Lina Khan : US antitrust takes big steps – How to read that in Europe ?

Une entrevue avec Cristina Caffarra, Vice President, Head of European Competition Practice, Charles River Associates International, Londres.

Avec la participation de Rupprecht Podszun, Professeur, Heinrich Heine University, Düsseldorf ; Pierre Régibeau, Chief Economist, DG Competition, Bruxelles ; et Mike Walker, Chief Economic Adviser, UK Competition and Markets Authority, Londres.

Cristina Caffarra : Good afternoon, morning, evening, depending on where you are. I can see we are now above 350 participants just now, which is quite a record number, and I’m sure it’s all due to the star appeal of our main speaker, Lina. Thank you for joining. I will introduce briefly and then direct the conversation a little bit. And of course, it hasn’t escaped anybody’s attention just three weeks ago, more or less to the day, after much anticipation, the report of the House Judiciary Antitrust Subcommittee on big tech landed in all its 450-page heft on the US and the rest of the world. This was, of course, the combination of a massive bipartisan effort led by Chairman David Cicilline, and of this about 400 pages deal in great detail with a huge amount of facts, documents, interrogatories, and indeed high-profile, less high-profile hearings for the main participants in the whole discussion.

Indeed, there are, in the end, lengthy chapters on each Google, Facebook, Amazon, and Apple, no punches being pulled, and describing in great detail a catalogue of concerns, of misconduct in some way, concluding that, bottom line, America has a monopoly problem in digital markets. Then there are another 50 pages that deal with what to do about it, suggestions for the way forward. And the report, for those of you who have been navigating it, is certainly not just a dry technical read. It uses a quite lofty language, which is intended, I’m sure, to underscore what is a historic moment. So, in his Chairs’ Foreword, David Cicilline says companies that once were scrappy underdog start-ups that challenged the status quo have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons. He quotes Louis Brandeis and says, “We may have democracy, or we may have wealth concentrated in the hands of the few, but we cannot have both.”

And then he ends by saying, “As a charter of economic liberty, the antitrust laws are the backbone of open and fair markets.” “Congress must lead,” antitrust “laws must be updated,” and agencies must enforce “aggressively and fairly.” So with all of this and the articles that have been written, podcasts and webinars that have been already held in the US around this, to Europeans that are watching from some distance, the significance and the implications of this report are perhaps not immediately obvious and so easy to decipher. So, seeing from here we are clearly under the impression that US antitrust enforcement over the last couple of decades was somewhat anaemic, somewhat pallid ; The Economist, last week, described it as decrepit, allowing markets to concentrate systematically, particularly in the digital space. Now, in Europe, we’ve been, of course, much more militant, although we haven’t really been able to move the dial much, and this is something we’ll discuss later, and this is why we’re seeing this big upsurge of regulatory initiatives, but at least we tried.

So, what does this report really mean ? What are the implications for the future of antitrust enforcement in the US ? How do we read it from here ? Has the tide turned ? And of course, the plot thickens somewhat because just two weeks after the report, we have seen the DOJ drop their complaint against Google last week in the US courts, and it is well known there are other investigations led by the state attorney general which are underway, capable potentially of turning into complaints in the future. So, who better to discuss all of this, the report and its implications, than Lina Khan ? Of course, I need to mention again Chairman Cicilline as the main driving force behind this, a number of other representatives, from both sides of the House actually, who, to us watching it, again from a distance, appear visibly engaged, well informed about the issues. Others also, like Slade Bond—I don’t want to forget him.

But Lina, of course, is widely credited from an intellectual perspective as the main author, the real power behind the throne, and all of us could see her regularly sitting to the side of Chairman Cicilline during the hearings. So, we will start a conversation with Lina. I will ask a few questions, clarifications to unpack the report a little for us, and then we’ll open up the conversation with some of the key players on the European scene to provide a European voice on this beyond mine. All of them, I’m very grateful for their acceptance. They’re all well known for their straight talk and candour, so their views on how this has been perceived and what is a compare and contrast in Europe are going to be interesting. Just to mention, we are fortunate to have Rupprecht Podszun, who is a well-known legal scholar from Düsseldorf, and whose views on the developments in Germany and in Europe really are always perceptive and resonate very widely.

We have Pierre Régibeau, chief economist at DG Competition, who, of course, will tell us he’s only speaking in a personal capacity but is deeply steeped into clearly what is a tumultuous change happening in Brussels at this point on the interface between antitrust and regulation. And of course, last but not least, Mike Walker is the chief economist at the UK Competition and Markets Authority, an agency which has certainly been always out in front in terms of the analysis of digital markets. It has been a pioneer in this area. And now with Brexit, of course, it’s going to have even more of a voice in the world seat. With our introduction, let me turn to Lina, and welcome her once again, and somehow try and start with a question, which is really about how did we get here ?

This is a report that would have been unthinkable two years ago. The usual kind of feedback, the wrap that we were getting in Europe from the US, was somewhat condescending. We, Europeans, somehow don’t quite know how to really do antitrust properly. We, in Europe, protect competitors, complainants we know a forum shopping in Europe for that very reason, these silly Europeans, they ultimately just protect competitors : they worry crazy stuff like fairness ? They don’t know about over-enforcement and how enforcement kills incentives to innovate. We are the real custodians of antitrust, of the doxy, free enterprise, innovation. What Europeans have is just that can be. So how did we get here ? What has changed the conversation in the last 18 months that has made this possible and what has shifted the so-called overturned window in the direction we now see ? Thank you, Lina, over to you.

Lina Khan : Great. Thanks so much, Cristina, and thanks to Concurrences for hosting this event. I want to underscore what you said, which is Chairman Cicilline, in particular, deserves enormous credit for spearheading this entire effort. We were able to conduct this investigation during remarkable political headwinds, and all sorts of other pressures and currents, and so I do want to underscore the real political courage that he had to really see this through to the end. I think you’re right ; this certainly feels like a historic moment in the US, and I think it reflects several years of agitation on several fronts. So, we’ve had, for a few years now, a group of academics, scholars, advocates, really full frontally critiquing the dominant approach to antitrust in the United States. This approach has taken a variety of forms ranging from academic scholarship to advocacy organising.

I think in the US we’re really seeing increasing systemic concentration across the board where a small number of firms are controlling markets, be it in agriculture to transportation to finance. And so, I think the systemic feature has really fuelled a growing critique that it’s not just in one market or another, but the antitrust enterprise in the United States seems to have failed in some fundamental way. I think we’ve also seen, frankly, really important investigative journalism in the last few years, especially around these dominant platforms, be it the reporting around Facebook’s use of Onavo data, Amazon’s use of third-party market data. I think as more and more of these facts have become public, as more former employees have started speaking publicly, I think the factual record has become more unassailable, and I think the backdrop of enforcement actions and investigations around the world has also created significant ambient pressure on US enforcers, and it’s something that US lawmakers, in particular, have started to pay attention to.

Of course, I think 2016, that election and the role that Facebook played, was a pivotal moment in the public’s understanding of the outsized power that these firms have. Of course, that’s something distinct from some of the antitrust concerns, but I think in terms of the broader public ambient understanding of just outsize power, I think it’s difficult to overstate the role that Facebook had in that. But I think the growing interest among policymakers has really allowed this growing agitation to translate into real institutional efforts. And I think the congressional investigation was an important sign of that, but of course, we’re seeing investigations both at the FTC, the DOJ, the state AGs, and I think we’re seeing the dynamism among these different institutions and how they interact with one another. Most significantly, I think Congress’ investigations and active roles can play an important role in pressuring the agencies, especially through Congress’ oversight function over these agencies. So, I think it’s a confluence of factors that have really united in a unique way at this moment.

