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Digital platform harms won't be fixed by competition regulation alone

Monday 29th July 2019

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Global digital platforms may have the potential for harm, but competition regulation isn’t necessarily the right tool for addressing them, a visiting academic says.

Concerns about the size of some platforms – which include Google, Facebook and Amazon – and how those these “big, powerful networks are used,” are legitimate, Professor Howard Shelanski says.

“It is very possible that certain things that happen as a result of these platforms are bad things,” he told delegates at the Competition Matters conference in Auckland on Friday.

“There are, I think, serious social issues of the way people interact, the way students learn, the way peoples’ minds get wired, that we are only beginning to learn about.”

He cited consumers’ growing “addiction” to Amazon Prime and the special deals it offers. That could also be killing main street in people’s hometowns and destroying entry-level jobs in retailing.

Shelanski, a professor of law at Georgetown University in Washington DC, said the social disruption being brought by the new technologies is of a “very profound kind” and probably more important than the competition issues related to the platforms.

“Those to me are public health regulation, employment regulation, all kinds of things that I think should be kept outside of the competition law purview.

“We can’t solve those with competition law. If we try to, we will have competition regulators making decisions about areas in which they are manifestly inexpert.”

Shelanski was speaking the same day the Australian Competition and Consumer Commission delivered the final report from its digital platforms inquiry.

It recommended that unfair contract terms be made illegal and that the country’s privacy laws be strengthened.

A code of practice for digital platforms would give Australians greater transparency and control over how personal information is collected, used and disclosed by digital platforms.

It also proposed a code of conduct to govern relationships between Google and Facebook and media businesses; the updating of the country’s merger laws; and the establishment of a new digital markets branch within the ACCC.

Shelanski told the conference he is not a fan of restricting platforms to certain lines of business, as that inherently reduces competition but also risks reducing scope for innovation between the platform and other product developers.

He argued the better tool was ensuring access to a platform and the data needed to operate on it. That enabled firms on the periphery to get access to the market and gave consumers greater choice.

Portability of customer data was important, but he said platform providers were entitled to keep the information and modelling they had “derived” from that data.

The key was knowing what level and form of customer data was needed to be useful to a potential competitor.

Using an Uber example, Shelanski said a rival ride service might offer customers a joining discount if they bring their Uber ride history and star rating with them. 

The customer could then use their own data, imported in a “fairly” rich way, without the whole lot having to be reinvented.

Later in the conference, ACCC special economic advisor Darryl Biggar said that when a firm becomes big enough to constitute a “bottleneck” in a market, line of business restrictions may be necessary given the influence they start having on other suppliers, distributors and manufacturers.

While Amazon had not reached that point yet, he noted it already accounts for 5 percent of global retail sales and half of all online sales.

Biggar said Amazon bars products from its platform that compete with its own and has also started making popular products in competition with those other suppliers are already offering.

The company also wants to enter every link in the logistics chain and has just started construction of a US$1.5 billion air freight hub outside Cincinnati.

“UPS and Federal Express: Amazon is coming to eat your lunch,” he said.

Biggar said that trend has worrying implications for the courier industry if rivals can’t get access to Amazon customers.

Earlier this month, Britain’s Competition and Markets Authority ordered a halt in any further integration of Amazon with the UK-based food delivery platform Deliveroo.  

Amazon shut its UK food ordering business in December after two years. It was entering Deliveroo as a minority participant in a US$575 million funding round.

The CMA said it had reason to suspect Amazon and Deliveroo would cease to be distinct businesses if the investment proceeded.

(BusinessDesk)

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