Q&A: How do we make competition policy fit for the digital age?

Jorge Padilla discusses with Jacques Crémer (University of Toulouse) how competition policy could be adapted to address issues raised by digital platforms in an interview conducted by Alexandre de Streel (University of Namur and Centre on Regulation in Europe), organized by Concurrences.

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Is there a consensus on the need to adapt competition policy?

The various reports adopted and commissioned by authorities suggest the existence of a broad consensus among economists and non-economists on a number of principles. The problem, in my view, is that we may end up adopting horizontal regulations that treat all digital platforms equally. It is important to focus intervention on those platforms which, due to their market power and business models, have the incentive and ability to behave against the public interest.

What reforms to competition rules should be adopted?

Market definition needs to be adapted to incorporate dynamic competitive threats that platforms face from potential competitors, which would facilitate intervention against killer acquisitions. We may also need to close an enforcement gap in Article 102 TFEU, as EU law does not condemn unilateral actions by non-dominant players that attempt to monopolize markets anticompetitively. Also, it is essential to reconsider the remedies imposed in platform markets. There seems to be an emerging consensus that remedying anticompetitive behavior in digital platform markets is a complex exercise and that cease and desist orders are unlikely to restore conditions of competition. Hence, ex-ante regulation may be needed.

What is your view of the various European proposals on the criteria that justify increased agency supervision?

The focus of the reform should be placed on the control of the unilateral conduct of firms operating platform businesses, especially on those whose business models involve the sequential entry and domination of adjacent platform markets. I am particularly concerned about conglomerate platforms, because their wide portfolios make it virtually impossible to challenge them in any of the markets in which they operate.

Do you think the process for remedy design should be more participatory or experimental?

In my experience, no remedy will ever command the support of all parties involved. This problem is unlikely to be resolved by making the remedy design process more participatory, even if I believe there is merit in consulting widely about remedy proposals. In my opinion, what we need is to adopt “contingent remedy designs.” That is, remedy designs that may unfold in different ways over time depending on whether effective competition is restored.

Should a rebuttal presumption of anticompetitive effects be established for some acquisitions?

Many economists believe that all horizontal mergers, whether they involve big tech platforms and irrespective of the industry, should be banned unless the merging parties can show efficiencies. I disagree because I believe that in many instances the alternative to a merger is not the status quo but a less efficient form of exit. Also because start-ups may find it easier to enter markets if they anticipate that they may be acquired by incumbents with the ability to scale them up. In any event, if the burden of proof is reversed, so that only mergers that can be proved to be efficient will be cleared, then we need to reconsider the standard of proof regarding efficiencies.

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