Below, we have provided the full transcript of the final episode of our series Antitrust in a Digital World: Does It Work?. Read below to see the discussion about Assessing the Global Approaches to Digital Platform Regulation through Antitrust.
Brian SCARPELLI:
Hello everyone. Welcome to Episode Four of ACT The App Associations and Competition Policy Internationals Antitrust discussion series on competition in digital markets titled antitrust in the digital world does it work? During the four event series our invited expert panelists aim to explore key issues surrounding the application of antitrust in the digital world focusing on global trends in digital platform regulation. Other things like the widespread impact of the European Commission’s digital markets Act and also the new US Biden Harris administration’s approach to antitrust and others. My name is Brian Scarpelli. I’m a senior global policy counsel with ACT The App Association. ACT The Association is a not for profit trade association that represents 1000s of small business tech firms and software development companies around the world.
I’m pleased to take part today as the moderator. We’re very excited to be joined by Catherine Batchelor director of the UK competition and markets authorities digital Task force. Deputy Commissioner Hardin Ratshisusu with the Competition Commission of South Africa. Masayuki Matsui, economic section counselor with the Embassy of Japan in Washington, DC and Dylan McKee, co-founder of Nebula labs. He’s located in the United Kingdom in New Castle. As I mentioned earlier on, this is the fourth episode which is addressing how digital markets face new and expanding regulations on a global scale. As various governments act and seek to increase competition and protect consumer privacy.
Our goal here today is to discuss global trends in digital platform regulation, examine where approaches to regulating technology overlap, where they differ, etc. To begin and format wise, our thinking here is that each of the panelists can provide some opening remarks and introduce themselves further as they would like to. First up, then after that we can turn to some discussion and Q&A. I should say thank you to the audience members out there already who provided some questions for us to consider in advance that we’ll be able to address I’m sure. First up for opening remarks is Cat. Go ahead.
Catherine BATCHELOR:
Thank you very much. Thanks for inviting me to speak today. I thought I’d use it as a bit of an opportunity to set out a bit of a perspective on where we are in the UK in relation to these issues around digital competition and regulation. I think the first point to notice that I think within the UK there is increasing consensus around the need for an ex ante regulatory regime to deal with the competition problems posed by the most powerful digital platforms. I think that’s come from the firm in review, that was the conclusion of the firm in review that was published back in March 2019. It was also a conclusion from the CMAs own market study into online platforms in digital advertising that was published last summer, the final report. I think the case is essentially to deal with this purely using antitrust tools, those tools are very slow to apply.
The remedies are backwards looking, they’re case specific and they focus on remedying a particular harm at a point in time rather than being a forward looking tool to shape the behavior of platforms and try and actively prevent harm before it occurs. I think that’s our view on why you need an ex ante approach to proactively shape the behavior of these firms and prevent harm in advance. In December last year, we published advice to our government on the design and implementation of what that ex ante regulatory regime should look like. Essentially, we put forward a regime that would apply to firms with strategic market status. By that we set out that would be firms with substantial entrenched market power and where the effect of that market power are particularly significant or widespread. We set out three pillars that would be foundations of that SMS regime.
The first was a code of conduct, which was to set out proactively some principles which would govern the behavior of these firms with the aim of managing the effects of the market power. Preventing the firm from exploiting consumers or businesses who rely on the firm, or to prevent exclusionary behavior which might create an unlevel playing field. The second pillar of that regime was pro-competitive interventions. These are the ability to implement tools like data portability, or interoperability which would actively address the sources of market power. Try and create greater contestability in those markets. Promote actively competition and innovation. Then the third pillar of the regime was a bespoke merger regime for these firms with strategic market status to try and provide greater scrutiny of those transactions.
We provided that advice to governments at the end of last year and that is still very much with government for consideration. But government have already confirmed that they will establish a new digital markets unit within the UK competition authority from April this year. That takes us very neatly to where we are today. April is only a couple of weeks away. Essentially, that’s where we are in terms of the UK and priorities for us. Within the competition and markets authority also the key priority at the moment is on establishing that new digital markets units within the CMA. Evidently, any new powers are dependent on legislation and government action but what we will be beginning to do from April is to try and begin work to support in operationalizing that regime once government has legislated for it.