Cristina Caffarra : Thank you. So, this report is, in many ways, the outcome of a confluence of militancy and agitation, as you put it, but it is also a catalyst possibly for change, and I wanted to talk about the status of the report a little bit. Because, of course, it is very detailed, it is very hefty. One observation that many have made is, well, it doesn’t quite read like a proper legal chair charge sheet, what, in Europe, we would call a statement of objection, a complaint in antitrust terms.

It is not trying to turn your factual findings into antitrust theories of harm as such. It does not read directly as a legal document. Of course, more of a political statement. And in many, many parts, it is certainly something that reads like an indictment of the agency’s lack of action as much as of the companies themselves. So, there are quite harsh words in places over that, but people over here are a bit surprised when they hear this is got no binding force as such. However important and very much into the discussion, it does not bind anyone at present. So, it’s a huge symbolic statement, but what are the next steps and what needs to happen before this actually creates change ?

Lina Khan : Great question. And I think understanding the significance of the report requires understanding the institutional structure of antitrust and situating the institutional role of Congress and the function of congressional investigations in antitrust, especially given that it’s not something that has happened in recent years. So, you’re absolutely right, this report is not designed to be a legal complaint, primarily because Congress does not enforce the antitrust laws. So, Congress in the United States wrote the antitrust laws and it’s supposed to conduct oversight, both of private parties as well as of the antitrust agencies, and then, through that oversight, to identify any deficiencies in the antitrust laws that require amendment, that require rewriting. These are really the core functions of Congress.

The growing interest among policymakers has really allowed this growing agitation to translate into real institutional efforts

And I think, importantly, Congress used to be a key institutional actor in antitrust. Through the fifties, through the sixties, through the seventies, these types of top-to-bottom investigations of different sectors were quite routine in Congress, and Congress would routinely hall in the CEOs, request documents, really create these multi-volume records, especially in contexts where Congress felt that the antitrust agencies weren’t doing their jobs to create this public record of the business practices that were occurring in various sectors, be it in ocean freight shipping, in telecommunications, in the glass industry, this was quite a regular muscle that Congress used. Importantly, these types of investigations and both the factual findings as well as legislative recommendations, in previous cases have directly fed into legislative reform. So, in so far as there are recommendations in this report, I think there’s a lot of interest among members of Congress to start legislating, to start introducing some of the recommendations as bills.

I think, importantly, a key function this report also served was to play that oversight function with regards to the antitrust agencies. Congress appropriates funds to the agencies, and it is also able to identify, through having access to memos and being able to request documents, what are the deficiencies in enforcement. In so far as we’re seeing market power problems across the economy or in a particular sector, but these market power problems are not being addressed by the agencies, is that due to deficiencies in the law ? Is that due to some cultural issues at the agencies themselves ? As part of the investigation, we were able to request the memos from the FTC that were able to give us insight into what was their thinking when they were reviewing these transactions, what were the sources of failure, not just in one instance or two instances, but really across the board.

And so, it’s really that investigative function over at both the agencies as well as the companies that fed into both the findings as well as the recommendations. And in terms of next steps, I think it’s likely we will see a congressional markup, where the congressional committee will adopt the report formally as well as its recommendations, and then start legislating, start introducing bills. And I think obviously we’re in a bit of an interim period with the political situation, but I think it’s likely that we’ll start seeing that even within this calendar year.

Cristina Caffarra : Great. So, let me pursue a little bit more this idea of a new law versus existing law enforcement. So just in passing, I mentioned before, significantly, we’ve seen just weeks ago the DOJ filed its complaint against Google and there’s been a public discussion of it, which has hailed it a breakthrough, but in substance, the general comment out there is that it is carefully drafted as a document and stays very close to the tradition of the Microsoft case. So, this is suggesting that it is possible to use the existing antitrust laws to pursue these cases.

On the other hand, the overwhelming sentiment that comes across in the report is around inequality of power as between the platforms, the businesses that depend on them, the exercise of power through some strong-arm tactics vis-à-vis the small dependents, the strong gatekeeping function, the setting of rules, that is ultimately unilateral which part is difficult to appeal, unfair, and so on. And so, these are not classic antitrust violations. I personally have been quite militant in agitating about the need to dig up exploitation as a category of antitrust abuse, but even in Europe, it is struggling to take hold. And so, do we need to apply the existing laws more actively or do we actually need more laws, or both ?

Lina Khan : I think you’re absolutely right that many of the key concerns in the report did have this broader vantage point that was looking at this fundamental inequality of power, and the abuse and exploitation of power. And I think that’s another reason why it was critical for Congress as an institutional actor to undertake this. Given that there’s been a tremendous narrowing of the antitrust laws in the United States over the last few decades, to the degree that I think the congressional intent in passing these laws has been subverted in many key instances, it was really the legislative body that needed to step in and say not only is there a problem, but it’s also affecting key aspects of our democracy, be it the free and independent press, be it economic and political liberties, user privacy, to really broaden the vantage point, again drawing back on what Congress original goals were in passing these laws. On your specific question of do we need to apply the laws ? Do we need to write new laws ? I think we need both.

I think the DOJ complaint was much welcomed in so far as it’s the first significant case the Justice Department has filed on monopolisation grounds in two decades, which is quite remarkable. And so, I think as we’re seeing the beginnings of what I hope will be an unfreezing of this ice age, I think it’s an important first step. That said, it’s no secret that there are areas of the antitrust laws that are effectively dead letters, be it things like monopoly leveraging, be it this American Express standard that the court introduced. It’s also true that litigation in the US can take a decade at least to work through the courts. And finally, there are so many markets that are suffering from market power abuses that I think when you have these types of systemic problems, the case-by-case approach can only do so much, especially given the fact that in the United States courts are quite meek or timid with their judicial remedies in many cases. And so, I think if we’re looking for the broader structural reform, I’m not confident that a case-by-case approach with the agencies and their limitations will deliver that.

I think if we’re looking for the broader structural reform, I’m not confident that a case-by-case approach with the agencies and their limitations will deliver that.

That said, to the degree that we still have these laws in the books, I think they need to be enforced. I will also say finally, I think there are a lot of instances in the United States where the courts have issued decisions where the holding might be fairly narrow, but there’s a lot of what, in the US, we call dicta, a language that isn’t really necessary for the precise holding but as judges pontificating on their broader views of the law. And I think in many instances that dicta, which is quite unfavourable to antitrust plaintiffs, has had a chilling effect, both on the agencies, but also on private parties. And so, I think there’s actually a lot of opportunities to test the boundaries of the law.

I think one of the great tragedies of the fact that we haven’t seen more monopolisation, more Section 2 cases, is that those boundaries have not fully been tested. And so, we have a sense that there are certain aspects of the law where it’s much more difficult to bring cases, and that’s why the report recommended that Congress override several of these judicial precedents, but it hasn’t fully been tested out. And so to the degree that some of these cases, both by the agencies and private parties, can further clarify what are the current boundaries of these laws based on this decade plus of judicial decisions, I think that’ll also be important in further clarifying for Congress where do we need to legislate. So, I think that the dynamic between the agencies and Congress is really important too.

Cristina Caffarra : Great. I want to pursue this further. Clearly, the last 50 pages of this report are where attention is focused on because this is where the fight is moving next. The analysis is, of course, detailed, as I said before, but this is what we do next. And so, there’s a series of recommendations there for restoring competition. I think not coincidentally, you start with a structural separation as the main check, then a number of other principles like no self-preferencing and profitability, prohibiting mergers by dominant platforms, and so on. Then you talk about strengthening the antitrust laws, as you just described, and reviving enforcement with more resources to agencies and so on.

