Article summary
  • The spotlight remains firmly focused on the large online platforms as we look ahead to 2021.

  • Regulators across the globe are expecting to have strengthened tools at their disposal alongside ex-post competition law.

  • We await a number of important competition enforcement decisions against the large digital players

  • We expect more restrictive merger control and the EU’s decision in Google/Fitbit will be an early barometer

  • The rules of the digital competition enforcement game are being set – Game on!

The threat of strengthened competition intervention and enforcement to address potential concerns in the Digital Economy is looming large as we look ahead to 2021. As noted previously, there have been a series of competition inquiries and recommendations, including by the EU, Germany, The Netherlands, France, the UK, Singapore, Australia and the USA to address the perceived competition law concerns that have arisen with digital markets and digital platforms in particular. Australia has already moved from recommendations to draft legislation.

The key competition concerns arising in each of these jurisdictions are very similar:

  • Lock-in effects – can arise by the package of services offered on the platform, the lack of data portability or other switching barriers and lack of interoperability with other services or data.

  • Entrenched positions of market power, “gatekeeper” status and “winner-takes all” – the risk of having a few large firms with highly entrenched positions of dominance in some core markets and which simultaneously serve as a focal point of an expanding digital ecosystem.

  • Barriers to entry / access to data – how likely is market entry? Is access to the platform’s data required and even possible for the development of competition (or the switching possibilities for customers)?

  • Leveraging of market power to adjacent markets or services and strengthening of the platform’s portfolio of service.

  • Effective merger control – how to spot genuine investments in start-up technology that is efficient and may spur the development in new technology and avoid so-called “killer acquisitions”.

  • Concerns over impacts on the production of news and other journalistic content, which are increasingly accessed via digital platforms.

This has resulted in regulators calling for strengthened powers to be able to ensure that markets characterised by large platforms with significant networks effects acting as “gatekeepers” remain fair and contestable for innovators, businesses and new entrants.

In the EU, the draft Digital Markets Act (together with the Digital Service Act) has just been published which will introduce a list of do’s and don’ts for digital gatekeepers (platforms with strong and entrenched economic and intermediary power) as well as a new market investigation tool that could be used to examine how certain markets are prone to failure and intervene to address the identified competition concerns (including “break-up” powers”). This promises to change the landscape dramatically and tip the enforcement balance in favour of the regulators. (Read more about the Digital Markets Act here.) These measures, combined with the expected new block exemption and guidance on Vertical Agreements and revised market definition notice, have the potential to provide greater certainty to businesses and address the challenges posed by digital markets and shape the future direction of EU competition law policy.

The UK, which already has market investigation powers, is also expected to introduce new measures following the conclusion of the Competition and Market Authority’s (CMA) market inquiry into online platforms in the Summer. The UK Government has just published its response to the CMA’s report adopting many of the recommendations and we will see a new Digital Markets Unit (part of the CMA) from April 2021 and the adoption of a new enforceable Digital Code. Further, the UK’s Digital Market’s Taskforce published its advice setting out its recommendations for the shape of the UK’s digital market regime which will seek to regulate digital players with so-called “strategic market status” – a position of substantial and entrenched market power. The UK’s SMS regime will have 3 core pillars: code of conduct, a pro-competitive intervention (PCI) regime and new SMS merger control rules which may include a new size of transaction test (similar to US merger control as well as Germany and Austria). Further, similar to the arrangements already being implemented in Australia, in part, it will govern commercial arrangements between news publishers and online platforms. (For more information see article Digital Platforms to be subject to a Digital Code in the UK to protect competition.) As we look to the post-Brexit world, this will clearly give the UK opportunity to influence the behaviour of large online platforms in a similar manner to that being adopted in Australia.

Moving to Australia, the proposed News Media Bargaining Code, which was a key part of the Government’s response to the ACCC’s landmark Digital Platform Inquiry, is imminent. While the final draft has not been made public yet, the most significant change following the initial draft is the inclusion of both national broadcasters, ABC and SBS. Initially, neither broadcaster was going to be permitted to bargain or arbitrate over remuneration on the basis that they were taxpayer funded rather than being funded by private advertising. More detail in this article.

A key takeout from the approach being adopted in Australia is a view by the regulator and Government that ex-post enforcement is not enough and the “digital gatekeeper” issues referred to above must be addressed by ex-ante interventions to avoid broader social detriments. We are seeing a similar approach in the UK and EU with the development of complementary enforcements tools that will sit alongside ex-post competition enforcement.

Another initiative in response to the Digital Platforms inquiry is the ACCC’s Digital Advertising Services Inquiry. The ACCC’s interim report is due by 31 December 2020, with the final report due on 31 August 2021. If the News Media Bargaining Code is representative, then it would seem likely that Facebook and Google (as well as other platforms including TikTok) may face further scrutiny from the ACCC.

