’impression que cet outil est utile.
Je dirais qu’aujourd’hui nous avons les avancées qui seront faites pas la Commission début
décembre et nous verrons ce qui sera retenu à ce stade. Si l’on voit bien tout l’intérêt qu’il y a
à avoir un champ d’application large, pour autant, avec un champ d’application restreint au
numérique, l’on pourrait quand même avoir une valeur ajoutée à ce type d’outil.

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Nicolas Petit:

Merci Isabelle pour votre réponse très claire. Je prends souvent l’exemple du fabricant de
tracteur John Deere, qui a pu parfois être défini comme « Tractor as a service », ce qui classerait
un fabricant de tracteurs dans le numérique. Et par contre, Amazon qui a d’énormes entrepôts
et beaucoup de main d’œuvre, qui pourrait tomber dans le champ non numérique. Donc il faut
se méfier de ces problèmes de définition, qui finalement ont comme effets malencontreux
d’handicaper un antitrust plus rapide, puisque c’est l’ambition notamment de ces outils. So, I'm
turning now to Andreas with the same very straightforward question, so should the NCT be
exclusively targeted towards digital markets? Andreas?

Andreas Mundt:

I echo to a certain extent what Isabelle has just said. A key question when it comes to these new
instruments is, do we design them specifically for the digital area only or do we make them
universally applicable since market failure is always possible also outside digital markets. I
think we will have to be very pragmatic here. It is true that the problems we want to solve
mainly relate to digital markets. They are the reason why we are thinking about enlarging our
competition toolbox and they are the ones causing the biggest problems. From this point of
view, it would make sense to limit these new tools to the digital economy.

However, this approach clearly has its disadvantages. Who wants to distinguish a digital market
from a non-digital market in the future? I assume that all markets we look at, including John
Deere, the tractor producer mentioned by Nicolas, will become digital to a certain extent. And
again, who wants to make that difference in the future?

The second point is, if in the future it is no longer possible to make that difference, but you
have identified structural competition problems on a market, do you really want to go to court
and have a long debate whether something is digital or whether the focus is digital? I think we
do not want to do that. With everyone calling for efficiency, there are good arguments
supporting the introduction of a universally applicable tool.

We had to deal with this question in Germany as well and we have, of course, encountered the
same problems with regard to the 10th Amendment, just to conclude that. It might be an idea
for the future to say that each company that is subject to these new tools must at least be active
on digital markets. And this is the direction in which the Amendment is heading here in
Germany by referring to another section in the existing law which relates to factors of market
power with particular relevance for multi-sided markets and networks. So that could be a
compromise, but I think everything else makes matters too complex and too many legal
questions might be associated with this if we really limit the approach/instruments/tools to
digital markets. Thank you.

Nicolas Petit:

Thank you, Andreas. Simeon, a quick reaction to that?

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Simeon Thornton:

Well, I think you're going to have quite a consensus on the panel because my short answer is
no, I don't think the tool should be exclusively focused on digital markets. If you allow me a
slightly longer answer, I think it's fairly clear that the NCT tool is based on the regime for
market investigations that we established in 2002 in the UK. These are holistic investigations
of whether a market is working well or not. And if it's not, they have strong order-making
powers to address concerns that are harming consumers.

We've had about 20 such market investigations since 2002. And if memory serves, precisely
none of those have been focused predominantly on digital markets. Indeed, when you look at
the sectors that have been the focus of those market investigations, including one I led recently
on the energy market, it focused on utility sectors, so energy and retail banking, transport,
airports, buses, etc, a lot on financial services and a whole range of quite heterogeneous
markets, such as private hospitals and funerals.

I am personally quite a champion of this tool. I think it is a powerful instrument that has allowed
us at the CMA to effect real change in a number of important sectors of the economy. We've
come up with quite innovative interventions from open banking, which came out of the retail
banking market investigation, controls and outcomes where appropriate, that came out of the
energy market investigation, a price cap, and divestiture in the case of BAA Airports.

In answer to your question, I think this is an important tool for the CMA and would be an
important tool for any competition authority, because it allows you to answer an exam question,
which is quite different actually from the typical antitrust exam question, which is, has there
been a transgression of the law that warrants a sanction? The exam questions that the market
investigation I think the NCT would answer is, is there a problem in the market that warrants
an intervention to improve outcomes for consumers? And it seems to me drawing on our
experience of market investigations, that that question's equally relevant to non-digital, as well
as digital markets.

Nicolas Petit:

Thank you. Thank you, Simeon. To bring maybe a sense of perspective here, when I was a baby
antitrust student, I remember Philip Lowe, former Director-General at DG COMP, one his
crusades when he was there was that competition policy had to move beyond simply talking
about antitrust infringements and competition infringements, but he also wanted to get tools to
deal with competition problems.

Simeon Thornton:

Yes.

Nicolas Petit:

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