So one issue though that you teed up and I want to pursue further is the scope for antitrust enforcement to really be used and dug up in a situation in which you have an antitrust jurisprudence that, as you mentioned, is not particularly favourable to these cases, to say the least. So, seeing from here there is a sense that there is a huge weight of antitrust jurisprudence in the US, the judges have been effectively trained to think a bit more like Chicago diehards, simplifying of course. There are these ideas though that markets have competition in dynamic, that you create a new service or product that squashes a competitor, but that’s just leads to product improvement. And you shouldn’t touch it unless you show a price effect on consumers, then you have no problem. So, all of this seems to be, and I don’t want to oversimplify it, but a weight which is there.

And how do you think this can be overcome ? It’s a problem in Europe too. We have a jurisprudence, which is what it is, and of course, needs to be tested. But either saying, the US in my experience is that this can be even more of a problem to action when the agencies think, “Are we going to win this case ? No, forget it.”

Lina Khan : Yes. I think you’re absolutely right that the antitrust jurisprudence in the US is not only unfavourable to plaintiffs but really has baked within it now, these frankly empirical assumptions about how markets work that no longer correspond to reality.

And I think that’s extremely true, especially in the context of digital markets. And so, I think when you have the situation where baked into the law are these empirical assumptions that are not corresponding to reality, I think really Congress is the only actor that can fix that. It has to step in and say, “This jurisprudence is no longer working for us. It really has strayed from the laws that Congress enacted. And this is how we’re going to revise the laws to make sure they’re able to address the challenges that we’re facing in digital markets.”

The antitrust jurisprudence in the US is not only unfavourable to plaintiffs but really has baked within it now, these frankly empirical assumptions about how markets work that no longer correspond to reality

I think it’s interesting here to revisit history in the US. So when the Standard Oil decision came out in 1911, this is where famously the court introduced this idea of the rule of reason, reasonable versus unreasonable restraints of trade, the reaction among lawmakers was that this was a huge power grab by the courts, that this was a judicial power grab and that courts were basically appointing themselves in the position of creating the substantive antitrust rules and that this would let them potentially lead those laws in places that Congress didn’t intend.

And it’s that perception of the judicial power grab that then directly fed into the creation of the FTC. So, the FTC was created by Congress in order to create this administrative body that would be accountable to Congress. And Congress deliberately gave the FTC pretty expansive authorities.

For a variety of reasons, I think the FTC has not really lived up to the potential that Congress aspired for it

In addition to having the ability to enforce the antitrust laws, the FTC also has expansive information collection authorities where it doesn’t have to be doing an official law enforcement matter to be able to compel commercially sensitive information from companies.

And then it also has this broader mandate, these unfair methods of competition, which was very clearly designated by Congress to reach beyond the four corners of the antitrust laws, recognising that there’ll be cases where there is some unfairness that should be prohibited, but the antitrust laws might not be able to reach there.

For a variety of reasons, I think the FTC has not really lived up to the potential that Congress aspired for it, both in terms of deliberately taking extremely narrow views of its own legal authorities, as well as not really using the full toolkit that it has at its disposal.

And so I think going back to that original vision and thinking what can we do to have the FTC play the role that Congress originally intended ? Because if you have the FTC creating administrative rules, interpreting what constitutes unfair methods of competition, you immediately have another institutional body that is creating substantive antitrust rules, not just the courts.

And I think it creates an important check in the system where Congress can also have more oversight. So I think, thinking about ways to give the courts more clear guidance, more bright-line rules, more structural presumptions, it’s clear that given the discretion that the courts currently have, they have really used that in a way that has led to a coherent administrable, let alone accurate reality-based antitrust regime.

And so I think giving them much more guidance, even if it comes at the cost in certain cases of accuracy or precision, some of those are some of the trade-offs that we’re going to have to deal with going forward.

Cristina Caffarra : Right. So, do you see potentially more structural presumption, for example, being brought back as a result of legislation ? Is it something that will happen, you think ?

Lina Khan : I think that’s a major thrust of the certain legislator performance and it’s one where I think there was some bipartisan agreement, especially when you have dominant parties buying up start-ups. I think there is a recognition that maybe in certain cases, the burden should really be on the merging parties rather than on the agencies.

I think there are certain cases where there’s been a presumption of illegality, like AT&T and Time Warner, and so far as those concentration levels were so high that it should have been presumed anti-competitive, that the courts have still run roughshod over those presumptions. So I don’t think it’s going to necessarily solve the problem in every case.

And then, of course, we have things like the American Express case where the courts are saying, “Even when there is direct proof of market power, we’re going to require indirect proof.” They’re requiring this cross-market netting. I think that’s an instance where we’re going to need a pretty clear legislative override. I don’t think the courts will be able to fix that by themselves. So, in addition, just more presumptions, just looking at the cases that have created an unworkable regime and overriding those.

Cristina Caffarra : Let me ask about regulation because some voices in the US that I think are beginning to get to this notion that antitrust is not enough, given the state base of courts, given the limitations we’ve just discussed, and there is a need to consider this regulation. Certainly, this is the direction we’re taking in Europe, and we are going to discuss it later. But especially as we’re talking about a handful of companies that are important, I see a thread in the conversation that is picking up this tone.

But there is still a standard, very significant opposition to the idea of regulation. It seems to me in the US—in which not just in the conservatives, amongst the conservatives, even amongst those you would describe as moderate—there is the notion that the regulation has never done anyone any good. Look at the history of regulated industries, total disaster, it killed innovations, terrible for governments to meddle in product improvement, regulatory capture, and so on. So, I know from the previous conversation we had, that you also take the view like I do that in some sense, there’s not much recent, meaningful experience and scholarship, particularly in the US or regulation, that is a hole that will need to be filled.

But do you expect that this conversation around the benefits and the need to complement and to trust the regulation will go further ? Something like a digital platform agency, some branch of one of the agencies under some sort of supervision. How do you see that interplay ?

Lina Khan : I think there is a growing sense that we are going to need certain market-wide rules. What is the institutional mechanism through which those rules are applied, I think this is still an open question. And I think you’re right that there is this ideological baggage around the idea of regulated industries in the United States.

Frankly, I think some of that baggage draws on really a poor history. There’s no doubt that with fits and starts with various regulated industries, but I think it was a process of evolution and adaptation, and there’s an enormous amount of learning that can happen.

I think the regulation and the regulatory state was critical to the development of US industry in many instances, including with regards to telecommunications, which is I think a great instance where we saw regulation and antitrust really play complementary roles.

The regulation and the regulatory state was critical to the development of US industry in many instances

So, I think there are sometimes these simplistic claims that get made that I don’t think usefully help advance the debate. And so, I do think we need to look at the trade-offs, but also think about what the instances are where we really do need these market-wide rules. I think in many cases, we had a toolkit that we applied to dominant intermediaries and network monopolies.

Nobody’s saying that we need to wholesale adopt those statutes for the tech platforms, but I think it’s a question of revisiting and re-identifying those legal principles and thinking about how we can adapt those to apply in the digital age. Because I do think that certain principles that we apply such as non-discrimination, such as reducing or eliminating conflicts of interest that can emerge where you have these critical intermediaries that are competing with all the firms that are dependent on them, the temptation to engage in the degradation of interoperability : these are things that we’ve been seeing for over a century. And so I think learning from that past history, not repeating the mistakes, but ensuring that we’re not just wholesale throwing out that toolkit that we did use in many instances, I think that’s going to be a really key step forward.

Cristina Caffarra : Great. Let me ask you the last question before we open up the discussion to people. I have to go there because, of course, this has such totemic importance in this discussion. One of the top-line in your list of potential actions in the report is the potential for structural separation, line of business restriction is also mentioned, the famous issue of breakups that is referenced there, as you just did mention now to railroad-style precedents. There is a reference to the UK CMA anticipating this possibility in their own digital report, but there is very little, of course, as ever in these kinds of reports, on the how, what one would break up and how. And of course, in Europe, my view is we’ve been far too hesitant, insecure to just really contemplate the possibility seriously.

