10 key themes
Antitrust, data and tech
Promoting competition and innovation
Antitrust authorities have long recognized the importance of data as a cross-sectoral resource. As agencies and non-governmental organizations publish their reports on competition in the digital economy and the role of data, many are coming to the view that the current antitrust toolbox is not sufficient to deal with many of the issues raised by the digital economy. While enforcers and governments around the world consider new regulations for digital markets, it remains to be seen how tensions between different regulatory regimes, including antitrust and data protection, will be resolved.
Data at the regulatory crossroads
It has now been over two years since the EU General Data Protection Regulation (GDPR) came into force and businesses were required to implement additional safeguards for processing personal data gathered from individuals in Europe. Other jurisdictions, such as Brazil and California, have since implemented similar data protection rules. As a relatively new law, the enforcement of the GDPR is being developed in a series of cases before competent privacy regulators and through private litigation, which continues to gain prominence in Europe.
Notwithstanding the fact that privacy laws such as the GDPR set out a detailed code for privacy protection, including identifying the associated enforcement authorities and processes, antitrust authorities do not appear willing to leave the enforcement of privacy standards to the specialist regulators. On the contrary, several antitrust authorities are seeking to use generally applicable antitrust laws to devise additional privacy rights and enforcement processes in a manner not obviously envisaged by lawmakers.
The UK’s CMA has, for example, proposed the application of "GDPR+" requirements for certain platforms that would impose a "fairness by design" duty to the choices that users make when using online platforms and services. The UK government has noted, however, that interventions of this nature will require further consultation. Most notably, the action of the German Federal Cartel Office (FCO) involving Facebook, which will continue through the German courts in 2021, goes further, suggesting that the breach of privacy laws can be sanctioned as an exploitative antitrust abuse. In addition, the ongoing work of Australia’s ACCC and Japan’s JFTC assessing antitrust and privacy issues in tandem has been particularly prominent in this context internationally.
The GDPR was enacted after extensive evidence gathering, stakeholder involvement and political debate. In that context, it is striking that antitrust authorities, which are not subject to the same checks and balances as legislatures, are showing a marked willingness to establish differing legal standards for privacy protection through creative use of antitrust law to open up access to data to promote innovation. These attempts at novel applications of antitrust law are likely to continue to come before the courts during 2021. Until the resulting tensions between privacy and antitrust laws are resolved by the highest courts, businesses will need to navigate a legal landscape characterized by significant uncertainty.
Novel applications of antitrust law to data-related issues extend beyond privacy issues. For example, recent initiatives by the CMA and the EC to restrict the United Statese of targeted advertising by online platforms reflect an increasing trend of using antitrust laws to tackle perceived consumer protection concerns.
How to unlock Big Data
Businesses continue to face contradictory pressures around their use of data. Data protection authorities have placed restrictions on the degree to which businesses can share personal data with third parties and are increasingly using their enforcement powers to police such conduct. On the other hand, antitrust authorities are looking to platforms to open up access to their data which the authorities believe may lower switching costs, stimulate innovation and drive market entry and competition. While digital businesses continue to evolve their approaches to privacy protection under pressure from relevant regulators, advertisers and publishers continue to push for greater data access.
Legislatures and antitrust authorities across Asia, Europe and the United States continue to explore ways to enhance interoperability and data portability requirements to promote competition. While there is significant partisan disagreement regarding many of the ambitious reforms described in the United States House Report – such as a proposal to prohibit companies that operate online platforms from selling their own products on those platforms – enhancing interoperability and data portability appear to be areas of potential common ground that could be ripe for legislative reform. This bipartisan consensus may provide the United States authorities with new tools for enforcing the antitrust laws. Ongoing discussions among Democratic and Republican lawmakers also may presage the possibility of broader reforms.
Policymakers in the United States, UK and EU all have proposed significant reforms aimed at regulating competition in digital markets. Many of the reforms proposed in the United States House Committee’s digital markets report would reach well beyond the tech sector and have profound implications for a wide range of companies doing business in the United States. While US lawmakers may not succeed in enacting many of their most ambitious plans, the Biden administration is expected to pursue stronger antitrust enforcement and to seek greater alignment and coordination with antitrust authorities in Europe. It will be important to monitor this transatlantic convergence on key substantive issues in the coming years.
In addition to requiring platforms to share their data, antitrust authorities are increasingly looking to place restrictions on how that data can be used by the platforms themselves. In particular, the EC’s probe against Amazon for using aggregated data from Amazon marketplace sellers in its own retail decision-making will continue to advance in 2021. Despite the fact that many businesses use market intelligence, large datasets and automated systems as part of their decision-making, the EC’s public statements suggest that it is taking a stricter approach to the United Statese of aggregated data by large businesses, noting that "the case is about big data". It remains to be seen how the EC will weigh the possible pro-competitive benefits of such data use against any perceived harms. This development may also result in an increased focus on data use, data silo and data access remedies.
The conduct being investigated also forms part of that which is to be restricted ex ante under the EC’s DMA proposal, intended to govern the conduct of so-called "gatekeeper" platforms. If passed through the EU legislature, the DMA would restrict those platforms’ abilities to give their own services preferential treatment and – similar to the United States House Report – require some level of interoperability between services. Implementation of these proposals will necessarily have far-reaching implications for those businesses engaging with "gatekeeper" platforms.