Alongside that, we will also continue to use our existing powers in digital markets to the full extent. We can’t sit and wait for legislation for the next couple of years. We have to be active in addressing anti-competitive practices. I’m sure many of you will be aware of our increasing antitrust work in relation to digital markets but also our continued consumer protection enforcement, our markets working on mergers work. I’ll touch on two other areas of priority very briefly. One is cooperation with other regulators domestically. Not only is there a new regime being proposed in the UK for competition but there is also a new online harms’ regime and there is also the existing privacy regime. We’re very aware of the need to ensure that all of this new regulation is coherent.
We’re working very closely with our fellow regulators particularly off common the ICO through the digital regulation cooperation forum to try and ensure that the landscape is coherent. The last point I wanted to touch on was international cooperation. Again, these are huge platforms operating across jurisdictions, we absolutely see that we will be more effective if we work with our counterparts in other jurisdictions not only in taken action but also in thinking about the evolving regulatory landscape. We intend to work very closely with our counterparts in other jurisdictions internationally to try and promote greater coherence and cooperation on the international scene between regulators. Very quick overview of where we are in the UK.
SCARPELLI:
Well, thank you very much. I think next up is Hardin. Go ahead.
Hardin RATSHISUSU:
Thank you very much Brian and thank you for the invitation. Today I’ll be sharing with you perspectives from South Africa on digital markets and how we’re trying to craft a path in this new area and seemingly complex area. But because we are running now there are some enforcement cases inquiry so I hasten to say that perhaps the views I’m expressing are my own and may not necessarily reflect the views of the Competition Commission of South Africa as we are currently considering other matters. I may traverse on cases and I wouldn’t want to be bound by those statements. Because I think we are exploring this topic in this platform. There’s not I think much divergence from our assessment of how countries are looking into digital markets and this digital fence.
We have seen engagements at a global level like the OECD, the international competition network and there is convergence in that and I agree with Catherine that we need to still work more at a global level, enhance international cooperation on these issues because there has to be some convergence in how we approach this. In South Africa, there is buy-in from government where the President established a presidential commission for 4IR and that was the starting point to start looking at how best should we be responding in South Africa as a small open economy. There are a whole lot of measures that are being proposed in various sectors. We continue to participate in that process. As the Competition Commission how to respond to this we started looking at also enabling markets for the digital future.
We looked at communication sectors, very concentrated in South Africa, we conducted an inquiry in that market and we managed to get the operators to reduce prices which I think has helped a lot especially during COVID when people were starting to work remotely we’ve seen those measures taking shape. We are making inroads in the financial services space advocacy there because these are in every market as well. But as the Competition Commission we’ve published just like many other authorities, we’ve published a paper on the digital economy and how we will be approaching these markets. Just how we would approach merger control, cartel investigations, abusive conduct and many other areas. In fact, we have just published the terms of reference for the market inquiry into online intermediation platform services now up for public comments and we’ll be finalizing this soon and start this inquiry in April.
The reason for this is that these markets to us are new and complex and maybe we are taking the approach that we need to try understand these markets and find solutions as the scope is quite wide. We would I think, like many authorities I think Australia, UK, we take them in chunks. That may cause some regulatory lag in responding to the challenges we face. But from our sense is that for the next three years we will be prioritizing digital markets. We have to really look at how analytical tools and cooperation with domestic regulators, particularly the information regulators is very important and shape a digital discourse at a global level. There’s still a lot of work. This is all what I can say. I think it’s something that we are grappling with but we hopefully we’ll find solutions that will not only enhance competition but ensure that these markets are inlcusive[inaudible 00:29:37]. Thank you.
SCARPELLI:
Thank you very much for those remarks. Appreciate that. Next is Masayuki. Go ahead.
Masayuki MATSUI:
Thanks, Brian. Thank you very much for having me today. I’d like to just mention briefly about to Japan’s approach on digital platforms. Japan is taking a co-regulation approach so to speak to bring the digital platform area. Co-regulation approach compared to government supplements, the limitation of self-regulation while taking advantage of its autonomy and the flexibility. Japan prioritizes this application of the Anti-Monopoly Law to the digital platform however, due to the nature of the Anti-Monopoly Law as a strict ex-post enforcement of regulation, Japan takes some measures to enable a prompt and appropriate law enforcement or extent activities regarding the digital market. As the law to supplement to the Antimonopoly Law, the act on improving transparency and the fairness of digital platforms was enacted in June 2020.
