Surfacing a few highlights from this @CEPR RPN discussion last week on #Ecosystem theories of harm in digital platform mergers. Worth watching in full, regulators in particular where🔥🔥🔥🧵
youtube.com/embed/dfs1D5Y0…
@TomValletti table sets: “approach to conglomerate mergers too narrow: not the same market, no problem. Should they be allowed to become even bigger? Why don’t they build instead of buying? Market power grows w each acquisition bcs ecosystem insulates from competition” 2/
“But yes, of course the agencies need to prove anticompetitive effects w specific evidence, not just general theories” 3/
Exam questions from me:
“How do we factor in the broader set of assets a company accumulated over time, presence in multiple markets, size, financial resources, capitalization? Anxiety among regulators: don’t want to look back in 5 years and say how did we miss all that?” 4/
“Ground rule is there needs to be a merger-specific concern, so cannot just worry abt size and power but need to show how an acquisition creates harm. Do we need to articulate a specific mechanism? Leveraging? Liability standards? Remedies?” 5/
Mike Walker Chief Economist @CMAgovUK: “My concern as enforcer is all about deals creating barriers to innovative/disruptive entry & raising rivals’ costs. Not a new issue, been around since applications barriers to entry, but much bigger now bcs it comes up in many more areas”6/
“Efficiency offenses are economically coherent. Short-run efficiencies often key to long-run theory of harm. V uncomfortable for regulators, but need to take dynamic competition seriously. If ecosystem mergers allow incumbent to limit path of future innovation, it’s bad news”7/
“Personally given I think entry to compete against large platforms’ core products is already extremely difficult, I am worried abt anything that makes that entry harder. So in some large ecosystem deals the bar should be set high esp. if they involve data advantages” 8/
@johnmarknewman @FTC “If you control lots of different levers, that gives you ability to create harm. Yes in practice we need a mechanism, a story to tell a judge. But we can’t articulate it perfectly in a pristine manner bcs it’s uncertain. We should focus on capabilities” 9/
“How many levers do you wield? It may not be the exercise of the power that counts. It's the power itself” 10/
@johnmarknewman “We're not going to have precise, pristine theories of exactly what's going to happen. But a set of “plus factors” may be useful: is target a market leader, network effects, data advantages, network bridging capabilities, is technology in flux at this point?” 11/
“Need to think of remedy from day 1, bcs it’s only worth deploying our scarce resources if a meaningful remedy can be had.
Those multiple leverage points, where regulators don't have good info abt which levers might be pulled, militate in favour of structural solutions” 12/
Hans Zenger @EU_Competition: “Most economic theories of dynamic foreclosure start w short-term benefits to consumers, followed by a very large negative. It’s our burden to prove in the end. But just bcs there's some small benefit early on, doesnt make it an efficiency offense”13/
“Much more abt dynamic forward-looking effects than old portfolio strength theories, denying entry points to rivals & creating impermeability of position across markets. It's a “foreclosure plus” standard: some foreclosure laced w potential competition, innovation, entry…” 14/
“Lens of capabilities is useful. Cant just say you have an advantage, too many efficiencies around, must show competitive harm. But standard shld be linked to expected cost: eg Nvida-ARM, getting it wrong cld mean messed-up situation for vast majority of chips in modern life” 15/
Hans Zenger, @EU_Competition “Then it's not only about the incentive, it's mostly about ability, and the higher the ability, that should factor into what an agency needs to show to discharge its burden of proof” 16/
Qualified support from academics on the panel 👇 17/
Patrick Rey @TSEinfo
“Need to rethink competition away from narrow approach (substitutes vs complements) to competition between ecosystems. Need to understand if merger of complements can pre-empt entry, or reduce incentive to support innovation of other complement providers” 18/
“Do we need a “mechanism” or are “capabilities” enough? The more capability you have the more levers you have. But that will not eliminate the need for a story. The standard of proof may need to be adjusted though given what we know, maybe a precautionary principle” 19/
Feng Zhu @HarvardHBS “Network effects entry barriers vary a lot – is demand hit-driven or do consumers value variety? Multi homing or single homing, one side or both? Clustering structure? Disintermediation?If deal facilitates network bridging it can raise cost to compete 20/
@AnnabelleGawer “Strategic decisions not made at level of separate markets,unit of analysis is constellation of markets. Platform has governance role, decides scope of the firm, but also configuration of platform “sides” & design of digital interfaces connecting these actors”21/
“Merger doesnt just change scope of the firm, but also other two. Platforms start w narrow scope & open interfaces, aiming to add members to their sides, but then close or recalibrate interfaces while expanding scope. Bad for entry, making engagement of others more difficult” 22/
Overall: strong candid discussion that should be required listening/reading to all those lamenting “regulators no longer use economic logic, they’ve all gone mad”… end/

