Some countries have called for several years for international cooperation for competition in digital markets. Yet the declarations are political without concrete policy proposals on how to achieve cooperation. International cooperation is vital to ensure a common approach that minimizes compliance and enforcement costs at a time of an avalanche of investigations and legislations worldwide to tackle competition issues in the digital economy. The paper proposes three cost-effective solutions to inform decision-makers in the context of future discussions in Autumn 2022 related to enforcement and policy approaches to competition in digital markets.
By Christophe Carugati[1]
I. INTRODUCTION
Some countries have called for several years for international cooperation for competition in digital markets. However, there are not yet concrete proposals to achieve it. The clock is ticking. Countries worldwide are investigating and enacting new competition rules against the same firms and the same practices globally. Yet, there are no concrete cooperation mechanisms that would lead to a common solution. Instruments are vital. Competition authorities and legislators are duplicating investigations and legislation, increasing compliance and enforcement costs with a risk of inconsistency — all the ingredients for ineffective and costly enforcement. International cooperation would minimize costs and ensure effective enforcement thanks to a common approach. But how to achieve it? This paper proposes three cost-effective solutions to inform decision-makers, bearing in mind the G7 Autumn 2022 discussions related to digital markets.[2]
Section II reviews the calls for international cooperation. It shows that the declarations are political without concrete policy proposals. Section III examines the benefits and costs of international cooperation. It argues that the benefits of cooperation outweigh the costs, as the digital economy is often borderless, raises cross-border competition issues, and faces legislations that are still nascent. Section IV then proposes some recommendations for international cooperation. It recommends the creation of a public database on competition cases in digital markets at the OECD with the assistance of the ICN, the development of guidance for the application of the relevant legislation at the ICN, and the creation of a center of digital expertise within the ICN. Section V concludes.
II. REVIEW OF THE CALLS FOR INTERNATIONAL COOPERATION
Some countries have called for international cooperation for competition in digital markets for several years since 2019 as competition authorities worldwide focus their work at both the enforcement and advocacy level in the digital economy.
In 2019, the G7 competition authorities, under the French presidency, issued a common understanding on tackling competition issues in digital markets.[3] This was at a time of a wave of expert reports on competition in digital markets in Japan,[4] Australia,[5] the United Kingdom,[6] the European Union,[7] and the United States.[8] The common understanding clearly stated that the borderless nature of the digital economy requires the promotion of greater international cooperation and convergence in applying competition laws through existing international and multilateral fora, such as the Organisation for Economic Co-operation and Development (“OECD”) and the International Competition Network (“ICN”) representing 140 competition authorities. They welcomed work commissioned by governments and competition authorities and committed to pursuing international cooperation. In other words, the only concrete proposal was the pursuit of ongoing discussions.
Furthermore, as part of the French presidency, the OECD co-chaired a conference on competition and the digital economy. Participants from the G7 competition authorities, the private sector, the OECD, and academia agreed to pursue international cooperation in the context of international fora and among competition authorities, notably through information exchange, coordination of cartel leniency programs, and joint investigations.[9]
Since then, the G7 has issued a declaration concerning competition in digital markets each year.
In 2021, the G7 under the UK presidency, with Australia and South Korea, issued a declaration stating that they shared policy objectives for competition in digital markets.[10] At a time of a wave of legislations to improve competition in digital markets, including in the EU,[11] the UK,[12] Germany,[13] Italy,[14] the U.S.,[15] and South Korea,[16] such a declaration was timely. They reiterated the need for international cooperation through regular dialog, exchange of information, and the alignment of international policy and enforcement approaches. In other words, the only concrete proposal was to pursue informal exchange between governments and competition authorities.
Moreover, as part of the UK presidency, the G7 competition authorities, joined by Australia, South Africa, South Korea, and India, issued a compendium of approaches to improving competition in digital markets.[17] The compendium stressed the importance of deepening international cooperation by continuing ongoing discussions and work and outlined some initiatives, such as the numerous OECD best practices roundtables dedicated to competition in digital markets.[18] Of particular importance, it referred to the current OECD work for legal models to support cooperation in the digital era. Again, the only concrete proposal was the pursuit of ongoing work.