Then this law has been just enacted in February 1 this year. Before introducing this Act I’d like to give you some background and also discussion on this law. We understand that digital platforms have dramatically improved users access to market and they have become ever more important in the digital era. The meanwhile concerns related to digital platforms are emerging such as low transparency in trading as seen in changes in terms and conditions and no provision to reasons for refusal to deal and insufficient procedures and systems for addressing the rational request a platform users providing goods and services. Back in June 2018, Japanese government decided to initiate a policy consideration on digital platforms by the National Growth Strategy. The government started studies from the perspective of competition policy, information policy and consumer policy.
Then December 2018 based on this study, “the basic principles for rule development” were decided. There are four principles to achieve transparency, to ensure fairness and to realize fair and free competition and to consider data transfer and openness rules and to establish balanced, flexible and effective rules. Then year 2019 we proceeded the policy consideration in line with its basic principles, the Fair Trade Commission and the Ministry of Internal Affairs Communications conducted the fact finding survey on digital platforms. In May 2019, the government published the option on how the rules should be developed. There are four actions to be addressed, actions that are detrimental to business partners, actions that may exclude competition business, action that may restrict the business activities, or business partners, action that may lack fairness and transparency. That means lack of transparency in search and display criteria, insufficient explanation and disclosure of information, unclear screening criteria and operation, inadequate consultation system and dispute resolution means.
Then the government concluded that the first three categories should be addressed by the Anti-Monopoly Law and the last item, the lack of fairness and transparency should be addressed by the new regulation. Then the government established the headquarters for digital market competition in September 2019 at the cabinet Secretariat then started detailed work on the new legislation. Then the Act of improving transparency and fairness of digital platform was enacted in June 2020. In this law the Ministry of Economy, Trade and Industry takes necessary measures to improve transparency and fairness in trading on digital platforms. The Act is to require disclosing terms and conditions and giving prior notices of any changes they have to their platform users and ask digital platforms to make a self-assessment report to the Minister of Economy and trade industry. Then the METI, the Ministry of Economy and Trade and Industry assess the situation, the business operation based on the report and the assessment result. Then digital platform covered by this law that they’re having a sales of a little less than three billion US dollar per year in online shopping malls then they’re a little less than two billion US dollar or more per year in application stores. This is where we are here. We are going to implement this law to have much more clear visibility on the transaction in the data platform. Also, we are conducting researches of the digital or advertisement, it’s ongoing process. That is still on the process of discussion or researches. I think I should stop here, looking forward to the discussion. Thank you.
SCARPELLI:
Wonderful, thank you so much. Last but not least here on the opening remarks, Dylan.
Dylan McKEE:
Yes, thanks for having me here. I’m really glad to be able to come along and share my thoughts, my experience as an app developer in this debate and my views on competition because I think, first and foremost, competition is hard. It’s a difficult cycle to regulate and being digital only makes it more difficult. I think there’s certainly a big conversation to be heard here. I think it’s an extremely important one. I think that the way that we perceive online platforms and regulate them has such a direct impact on the products that we create as app developers. The way that we reach our customers and the way that our customers and partners can reach their customers as well. A huge amount of day-to-day importance upon laws that need to be able to adapt regulations and be able to adapt and keep current.
In terms of background and my perspective on this and where I’m coming from, I’ve been working in the mobile app industry for over 10 years now. I started developing apps in my bedroom when I was a teenager, at the launch of the Apple’s App Store back in 2009. Since then, I’ve had the opportunity to witness the growth and the change and the opportunity in the app economy. I’ve built things that have became accidentally really quite popular from backgrounds at the age of doing it as a hobby to taking it forward into a business where I am now. I’m the co-founder of Nebula labs and we’re a software house. I co-founded this with my partner Nick Flynn and we specialize in developing mobile apps and web platforms and the bespoke software to go behind them.
We work with a really wide range of clients from startups, from one or two person teams to realizing their ideas which was a technical partner to enterprises and government organizations. Our niche market is location based software. We do a lot of work in the location based sectors. We do a lot of work with, for example, the local transport provider up here in Newcastle where we have a smart ticketing app that we’ve integrated with Google pay and the Google infrastructure to make that work. We also work in a few other sectors less heavily. For example, we do quite a lot of work in health and fitness. Last year we got to Apple’s App of the day twice with one of our health and fitness apps that we’ve developed for a local startup team. We also are doing quite a lot of work on data analysis due to location based work that we’re doing.
