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Free Knowledge Advocacy Group EU

New Competition Tool

Inception Impact Assessment Feedback and Consultation 2020

This initiative by the European Commission aims at identifying the gaps in the current EU competition rules and possibly creating a new complementary tool to strengthen competition enforcement.

Purpose of the initiative

The European commission called for feedback to test out which scenarios it should adopt when creating a new competition tool to cover the areas in assessing competition that it feels are not sufficiently tackled by the existing instruments. The EC also requested a more detailed opinion on what are the key structural competition issues, and - taking those into consideration - what the preferred scenario for an intervention should entail. This inititative is parallel to the Digital Services Act Package that the European Commission has also been seeking input on. FKAGEU has submitted a response to the consultation as well.

Why is this important?

One of the European Commission’s main objectives for the current legislative is regulating platforms. The Digital Services Act is an important but not the only one part of this endeavor, as the EC’s Vice-President Margrethe Vestager seems to be set to solving some of the problems through competition mechanisms. It is in fact good news, as pushing everything that relates to dominant platforms into a Digital Single Market regulation may be limiting to solving issues that have little to do with the common market area and a lot to do with how powerful some actors have become.

Regulatory context

Competition policy in the digital era - a report by Special Advisers to Commissioner Vestager (2019)

Relevant EU positioning by Wikimedia

Feedback on Evaluation of the new complementary tool to strengthen competition

Feedback by FKAGEU

Free Knowledge Advocacy Group EU welcome the European Commission’s initiative to address structural competition problems in the form of a New Competition Tool, and recommend the Commission pursue Option 3. Structural competition issues pervade many different markets, and defining specific sectors as being “digital” or “non-digital” may create incentives for gamesmanship with sectoral definitions or corporate structuring.

In our opinion, structural risks to competition can create the conditions for consumer harms and market inefficiencies even before any particular firms might be recognized as dominant; conditions for structural competition problems can often be diagnosed ex ante. Therefore, we recommend that the Commission use a market structure-based approach. The Commission’s April 2019 Report identifies a number of promising areas for future work, including tying or leveraging market dominance into other markets. This not only occurs when a firm has achieved dominance through normal competitive means in the first market, but also when it attains dominance through the operation of law, such as when limited monopolies are legally provided (by the state, or by licensors) via intellectual property exclusivities.

The Free Knowledge Advocacy Group EU unites the European Wikimedia chapters and communities so they can have a clear and coherent position on major legislative and political changes affecting the vision, mission and values of the Wikimedia movement. We support the feedback of the Wikimedia Foundation on the topic.

Submission by Free Knowledge Advocacy Group EU

Feedback by Wikimedia Foundation

The Wikimedia Foundation and the Free Knowledge Advocacy Group EU welcome the European Commission’s initiative to address structural competition problems in the form of a New Competition Tool, and recommend the Commission pursue Option 3. Structural competition issues pervade many different markets, and defining specific sectors as being “digital” or “non-digital” may create incentives for gamesmanship with sectoral definitions or corporate structuring. Many sectors not typically included in commonplace definitions of “digital” may generate structural competition risks. We therefore recommend the Commission use a horizontal scope in addressing these issues.

In our opinion, structural risks to competition can create the conditions for consumer harms and market inefficiencies even before any particular firms might be recognized as dominant; conditions for structural competition problems can often be diagnosed ex ante. Therefore, we recommend that the Commission use a market structure-based approach.

The Commission’s April 2019 Report identifies a number of promising areas for future work, including tying or leveraging market dominance into other markets. This not only occurs when a firm has achieved dominance through normal competitive means in the first market, but also when it attains dominance through the operation of law, such as when limited monopolies are legally provided (by the state, or by licensors) via intellectual property exclusivities. IP rights, particularly when aggregated by large entities, provide substantial means for a firm to leverage other markets, whether they be for distribution of media containing copyrighted works, or for competitors using methods or systems that allegedly read on a patent. These problems can be exacerbated by the prevalence of software-as-a-service models or other leasing or licensing models, which provide a rightsholder increased mechanisms to restrict the uses of a work to gain competitive advantage in more varied, related markets.

The Report also notes the issues of network externalities in two-sided markets. These issues can be further compounded when the business model involves more than two sets of distinct users, such as content producers, content consumers, advertisers, advertising networks, and advertising audiences. In various types of media, whether social media, broadcast, or print, the entity at the nexus of these different user groups has multiple ways of influencing competition and the shape of the market.

The Wikimedia Foundation and Free Knowledge Advocacy Group EU therefore recommend the Commission purpose Option 3 for exploring a future competition tool, and urge the Commission to address the specific market features raised above.

Submission by Wikimedia Foundation

FKAGEU response to consultation on New Competition Tool

Due to the size of the survey a document was created with the FKAGEU responses. The responses were submitted on September 7th, 2020. The approach presented focuses on:

providing examples of structural issues leading to a lack of competition on the digital market: centralisation, vertical integration of services and supply chains, information asymmetry on the customer side, high switching costs, and network effects
providing examples of market behaviour that affects competition on the digital market: extension of market power to related markets, anti-copetitive monopolisation, oligopoly and resulting alignment of market practices, gatekeeping, and tipping markets
supporting the idea that competition issues on the digital market are a result of a tacit collusion and other structural problems that require intervention on the market and not only when a dominant company emerges
supporting the notion of creating a new competition tool that would address the structural issues and be horizontal in scope

FKAGEU also took a position on access to data as a factor in achieving a competitive advantage. From the perspective of the businesses that experience the competitive disadvantage. From the perspective of the businesses involved it would be better if the anti-competitive monopolies share more data. From the perspective of the consumers, whose data has been excessively collected, used in an untransparent way (and sometimes unethically) and entered into datasets that inform secret market strategies to target whole cohorts of the population, not only is it better that this data is not further shared; it is also better if it is not collected at all.