Exploring common data spaces and data pools
Governments are becoming increasingly alive to the importance of a homegrown data industry and are keen to ensure a degree of regional "data sovereignty". Most notably, the EC has announced plans to develop common European data spaces relating to strategic sectors – including energy, financial services, health, agriculture and climate change.
In its "Strategy for Data", the EC set out its policy to promote the creation of "data pools", overcoming data as a barrier to entry and expansion and enabling innovation.
However, there remain unanswered questions both in relation to collusion risks and around the extent to which businesses contributing to data pools will be required to provide access to third parties. In particular, it is not clear whether access to third parties will only be mandated where data is considered indispensable to compete in the relevant market in line with the "essential facilities" doctrine, or whether it will be based on a lower standard.
Proposals for updates to the EC’s Horizontal Cooperation Guidelines are expected in March 2021 – combined with an offer by the EC to provide specific project-related guidance, this is intended to provide businesses with confidence to pool data without concerns about breaching antitrust laws.
Competition authorities need to clarify the legal framework for data pooling in order to allow companies to engage in pro-competitive data sharing confidently. Companies should normally be free to choose with whom to share their data but need to be mindful not to create an ‘insiders vs outsiders’ dynamic whereby those that find themselves outside of the pool would face barriers to compete.
The regulatory jigsaw - global issues with local remedies
While many antitrust authorities have come to the view that they need new tools to address issues in the digital economy, they have not reached a consensus on how best to "tool-up" and implement regulation. Until recently, and in contrast to the degree of cooperation which exists in the area of merger control, there has been limited international cooperation or even alignment on how to apply antitrust laws to data and digital business models.
Consistency is not just important for businesses that may otherwise be required to fragment their practices across regions. Consumers may also be disadvantaged by certain proposals on default standards and data use which may impact the personalized service received by consumers from digital businesses. At the same time, some high-profile antitrust actions in the digital sector in recent years may have had little impact. While authorities have focused on imposing eye-wateringly high fines, these actions may not have resulted in any structural change or a shift towards a more competitive dynamic in the market nor in any benefit to consumers.
National competition authorities have signaled their intention to take their findings to international fora and seek renewed engagement on potential cooperation. In addition, the EC's Executive Vice-President Margrethe Vestager has signaled an intention to build "transatlantic convergence" with the new US administration, with a view to agreeing a digital rulebook "likely to become the global standard".
Regulators from a handful of countries are closely communicating with each other to align their policy directions. While there is a consensus to enhance the red tape beyond antitrust regulations, they are also aware of the need to be flexible to preserve innovation and address issues in the rapidly evolving digital economy. Japan is one of the first countries trying to reclaim the notion of ‘pre-regulation,’ where the Ministry of Economy, Trade and Industry rather than the JFTC will start a regular ‘monitoring review’ somewhat emulating the industry regulations we would typically see in the financial services or energy sectors. Stakeholders should not shy away from voicing their views to influence the still nascent regulations and policies.
Looking ahead in 2021:
- View data issues holistically: businesses should continue to expect antitrust authorities to utilize the principles of regulated industrial sectors when seeking to set higher standards for businesses. As tensions grow between legal regimes, commercial and legal teams will need to work together to agree on business proposals that are compliant with evolving regulatory approaches.
- Assess the appropriateness of data pooling: consider whether the benefits to innovation outweigh any wider obligations to make data available.
- Consider the implications of new rules (including as business grows): given the rapid and diverging way in which antitrust regulations are developing, commercial decisions will need to be taken with an eye on future (potentially conflicting) regulatory developments. In addition to the EC’s DMA proposal and the US House Report’s recommendations, both of which include proposals for interoperability:
- In April, the UK government will establish a Digital Markets Unit (DMU) within the CMA to oversee an enforcement regime for platforms with "strategic market status". The DMU will continue the work of the CMA’s Digital Markets Taskforce in designing and later enforcing provisions of a principles-based code of conduct, including around an "open choices" principle to ensure core services interoperate with third-party technologies. However, the UK government has stopped short of providing the DMU with powers to mandate interoperability, noting that such interventionist powers require further consultation. The CMA’s Digital Markets Taskforce has urged the government to act quickly.
- Amendments to German competition law are continuing through the German parliamentary process, having received endorsement from federal government. The amendments will bestow additional obligations upon companies with "paramount cross-market significance", including similar prohibitions on hampering interoperability. However, the future relationship with the DMA would still need to be clarified, as the DMA may restrict tighter "gatekeeper" rules at the national level.
- Following the recent launch of the Digital Market and Competition Unit in 2019 under the Prime Minister’s Office and Parliament’s approval of the Digital Platform Transparency Act in 2020, Japan’s METI will start a new monitoring review mechanism for certain large platforms in Japan in the early half of 2021, subjecting these platforms to mandatory disclosure requirements across a broad range of business practices.
- China’s authority, the SAMR, will take forward its draft antitrust guidelines for enforcement in the "platform economy" which aim to clarify how conduct of platforms – including relating to use of and access to data – may fall foul of anti-monopoly rules.