I started on iOS personally. But today, we’ve got apps on all platforms. We’re now up to seven employees of a typically technical basis as well. We’ve got the ambition to keep on growing. But we need a healthy app economy and digital economy around us to able to do that. We need to be able to address our clients and our clients needs in a way that is compliant in a legal and regulatory environment. Obviously, particularly being here in the UK, post Brexit there’s a lot of uncertainty in ways that we might go. That opens up, obviously, potentially a lot more opportunities but potentially a lot more question marks and gray areas really, in my opinion, and a lot more uncertainty, in my opinion about where we might go. I think in terms of regulation going forward that’s a big question for me.
In terms of, I think one of the reasons that we have success so far is that the app economy is a trusted ecosystem. It’s where customers can download trusted software to their phones and it’s almost a central place to discover this software that we can develop and get it out to them. I feel like, although some big parties want to regulate against that for their own interests, I think it has to be done in a way that can work for small parties like ourselves and our partners, our clients. I worry that too much regulation to help a few big parties could potentially impact a lot of small parties really significantly in ways that haven’t been seen. I think there are talks about regulation in that and I think they need to be really carefully considered from all parties and all sizes before going down a path there.
I feel like no matter what happens in terms of regulation it’s important to keep in mind that the app economy is an ecosystem. It’s not just an economy. There’s more to it than money changing hands. Any changes that impact a large online platform and business model will have a direct impact on us, the smaller, more independent players in the scene. That’s why it’s important that I think anything that is done to benefit a big player has to be looked at from a small perspective as well. We need to look at whats working and what isn’t working rather than trying to just fix things for the sake of it and trying to fix things that aren’t real problems or aren’t really actually stifling innovation in my opinion. Thanks so much, am looking forward to chime about this.
SCARPELLI:
Great. Well, thank you all for those opening remarks. As I mentioned earlier, we got a number of great questions from the audience in advance. These are mixed in a little bit but just for moderators prerogative, one interesting thread that I thought might be interested in picking up on from some of your opening remarks and related course, to global trends, and the theme of this entire discussion is the topic of international coordination. I wondered if is there a adequate construct today for that international coordination and information sharing between your governments and others? For example, Hardin you mentioned the OECD. That certainly is one but is it, in anyone’s opinion, is it sufficient? Is there more work to be done for international coordination? Should it be done on more of a bilateral and formal basis? Is there a role for free trade agreements, FTA is with respect to this issue? Just curious about any thoughts that folks had about that, an interesting thread that was raised in the opening remarks.
BATCHELOR:
Should I perhaps jump in first? I think our sense is, there are already very good mechanisms for international coordination both bilateral and multilateral. We have very good contact with our fellow competition authorities in other jurisdictions. Equally, we absolutely appreciate the role of organizations like the OECD, or the international competition network in bringing organizations together to discuss particular policy issues in relation to competition in digital markets. But having said that, I think our view is that there is scope for these mechanisms to be strengthened going forward. I think there are a couple of areas for that. One is about cooperation mechanisms in enabling us to work better with our counterpart authorities. We highlighted this in our task force advice.
Things like information sharing gateways, things that would enable us to pass information between each other and therefore perhaps economize or share better information on whether it’s information in an investigation or a case or whether it’s thinking about remedies. We think there are certainly areas that could be strengthened in terms of enabling us to cooperate better with our counterparts. The other is perhaps a little bit more coordination. I think we recognize that many authorities across the globe are essentially looking at the same issues in a slightly different gris, perhaps using slightly different tools. I think our sense is there is probably scope for greater coordination to try and come together and say, “Well, we’re all looking at the same issues. Can we think about this in a more coordinated way?” I think that would be in our benefit but probably also in the firm’s benefit. I think there’s scope to do more but building on a very strong foundation.
SCARPELLI:
Sorry. I saw you unmuted yourself Hardin.
RATSHISUSU:
Yes.
SCARPELLI:
Yes, please. Go ahead.
RATSHISUSU:
I thought I’d chip in, maybe follow that order because I think the question you’re raising is a very important question that of international cooperation. I can tell you, for competition regulators we’ve been traversing with this for years on things that we should do to enhance international cooperation. It is still not settled as we speak today, just on the core work we’ve been doing for years. If you look at cartels, abuse of dominance, what does it mean to all of us around the world? There is some consensus in some cases. How do we tackle cartels? If you look at the UN has adopted a framework only last year that would enhance international cooperation but it’s still guiding principles on how authorities can collaborate. We have instruments through the international competition network, we have instruments through the OECD.