In 2022, the G7 under the German presidency issued a declaration stressing the need to deepen international cooperation through international and multilateral fora regarding platform regulations and their implementation.[19] In this context, they will compile an overview of legislative approaches to competition, contestability, and fairness in digital markets to foster greater coordination. At a time when several of the above countries adopted and are starting the implementation of regulations to promote competition in digital markets, including in Germany,[20] South Korea,[21] and the EU,[22] the overview is relevant to ensure consistency among these countries. Moreover, G7 countries will support discussions in autumn 2022 related to enforcement and policy approaches to competition in digital markets. They also welcomed ongoing discussions among G7 competition authorities. In other words, the only concrete proposal was a compilation of an overview of legislative approaches. There are no proposals on how to foster enforcement and policy approaches.
In sum, there have been many calls for international cooperation without concrete policy proposals on how to achieve it.
III. BENEFITS AND COSTS OF INTERNATIONAL COOPERATION
International cooperation enables the achievement of various purposes, from ensuring a common understanding of a case to developing a common approach in competition decisions. However, competition authorities and businesses must balance the benefits and costs of international cooperation. Indeed, cooperation involves costs as it requires a certain level of harmonization between countries to ensure convergence.[23]
On the benefits side, harmonization reduces legal uncertainty, transaction, and compliance costs and enables economies of scale. It internalizes interstate externalities that might create a rule from one country to another, thus preventing “a race to the bottom” to attract economic actors.
Moreover, enforcement cooperation enables competition authorities to develop stronger and better relationships with their counterparts, improve staff quality and enforcement practices, raise their international and domestic reputation, and improve knowledge of other legal systems and sectors.[24]
On the costs side, the process of harmonization in the short term might increase transaction costs due to the process of standardization, such as amending contracts. Moreover, harmonization implies that countries cannot satisfy their preferences with specific national laws. They thus cannot learn from the diversity of national laws, in which the learning process is helpful to design efficient rules. Lastly, various national laws make it more difficult for interest groups to seek more rent as they have to lobby in several jurisdictions.
Furthermore, enforcement cooperation entails some costs for competition enforcers. These include resource-related costs, time-related costs (e.g. delays in investigations), administrative and communication costs, language and time difference costs, costs related to the differences among legal systems and procedures, and risks of disclosure of confidential information.[25]
In the digital economy, the benefits of international cooperation likely outweigh the costs for three main reasons.
First, the digital economy is often borderless. Businesses apply the same practices globally. Cooperation allows businesses to save compliance costs and scale up cross-border. For example, competition authorities and legislators worldwide focus a lot on interoperability, namely the communication between products and services, to foster competition. The European Digital Markets Act (DMA) is the first legislation that mandates messaging services such as WhatsApp to be interoperable with rivals’ equivalent services (Art. 7 DMA). As messaging services allow users to send messages worldwide, the DMA has de facto an impact worldwide. In this case, international cooperation ensures that other legislation or enforcement actions do not lead to opposite results that would raise compliance costs and prevent scale-up.
Second, the digital economy often involves the same competition issues worldwide. Competition enforcers face similar problems against firms that apply the same practices globally. The problems are different depending on the business models of each firm but are recurrent in multiple countries. Cooperation allows competition agencies to save enforcement costs and upscale their knowledge. For instance, Apple is facing several antitrust actions concerning its app store rules that prevent alternative payments, including in the UK,[26] the EU,[27] the Netherlands,[28] the U.S.,[29] South Korea,[30] and Australia.[31] However, existing remedies in the Netherlands and South Korea differ. The Dutch competition agency prevented Apple from imposing on dating apps to create an alternative version of their apps to use third-party payments.[32] By contrast, the South Korean competition authority allowed it.[33] Both countries allow Apple to charge developers a commission fee to use alternative payments, whereas complainants seek to bypass Apple’s commission fee for in-app purchases. In the EU, the Commission could impose a new requirement to prevent the commission fee. In that case, Apple would face three interpretations of the same rule mandating alternative payments that conflict with each other, leading to inconsistency. In that case, international cooperation ensures that competition authorities share knowledge to guarantee consistency.