We’ve even seen Commissioner Vestager yesterday again, saying, “Ooh, this is really the last resort. We can’t really overdo it, and we really need to go there only as a last resort.” But in the US, they appear to be a series of voices that are favourable to it, not just on the left, but that appears to be also some consensus on the conservative side, but that is something to be actually thought of very seriously.

Do you see this as realistically on the card, and why you can’t be specific ? How do you see that particular threat playing out ?

Lina Khan : Yes, I think we’re at the beginnings of an important conversation that will further continue to detail how you would implement these remedies and specific contexts. Because Congress is a legislative body, it has to pass laws of general applicability. So, it wouldn’t pass a law just designed to address the Facebook problem or just designed to address the Amazon problem.

It will have to be a market-wide law of general applicability. That said, I do think in the US, we have experimented significantly with conduct and behavioural remedies. Not necessarily in the tech context or there was the Google/ITA remedy, the consent decree there.

But in other cases, especially in vertical mergers, such as Comcast/NBC, Ticketmaster/Live Nation, these were big vertical transactions that there were a lot of anti-competitive concerns raised at the time.

Those were both transactions that were permitted with conduct remedies. And I think the conduct remedies proved extremely difficult to administer and oversee, such that several years later, the DOJ is back to investigating Ticketmaster or Live Nation for engaging in the very tactics that parties predicted when these companies were merging.

So, I think the administrability of the remedies is really going to be critical. And frankly, I think designing remedies that are addressing the source, the incentive, and I think we’ve really struggled to design conduct remedies that can do that. So, I think that backdrop is a broader experience, not just limited to tech, but across markets is also going to be informing this conversation.

And frankly, I think it’s no doubt the US has been behind the curve, especially with regards to the European Commission, with CMA ; we learned an enormous amount from the work that other jurisdictions have done.

We were in close touch with both folks at the CMA and European Commission. But that said, I think we’ve also been learning from the remedies that were issued in the three Google cases. And thinking through whether something short of a structural remedy will really be able to address the source of the problem.

And I think this is true, both with backwards-looking cases, right, when we’re looking at things like Search, Android, but also when we’re thinking about forward-looking remedies with regards to Voice and the Cloud, which were also markets that the report focused on as key areas to be vigilant, given that these firms are positioned to, in several cases, extend their monopolies to these markets. In some instances, using the same toolkit that they’ve used in other contexts.

Cristina Caffarra : This is fascinating because, of course, my view has always been and continues to be in Europe, we’ve been certainly ahead of the curve, as you say, we have pursued what I think were great cases. And the reluctance to timidity to go to remedies that are really going to work is really what ultimately is responsible for us not being able to say we move the dial.

We started 10 years ago, and we did great cases, but the results are yet to be seen. And so there is, I think, an intellectual reluctance to consider the direct conflict of interest in how to address that and really default to behavioural remedy because one feels that they are more manageable, that I think needs to be thought through again because it isn’t certain here. So, thank you for all of this insight.

I’m sure the audience has stayed consistently at about 40 throughout the last half hour. So we haven’t lost anyone. I think they were all enthralled. Let me open up the discussion to the rest of the panel and bring in some European reaction and some European experience into this.

First up, Rupprecht. If I may, Rupprecht, as I mentioned, you are a very involved participant in the European discussion beyond the German one. You are in a position to certainly have a sense for how things are developing here in terms of compare and contrast. You recently, very recently, also did a report together with Philip Marsden, then moving on from whether we should intervene, on how we should intervene ? And in particular, how we should set out to implement their workable combination of antitrust and regulation, the canings of it, how it will play out. So, I’m interested in your views and in your comments on that. And of course, anything else you may want to say in response to what you’ve heard from Lina ? So, Rupprecht.

Rupprecht Podszun : Thank you so much, Cristina, and thanks to Lina as well for introducing this. I think the first comment needs to go out at a time where there’s a lot of pointing fingers at the United States from Europe. And I think we have to acknowledge one thing here. This is a 450-page report, plus the complaint the other day by the DOJ against national champions.

And I may remind our audience of how we treat national champions sometimes in Europe. So, I think this is really a remarkable thing to notice. It may be a bit easier to write such a report in Germany against a US company than in the US. So, I think we should acknowledge this as a first feature.

Now, what I found pretty interesting and I’m not an expert of US antitrust law whatsoever, and certainly not if Lina is present, I think the interesting thing is that we joined the conversations where there had been a wide gap in the past years.

It had been difficult, Cristina, you had mentioned that to discuss things, and now we move together in the perception of the problems. And what I found really stunning is that what Lina describes reminds me of a lot of the situation here. Basically, we have a set of rules that is okay. That’s my impression. I love 102 TFUE. You can do basically very much with that.

We are always talking about delivering efficiency and innovation to markets. I think we have been less efficient and less innovative in the past years than we should have been in antitrust

But enforcement lags behind, and enforcement includes the courts. I think that is something that we have to speak about. It’s become very difficult to get a case through in a swift manner, in a time period that is not exploding.

We haven’t even seen a final result on one of the Google cases or that German Facebook case, which simply is not in line with what is happening these days. So, I think we need institutional reforms, we need effective enforcement, and that is the core of the study that I did with Philip Marsden.

We have some consensus that something has to be done, but we also probably have some consensus that antitrust is at its limits. And this is where we have to move into new ideas. We are always talking about delivering efficiency and innovation to markets. I think we have been less efficient and less innovative in the past years than we should have been in antitrust, particularly in this enforcement regime.

And that’s why we, Phillip and I—but this is now very much in line with what Commissioner Vestager proposes as the Digital Markets Act—are going to the direction of ex ante rules with clear-cut dos and don’ts for gatekeeping companies, which are probably easier to enforce, or that’s the idea of it, easier to enforce, easier to adjudicate on, and having the ability to act more swiftly, more flexibly than before.

Cristina Caffarra : Great. Thank you. And let me move the ball to Pierre. Pierre, I’m sure, will have a lot to say potentially also on the Google complaint. I’ll leave the floor to you and then I will ask you specific questions if I feel that you haven’t quite covered all I wanted you to cover. Please go ahead.

Pierre Régibeau : Okay. So, I’m going to try to cover everything without further questions. Let’s make it again. First I wanted to say that talking about the report, I’m actually very happy that it’s not a technical law or competition report because I think that it’s very important for everybody involved in the process to understand that it’s not just a turning point in terms of competition law and competition policy, but I think it’s a turning point in terms of society.

And therefore, since it’s a societal issue, is that you’re trying to contribute to solving instead of competition policy, it’s quite appropriate. So, the starting point of this change in the US, big and broad noisy kind of a document. And you see this as you’ve already mentioned and what Lina has mentioned is that in what is broad that politically, this is out of detail with competition law.

So, you saw concerns about privacy, about free speech, about the extent of the power of those companies in more and more sensitive sectors. So, these are not narrow competition law issues. These are already societal issues. What kind of society do we want ?

And from that point of view, beyond those images, the societal issue about privacy and things like that, if you go back to the origin of antitrust law in the US, this kind of issues of the relationship of power between a large company and concentrated economic activities and the democratic society at large, well it’s at the very core of the movement.

It’s not just a turning point in terms of competition law and competition policy, but I think it’s a turning point in terms of society

So, it gave us the kind of antitrust law regime that we have today. And I think it’s actually very important to go back to this. And when you think about this actually, so it also tells you that besides the debate and probably the fear of the adversarial debate that we might have with the large platform, so it might be a more participative civilised debate to have about this broader societal issue.

I think that Jean Tirole will be certainly in favour of this more participant approach to get these companies to understand that some of the change that people are asking for is not because it’s solely been felt that they’ve violated the law abuser power, although that’s part of the deal, but that in a changing society, based on changing technology, there’s a feeling too much concentration is just too bad by itself.

