Antitrust Authority Targets Big Tech

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As part of its increased focus on how Big Tech works – where platforms use a wide range of metrics, including intellectual property, privacy data and algorithms to improve their competitive position – the Fair Trade Commission (FTC) released the Draft White Paper on Competition Policy in the Digital Economy for comment. This primarily advises on the FTC’s policy stance and future directions for competition issues regarding digital platform operators.

The FTC — which is also planning seminars and public hearings — is expected to finalize the white paper once it receives public comment.

In this draft white paper, the FTC indicates that its focus on competition enforcement will include the following issues and efforts.

Table 1: Definition of relevant markets and assessment of market power in the digital economy

Potential difficulties

  • How to define relevant markets, in particular two-sided/multi-sided platforms and zero-priced products/services.
  • How to assess market power if the price of a product/service is zero.

Current app

  • Define two relevant markets if it is a bilateral non-transactional platform and one relevant market if it is a bilateral transactional platform, and use modified tests including a small but small price increase significant and non-transitory (SSNIP), small but significant non-transitory decrease in quality (SSNDQ) or small non-transitory but significant increase in cost (SSNIC) if a product/service costs zero.
  • Consider competitive indicators of market dynamics to assess market power.

Future directions

  • Observe the developments of the latest international cases and theories.
  • Improve the collection of digital economic data.

Table 2: Abuse of a dominant position in the commercial practices of online platforms

Potential difficulties

  • Self-preference – whether platform operators have legal self-preference and how to oversee rectifications of it.
  • Linkage – if there are two respective products, especially where there are cross-subsidies.
  • Predatory pricing/unlawful inducement to low prices – is this reasonableness?
  • Price discrimination – whether personalized prices and loyalty discounts are subject to fair trade law.
  • Most favored nation clauses – if vertical concerted actions are subject to the Fair Trade Act.
  • Resale Price Maintenance (RPM) – if a high degree of market power should be considered and if RPM has a positive effect.
  • Restrictions on online sales – how to assess indirect network effects, the industrial life cycle of platforms and territorial restrictions.
  • The interplay of data privacy and market competition – whether to intervene in privacy breaches.
  • News media markets – whether to intervene in negotiations between platforms and news media.

Current app

  • Self-preference – assess if the product/service is an essential facility and entrust supervision to professionals.
  • Tied selling – determine illegal tied selling only if the market power of the main products extends to the market for the tied products and there are competition concerns.
  • Predatory pricing/unlawful inducement to low prices – assess market power, frequency of the act, total profit and loss and market share of competitors.
  • Price discrimination – consider market position, network effects, and critical installs of platforms.
  • Most-favoured-nation clauses – determine the vertical restraint according to the 15% market share criterion.
  • RPM – assess the competition between brands and assess whether RPM promotes quality pre-sales service.
  • Restrictions on online sales – comprehensively consider trade patterns and consumer influences.
  • Interaction between data privacy and market competition – there may be no intervention in privacy breaches unless market competition is affected.
  • Good business in the news media – cooperate with the group led by the Executive Yuan.

Future directions

  • Self-preference – further investigate how platforms work and clarify self-preference.
  • Tied selling – consider cases carefully with respect to their nature, network effects, economies of scale and consumer influences.
  • Predatory pricing/unlawful inducement to low prices – reevaluate whether firms will offset their losses with supracompetitive pricing after predatory pricing and avoid misjudging the benefits produced by low pricing.
  • Price Discrimination – clarifying how personalized pricing works and costs.
  • Most-favoured-nation clauses – flexibly revise determination criteria and discuss whether to regulate horizontal concerted actions with vertical transactions.
  • RPM – include market power as a determining factor.
  • Restrictions on online sales: refer to the experiences of the United States and the European Union;
  • Interaction between data privacy and market competition – same as current app.
  • Good business with news media – proactively take relevant steps to help news media negotiate with platforms.

Table 3: Lethal Acquisitions and Data Privacy Acquisitions

Potential difficulties

  • How to determine if acquired startups will become Big Tech competitors.
  • Whether killer acquisitions will have a negative effect on innovation.
  • Whether to consider privacy protection as a non-price competition of quality of service.
  • Apply past experiences to determination and refer to the Facebook case in the United States.
  • Consider confidentiality as the quality of service in determining.

Future directions

  • Apply potential competition theory to killer acquisitions.
  • Consider the positive development of killer acquisitions.
  • Simultaneously assess privacy protection and the promotion of competition.

Table 4: Legality of concerted actions facilitated by algorithms

Potential difficulties

  • How to prove the existence of collusion.
  • If algorithms can become a tool for concerted actions.
  • Invite professionals to review the algorithms.

Future directions

  • Conduct more market research and industry surveys.
  • Improve the dissemination of laws and their relevant application.

Table 5: False and misleading online advertising

Potential difficulties

  • That online advertising that targets a specific audience and online endorsements and testimonials are subject to fair trade law.
  • Decide how to evaluate the exploitation of search engine optimization techniques.
  • Apply the Fair Trade Act to false and misleading online advertising.
  • List false and misleading online advertising as a key enforcement objective.

Future directions

  • Increase investigative capacity.
  • Improve regulatory intensity.

Jane Wang, Martina Yu-Ting Ma

Transnational Formosa

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