Florence Competition Summer Conference, 24 June 2021

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Introduction

Thank you so much for inviting me to join you today. I’m only sorry that I can’t be with you in person. After so many months of enforced absence, Florence is calling to me – and I hope it won’t be long before we meet again face to face.

Of course, enforced absence is etched into this city’s history. Its most famous son, Dante Alighieri, died seven hundred years ago this year, not in Florence, but in exile. For the last two decades of his life, Dante could not enter Florence, without facing execution. And nothing – not his poetic talents, nor his years of service to the Florentine Republic – counted for anything with the city’s gatekeepers. Because no matter how much we may think our society rewards merit, those rewards are only available if gatekeepers allow it.

Digital platforms and the lessons of competition enforcement

Today, millions of businesses depend on digital gatekeepers to connect them with their customers. Those platforms may not literally have the power of life and death – but they do have many different ways that they can undermine competition, and threaten the survival of the businesses that rely on them.

Some of those ways are familiar from decades of competition enforcement like tying products that face fierce competition to others that are “must-haves”. Other ways have developed in line with the new types of power that these platforms have.  As both player and referee – both operating a platform, and competing in markets that rely on that platform – these companies can harm competition by favouring their own services, or misusing data about their business users to compete unfairly against those same users.

In recent years, competition authorities around the world have come around to the need to enforce their rules firmly, to deal with this sort of behaviour. We’re seeing that sort of action, not just in the EU, but also elsewhere – in the UK, the US, Australia, and others.

We embarked on this journey several years ago, with our cases on Google Shopping, Google Android, and Google’s search ad service, AdSense; we did a sector inquiry into e-commerce, and a series of e-commerce cases including one on Amazon’s e-book contracts; and we had merger investigations looking at data and privacy, like Microsoft’s purchase of LinkedIn.

I’m glad that this activity has gone mainstream. In fact, these days you hear some voices arguing that authorities should do even more, by enforcing our rules even more strongly.  But we need to be careful. Competition enforcement works because it’s firmly based on evidence and the law, and on sound economic analysis of how markets work. And no matter how important it may be to tackle the dark side of digitisation, we can only do our bit if we stick firmly to those principles.

Competition and digital platforms in practice

With the years of experience that we’ve built up through cases, we’re now in a position to design regulation to help tackle harmful behaviour that we’ve seen again and again. And in the meantime, the pace of our work on enforcing the competition rules hasn’t slackened one bit.

In April, we reached the preliminary conclusion that Apple misused the power of its App Store, to the detriment of music streaming services that compete with Apple Music. It required those rivals to use Apple’s in-app purchase system to sell subscriptions through their apps – and to pay a 30% commission. Its contracts also included “anti-steering” clauses, which banned those services from telling their users that they could get a better deal by subscribing directly through the website.

We’re also looking at cases where platforms seem to have misused the special access to data that they have, in their position as both player and referee.

Take Amazon, for instance. Each business that sells through the Amazon marketplace generates data, about what people buy, which helps it set prices and choose what to sell. But those businesses only know about their own customers; Amazon has data about the whole marketplace. Only Amazon knows, for every single seller, how much they’ve sold of each product, how much revenue they’ve made, which offers have been most attractive to customers.

In November last year, we reached the preliminary conclusion that Amazon misused that data to compete against those sellers when Amazon itself sold products on its marketplace.

There’s a similar issue at the heart of the case that we opened earlier this month into Facebook. In that case, providers of online classified ads use Facebook’s social media platform to advertise their services. And we’re looking at whether Facebook misuses the data it collects through that advertising, to help its own classified service, Facebook Marketplace, to compete.

Just two days ago, we opened a new investigation into Google’s behaviour in the ad tech sector.

In 2019, advertisers spent some 20 billion euros buying display ads on the Internet in the EU. That income is a vital source of revenue for companies that offer content on the Internet for free. And although the machinery that supports that advertising – the so-called “adtech stack” – is hidden from most of us, that doesn’t make it any less important for it to stay open and competitive.

The stack includes a whole series of services that together make online display advertising possible – the platforms that sell advertising space, and the ones that buy the space on behalf of advertisers. It includes the ad servers that select and display an ad each time we click on a web page, and the analytics businesses that help advertisers understand how their digital campaigns are working.

Each part of this stack involves different businesses – but Google has a strong position in them all.  In our investigation, we will be looking at ways in which Google may have misused its power, to consolidate its control of the ad tech machinery.

We’ll be looking at whether it used YouTube to direct advertising towards its own adtech businesses. We’ll investigate whether it used its position as a market leader both for buying and selling advertising space, to shut out rivals by dealing preferentially with its own platforms. And we’ll look at whether it’s favoured its own services by making it harder for those rivals – but not Google’s own adtech businesses – to track and target users precisely.

And as technology changes, there’s a risk that new gatekeepers will emerge – or that old ones will extend their power into new markets. We saw that with the mobile Internet – with the way, for example, that Google used the power of its Android operating system to take control of the new markets for mobile Internet search. And now, the first results of our sector inquiry on the consumer Internet of Things suggest that the same thing may be happening again, in the growing markets for smart home devices. Many businesses have told us that providers of voice assistants and smart mobile operating systems – which we use to control our smart homes – are already becoming gatekeepers in these markets, and using their power to make it harder for others to compete.

New remedies in changing times

With all these cases, we’ve identified market practices by big platforms that threaten competition.