These instruments exists but for the digital markets, if you ask specifically this one I think we are lagging behind developments as regulators. I get a sense that in this particular problem we face because we face very few large platform firms that most likely affect us in the same way. This is the first time we face a problem like this where and I think this is where you expect more convergence around the world because if we are dealing with one company, dominant search company, we experienced it the same way. You have seen coordinated responses in the EU. There is a coordinated response there through the bloc. But I get a sense that it’s a challenge on us as competition authorities to ensure that as Dylan is warning us, don’t sometimes over regulate because we may think we are solving a problem but creating a bigger problem.
But we can only do that if we collaborate and I think bilateral engagements on these help us understand technical questions that we should address, we work very closely ourselves with the UK CMA, the US, EC authorities but I get a sense that the sooner authorities get back again on the table so this ought to be the main agenda. [inaudible 00:47:15]International cooperation is the main agenda for the OECD, main agenda for the international competition network on how best should we collaborate. Right now it feels like a race because we are doing something in South Africa, the UK is doing something, EU is doing something, US is doing something, Australia is doing something. Hopefully, with all these discrete interventions we will be able to come to some form of a solution. You ask about trade, trade is very important.
In fact in Africa there’s an opportunity now because we have the African continental free trade area which is now in effect. It’s going to join all 55 member states, 1.3 billion in population. This is the first time we have an agreement like this in Africa. There is a competition policy chapter in that framework and this is in very digital market or digital platforms probably a candidate market to consider as a continent. I think we can look at what’s feasible, regional cooperative framework is more feasible, is it over ambitious if we are to pursue a global unified agenda? This is something that we ought to continuously explore but we need some certainty on this without delay given the challenges we’re facing at the moment. Thank you. That’s my contribution to that.
SCARPELLI:
Great.
MATSUI:
I just want to add other few points. I just want to echo that international coordination has been well exercised but also we should strengthen international coordination so that the business can be more I think, open and transparent and more innovative for new entrants. The Japanese Government is also prioritizing having a more transparent process for the regulations. We took long process for two years to implement a new legislation and we are conducting a lot of researches on the digital market and the digital advertisement market.
Also, we try to provide the information in English as much as possible. I think it’s very much the barriers for the Japanese regulation where you only provide the information in Japanese. This is not good for any international businesses in the digital platform as this is a cross border issue. We are trying to provide information or the process or reports in English as much as possible so that we can have more transparent, we can have any discussions with it. Also, we are prioritizing having a lot of hearings and public comments process through the regulation so that we can increase more transparency. And we are prioritizing also to having more international coordination. Thank you.
SCARPELLI:
Great. Well, I had, just as rounding up the different questions that we got, I had a good one for you Dylan if it’s okay. Thinking about your perspective as a developer over the years, when we talk about how the App Store lowers barriers for entry for developers like yourself, how does that mesh with some of the antitrust theories of exclusionary conduct and where a small business might find their customers? What do you think about that and where’s the balance?
McKEE:
Really good question Brian. I think that’s a really good point that needs to be carefully considered. I think going back to especially what Hardin was saying that about this almost race regulation, it feels like we’re definitely joining that at the moment and it feels like it’s almost a race out of necessity to be in the race rather than a race out of necessity from the industry. In some ways I think not doing it just for the sake of saying our country’s doing that as well or our trading block’s doing that as well is a really important point in the wider picture. I think looking at do we actually need this rather than we this because they’re doing it is a really interesting view and probably a different discussion there.
But going back to where we are as a small business, a small developer who has done really well in some cases and being on the App Store I don’t feel like competition is one of the things that really holds us back. I think, on the contrary, it’s a competitive world but that can be really good in terms of pushing us to innovate, pushing us to look for different solutions to the same problems that people are trying to solve but in different ways and always looking at the user experience and the user centeredness and focus of the products that we develop. I think in that way competition can actually help out. I think, yes, app stores and regulated marketplaces that are regulated by corporates not full regulation bodies do cause some stress in terms of review processes, that kind of thing.
But in terms of on a day-to-day basis, as a independent software developer it’s not one of the things that is in our top three, or even top five stresses. We’ve got a lot of other challenges to have to think about like finding the right partners to work with, keeping the right culture within the company and the products that we develop. If a player takes a bit longer than we would have liked to get onto the App Store, it’s an inconvenience by all means but it’s not a business breaker. On the contrary, I think everyone having equal access to the store at the end of the day is really good in some ways because it’s allowed us a small team based up here in the north of England to get an app onto the front page of everyone with an iOS device, for example, their app store last year by being up for the day which is really a huge achievement for a small group of people based up here compared to a multimillion dollar Silicon Valley company that might have been on the front page the day before.
