OECD/G7 Conference, Paris, 3 June 2019
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Ladies and gentlemen
It’s a very great pleasure to be here in Paris, to take part in this discussion of the future of competition in our digital economy.
When we look to the future, we see one big change that overshadows everything else. It isn’t only changing the way we shop or watch TV. It’s transforming the way that we deal with our governments, the way that we run our electricity grids to help tackle climate change, even the way that farmers get the best out of the crops they sow. There are really only two types of industry today – those that have been transformed by digitisation, and those that will be.
And the same goes for public policy, too.
You can’t sensibly talk about democracy today, without appreciating the enormous power of digital technology, for both good and ill – like the way social media has made it easier for harmful lies to spread; and also helped bring people together, through organisations like Pulse of Europe, to stand up for freedom and peace.
You can’t have a meaningful industrial policy, unless it’s a digital policy, which recognises the need to invest in research, and to support the varied ecosystem of businesses that helps Europe come up with innovative ideas.
And you can’t have a competition policy that is ready for the future, unless it can tackle the threats to competition that come from digitisation.
And we need competition: it drives innovation - makes sure that the market serves consumers and customers. Not the other way around.
Competition rules and the challenges of digitisation
So in the past few years, we’ve put a lot of thought into understanding what digitisation will mean for competition.
We’ve dealt with cases, like our three investigations into Google, that have helped us understand how powerful businesses can harm competition in this digital age. Two years ago, we completed our inquiry into e-commerce markets throughout Europe, based on evidence from almost 2000 European businesses. In January this year, we brought together more than 500 people for a conference in Brussels, to discuss how digital technology is changing our markets. And in preparation for that conference, we collected more than a hundred written contributions, from all sides of the debate.
And most recently, just a couple of months ago, we received the report which three special advisers have spent the last year preparing for us, on how digitisation will affect consumers in Europe – and how competition policy can adapt.
The power of digital platforms
And one of the most important messages from that report is that we need to address the power of digital platforms.
This new digital world is a world of connections. Our smartphones and our cars and the appliances in our homes, the machines that made those products and the shops where we bought them, all speak the same digital language – and all of them, in principle, can be connected.
But that can also mean that we become very dependent on the platforms that help us find the right connections, among that enormous range of possibilities. It can concentrate a lot of power in their hands – especially when you consider that digitisation can make it especially hard to compete with big platforms.
It’s not just that digitisation has made economies of scale more important than before. It’s also that the huge amount of data that some platforms have, and the huge networks behind them, can give them an edge that smaller rivals can’t match.
So it’s especially important that we protect the opportunities for competition that do still exist.
One of my favourite lines is by Leonard Cohen who once sang: “there’s a crack in everything - that’s how the light gets in.” Even in markets that are dominated by big platforms, there are still those little cracks, where innovative rivals can squeeze into the market. And our job is to make sure that big platforms can’t go around sealing up those cracks, and making their position watertight, even in the face of innovation.
Preserving competition with dominant platforms
We need to preserve the opportunity for smaller rivals to break into the market, by offering something different, which dominant platforms don’t have. That could mean persuading sellers to offer a lower price on those smaller platforms. Or it could mean getting hold of innovative new products which those sellers don’t offer on the dominant platform.
And so we need to keep an eye on the “MFN clauses” which big platforms use to stop sellers from selling cheaper elsewhere, or offering different, more innovative products. Just a couple of years ago, we agreed with Amazon that it would take out these terms in its contracts with e-book publishers. In November last year, we launched an investigation into the reservation systems that travel agents use to book airline tickets. And I fully agree with the special advisers that the Commission will need to watch this issue very closely in the years to come.
The Commission will also need to make sure that big platforms don’t make it harder for their customers to switch over to rivals. For instance, in some markets, it’s common for users to make use of more than one competing service, the way that many of us have more than one messaging app on our phones.
That “multi-homing” can make it easier for smaller, more innovative companies to break into markets that are dominated by big platforms. It can give users the confidence to try out a new service, even if it doesn’t yet have a big enough network for them to be willing to take the risk of giving up on the old one. So it will be important for the Commission to watch out for big platforms that try to drive out competition, by discouraging their users from multi-homing.
But perhaps the biggest threat to competition and innovation comes from platforms that are not just a single business, but the centre of large empires.
In many cases, that means that a platform business runs an ecosystem of related products, which all work seamlessly together.
That sort of integration can be good for consumers. Our lives can run more smoothly when different parts are connected – our camera to our messaging app, for instance, or even our home thermostat to our calendar.