But that’s not the only way that competition enforcement needs to adapt to the digital world. As this conference makes clear, an equally important – and often more difficult – part of the puzzle is finding the right remedies to restore competition.

Here again, we’re in a strong position. We have the toolbox we need to find suitable remedies – and the ability to go on refining those remedies, to make sure that they’re doing their job.

We’ve seen that with the changes that Google has put forward, to restore competition for browsers and search apps on Android tablets and phones. In 2019, Google introduced a “choice screen” that allows Android users to choose the browser and the search app they want as their default. And since then, we’ve been working with Google, to make sure the choice screen really does give its rivals a chance to compete. Google’s announcement earlier this month, that rivals won’t have to pay to appear on the choice screen, is promising – though as always, the test of this remedy will be how it actually works in practice.

And it’s not just the competition rules that can give us the remedies we need, to keep markets open.  Remedies are also a vital part of our proposal for a Digital Markets Act to keep these markets fair and contestable, by giving gatekeepers clear, unambiguous duties. We’ll have the power to fine gatekeepers that breach their obligations – but just as importantly, the proposal would make it possible to impose remedies needed to ensure compliance and restore fair and contestable digital markets. That includes a far-reaching set of possible actions if we find, after a full investigation, that a gatekeeper has systematically broken the rules to strengthen or extend its position – a set of actions that, if necessary, could go all the way to breaking up the company.

Of course, in this case, a structural remedy, where the company has to sell part of its business, would be very much a last resort – just as it is with our antitrust rules.

When it comes to mergers, though, things are rather different. There, we’re looking at companies gaining power in the markets not by earning customers, but by buying them. So – like most merger authorities around the world – we’ve generally looked for structural remedies for horizontal mergers between direct competitors. In fact 80% of the remedies we accepted last year were structural.

But when merging companies don’t compete directly, there’s less chance of harm, and more scope for efficiencies that can offer consumers a better deal.  So if there is a competition problem, we explore all options.  If divestments can’t solve the problem, we consider other types of remedies such as open access or interoperability.   These remedies need to be considered because in many vertical or conglomerate mergers, the only alternative to behavioural or quasi-structural remedies is often to block the merger.  And this is always an option if we are not convinced that remedies can work.

To give one example.  As data gets increasingly important, we are likely to see more often concerns about data accumulation . And to fix that sort of issue, an important question is whether we can use a “data silo” remedy, that lets the companies merge, but keeps their data separate. In effect, that’s a digital version of something that’s always been part of our toolkit of remedies, in antitrust as well as  merger cases – it’s a kind of firewall that prevents companies from taking data from one side of a business and using it in another part. 

That is what the Digital Markets Act proposes when imposing restrictions on the use of data by gatekeepers that compete with business users also generating data on the platform.

And a data silo is what we accepted last year, when Google bought Fitbit. Since Google didn’t sell wearables, and Fitbit’s position in the market was not significant, we found that the merger did not lead to meaningful overlaps on the wearables market itself. But we did have concerns that combining the companies’ data might harm competition, if Google could use Fitbit’s health and fitness data for advertising.  So in that case – for the first time – we accepted a “data silo” remedy to fix concerns about combining data, with Google committing not to share Fitbit’s health data with Google’s advertising business.

A data silo remedy like this is much more than a simple promise not to combine data. It’s much closer, in fact to a structural remedy – with technical solutions that reliably keep data separate. It is in fact a quasi-structural remedy.  Google’s compliance will be monitored by an independent trustee – with the help of an equally independent technical expert. And to make sure that the remedy would be effective, we worked closely with the European Data Protection Board, as well as consulting extensively with other companies in the market through a market test.    

We were also concerned that, after the merger, Google might arrange for Fitbit’s products to work better with Android than with other wearables, and deny other apps the chance to use Fitbit data. So alongside the data silo remedy, the companies also agreed to maintain interoperability between Android and other companies’ wearables, as well as allowing other apps to have access to Fitbit’s health and fitness data – with the consent of users, of course. 

Pooling and sharing data

Because we get the best out of data, not by hoarding it, but by sharing it. Insurance companies, for instance, need access to claims data to set the right price for policies – and to protect themselves from fraud. So by pooling their data, they can make better judgments – which means that consumers pay less.

In Ireland, members of the national trade association, Insurance Ireland, have access to pooled data. But to get that access, you first needed to be allowed to join. And last week, we reached the preliminary conclusion that Insurance Ireland effectively blocked or delayed some companies’ membership, denying them access to data which they needed to compete.

This, if you like, is the dark side of pooling and sharing data. It can become a way to shut some businesses out of the market, or a way for companies to collude. That’s why, as part of our review of the guidance and rules on horizontal agreements between competitors, we plan to include guidance to help companies pool or share data in ways that don’t undermine competition.

Conclusion

Dante’s exile came as a terrible shock – in an instant, his fortunes had been overturned by forces that were  beyond his control. As he wrote in the Divine Comedy, Fortune could “change around… possessions from one people to another… and no one could do a thing.”

That sense of unpredictable, disorienting change is very familiar today – not least because of  the digital revolution that’s transforming our world. But that doesn’t mean that we need to put a sign on our laptops and smartphones that says, “Abandon hope, all ye who enter here.” It just means we need effective rules and regulations to give us the confidence that the dark side of digitisation is under control – so we can find our way safely out of the dark wood, and make the most of its enormous potential to make our lives better.

Thank you.