And I think that keeping this greater dimension in mind is actually important. Now, going from this, there is a somewhat corresponding issue, but at a more economic and narrower level. And that’s the issue of what we think about the proper model for competition in digital markets going up.

And then I think one has to be a little bit careful because it’s sometimes easy to jump from this concern about bigness to saying, “Oh, you’ve got this big platform, or you’ve got Facebook that is certainly dominant in one of the activities, therefore we have to make really certainly dominant in one of the activities. Therefore, we have to make really sure they kind of get into any other activities where they might be able to leverage their advantages.” So, there is a tendency to jump from, “Oh, we have too big companies,” to say, “Oh, let’s stop. Let’s kind of cut the wings of a platform and just get a freeze on what they are,” even maybe divide them. I think that’s a little too quick. As you know, we still have to think a little bit about a more fluid kind of competitive scene where there is a competition between large platforms.

But there are rules that do not preclude kind of single project or more limited platform from competing. On that point of view, I think what is very important is a reading one has of the evolution of those platforms over the last several years. One reading is that they’ve started encroaching onto each other’s business, overlapping in much more markets. So that’s the optimistic reading, to say there is going to be quite a bit of inter-platform competition. So, we still need competition by smaller firms, but let’s not worry too much about the platform per se. So, they’re going to take care of each other.

Another reading, and that’s one fine kind of some indirect echo of these. I find that echo when I read the Google complaint in the US : this idea that there are also cosy guilts between those platforms. This whole idea that Apple is very happy to get a bunch of money to give exclusivity or priority default to Google search and that maybe that leads to softening of competition somewhere else.

I think it’s an important aspect of the issue that might maybe have received too little attention so far. So that’s or my reaction to kind of the report itself. I can either stop there and let you ask your question, or I can go on, whatever you prefer.

Cristina Caffarra : I would like to ask you something else to broaden out because there is a thread in what you are saying, and we can come back to it after Mike, that essentially suggests, let’s just not be overambitious over what antitrust can do. It does have a limit in its ability to address societal problems as such. And, to some extent, that’s true. Of course, it’s true, but it is, of course, the sort of justification that’s been used over time for this permafrost in the US.

You know, let’s not discuss anything that is really outside this narrow economic view of antitrust and we, therefore, do not very much. Now, in Europe, what’s happened now is there is, of course, as you know very well, a strong tilting towards the regulation to catch this. “Okay. So, we can’t do everything with antitrust. Okay, we’ll do it with regulation.” Right ? And of course, there is a bigger discussion out there in Europe, which you’re very steeped into. There is a bigger European ambition to fill innovation deficit, digital sovereignty, data, autonomy, and all of this.

But there is going to be, certainly, at least, one sees a strong strand, a strong impetus towards regulating platforms and taking up the slack that antitrust hasn’t really been able to. So, it’s a building site at the moment, but I think it’s useful to have your perspective on what’s actually happening and what it’s going to look like. And what would you like to see it look like ?

Pierre Régibeau : No, I think you misinterpreted a little bit my position. I’m not saying, “Oh, it’s a big societal issue ; therefore, we cannot do anything in antitrust law.” No, I said that antitrust laws themselves are the children of the big societal issue so it’s perfectly legitimate for Congress, for example, to legislate, to change the antitrust law in order to take those changing societal preferences into account.

What I wanted to say, though, which is closer to what you interpreted me as saying, is that I find this a much better, stronger and more appropriate channel than spending their time saying that when I do my job as a chief economist, I’ve got to take into account into efficiencies factors A, B, C, D, E, F, G, on which I essentially have no data just because it’s a social dimension. Yes, I have sympathy but that’s not the right way to do it.

And then what is the right way to do it ? Definitely, legislation is one of the ways and regulation is another way. Actually, that’s going to be a bit of a question that I would have for Lina after that, is that, in Europe, when we think about regulation, of course, it’s going to be a basis of legislation as a bottom. But we think about having one specialised regulator at the EU level that might interact with the national regulators.

There is a concern regarding synchronicity between the US and between Europe because, as it is obvious, there’s been no synchronicity

In the US, it seems that for now, the attention seems to be much more towards kind of legislation, which it seems, for this special case, it would mostly strengthen the head of the FTC, but what is kind of the appetite for going farther than that and having really kind of a central regulator ? So, developing a little bit about the discussion you’ve had at the end with Lina.

And there is a concern regarding synchronicity between the US and between Europe because, as it is obvious, there’s been no synchronicity. It’s taken a long time for the US to wake up to the fact that there might be a problem. And I’m really worried that we’re already jumping to regulation, which I think is appropriate in Europe. Why the US is still feeding itself about antitrust ? That doesn’t seem to be a good scenario. It would be nice if things could be accelerated in the US on both fronts at the same time so that the approach to a regulatory approach, a regulatory/legislative approach, to these issues could be better coordinated between the US and Europe, and actually, the rest of the world, that we should not ignore.

So, in terms of what’s happening in the future, I’m quite concerned about this lack of coordination. Now, this is a problem also in Europe, because as you know, I’m in favour of regulation, but I’m not in favour of rushing into regulation, giving too many rigorous reports too fast, doing regulation without having laid the foundation of assigning property rights on data without having already started efforts to foster more standardisation and interoperability and so on. So, while I do support the move in Europe, I’m a little bit concerned about the pattern that it follows and the speed that it follows. And if there could be a more meaningful conversation with the US, it might be one more reason to slow down a little bit and go through it more progressively.

Cristina Caffarra : This is a super important point, which I want to turn to at the end and hear Lina again and all of you. So, hold that thought. I’ll put it back to you later. I want to give Mike the floor. Thanks for your patience. Of course, Mike, the CMA is, I said it at the beginning, a pioneer in development over the last few years, the Digital Markets Unit, to be created within the CMA on the back of the final report, the celebrated market study that Lina mentioned on digital, which has been certainly the reference to many other authorities for the work that they’re doing in this space. A lot of militancy, I have to say, on digital mergers, potential competition, killer acquisition, direct, reverse, and so on.

And so, there’s also a plan to separate substantive and jurisdictional tests for mergers in digital, we heard recently, and potential plans to investigate Google and Facebook. So, a lot of work on the agenda and the interplay between the antitrust enforcement role that you have and the digital regulatory role that you are certainly taking up is important. Let me let you just go in every direction you want on this, but you’re welcome.

Mike Walker : Okay. So obviously, I’m speaking on my own behalf, not on behalf of CMA, although given that Pierre’s gone all hipster on us, I can’t imagine anything I’m going to say is going to be as interesting as that. So, look, I really welcome the House support. I agree with Pierre about it actually, it’s a really good thing that it is readable and accessible. It’s not a dry sort of legal document. I guess I’d have a couple of comments on what we’ve been talking about so far.

All the action is going to be in the last 50 pages around remedies. I’m really quite in favour of structural remedies, but structural remedies are only appropriate in some areas. So, for instance, if we think about with Google, for instance, you could easily think that a reasonable structural remedy is around the ad tech stack, where a lot of that has been put together by acquisition. There’s no particular reason why it’s all put together, but putting it together creates lots of market power and conflicts of interests.

Structural remedies are only appropriate in some areas

Equally, it may well be that in other areas, search, perhaps, so the network effects are such that actually, separation doesn’t really make sense. And what makes much more sense is all the other stuff we’ve been talking about in terms of how you might level the playing field around data, click-and-query data, and so on. So that’s one thing about structural remedies.

I know that the report leaves open the prospect of antitrust being useful. And of course, we’ve got the Google case. I’m pretty down on antitrust in this area, just because, as Lina said, it just takes too long. So, Lina says this is the first monopolisation case in 20 years in the US, so that tells you something. You come over to Europe and, at least in the UK, we have some really simple excessive pricing cases, at least, simple conceptually. They take forever. The idea that actually we’re going to be able to use those tools to do something about this tech issue seems to me to be pretty ambitious. And so, we really are pushed towards regulation. And then I agree with Pierre. Obviously, we need to be really careful about what that regulation does, but I think we are pushed to ex ante regulation.

