In a 2020 dominated by COVID-19, regulators grappled globally with prolonged merger reviews and company valuations fluctuated greatly. Antitrust scrutiny and enforcement remained robust with the focus on big tech continuing to grow. There now appears to be competition amongst regulators themselves as a wave of investigations are launched and new tools proposed to regulate digital markets.
The presidential election in the United States is unlikely to change this direction of travel, with more aggressive regulatory enforcement expected to continue. The European Union has been investigating big tech for decades and is now looking to introduce regulation to complement antitrust tools. Finally, the UK is working to position itself as a robust enforcer following Brexit.
With the first vaccinations underway, the next twelve months should see greater economic recovery, which will lead to further consolidation and continued pressure on big tech, one of the few industries to have performed strongly throughout the crisis.
The antitrust focus on big tech in the United States had begun before the presidential election with the DOJ, FTC, State Attorneys General (AGs) and Congress all looking closely at the business practices of the tech giants. There is largely bipartisan support for these efforts, and the incoming Biden administration will not significantly change the approach to antitrust enforcement.
In June 2019, Congress initiated a bipartisan investigation into the state of competition online, spearheaded by the Subcommittee on Antitrust, Commercial and Administrative Law. On October 6th, the Subcommittee released a 449-page report entitled Investigation of Competition in Digital Markets, recommending a number of concrete policy recommendations.
The report urges Congress to consider passing commercial nondiscrimination rules that would make large companies offer equal terms to companies selling products and services on their platforms. It recommends barring certain dominant platforms from competing in “adjacent lines of business” where they would have a huge advantage. The report also calls on Congress to define a new standard for antitrust violations, declaring that the laws should be “designed to protect not just consumers, but also workers, entrepreneurs, independent businesses, open markets, a fair economy, and democratic ideals.”
Moving into 2021, new legislation will be introduced to overhaul the nation’s antitrust laws. Regulators are not waiting for new rules to be introduced however, with a series of antitrust investigations launched in recent months by the DOJ, FTC and almost every State AG.
The European Commission has been under sustained pressure from EU Member States and civil society to reform its competition rulebook for the digital economy. This has followed a series of antitrust decisions against online platforms that, in the eyes of many, seemed to produce only limited results.
In response, on December 15, 2020, the Commission published its Digital Markets Act proposal which, when adopted, will heavily regulate the behavior of large online platforms acting as ‘gatekeepers’, subjecting them to a series of positive and negative obligations.
Unlike the tailored approach of other regulators (see the United Kingdom below), all obligations are applicable to all platforms deemed to be gatekeepers, with some scope for further clarification by the Commission on compliance in specific cases. Obligations include mandatory notification of all M&A activity, a ban on self-preferencing and a requirement to provide data access to third parties. Non-compliance with any of the obligations can bring significant fines of up to 10% of global turnover, reflecting the current limits that are applied in antitrust. Behavior or structural remedies can also be applied in cases of “systematic non-compliance.”
Starting in the New Year, the proposal will be debated and amended by the European Parliament and the Council, representing Member State governments. Irrespective of the final form that the legislation takes, it is abundantly clear that the European Union has the digital economy squarely in its sights.
The United Kingom’s proposals on digital competition have been more than two years in the making. In the summer of 2018 Ministers asked Professor Jason Furman, a former advisor to Barack Obama, to carry out a broad review of competition policy issues and regulation in the digital sector. The final report, published in March 2019, called on the UK to establish a new regulatory center of excellence for the digital sector tasked with encouraging greater levels of choice and competition, backed by new powers in law.
The latest proposals, published in December 2020, will be consulted upon early next year, ahead of legislation. These represent the consolidated recommendations of the Competition and Markets Authority (CMA), and the sector regulators for data (ICO), telecoms (Ofcom), and financial services (FCA). A Digital Markets Unit will be established within the CMA to police the new regime. As with other global digital regulatory initiatives, the emphasis will be on proactive, pro-competitive intervention to promote competition and innovation. Data is recognized as a key means of driving this, so remedies could include imposing more stringent interoperability requirements on tech firms and strengthening consumers’ ability to control and share their data. Proposed mergers will also be subject to greater scrutiny ex ante, including the ability to block transactions on the grounds of potential harm to consumers.
Unlike other jurisdictions, however, the UK’s focus will be on developing tailored regulations for individual firms deemed to have “Strategic Market Status” (SMS). The UK’s approach is to avoid having to establish common rules that apply equally to all digital platforms, avoiding problems of definition, scope and lack of timely action that have been seen elsewhere. Instead, SMS firms will be determined according to an objective economic assessment of their market power and have their activities monitored closely. Each will be expected to abide by an enforceable code of conduct, designed to address specific issues of market concentration and competition linked to their SMS designation. Failure to do so could trigger fines of up to 10% of global revenues.
More Uncertainty Globally in 2021
These developments in three major “western” jurisdictions will be observed and scrutinized in other parts of the world and we expect similar trends all over the globe. The continued search for the right antitrust paradigm in the digital economy, tainted by boosterism and protectionism, will dominate next year’s headlines as the economic crisis continues and authorities look for sustainable recovery plans.
Political impatience with the laborious definition of relevant markets and established theories of harm will likely lead to apparently hard and fast ex ante rules, tougher merger control and competition between jurisdictions to outdo each other in being quick and tough. The new politically-driven rules will be tested in the courts, where delicately balanced criteria will be parsed in the light of (until recently) inviolate and hallowed precedent. The pendulum is certainly swinging towards more regulation in tech but it will not come to rest at a point 180 degrees away from today’s status quo. Wherever it finally ends up, we should expect a bumpy year with considerable uncertainty all over the antitrust world.