Having that equal access to the store and that level playing field, no matter what size of developer you are is really important. I think if your products good and innovative it’s the user experience and the innovation that wins there. Whether you’re a huge player, or a small player like us, you’ve got about the same chance of being able to get that publicity and that success through the app store. Whilst there are drawbacks to some of the processes involved, they’re definitely not the biggest business concern and can be a huge business gain given the level playing field. I think the other thing I would like to say is that it’s an extremely fast moving fast changing market where releasing updates of apps, sometimes on a weekly basis, sometimes even more regularly peak times for some of our clients and for some of our projects.
I think in terms of regulation that fits with software that’s been released that regularly it’s going to have to be really carefully brought up because a law that’s made today which sounds great when it’s passed might be so irrelevant in the way that we’re releasing software in two or three years time and laws obviously take, in the UK, a law can take six months to a year to get passed at least between the House of Commons and House of Lords etc, for example, and to be able to change the law quickly enough to keep up with digital economy is really difficult in my opinion. There’s so much to think about there that I just don’t think that traditional government can cope with in some ways. Like I say, I think we’ve done really quite well out of the actual being on a level playing field, for example, me personally, my first iOS app that I released was a real unexpected success.
It got featured in, well not featured but it got on the top downloads charts in over 20 countries worldwide within the first few months of release. There were hundreds of 1000s of downloads a week when it was first released to over a million worldwide now. That was when I was 13 pulling out of my bedroom and to have the ability to do that in a level playing field that allowed me to put that out there and be alongside the Facebook’s and Googles at the time was absolutely phenomenal. I think if it was too heavy regulation that was imposed it would almost stifle anyone being in my position in the future from doing that. It would have almost been, it was fine for that golden age when it was a free and open marketplace but now it’s so heavily regulated there’s no chance of you being able to do that.
After its existence for 13 years now which it’s quite a long time they’ve completely changed the game in terms of how people get software, they’ve introduced these trusted gardens of apps and developments and that’s allowed the app economy to grow to what it is today and it’s highly unlikely that the world of tomorrow will look that much different. I think in terms of staying ahead we’ve got to be able to have an open ecosystem where regulation is quite light touch and is the bare minimum required to keep these places fair rather than really heavy, really set in stone and really rigid. I think that’s my take on it from my position in the company.
BATCHELOR:
Am I okay to come in and just perhaps provide a bit more of a sense of where we are in the UK to respond to some of Dylan’s points?
SCARPELLI:
Absolutely.
BATCHELOR:
I just thought, it’s really helpful listening to you Dylan and it might be that it’s worth the conversation offline after this as well. But I just thought I might reassure in terms of the approach that we’re proposing to take in the UK. Essentially, what we are asking for from government are the tools to be able to regulate where we see clear evidence of a problem. We’re not talking about trying to come up with a rule now that would apply to everyone de facto, what we’re asking for is the ability to do an evidence based assessment to consider whether there are problems in a particular market. Whether a firm has substantial entrenched market power and the effects of that market power are widespread and significant.
If we find that to be the case, and there to be particular problems then that assessment would involve coming out and talking to a range of stakeholders and market participants such as yourself that we can put in place targeted regulation where it is needed. There are two advantages to that approach, one that we can craft an approach which is targeted at a very particular problem. Secondly, that because we are setting the regulation, we can update it and adapt it exactly as you say, as markets change. It’s not subject to a two year process whereby it has to go through the House of Commons to decide whether it’s needed or needs to be changed. The idea is to give the DMU, the new Digital Markets Unit, well at least in our proposals and as I say this is all still for government, the ability to be able to carry out that evidence based assessments then if we find the potential for exploitative or exclusionary conduct to be able to put in place targeted remedies.
I hope that assures, in a way that we are very much trying to design a system which builds in some of the points that you’re making about the fact that a range of participants will have different views on their experience of a market, the fact that markets move quickly. The fact that, as I say the problems will be diverse. I think it’s worth saying the only market that we have looked at as the CMA is digital advertising. We found a clear case in relation to digital advertising that there was a case for regulation. There is still a need to do that evidence based assessment in relation to digital markets more widely and we’re not coming at the issue with any preconceived ideas as to where our regulation may be needed. But what we’re asking for is the tools to be able to address it where we do find problems in the future.