Then one more comment, it’s actually picking up on something Pierre said, which I think is really important. Talking about competition between the platforms, but then raising it with this Google complaint. I read that Google complaint that DOJ has made and I think, “Hang about, why is only Google in the firing line here ?” Apple has got some expensive real estate there, which it has decided to make a lot of money off by selling the search default to Google ; Apple is happy for Google to pay it a lot of money for Google to lock everybody else out. So, I do think that this set of duopolies that we see, these sort of cosy duopolies across the sector, is a real issue that we are going to have to take seriously in the future.

Thank you. So, I wanted to go back to the point, the point that Pierre made, which I think is interesting, and I’d like to hear all of the participants, all of the speakers, starting from Lina. I think Pierre kind of stylised the scenario, which I think is important and interesting. So, in Europe, as Mike compared, of course, and Rupprecht outlined, we have essentially moved toward the regulation sphere because of this fatigue with antitrust that doesn’t quite deliver for various reasons, time and all that.

And yet, in the US, there is this awakening in the antitrust sphere. So, there was nothing happening for years. This is an interpretation that will be resisted by some of the US listeners, I’m sure, but seeing from here, one cannot really say that a case in 20 years in this area is very much. So, there was this permafrost and now Congress, the confluence of the agitation, of the militancy, all of these progressive views, have essentially pushed things in the direction of more enforcement.

We need more enforcement ; we need new laws. We need to overcome the jurisprudence. So is the future one in which, instead of somehow converging a bit towards a common way of thinking about things, we will see a persistent dichotomy in some sense ? I think I interpret what you’re saying, Pierre, in saying Europe, so far, it’s been ahead in antitrust, US was asleep. And then now we are going to regulation, and the US is catching up on antitrust, but with no particular appetite for regulation.

So is the global conversation, which we really need to have a common understanding of what we’re doing, going to remain at odds ? A bit of a conversation of the deaf as between us and the US ? Lina, would you care to comment on this ?

Lina Khan : Sure. I think it’s absolutely true that in the US, given the permafrost, as you put it, the focus is primarily on resuscitating antitrust enforcement. But that said, the legislative body that is positioned to design market-wide rules did just issue a report suggesting we do so. There have been a set of bills introduced by several lawmakers over the last few years, also pushing for certain types of market-wide rules, be it in relation to interoperability or non-discrimination. So, I think we are seeing a slow but steady march in that direction.

I think in the US, historically, this kind of projects, the ideological project, the intellectual currents that we saw in the sixties through the eighties were first to push for the deregulation of industry, to kind of dismantle these regulatory regimes that we had spanning the airline industry across sectors.

And the argument that was made at the time was, “We think competition can govern these markets and antitrust will be a really critical tool to do so.” So that dismantling of the regulatory regimes was partly justified on the basis that we would see more antitrust. But then, of course, we also saw the gutting of antitrust. So, I think just historically, there is more intellectual work to be done in the US to try and recover that learning about regulation and regulated industries, given just how thoroughly it was dismantled.

In the US, given the permafrost, […] the focus is primarily on resuscitating antitrust enforcement

I think the efforts to revive antitrust are now hopefully going to be accompanied by more of an effort to think about these market-wide rules. Just to go back to something I think Mike and Pierre both mentioned, with regards to structural remedies, I think that the goal in including that in the report was really to give it a seat back at the table, right ? This is a tool that we have abandoned, and to say, “This needs to be a key part of the toolkit.” I think they’re absolutely right that it’s not going to be something we apply wholesale, categorically in any context we find.

One thing I really admired in the CMA report and something we tried to also exemplify was really diving into the mechanics of how various markets work, right ? What is a search, right ? You can break it down to crawling, indexing and query. What are the key features that each of those represents, right ? Where do we see economies of scale ? Where are the barriers to entry ? And then once you have that market-specific diagnosis, then looking at the toolbox and saying, “Okay, what tools do we have for which of these problems ?” So, I think that’s the approach we really need. And I hope the House report, as well as subsequent efforts, will kind of follow through.

Cristina Caffarra : Right. Let me move it to Rupprecht. Any comment you want to make on this, and in particular, I know that the view, when I talk about the big tilt towards regulation, of course, this is something which is happening in Brussels. I think the perception is that the view in Germany may be slightly more nuanced than this, at least my perception of what Andreas Mundt has been saying recently, is quite a sort of finely poised.

He has been saying in conferences, “Ooh, this regulation, I’m going to pour water into the wine.” I think that must be a German expression. Because he has been saying, “I’m not so sure about going full towards regulation. What does it do, and how do you define these gatekeepers, and what do you tell them to do and not to do ? Isn’t, in some sense, a finer kind of tools required when you look at individual conduct and individual companies that you cannot just have these broad rules there.” So, the appetite, perhaps, in Europe for regulation is not quite as universal as I’ve described it now, but I’d like to have your views on this discussion.

Rupprecht Podszun : Well, first of all, I think I’m not willing to wait for the consensus emerging in a global conversation of professors and chief economists, with all due respect to all of us. But my learning from the past years is that actually, we get to learn things in cases much more than we are doing in studies. All these studies are perfect and interesting, but I’ve learned, or we’ve seen so many intricate problems once we took the cases to court, or once we took the cases to the authorities, that I think we really need to act now.

And the same is true, I think, for legislative measures. So, let’s put that to Parliament, let’s put that to the relevant bodies, and they will take their time. We’re talking about regulation entering into force maybe in 2022 or something, which is, again, two years from now. So, I think, Pierre, with all due respect, I would move on now and not wait for the US to do this. And Cristina, if you allow me to, I think this is a learning process that now is on a global scale, and that’s the great thing. And in Europe, we have profited from this learning process with national competition authorities, national courts dealing with that, everyone pushing. The Bundeskartellamt’s Facebook case certainly has pushed the debate much further, etc. We should use that opportunity with the US now on board, but we should not wait for some sort of consensus.

It is only problematic if we build rules that then petrify a certain situation for ages.

Second thing is, it is only problematic if we build rules that then petrify a certain situation for ages. I think this is a feature of European law where we may find some sort of solution. If you think about the GDPR, the data protection regulation, that’s a great piece of work, but politicians, lawmakers, shy away from reforming it because it’s sort of such a massive work.

You cannot sort of deal with that in a swift way, and you cannot adapt it to what’s changing now. So, if we do have new regulation here, if we do have new rules, that should be flexible also in the law-making process. And the third thing is, one thing that always stuns me when I discuss with people like all of us here, we are all from the island of antitrust, right ? We are in the splendid isolation of antitrust, and there are all sorts of regulation out there already. Pierre, you mentioned that earlier, regulation in the more European sense of legislation.

In Europe, we have the Unfair Commercial Practices Directive, we have the Unfair Contract Terms Directive. Both of them have blacklisted practices for companies that heavily influence that behaviour, and few economists have ever looked at that. The whole handling of that is completely different from our incredibly sophisticated economic approaches to competition law.

So, I think we shouldn’t draw this very strict line that either we regulate companies on the sophisticated level of competition law, or we do nothing at all. There is a whole body of law that many of us ignore because we are only dealing with competition offices that do exactly that. And no one ever told me whether the rules are misleading advertising or uncertain contract terms, but that makes sense from an economic viewpoint. And I’m pretty sure if you send it to law firms and if you send it to economic advisors, they will tell you in perfect models that all this does not make sense in terms of concerns.

Or they can. They can probably say that, but I just want to caution us for sort of shying away from what we call regulation as the devil that sort of shows up and we are reducing everything. This only happens if we do not have flexible rules and if we sort of look at it from really only economics, consumer welfare approach, as we have done it in the past years in antitrust.