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More from @Caffar3Cristina

Feb 21
Platform regulation #DMA: “ink is almost dry” on Art 5/6 various “thou shall not’s” for “gatekeepers”. BUT rules need translating into relevant prescriptions for each business model. We focused on e-commerce last week for a great discussion @cepr_org #Competition_RPN/ @MaCCI 🧵1/
Video recording can be found here 2/
Aside from public narrative (universally adverse), a ton of economic research underway looking at the behavior of hybrid marketplaces, esp. Amazon. What does it show? Does anyone care? Should regulators/enforcers care & acknowledge the tradeoffs? Or is it all beside the point? 3/
Read 32 tweets
Sep 25, 2021
So, showtime. While no one was paying attention, Google shifted the #search_monopoly from desktop to mobile - and won. Appeal heard next week: @EU_Competition decision in 2018, started in 2013, on econ theory of harm developed originally for the #Russian case before @FAS_RF 🧵1/
Aside from fripperies on market definition, real issue was #leveraging power in #Google_Playstore (that every OEM wanted) by offering it #free on condition Google Search was #preinstalled “at every entry point” on the device. Plus other goodies. No other engine stood a chance. 2/
Unusual (& initially counterintuitive) was that leveraging was not “from dominance in search” into something else, but from #must_have Playstore to establish & protect #search_monopoly. Eventually we got there: it’s like #Microsoft! Tying/ leveraging! There’s precedent! Cool.3/
Read 7 tweets
Jan 23, 2021
So #Google threatens Parliament to shut down Search in Australia if the proposed "new-media bargaining code" is not changed (rules mandate #Google & #Facebook to pay publishers for links to news articles in search results). Meanwhile in Europe … 1/ wsj.com/articles/googl…
...on the same day a settlement is announced between @GoogleEnFrance and French publishers @AlliancePress on payments for news - after the @Adlc_ went to war with #interim_measures and an #injunction to negotiate. Seems to have concentrated minds... 2/

techcrunch.com/2021/01/21/goo…
Why the difference? Well, the #French solution is a local affair, a "framework agreement" for #Google to negotiate licensing deals with individual publishers under the Copyright Directive. The @acccgovau #bargaining_code has potential to #contaminate other jurisdictions...3/
Read 7 tweets
Jan 22, 2021
Well, about timeto hear. We write just about this w @johnnyryan today: antitrust complaints do not get #privacy_regulators off the hook. They have tools to address the #data #free_for_all, not just self preferencing. #purpose_limitation #GDPR
Complainants go & complain about #self_preferencing to antitrust agencies re changes that disadvantage them. Fine. But online advertising is all dysfunctional & #GDPR has tools that must be used to address also
#internal #data #free_for_all (while #DMA gets going)
Read 4 tweets
Dec 16, 2020
Nonono. There is *nothing* new in #DMA on digital mergers other than the obligation of #gatekeepers to inform. *Nothing* new on substantive assessment (unlike @CMAgovUK proposals). So *nothing* to prevent a new Facebook/Whatsapp or indeed #Google_Fitbit 1/
When asked about it at press conference, @vestager pivots quickly to importance of #interoperability. That’s key for rivals to compete but rest of us worry much more about #personal_data use in #health_tech. @EU_Competition why was so hard to see this deal is about #data 2/
...and there is #direct_harm to consumers from direct exploitation of their data by a discriminating, extracting monopolist. A large group of economists said it, privacy experts said it, consumer groups said it, civil liberties groups said it. Not enough? @1Br0wn @johnnyryan 3/
Read 4 tweets

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