SCARPELLI:
Great. Thank you. Hardin, Masayuki? No worries, if not.
RATSHISUSU:
I think there are things that, of course, we come from a regulatory perspective. There are things we see that maybe a small app developer may not see. If I give you an example, we are looking at online intermediation. One of the areas we’re looking at is the app stores, predominantly the major ones. What we’re interested in is access to the platform. It may look like, access is easy but we know that there are some challenges especially when you start developing products that compete with these platforms. We’ve seen complaints in other jurisdictions. I think Spotify, it’s one of the major ones that’s currently ongoing.
What we are talking about and like the recurring theme from colleague in Japan, that it’s about fairness. Again, it is a call to these large platforms because I’m not hearing even the large platforms coming to the party to say they are hearing the concerns and they would like to respond in a certain way. I hear a lot of defensive attitude, which I think is causing national jurisdictions to act in the manner that we are. I think we need that engagement now with the platforms, we need that engagement as regulators as well so that we can find a more lasting solution that will promote competition and innovation in these spaces. Thank you.
MATSUI:
Also, I just wanted that I agree with Dylan’s observations. If we have very heavy laws it’s very difficult to catch up with new innovation and development. In our new legislation, as I said, we are taking co-regulation approach. It’s a collaboration between the government and the digital platforms. That’s why we introduce self-assessment by the digital platforms. Also, it’s important to observe the current situation, the market as Catherine mentioned the evidence based. Then if we can share the same understanding of the market situation and also assessment or any problems we can work together, the government and then the digital platforms can work together. We’d like to have this collaborative environment. Then also for the trusted ecosystem in the digital market so that we are trying to create this good circle or ecosystem through this new approach assessment. This is how our digital headquarter is trying to do. Thank you.
SCARPELLI:
Thanks. Appreciate everyone’s contributions on that one. Another question that rolls several that we received hopefully into one theme and interested in anyone’s viewpoints here is, between the laws that you all have in place that as a regulator you’re using, or and the way that you think it should be or both, should the focus of a digital platform inquiry or an investigation be more on the consumer harm aspect, or the competitive harm aspect? Is it both and back to the international coordination topic that we started the discussion with, I wonder if that is a point of divergence or convergence across different regulators such as yourselves and where you are.
BATCHELOR:
I’m happy to offer a perspective, but equally don’t want to be the first one to jump in every time. I would say they’re one and the same. We don’t look at competition for competition’ sake. We look at competition to the extent it delivers positive outcomes for a consumer. To the extent which in a competitive market that delivers, whether it be lower prices, better quality products, and better clarity on terms and conditions, greater innovation. We care about competition and so far is it delivers those outcomes for consumers. The focus is very much on the end consumer whether you are looking at the outcomes directly for the consumer themselves, or whether you’re looking at, for example, the relationship between a platform and a business, if you’re looking at that you’re still looking at the impact or the post effects on the end consumer.
If, for example, given we’ve been talking about app stores, and this isn’t by any way, an accusation, it’s just an example. But if, for example, you were to say that an app store was exploiting an app developer, then we would care about that in the sense that may lead the app developer to produce worse products, worse apps for consumers, whether that means worse terms and conditions in terms of how consumer data is used, or lack of innovation in terms of the quality of the app in the future. The focus is very much on competition which delivers outcomes for consumers.
SCARPELLI:
Anyone else?
RATSHISUSU:
I think that’s a good question I think it’s probably for the regulator. But I’m also eager to hear from the app developer because it depends on the platform. Because this is a very difficult one, because you are hearing when consumers don’t pay for something, it’s free. It’s good for them. This is what we hear. What we are saying as regulators is that sometimes something what appears free is not actually free. There’s a cost to it. I think the argument has been the data that maybe you’re giving away your data. That’s the price you’re paying. Some markets, unfortunately, with the strong network effects, the structure never changes. You create large dominant platforms. This is the challenge for authorities. What do we do and as Catherine is saying, if I look at the competitive process, what we don’t want to see it’s a platform that distorts a market, that excludes other participants from playing in that market.
That raises barriers to entry into a market to the point where it creates a monopoly and we know with a monopoly sometimes this monopoly may be tempted to exploit its position. This is a question that it needs a lot of education to the consumer so that the consumers can understand our actions that when you’re looking into the activities of a large platform we are not just looking at the service they get, we are looking at other things and these other things they matter for the app developer, as an example. They matter for someone who would like to advertise on the platform.