Third, the digital economy faces legislations that are still nascent. Legislators worldwide are considering new legal instruments to deal with competition issues in the digital economy. Yet, only Germany, the EU, and South Korea have specific rules. Only Germany has started to enforce its new competition law to digital markets by designing firms falling within the scope of the law and by opening or expanding existing antitrust investigations. Cooperation allows enforcers to improve their knowledge of other nascent national laws and businesses to benefit from greater legal certainty on how they will deal with new competition issues. Moreover, as the legislative regimes are still young, the cost of harmonization is low compared to the benefits.
Of course, the benefits and costs and the effectiveness of international cooperation depend on the instruments for cooperation.
IV. RECOMMENDATIONS FOR INTERNATIONAL COOPERATION
Instruments for international cooperation already exist. These include: informal (e.g. information exchanges) and formal cooperation (e.g. information exchange with confidentiality waivers); formal agreements (e.g. Memorandums of understanding between competition authorities); regional enforcement cooperation (e.g. the European Competition Network); notification of planned or current investigations; comity that takes into account other jurisdictions’ interests; assistance in investigations (e.g. to gather evidence in a different territory); enhanced cooperation (e.g. resource-sharing, work-sharing, including lead enforcement agency and joint investigative teams); and mutual recognition of decisions.[34]
However, international cooperation faces limitations due to resources, coordination, legal barriers, trust and reciprocity, and other practical issues such as language or time differences.[35] In particular, legal obstacles related to the exchange of confidential information, assistance in investigations, and enhanced cooperation might require changes in national laws that will likely take time.
The OECD is currently working on improving international cooperation following a 2019 survey from competition authorities worldwide in the context of a joint report by the OECD and ICN on international cooperation in competition enforcement. It will work on developing enforcement cooperation work-products and networks, providing policy and practical support to develop effective regional enforcement, improving transparency and trust, and removing legal barriers to cooperation. Despite respondents calling for future OECD work to focus on effective enforcement cooperation related to digital economy issues,[36] the OECD and ICN did not outline any specific areas of focus to address it.[37]
The digital economy raises specific issues for international cooperation due to the cross-border and cross-regulatory nature of competition issues, requiring new and complex digital skills and tools to analyze data and algorithms. It is worth noting that some traditional non-digital sectors, such as automotive or insurance, are likely to face similar issues due to the digitalization of the economy.[38] Yet, international cooperation will occur in these sectors only in cross-border cases or if the competition issues of a national actor are similar in different countries.
Some authors have thus called for establishing new international bodies, such as a Global Digital and Data Regulator aiming to create a global regulatory framework for the internet and data, and a Global Competition Authority seeking to deal with global competition issues.[39] Yet, the latter necessitates high operational costs and a political will among countries to create new international bodies, which is highly unrealistic in the current geopolitical context.
However, some jurisdictions have created new domestic bodies to deal with the cross-regulatory nature of competition cases. The UK launched in 2020 the Digital Regulation Cooperation Forum (DRCF) between the competition, data protection, telecommunication, and financial authorities to ensure greater cooperation on digital issues by setting joint projects, approaches, and teams.[40] France created in 2020 the digital platform expertise pole (“Pôle d’expertise de la Régulation Numérique (“PEReN”) in charge of helping state administrations, including the French competition authority, to tackle digital issues by supporting them with data science skills and tools.[41] Last, the DMA sets up a high-level group composed of the European bodies of the competition, data protection, consumer protection, telecommunication, and audiovisual media authorities, to provide advice and expertise to the Commission in the implementation of the DMA and to ensure a consistent regulatory approach across different legal regimes (Art. 40 DMA). At best, if successful, such cooperation models between different authorities should be elevated at the international level to solve cross-border and cross-regulatory issues. For instance, some competition, consumer protection, and data protection authorities have investigated WhatsApp’s privacy change to share some data with Facebook without giving a choice to users in 2017 and 2021.[42] However, such international cooperation is likely to take several years as it is already difficult to coordinate between authorities at the national level.