But if successful integration depends on us getting all those services from the same company, that can make it hard for smaller rivals to break into the market. Because it isn’t enough just to offer a better product – a better messaging app, let’s say, or a better calendar. You have to be able to replace the whole ecosystem. And although a few big companies might be able to do that, it’s well beyond the reach of innovative startups.
So interoperability – making sure that products made by one company will work properly with those made by others – can be vital to keep markets open for competition. That’s why, when we approved Microsoft’s takeover of LinkedIn, that approval depended on its agreement to keep Office working properly, not just with LinkedIn, but also with other professional social networks.
And as ecosystems grow, the Commission will need to keep a close eye on strategies that undermine interoperability. 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.
Leveraging the power of platforms
And one of the biggest issues we face is with platform businesses that also compete in other markets, with companies that depend on the platform. That means that the very same business becomes both player and referee, competing with others that rely on the platform, but also setting the rules that govern that competition.
It’s easy to see how this sort of double role can bring a risk of a conflict of interest; a risk that the operator of a platform will be tempted to tweak the rules and features of the platform to benefit its own services.
Because those dominant platforms can have a great deal of power, to set the rules of the game. They can decide, by the way they design ranking systems, which businesses can easily be found – and which can’t. They can even set rules that exclude some users altogether. And by doing that, they can have a lot of control of the way competition works in other markets – control which they can use to favour their own services.
For instance, when Google started to show results from its own comparison shopping service at the top of the first page of search results, with its rivals – on average – down on page four, it seriously affected the ability of those rivals to compete. In fact, some of them immediately lost more than 90% of their clicks.
So the power that dominant companies have, to set the rules that govern how our markets work, has to come with a responsibility, too, not to use that power in a way that undermines competition. It’s a new example of a fundamental principle of the EU competition rules – the fact that dominant companies have a special responsibility not to misuse their power, to harm competition.
And as digitisation affects ever more of our markets in the future, the Commission will need to keep a very close eye on the way that dominant platforms set the rules for those markets.
That could mean that we might see more cases like Google Shopping, where the Commission has to require platforms to treat other companies’ services equally with their own. But we shouldn’t assume that the competition rules are the only answer to this issue.For instance, in February this year, the European Parliament and the Council reached an agreement on our proposal for new regulations, to make sure that platforms treat their business customers fairly and transparently. And that sort of regulatory approach could be a useful model, to tackle other problems which the platform economy creates.
Private businesses, public responsibilities
Of course, none of this means that platforms are bad in themselves. We need some sort of platform, some sort of digital meeting place, to make the most of the connections which the digital world can offer.
But as platforms have grown, they’ve taken on tasks that have a fundamental impact on the way our societies work. Digital platforms can censor the information that reaches us, or set the rules that govern whole markets. And we need to find ways to keep that sort of power under proper democratic control.
It may even be necessary for governments to reassert control of parts of the digital world, when they find that commercial interests alone don’t provide the services we need.
It can be convenient, for instance, when platforms let us use our accounts with them to log on to many different sites across the web. But it can also allow those platforms to collect information which could threaten our privacy, and give them even more power in the market.
So it can help if, instead, people can rely on a public provider to identify themselves across the web. That’s why the EU’s rules allow governments to create an electronic ID that we can use throughout Europe. And unlike the identification that platforms provide, the idea isn’t to collect information about us, but quite the opposite. A public European electronic ID should speak for us, not about us, collecting and disclosing only the information that’s strictly needed.
So as we look to the future, it’s important to take a broad view of how the power of platforms is affecting the basic values of our society – values like privacy, freedom, fairness. And if it turns out that those values are under threat, then we need to be ready to act.
The most important challenge for competition enforcement is being able to step in, quickly and effectively, to tackle threats to competition before it’s too late. We need to be mindful of new strategies that can harm competition, so we’re ready to deal with them when we meet them in practice, when the evidence shows that competition could be harmed, even when it is hard to put an exact figure on the cost to consumers.
And of course, these issues are relevant, not just in Europe, but all over the world. Competition authorities in many different countries – including several that are represented here today – have been studying these issues in recent years. And it’s important that we get together to share ideas and experiences, so we can all get the most out of the work that’s been done.
So I want to thank the OECD, and in particular its Competition Committee, which has done a lot of valuable work in recent years, to help us learn from each other. It’s put together a series of excellent discussions and reports about digitisation, and what it means for competition enforcement.And as this Commission comes to the end of its term of office, we are making sure that the next Commission is ready to continue dealing with these challenges from its very first day.
Because we’re at a moment in our history when the choices we make will define the sort of world we live in for decades to come. And we can’t afford to miss a beat, when it comes to making sure that we protect the values that matter to Europeans.