Thank you. And I like the notion of experimentation and enriching the progress and making progress from different angles. This is essentially what you’re saying. In Europe, we’ve had some of that and possibly that is flowing into a current view, but from different perspectives. Pierre, do you want to react to any of this ?

Pierre Régibeau : Yes. I’m not coming into this not liking regulation from a narrow economic point of view at all. I like regulation, but I’m really concerned because the particular stakes are so high and therefore people are going to want to say, “Look, the big thing we put together,” that we’re going to go too far, precisely ignoring the kind of learnings that you refer to. Also, that we might, as I mentioned, go in the wrong order. It makes very little sense to get regulation as to what you can do with data, without having a clear idea of who has property rights in the data. That’s not just an economic approach. And clearly, I completely agree with your point that the kind of ex ante regulation that we have is also just another tool. And there are other tools like, as you say, contract law, consumer law, both at European level and at the national level, to which we should give more attention completely. I agree with that.

Mike, you want to pick any of these up or should we open to the audience ?

Mike Walker : Well, I was wondering, I’m interested to hear actually Lina’s response to some of what we’ve been saying.

Cristina Caffarra : Indeed. I was keeping that for the end, but she can do it now and at the end as well. Please go ahead.

Lina Khan : Was there a specific component or just this general conception of we are on the antitrust island and we should be thinking more broadly ? Yes, I think that’s absolutely right. I think there are concurrent discussions happening in other areas of the law in the United States, be it with regards to content moderation, be it with regards to consumer protection, be it with regards to how do you ensure the correct liability structure for these platforms without having an undue chilling effect. And so I think all of these, in so far as many of these problems are exacerbated by market power, I think there is a deep connection there, but I think it’s absolutely right that we need to be thinking more broadly beyond just antitrust and beyond even just regulation and including these other legal sites of reform as well.

Cristina Caffarra : Mike, go ahead.

Mike Walker : I’d just say one thing we shouldn’t lose sight of is, I think, given where we are now, okay, fine, lots for us to try and deal with, we do have to up our game on merger control. If we look particularly at Google and Facebook—lesser I think, Apple and Amazon—Google, and Facebook, they have bought a lot of their market power and regulators. I include us in that ; we have been a little bit asleep on the job on this, and I think it’s really important that merger control in this era becomes much, much fiercer and need to talk about changing balance of the burden of proof and those sorts of issues. I don’t know what the particular right answer is, but I think it’s really important that we don’t allow ourselves to allow some of the mergers that we have allowed in the past to happen again.

Cristina Caffarra : Well, for sure, merger control is one of the key tools. And, as you know, I take strongly the view that we’ve been far, far, far too lenient in terms of getting things through. And then we wring our hands three years later and we say, “Well, we can’t unscramble the eggs. What to do ?” And so clearly one of the things that the UK authority has certainly been singled out for is a militant approach. But I think in the circumstances, this is the only approach to take in all of this.

We are at the time, but I want to give the opportunity to some of the audience or to pick up some of the questions from the audience, we have about 20 there. I’m not sure we’re going to be able to take them all, but I will probably do a selection. And I don’t think we have time to directly hear from the people asking. I will abuse my privileges as the chair to just do a form of selection.

One of the sentiments that appear in a few questions, Pierre, is a reaction from, I think to what your perhaps optimistic view is, as you put it yourself, that, we have these platforms that are entering into each other’s domain, they are doing various things that actually suggest that they’re competing among themselves. The news today is that Apple apparently is building its own search engine. So, is it the case that this is benign ? Or it is also described generally as part of that enveloping conduct that they are able to do because they can leverage their position into adjacent markets. And it is at the basis of a number of calls for a line of business restrictions, for example, as opposed to structural separation.

So, do you think that this optimistic view is one that we should attach much value to ? Or do you think it is just indeed an optimistic view, but the reality is very different ?

Pierre Régibeau : Again, my view is not that everything is hunky-dory.

What I’m saying is that there are important trade-offs and we should be flexible. If you start presenting all those platforms for diversifying into other domains, you also stop them from increasing competition to each other in some fields. Like, for example, wearables. Do you want to have Apple dominating wearables, or do you want to allow entry by others ? I’m not saying what the answer is, but that’s a question you have to ask.

Also, I don’t see necessarily a contradiction between allowing those platforms to get into other markets, and therefore creating much more of a system competition, which we know can be quite intense. But then take interoperability measures, that still allow firms that do not follow this integration model to strive and be good at what they do is. There is no contradiction with that. And I think that probably the best world is one where you have some fully integrated, or very integrated platforms, and a number of them, the more the better, but also a lively universe of smaller firms, less specialised firms.

And what I’m afraid of, and that’s also based on the discussion of some here, is that due to our legitimate concerns about the platform, there’s a tendency to just say, “Oh, you should limit them as much as you can.” And I think that’s a too narrow view.

Cristina Caffarra : Okay. So, well, that’s one view. One of the things that come up repeatedly, I think, in the questions, is the theme of the way in which regulation actually can be modelled, can be designed. This is something we touched upon. It is something which remains, I think, at this point, the question there is. Of course, the reference—which is often made to telecommunication, to the railway—it is a reference that I think is appropriate because it will be a former attempt to regulate ; our efforts to regulate have had a single business model at their heart pretty much. Whereas here, we’re talking about companies with very different formats and business models. So, the discussion here in Europe about the way in which you design regulation is really also taking into account how do we think about differentiating across business models ? We can’t have a single rule. Lina, do you have a reaction to that and how you see the potential design taking this into account ?

Lina Khan : Yes, I think you’re absolutely right, we need to be sensitive to those differences in business models and in markets. I think the House report acknowledged that even though these firms do different keyways, it does seem increasingly undeniable that they are playing this gatekeeper function. And so, in so far as we’re thinking about creating some type of ex ante regime for gatekeepers, I do think there are ways to create one that’s coherent and cohesive and can apply it to all of them while taking into account any necessary sensitivities to important and relevant differences.

I think, of course, the major question is going to be, how do you define the gatekeeper ? And I think we’re eagerly waiting to see what the European Commission comes up with. I think there’s a discussion here about how would you think about it ? This is not the first time in the US that we’ve had these discussions and thoughts. Through the seventies, there were a series of legislative proposals that would have basically sought to identify persistent monopolies. And there were various factors that they had identified ranging from looking at market power over a number of years, looking at persistent profits, looking at entry.

The major question is going to be, how do you define the gatekeeper ? And I think we’re eagerly waiting to see what the European Commission comes up with

So, I think of just revisiting some of the previous discussions that there have been, but then also, of course, updating the present ones. I think it was Mike or Rupprecht who said that we are in this kind of grand global learning moment where we’re seeing how different regimes are approaching it. I think Australia has taken a really interesting regime with the news publishers in particular. I think that is a regime that Chairman Cicilline has introduced through some legislation that would mirror certain aspects of that. So, I think this kind of grand experimentation. One in the US we’ve talked about as laboratories, a democracy of kind of seeing how these different experimentations pan out in different regimes, I think is something that I hope will continue in this. I think cross-jurisdictional learning is immensely important and useful.

Great. Another theme that appears in the chat is going back to the questions, to the notion of exploitation. It is a question I’d like to traverse briefly with all of you because one of the points I made is that I’m very much a fan of exploitation is a category of abuse. It’s in 102, it’s something that in principle exists and we can pursue. And yet it is incredibly difficult to get anything going on those grounds. And as I said, it’s one of the reasons why we are somewhat moving towards regulation because it seems to be the way in which we can make those cases.

