Vestager’s grand plan for regulating the digital economy

Margrethe Vestager of Alliance of Liberals and Democrats for Europe, and cadidate as next president of the European Commission, during a press briefing in the hemicycle of European Parliament transformed into a giant TV studio, in Brussels, Belgium, 26 May 2019. [EPA-EFE/OLIVIER HOSLET]

The EU should be “ready to act” should social values such as “privacy, freedom and fairness” be under threat from expanding digital monopolies, the bloc’s Competition Chief Margrethe Vestager said on Monday (3 June).

Speaking at the OECD’s conference on competition and the digital economy, Vestager rallied the cause for introducing sweeping regulatory reforms to the EU’s digital marketplace, including offering smaller players in the market the opportunity to compete.

In a veiled comment that suggested she is not altogether adverse to the potential breakup of some of the world’s digital giants, Vestager also said that the main cause of concern for the future of the EU’s digital economy was the dominance of the tech monoliths and their power over smaller players in the market.

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“The biggest threat to competition and innovation,” Vestager said on Monday, “comes from platforms that are not just a single business, but the centre of large empires.”

She added that one of the main ways in which this could be achieved would be in the area of ensuring that high levels of product interoperability – ensuring that products made by one company will work properly with those made by others – are still possible within the EU’s digital marketplace.

“As ecosystems grow, the Commission will need to keep a close eye on strategies that undermine interoperability,” she said. “So the expansion of platforms into new markets doesn’t undermine competition as it goes, like a bloom of algae that kills off every other form of life as it expands.”

Adding that the EU needs “to preserve the opportunity for smaller rivals to break into the market,” Vestager also rallied for a number of reforms in order to foster a fairer competitive environment.

She suggested that such could include sellers being ‘persuaded’ to offer lower prices to smaller platforms for the sale of their goods as well as ‘innovative new products’ being offered only to smaller businesses rather than dominant ones. Vestager also noted that the Commission would have to keep an eye on attempts from large platforms to clamp down on the ability of customers to switch their allegiances over to rival services, a practice known as “multi-homing.”

Vestager’s comments came as she continues to stake her claim for the next President of the European Commission, with a particular attention to competition policy within the digital economy – a subject very much ‘in vogue’ at the moment.

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Across the Atlantic, US counterparts are stepping up their scrutiny of the larger tech platforms, as congress hones in on the likes of Facebook, Google and Amazon with an antitrust investigation amazing “anti-competitive products” with the Department of Justice moderating investigations into Alphabet’s Google and Apple, while the Department of Justice will oversee a probe into Amazon and Facebook.

In reference to the authority that the tech giants have garnered through their practices, Chairman of the House Judiciary Committee Jerrold Nadler said in a statement that “there is growing evidence that a handful of gatekeepers have come to capture control over key arteries of online commerce, content, and communications.”

Antitrust subcommittee ranking member Jim Sensenbrenner added that US lawmakers “must discuss how the regulatory framework is built to ensure fairness and competition.”

For the EU’s part, Vestager believes that there are areas outside competition policy in which the EU can flex its muscles.

Referring to the recently adopted platform-to-business regulation (P2B), which obliges online platforms to be transparent in their business practices when dealing with firms, she said the regulation “could be a useful model, to tackle other problems which the platform economy creates.”

Under the rules, online businesses should justify when they decide to terminate business relations and are required to disclose how businesses are ranked on their platforms. The measures will impact a range of platforms that use ranking structures in their user-interfaces, such as Airbnb, the Apple App Store, and Booking.com.

The plans are an example of how the EU may seek to readdress competition imbalances under Vestager’s leadership – with more of an emphasis on regulatory reform rather than the distribution of heavy fines for unfair practices.

“The power that dominant companies have, to set the rules that govern how our markets work, has to come with a responsibility, too,” Vestager said.

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