While these domestic or supranational solutions are welcome to improve enforcement cooperation among various regulatory fields, they do not amount to international cooperation mechanisms. In particular, the digital economy raises specific issues related to the application of competition law, not so much associated with substantive or procedural laws. Therefore, recommendations to improve international cooperation on digital matters should focus on implementation and enforcement. In this context, the OECD and ICN should focus their work on the below three cost-effective solutions that enable effective international cooperation on digital issues at the least cost.
First, the OECD, with the assistance of the ICN, should create a public database on past and ongoing competition cases in digital markets. Competition authorities might not be aware of ongoing investigations in other jurisdictions. In this context, the OECD should create a public database on cases with a non-confidential summary, mentioning the alleged infringer and infringement to competition and the status of the case. The OECD is already familiar with such practices, as it has created a database on international cartels.[43] Therefore, the database would enable competition authorities to be aware of ongoing issues to timely and effectively coordinate their enforcement actions.
Second, The ICN should develop guidance for the application of legislation dealing with digital issues. Guidance is a flexible tool that can influence substantive or procedural laws. In this regard, such guidance enables interoperability among national laws while preserving the regulatory autonomy of each country. The implication is that the guidance on the assessment of competition issues neither forces a country with a different legal regime to change its law nor to adopt the rules from the most restrictive regime, as the guidance is interpretative rather than prescriptive. In other words, the guidance helps interpret an issue pursuant to the national legal regime without changing it. The ICN already works on this aspect. For example, a 2020 ICN survey report outlines that it is considering guidance on the assessment of dominance in digital markets.[44] Respondents to this survey also pointed out that guidance would be welcome to deal with other digital issues, including, among other things, market definition, theories of harm and conduct (including zero pricing), effects analysis, and remedies. In this context, the ICN guidance would enable competition authorities to understand better how to tackle digital issues consistently.
Third, the ICN should support within its network the creation of a center of digital expertise. Digital issues require complex digital skills and tools. Yet, competition authorities might not have the resources and tools to deal with that due to resource constraints. In this context, the ICN should create a center of digital expertise composed of the digital economy unit of each member. It would provide technical support by developing digital tools for ICN members in dealing with digital issues. It could even provide assistance for investigations and enhanced cooperation in the remit of existing international instruments. The center of expertise would thus offer the specific skills and tools to enforce digital issues efficiently and effectively.
V. CONCLUSION
International cooperation is crucial to cross-border enforcement in the digital economy. After several years of calls to improve international cooperation, the G7 countries and international organizations, including the OECD and ICN, should now focus their work on concrete and actionable proposals to achieve it. This paper offers some realistic, cost-effective solutions in the context of existing international fora. The benefits stemming from implementing these recommendations would reduce enforcement and compliance costs for both competition authorities and businesses, while ensuring greater legal certainty.
[1] Dr. Christophe Carugati, Doctor in Law and Economics on Big Data and Competition Law, Paris Center for Law and Economics (CRED), Paris II Panthéon-Assas University. For correspondence: Christophe.carugati@bruegel.org. Dr. Carugati is an affiliate fellow at Bruegel’s economic think tank, working on competition and digital policies. The author would like to thank Assimakis Komninos from White & Case and Mathew Heim from Amazon for their helpful comments.
[2] Ministerial Declaration G7 Digital Ministers’ Meeting, May 11, 2022.
[3] Common Understanding of G7 Competition Authorities on “Competition and the Digital Economy,” July 5, 2019.
[4] Japan Fair Trade Commission, Report of the Study Group on Data and Competition Policy, June 6, 2017.
[5] Australian Competition and Consumer Commission, Digital Platforms Inquiry Preliminary report, December 2018.