Unfortunately, here we’re dealing with the market with very huge and large network effects and if we do not attempt to this in time we may not be able to reverse where there is likely to be harm in this space. I have to choose my words carefully because we are still looking into these markets to try understand exactly how best should we respond. As I’ve said, we have a market inquiry in South Africa, we are looking into some complaints, but indeed, this is that question that needs an informed consumer so that consumers can also support the work of regulators and make meaningful contribution to the issues we are faced with.
MATSUI:
I just want to add one comment. This is a very good question. This is fundamentally important to have a balance between consumer protection and the competition. We are taking both as important priorities. As our first approach, we found out that we need to do something about the transparency especially between the digital platforms and the business users. We need to touch on this problem and we address this issue first. But also we are looking at how we can have a good environment to provide good services to consumers especially how the data are treated by the digital platforms and the customer data are properly treated or not. This is one issue that we have to look at. Also are there any lock-in effects in the big digital platforms and also are there any good choices for consumers to choose the digital platforms and services? We are looking at both. They’re very important values and we would like continue our work on this.
SCARPELLI:
Okay, great. Well, I realize we’re getting a little close to the end of our time here. But I had maybe one question which I thought in particular I think something that you were talking about Hardin, your response to the last question is something of a bridge to. But I would imagine Dylan, others, you probably also have some views on this. If it’s fair to call it a tension, is there some tension between privacy and antitrust policy goals as the privacy advocates want better controls and the anti trust interests may have had problems with the hands-on approach that that greater privacy controls could require, how can that tension again, if it’s fair to call attention be managed?
RATSHISUSU:
Thank you. Thanks for that. I think this is something that we and I think there is some consensus here at the global I think OECD discussions on the need to ensure that the users are not exploited. I think everyone has a right to privacy, I think that it’s a very important issue. There’s some common understanding to that and I don’t think we should reach a point where we say it’s all about competition. Transparency is very good but there’s a point where I think we have to draw the line.
This is where it looks like it’s tension but I think it’s reality especially when we look at individual data privacy. That, to me, it’s something that needs to be preserved but at the same time we need to see competition authorities working more closely with the data authorities because there could be certain things that can be done that stifle competition but if we work together, we can strike a balance between the two. But yes, I don’t think it’s either privacy or competition. I think we have to strike that balance. Thank you.
BATCHELOR:
I would wholeheartedly echo with what’s just been said particularly the point that I think competition authorities need to work more closely with data protection authorities. But I completely agree. I think if you come back to this fundamental point that both of those regimes center on the idea of informed consumer choice, informed customer consent. In data protection you want consumers to be able to make an effective choice about how their data will be used or processed and shared. Equally, you want that from a competition perspective as well. Because if consumers can do that, then it actually drives firms to be able to compete more to provide the level of privacy that consumers want. I think there are a lot of synergies across the two regimes. I think that there’s a lot that can be done through competition and data protection authorities working closely together.
MATSUI:
Just to want to echo Hardin and Catherine, that it’s a very important to work between the authorities the Data Protection Authority and also competition authorities. This is a very important point. Thank you.
SCARPELLI:
Dylan, any thoughts on that?
McKEE:
Definitely. I think the two work together quite well. But I think to the end consumer not to a business in the space, the biggest beneficiary there’s always going to be the privacy aspect and that’s as a consumer using an app. That’s what I care about more than I think the process that the company went through to get that up to me if that makes sense. I feel from a truly consumer point of view the real issue there probably is the privacy and totally support better privacy regulation. I think, obviously, particularly what Apple’s doing at the moment is really impressive in terms of privacy and disclosure and that informed consent and I think that is the right direction to go in. I feel like some regulation around that would be more welcomed by developers like myself.
SCARPELLI:
Okay, great. Well, I do realize here that I think we have reached our time. There’s so many more interesting threads that we could pull on and talk about but really I think for the App Association and for CPI and I’ll go on a limb and say for all of the audience here who are watching this live and we’ll watch the video of it in the future, thank you all so much for your participation and sharing your expertise and experiences here today. Fascinating questions that we’re only just seeing the tip of the iceberg on and all the work that you’re all doing is extremely important and impactful. Certainly my organization looks forward to working with you all moving forward. With that, I would offer a virtual round of applause to you all and thank you so much.