As to Singapore, in September 2020, the Competition and Consumer Commission of Singapore (CCCS) published a market study on e-commerce platforms. While CCCS did not identify any major competition concerns at the time of the market study, it highlighted a number of potential concerns similar to those identified by authorities in other jurisdictions and discussed above. The CCCS put forward several recommendations to update its existing competition guidelines in order to provide clarity on and improve the application of competition and consumer protection laws in light of the potential concerns that have been identified. These recommendations include: Updating guidance on market definition, abuse of dominance and types of conduct such as self-preferencing (section 47 Prohibition); merger control (to address the risk of “killer acquisitions” and the role of data) and a further study and monitoring of the use of AI or algorithms that may result in the alignment of market behaviour. 

"For 2021, will the enforcement balance change? Regulators will have an increased armoury at their disposal and will seek to use the new weapons, let the games begin!"
Anthony Rosen, Legal Director
Ex-post interventions

The CMA also recently flexed its muscles imposing a significant fine (£17.9m) against ComparetheMarket which highlights its desire to tackle harm and protect competition in digital markets. The CMA stated “Digital markets can yield great benefits for competition, and therefore for consumers. We are determined to secure those benefits, and to ensure that competition is not illegitimately restricted. Today’s action should come as a warning – when we find evidence that the law has been broken, we will not hesitate to step in and protect consumers.

For 2021, we also await some important EU enforcement decisions with ongoing investigations against Apple (noting that in March, Apple was fined Euro 1.1 billion in France for unfair distribution practices and resale price maintenance), Amazon and other platforms. The European Commission has ongoing investigations against Apple to assess whether Apple's rules for app developers on the distribution of apps via the App Store violate EU competition rules. In relation to Amazon, the European Commission has reached a preliminary view that it has breached EU antitrust rules by distorting competition in online retail markets. The Commission takes issue with Amazon systematically relying on non-public business data of independent sellers who sell on its marketplace, to the benefit of Amazon's own retail business, which directly competes with those third party sellers. The Commission also opened a second formal antitrust investigation into the possible preferential treatment of Amazon's own retail offers and those of marketplace sellers that use Amazon's logistics and delivery services.

In Australia the private sector, app developers and the ACCC will be closely monitoring developments in Epic Games proceedings against Apple in the Federal Court of Australia. These were filed in November 2020 and follow similar proceedings launched in the US. The claim relates to the online video game Fortnite and follows Fortnite’s removal from the App Store and the Google Play Store following Epic’s attempts to replace in-app payment methods in favour of their own payment system. Epic claims that Apple has contravened several provisions of Australia’s competition and consumer laws including misuse of market power, exclusive dealing and unconscionable conduct.

Merger Control

On the merger control side, the European Commission’s decision concerning Google’s acquisition of Fitbit is awaited and promises to shed further light on the approach to tech mergers and Big Data. The European Commission is concerned that the proposed transaction would further entrench Google's market position in the online advertising markets by increasing the already vast amount of data that Google could use for personalisation of the ads it serves and displays. A decision is expected by 8 January 2021.

Again, useful guidance on the outcome may be available from Australia, where the ACCC is in the Stage 2 equivalent (Statement of Issues) of its consideration of Google’s acquisition of Fitbit. The ACCC has published a draft enforceable undertaking pursuant to s.87B of the Competition and Consumer Act 2010 (Cth.) (CCA) and invited public submissions. Under the current draft, Google would be precluded from using certain user data for Google advertising purposes for ten years, with a right to extend for a further 10 years. Google would also need to maintain: (i) access for third parties to certain user data; and (ii) interoperability between 3rd party wearables and android devices, for a period of 10 years.

Finally, the US has now entered the fray with its enforcement action against Google, the first time since the Department of Justice’s suit against Microsoft back in 1998. The FTC and a coalition of 48 States has also commenced antitrust actions against Facebook for illegal monopolization (more information here and here) which threatens to re-open the Instagram and WhatsApp acquisitions. Amazon and Apple are also under scrutiny. Further, with the new Biden administration there may now be greater impetus for antitrust reform building on the output of the House Subcommittee on Antitrust, concluding its 15 month inquiry in October with a 450 page report and a series of recommendations to restore competition in the digital economy, including behavioural rules, strengthened merger control and greater enforcement.

The outlook for 2021 is certainly hawkish. The battle lines are clearly being drawn. The spotlight will remain firmly focused on the large online platforms. Regulators will no doubt have increased enforcement tools at their disposal and will seek to test them. There will be a clear need to manage the careful balance between the risk of over and under enforcement and regulators will need to get this right or risk harming innovation and competition. The rules of the game are being set – Game on!