Webinar Synopsis: New EU Competition Tool - A Paradigm Shift in Competition Rules for the Digital Economy and Beyond?

Economist John Davies joined speakers from DG Comp, Facebook and Freshfields Bruckhaus Deringer in a webinar organized by Concurrences.

John Davies was broadly supportive of the new competition tool, noting that market tipping is not covered by existing tools effectively. Asked about tipping, John gave the examples of VHS vs Betamax, and Blu-ray vs. HD-DVD, stressing the initial war between competing businesses concerning technology standards. Tipping also happened in the market for word processing software, with Word being now virtually the only word processor on the market. However, there is potentially a difference between a standard tipping to a given technology and the market tipping to a monopoly provider – competing word processors are now compatible with Word. Markets tip largely because of direct and indirect network effects between users on the same side or different sides of the market, through technology, standards and compatibility, particularly when there are barriers to entry.

The new competition tool would not be useful in trying to stop companies tipping in the first place, as one would not be able to identify what companies are likely to tip successfully. John also objected to the relevance of prohibiting companies that are not in a dominant position from adopting conduct that would consist in an abuse if they were in a dominant position. Targeted interventions that promote competition should be encouraged: making standards available more widely, promoting interoperability, restricting monopoly power that comes from a market that has tipped so that any monopoly is strictly limited to the asset that has become the standard rather than leveraging into other markets, etc. Articles 101 and 102 are not useful here. The focus should not be on the firms’ conduct but on the market’s structure and promoting competition. Regarding remedies, John noted that a new instrument can provide for remedies affecting the market in itself, rather than an individual company or a small group of companies.

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