[6] Furman et al., Unlocking Digital Competition, Report of the Digital Competition Expert Panel, March 2019.
[7] Crémer et al, Competition Policy for the Digital Era, May 2019.
[8] Federal Trade Commission, Hearings on Competition and Consumer Protection in the 21st Century (accessed August 22, 2022). https://www.ftc.gov/enforcement-policy/hearings-competition-consumer-protection.
[9] OECD, Conference on Competition and the Digital Economy; Co-chairs’ Summary, June 2019.
[10] G7 Shared Policy Objectives for Competition in Digital Markets, December 15, 2021 (accessed August 22, 2022). https://www.gov.uk/government/publications/g7-shared-policy-objectives-for-competition-in-digital-markets.
[11] Press release, European Commission, Europe fit for the Digital Age: Commission proposes new rules for digital platforms (December 15, 2020) (accessed August 22, 2022). https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2347.
[12] Competition and Markets Authority (CMA), A New Pro-Competition Regime for Digital Markets Advice of the Digital Markets Taskforce, December 2020.
[13] Press release, Bundeskartellamt, Amendment of the German Act against Restraints of Competition (January 19, 2021) (accessed August 22, 2022). https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2021/19_01_2021_GWB%20Novelle.html.
[14] Zampa et al., Italian Antitrust Authority’s Proposed Reform of the National Antitrust Rulebook: What’s in it for Digital Players?, FRESHFIELDS BRUCKHAUS DERINGER LLP (March 29, 2021) (accessed August 22, 2022). https://technologyquotient.freshfields.com/post/102guan/italian-antitrust-authoritys-proposed-reform-of-the-national-antitrust-rulebook.
[15] press release, Cicilline, Cicilline Statement on Big Tech Markup (June 24, 2021) (accessed August 22, 2022). https://cicilline.house.gov/press-release/cicilline-statement-on-big-tech-markup.
[16] Choudhury, S.R, South Korea Passes Bill Limiting Apple and Google Control Over App Store Payments, CNBC (August 31, 2021) (accessed August 22, 2022). https://www.cnbc.com/2021/08/31/south-korea-first-country-to-curb-google-apples-in-app-billing-policies.html.
[17] Compendium of Approaches to Improving Competition in Digital Markets, November 29, 2021.
[18] OECD Handbook on Competition Policy in the Digital Age, 2022.
[19] Ministerial Declaration G7 Digital Ministers’ Meeting, supra note 2.
[20] Germany has already started enforcing its updated competition law to digital markets against Alphabet (Google), Meta (Facebook), Apple, and Amazon. See the latest enforcement action against Amazon. Press release, Bundeskartellamt, Amazon Now Subject to Stricter Regulations – Bundeskartellamt Determines its Paramount Significance for Competition Across Markets (Section 19a GWB) (July 6, 2022) (accessed August 22, 2022). https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2022/06_07_2022_Amazon.html.
[21] Reuters, South Korea Approves Rules on App Store Law Targeting Apple, Google, REUTERS (March 8, 2022) (accessed August 22, 2022). https://www.reuters.com/technology/skorea-approves-rules-app-store-law-targeting-apple-google-2022-03-08/.
[22] In July 2022, the Parliament and the Council adopted the Digital Markets Act. The text now is waiting for signature of the act. European Parliament, 2020/0374(COD) Digital Markets Act (accessed August 22, 2022). https://oeil.secure.europarl.europa.eu/oeil/popups/ficheprocedure.do?reference=2020/0374(COD)&l=en.
[23] Visscher, L., A Law and Economics View on Harmonization of Procedural Law, ROTTERDAM INSTITUTE OF LAW AND ECONOMICS (RILE) WORKING PAPER SERIES, NO. 2010/09, 2010. Wagner, H., Economic Analysis of Cross-Border Legal Uncertainty–The Example of the European Union, DISCUSSION PAPER NO. 371, FORTHCOMING IN: JAN SMITS (ED.), THE NEED FOR A EUROPEAN CONTRACT LAW. EMPIRICAL AND LEGAL PERSPECTIVES, GRONINGEN: EUROPA LAW PUBLISHING 2005, October 2004. Bergh, R. and Visscher, L., The Principles of European Tort Law: The Right Path to Harmonisation?, EUROPEAN REVIEW OF PRIVATE LAW 4-2006, 2006.
