Event Synopsis: Celebrating Five Years of Compass Lexecon's Chile Office
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Compass Lexecon Chile celebrated its 5th anniversary of the office opening on 20 November with a conference on “The Future of Antitrust in the Digital Economy Era” in Santiago. Office head Fernando Coloma welcomed Kirsten Edwards-Warren and Jorge Padilla from our EMEA practice and former Chilean national economic prosecutor and head of CentroCompetencia UAI, Felipe Irarrázabal, to mark the occasion with insightful discussions on antitrust issues in digital markets.
Kirsten delivered a keynote that assessed the wave of antitrust investigations by the European Commission and other European regulators against “Big Tech” companies: Microsoft (potential abusive tying of MS Teams with the rest of their software-as-a-service suite); Amazon (use of non-public marketplace seller data and self-preferencing practices related to the Buy Box and the Prime subscription); Apple (potential abusive anti-steering rules in the App Store and refusal to provide access to NFC technology in its iPhone to rival digital wallets); Google (abuse of dominance in the search market and self-preferencing practices with its comparison service Google Shopping); and Meta (tying of its social network Facebook with its classified ads service Facebook Marketplace).
Kirsten also discussed the Commission’s efforts to incorporate ex ante regulation on the so-called “Gatekeeper platforms” with the Digital Markets Act (DMA). She considered the challenges faced by companies and practitioners adapting to the new antitrust landscape – the back-and-forth discussion to establish the thresholds for Gatekeeper designation; potential regulatory blind spots and ambiguities related to the self-monitoring nature of the DMA; and the trade-off between increasing regulatory oversight and diminished incentives to innovate in the European digital economy. To conclude, Kirsten weighed in on the implications of the DMA for competition and innovation in digital markets moving forward. She was hopeful that it is progressing better than the critics expected, yet apprehensive that we are sailing into uncharted waters in antitrust law and economics amidst a growing regulatory chasm between the US, the EU and other jurisdictions.
Jorge delved into the issues for practitioners during a Q&A session led by Felipe, highlighting:
- Data as the “essential input” of the digital economy era: As shown in Google/Fitbit and other high-profile merger cases, companies are gathering and employing increasing amounts of data to match their products with customer needs, enhance market segmentation and offer more personalized experiences. While the use of data has been mostly positive for consumers, Jorge expects more emphasis by regulators in merger analysis involving companies with complementary databases, as there is the potential for risks to competition related to data tying that could shore up incumbent’s competitive moats or exclude new challengers from the market.
- Increased emphasis on potential competition concerns: Jorge focused on “killer acquisitions” and “reverse killer acquisitions”. In both cases, he expects regulators to increase their focus on theories of harm related to potential competition, which in the case of reverse killer acquisitions may be controversial (as the conventional wisdom in antitrust is that conglomerate mergers are most likely pro-competitive, given the lack of horizontal or vertical risks). Jorge also warned of the risks of over-enforcement in merger control procedures, focusing on the potentially negative effects on incentives to innovate by startups and new challengers, many of which see acquisition by a larger firm as the way to capitalize on their efforts.
- The development of “digital ecosystems” by Big Tech firms as both a competitive moat and key driver of efficiencies: Jorge reviewed the Competition Market Authority (CMA)’s analysis on the Microsoft/Activision-Blizzard merger, where there seemed to be a major disconnect between the Parties’ position (that by combining their suite of games, they could enhance the value of their gaming ecosystem for the benefit of consumers) and the CMA’s (which focused on risks of foreclosure of the Parties’ games to rival game consoles). Jorge compared the CMA’s stance to traditional theories of harm on conglomerate risks, which are not novel, and concluded that mergers aimed at creating or improving digital ecosystems usually bring many efficiencies to consumers. However, due to the potential risk of such mergers improving the competitive “moat” of incumbents to an undesirable extent, there is still the need for an in-depth case-by-case analysis.
- Renewed emphasis on exclusionary and exploitative theories of harm in cases related to digital markets: Jorge and Kirsten highlighted that several cases brought by European national antitrust agencies have focused on “unfair trading”, “self-preferencing”, “raising rivals’ costs” and “refusal to supply/interoperate” theories which often do not have a well-defined causation link to consumer harm. Moreover, Jorge pointed out that some inquiries into Big Tech are not motivated by competition concerns but rather by politics (especially in the US). These cases are a potential sign of shifting grounds in antitrust, where some of the key tenants of the past decades of case law may become obsolete, but economic analysis –and its growing, data-driven toolkit– will remain critical moving forward.
For the past five years, our Chile team has maintained Compass Lexecon’s standards of integrity, excellence, academic rigor, and creativity in the Chilean market, working with some of the most advanced legal counsels and corporations. So far, we have been involved in several dozen cases related to merger control procedures, antitrust investigations, international arbitration (with close support from our world-leading Buenos Aires team), among many other practice areas, advising clients across Latin American (Argentina, Chile, Ecuador, Peru and Uruguay).