Rupprecht, starting from you. In Germany, of course, we have seen the Facebook case, which is not quite an exploitative case, but certainly was generally seen as an imaginative way to think about the way in which the freedom of choice of consumers is being ultimately reduced, and that in and of itself can be an antitrust concern. So, there are tendrils that suggest that exploitation is something that we should be doing more of if we are sufficiently imaginative about that, but we don’t see it in the wild. The agencies are really quite reluctant to pursue that. So, starting from you, Rupprecht, and then go into the others, why aren’t we seeing more of this ? And should we ?

Rupprecht Podszun : Ooh, very tough question. Traditionally I see as an exploitative case, I see excessive pricing and we all know sort of what the difficulty is with sort of setting the right price or finding the benchmark of what is excessive. Now, and I fully agree that this is such a difficult endeavour that we shouldn’t sort of now go around and do exploitation cases everywhere. I have much more sympathy for the cases like Facebook, where the exploitative condition is sort of the thing that not the price, but the condition is the difficult issue where you have the impression that the consumer is harmed and competition is harmed through exploitative conditions, which is probably even a bit closer to our traditional understanding of, say, 101 cases if you think of certain contract terms.

In my view, one of the points probably is that in competition law, we have always said that this is about protecting consumers, but we’ve never really protected consumers as an individual or collective being as such. We haven’t seen them as relevant actors in this sphere. I think this is one of the blind spots of competition law. A lot of talk on consumer welfare, but very little on really looking at what this case means for this specific consumer. And this is something that the Federal German Supreme Court in the Facebook ruling has really put to the centre of this case. We need to take the consumer as a sovereign market actor on board. And if you do so, you see the consumer as well as someone who can probably be harmed by exploitation. I remain a bit more hesitant than you, Cristina, on the exploitation cases, to be frank.

We need to take the consumer as a sovereign market actor on board

And why is that ?

Rupprecht Podszun : I don’t want the competition authorities to meddle too much with now really prescribing what is the right thing to do in the market. And this is something that actually, if I may add that to the discussion before if we ask what is the competition that we wish to see, I don’t know. In this regard, I’m really the old Hayekian pretence of knowledge type of standard. Let’s see what happens. If Apple comes up with a search engine, fair enough. Maybe that’s a good thing. I can’t sort of say what exactly happens when we make specific rules. I don’t know what happens if we introduce certain regulation. I don’t know how they find their ways around or so. This is exactly the learning process that we will see and I don’t want to see competition authorities modelling something that they wish to see in the sense of, we have this clear picture of there has to be this, this and that.

Cristina Caffarra : I agree, and I hear you. We don’t want competition authorities to model how a market should work. But it is too narrow, to my mind, to have confined exploitation to cases of access prices. If there is an expectation, it should be possible to identify. What are the bases that we are going to say some conduct is unfair or not really capable of really representing a fair relationship between two sides ? Well, let me move on to Mike. Final round, because we won’t have time to do much more, but final round on anything on this or anything you like.

Mike Walker : Well, on this issue around exploitation, I agree that it’s an issue. If you look at the CMA report on digital advertising, if you look at the ad tech stack issue, that’s not really exclusion, that is really about exploitation. The issue is the nearly 35% of the revenue that flows just to the intermediaries. The PwC report suggests that there is about 15% “missing money.” We can’t even see where that money’s gone. And there are concerns there about the exploitation of market power.

I think if we go right back to almost the first thing you said, Cristina, you talked about the inequality of bargaining power and the way that is dealt with in the House report. And I think those are really substantive and all that issue around the ability of the platform to give “take it or leave it” offers, that consumers have no choice but to say, “Oh yes, fine,” even though consumers actually don’t know what’s happened to all that data. Those issues are around exploitation. I’m sorry. I’m still down on antitrust here. I’m still thinking we have to have some regulation here. But if actually, we can speed up antitrust, then that’s fine. I just don’t think we can.

Cristina Caffarra : Great. Pierre, the final round of comments to you before I sort of give Lina her last word.

Pierre Régibeau : Just on the same issue, clearly within mergers, we can deal with some issues like degradation of privacy, and so on, much better because we know what the benchmark is, right ? This is a counterfactual, or maybe even the pre-merger situation. When you move to antitrust, of course, the problem is that we don’t have a keen benchmark for, say, what would be sufficient privacy, and we never going to have it. So, I think there are two approaches. If you really insist on doing something so antitrust, you can do things like retiring to the notion of dependency, or as your bargaining power, as Mike said, and say things where you don’t give a choice to consumers.

For example, “You’ve got to give me your information if you want to use my service,” as opposed to say, “But if you don’t want to, you can pay $10 a year, which is what I make off of you otherwise your information,” and not give it to me. Why don’t you give people the choice ? That could be seen as potentially exploitative. Or any kind of practice that really deprives consumers of the kind of information that they need to make an informed consumer choice, that could possibly be frayed as an exploitive abuse, is all really a need for the defined benchmark.

But I’m also with Mike saying that, yes, you can use antitrust with that, but it might be the rare case where antitrust is actually the best too. And I would hope that different forms of regulations could go faster.

Cristina Caffarra : Great. We are way past our end time, and we still have more than 300 people there, which is, again, remarkable. But I want to leave Lina the final word and give them the opportunity to comment on what you’ve heard, but perhaps turn the table a little bit. What do you make of all of this movement in Europe ? How do you see from over there ? There is a direct question there in the chat that says, “What are your views on the upcoming Digital Services Act ?” So, I’m not going to put you on the spot for that because no one quite knows what upcoming Digital Services Act really looks like. But a view from you of this debate would be great, and also on how we read that between the US and Europe. Another question in the chat was, “Why is that only the US and Europe ?” Of course, it is not. I’m not suggesting that. Australia is a big player. Everyone else is a big player. We are interested in other parts of the conversation, and I’m sorry that Europe/US is a simplification. But over to you.

Lina Khan : Just to pick up on this thread about exploitation, I think Mike’s exactly right that that does go to the heart of much of the conduct that’s described in the report, be it through the arbitrary increase in prices to the imposition of oppressive contractual terms. I think that was a really striking component of what we heard, that in many instances there were things like the requirement that business partners surrender rights to IP or give up their right to go to court. These contractual terms that parties across the board told us : “but for our extreme and total dependence on this firm, we would never accept this contractual term.” But I think those forms of exploitation are core.

I do think that, at least at the enforcement level, the enforcers have been reluctant to really use the existing laws to go after that type of exploitation, though I do think that the two democratic commissioners on the FTC have done some separate writings through dissents and whatnot, potentially laying out a path forward to use the existing regime to go after some of these anti-competitive contractual terms and exploited of contracts. So, I think that’ll be something interesting to keep a watch on.

I think on this broader question, I think to go back to what I said earlier, I do think we’re kind of in this live grand experiment, and I think it’ll be really important to kind of stay in touch across jurisdictions to see how things are developing. I think on the Digital Services Acts, we’re looking keenly to see how gatekeeper is defined and what we can learn from that. I do think that it will be interesting to see if the US can continue its resuscitation of antitrust, and on those grounds, there can be more convergence between the US and Europe, whether we can see that similar types of convergence potentially when it comes to ex ante and regulation. So, I think seeing the extent of the potential convergence will be something to keep an eye on as well.

And thank you so much to Cristina and to you all for this conversation. It’s been a great learning experience as well.

Cristina Caffarra : Well, I want to echo Lina, say thank you, Lina, in the first place. I think you have entirely proven your superstar appeal. But of course, the conversation is much more interesting because of Pierre and Mike and Rupprecht in it. So, I want to close now and thank the audience, of course, a large number of people that stayed with us, over 300 for a very long time. And the questions have been actually long and perceptive. I’m apologising ; we haven’t been able to go through them all. But I think the conversation was scintillating. I learned a lot from it. And so, thank you very much. Bye-bye.

Lina Khan : Bye. Thanks, everyone.

Concurrences Law & Economics Webinar, 28 October 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.