[24] OECD and ICN, OECD/ICN Report on International Co-Operation in Competition Enforcement, 2021, p. 138.
[25] Ibid. pp. 136-138.
[26] Press release, CMA, CMA Investigates Apple Over Suspected Anti-Competitive Behaviour, (March 4, 2021) (accessed August 22, 2022). https://www.gov.uk/government/news/cma-investigates-apple-over-suspected-anti-competitive-behaviour.
[27] Press release, European Commission, Antitrust: Commission Sends Statement of Objections to Apple on App Store Rules for Music Streaming Providers (April 30, 2021) (accessed August 22, 2022). https://ec.europa.eu/commission/presscorner/detail/en/ip_21_2061.
[28] Press release, Authority for Consumers & Markets (ACM), ACM: Apple Changes Unfair Conditions, Allows Alternative Payments Methods in Dating Apps (June 11, 2022) (accessed August 22, 2022). https://www.acm.nl/en/publications/acm-apple-changes-unfair-conditions-allows-alternative-payments-methods-dating-apps.
[29] Nellis, S., U.S. Judge Denies Apple’s Request for Pause of ‘Fortnite’ Antitrust Orders, Reuters (November 9, 2021) (accessed August 22, 2022). https://www.reuters.com/technology/us-judge-skeptical-apples-request-pause-fortnite-antitrust-orders-2021-11-09/.
[30] Reuters, South Korea to Probe App Store Operators Over Suspected In-App Payment Violations, REUTERS (August 9, 2022) (accessed August 22, 2022). https://www.reuters.com/technology/skorea-probe-app-store-operators-over-suspected-in-app-payment-violations-2022-08-09/.
[31] Press release, ACCC, Dominance of Apple and Google’s App Stores Impacting Competition and Consumers (April 28, 2021) (accessed August 22, 2022). https://www.accc.gov.au/media-release/dominance-of-apple-and-google’s-app-stores-impacting-competition-and-consumers.
[32] Press release, ACM, ACM: Developing a New App is an Unnecessary and Unreasonable Condition that Apple Imposes on Dating-App Providers (February 14, 2022) (accessed August 23, 2022). https://www.acm.nl/en/publications/acm-developing-new-app-unnecessary-and-unreasonable-condition-apple-imposes-dating-app-providers.
[33] Apple, Distributing Apps Using a Third-Party Payment Provider in South Korea (accessed August 22, 2022). https://developer.apple.com/support/storekit-external-entitlement-kr/.
[34] OECD and ICN, supra note 24, pp. 61-68.
[35] Ibid. pp. 129-140.
[36] Ibid. p. 186.
[37] Ibid. pp 183-202.
[38] Speech, European Commission, Speech by EVP Vestager at the Fordham’s 49th Annual Conference on International Antitrust Law and Policy “Antitrust for the Digital Age” (September 16, 2022) (accessed September 19, 2022). https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_22_5590.
[39] Gawer, A., Big Data: Bringing Competition Policy to the Digital Era, OECD, December 16, 2016.
[40] The Digital Regulation Cooperation Forum (accessed August 23, 2022). https://www.gov.uk/government/collections/the-digital-regulation-cooperation-forum.
[41] Pôle d’expertise de la Régulation Numérique (accessed August 23, 2022). https://www.peren.gouv.fr/en/equipe/.
[42] Carugati, C., The Antirust Privacy Dilemma, 2021.
[43] The OECD international cartels database (accessed August 23, 2022). https://qdd.oecd.org/subject.aspx?Subject=OECD_HIC.
[44] ICN, Report on the Results of the ICN Survey on Dominance/Substantial Market Power in Digital Markets, 2020, pp. 31-34.
