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Speech Martijn Snoep over toezicht in de (digitale) economie

Speech ACM voorzitter Martijn Snoep over mededingingstoezicht in de (digitale) economie. Conferentie Global Antitrust Hot Topics Concurrences in Brussel.

Opening keynote Global Antitrust Hot Topics (EU, US & Global perspectives) Concurrences, Baker Botts, Martijn Snoep, 26 september 2019
Ladies and gentlemen,

It’s a great pleasure to be here today with you, and it’s an honor to open this conference on hot topics in global antitrust. Thank you for inviting me to make some introductory remarks in these fascinating times.

The topic of today is Global Antitrust Hot Topics. For me, the hottest topic is not in antitrust, but in trust.

Ten years ago people were both happy and naïve. Happy because the apps provided free services that they did not have before. Naïve because only a few thought about side-effects on markets and privacy. The providers of these apps were generally trusted.

But that has changed. Today, more and more people believe that Apple, Google, Facebook, Amazon and the like not only provide benefits but also threats to our societies and to their individual autonomy. They expect governments to police these companies actively, and to protect the interests of individuals. The trust they once had, has significantly diminished. This is not limited to digital markets, there are similar trust issues in healthcare, labor and energy markets.

This is a serious problem. That is because, for markets to function well, people need to have trust in markets, and have trust in the role that the government, including competition authorities. This creates a tremendous responsibility for us as competition community, because it goes to the heart of the social contract in our societies.

Today, I would like to focus on the importance of trust of people in fair markets and in fair market outcomes, and how we can preserve and contribute to this trust.

In modern times, governments need to ensure that markets work well for people and businesses. More specifically, that markets generate fair outcomes through a fair market process. And that people and business have trust in that they do so. Without such trust, there is chaos. And with chaos, neither markets nor governments are able to function properly. So our ultimate goal is to build trust.

When talking about trust, we distinguish three levels:

  • Trust in fair market outcomes
  • Trust in a fair market process (a competitive process played by the rules)
  • Trust that governments will intervene in case of unfairness
This sounds perhaps straightforward and analytical, but, in reality, trust in the fairness of markets is fuzzy, hard to measure, subjective, and, from time to time, contradictory. One can have an entirely fair market process. Everybody is playing according to the rules. But alas, an unfair outcome is the result. And a fair outcome for the people paying low prices for a certain product can imply unfair outcomes, low wages, for others. No definition of fairness is uncontroversial or unambiguous, and is likely to vary with time, place, and culture. But all this, is no reason to abandon trust in fairness as an objective. It will take time. It requires a continuous effort. And it will never be perfect.

So we need to be ambitious but also humble and realistic about our abilities to engineer markets and market outcomes that are perceived as fair. And we have plenty of reason to be humble and realistic about our ability when we look at the past. Our track record in market engineering is not that great.

I was very much confronted with this track record when I read FTC Commissioner Christine Wilson’s recent address at the British Institute of International and Comparative Law. She talked about some historical regulatory misadventures in the US railroad sector. Highly recommended reading.

Commissioner Wilson described how, at various stages, regulation was introduced in the US starting from the end of the 19th century, influenced by populistic tensions, lobbying efforts, and new technologies. New economic patterns emerged when transport possibilities emerged with the introduction of cutting-edge railroads: wheat grown in North Dakota was shipped to Minneapolis, where it was milled into flour, and shipped by rail again to bakeries on the other side of the US.

With new technology came new complaints: farmers with only one vertical integrated railroad nearby argued that they paid a lot more than farmers with more distribution options, which harmed their competitive position. They thought this was unfair. Railroads also complained, because some routes that ran in parallel were characterized by ‘ruinous competition’ and possibly bankruptcies. This was also considered unfair by them. In the end, well-intended regulation was introduced in 1887: tariffs had to be ‘reasonable and just’, and ‘unjust discrimination’ by railroad companies was prohibited. The enforcement of these rules did not work out very well because they led to decades of litigation or to interest-group-influenced modification of the regulation. Several initiatives for more efficient and better services were not allowed by the regulator, leading to high transport prices. There was even an attempt to prohibit vertical integration. After almost a century of regulation, the railroad industries were significantly deregulated, leading to a decrease in prices by 35 to 75 percent, generating huge benefits for consumers. Good intentions came with a high price tag.

So yes, we need to be humble and realistic but that does not mean that I’m opposed to any kind regulation as such. I do believe that it’s useful to update the rules of the game and modify the application thereof to the problems of today  (I’ll come back to this later). But again, I want to underline that we should be careful when introducing new rules, and note that the law is not theoretical but real.

I believe that, the very least we should do, are the following four things:

First, we should act and do stuff. And show that we care and we can do more than producing elaborate and thoughtful reports. Paraphrasing Isabelle de Silva of the French competition authority: let 2019 be the year of general reports, but 2020 should be the year of concrete action.

Second, we should actively engage in a dialogue with people and small and medium-sized businesses to discuss their concerns  To illustrate: we see an increasing number of people and businesses coming to us with questions on how competition rules play out in sustainability initiatives. We see hospitals and doctors asking whether they can collaborate more with each other to face the challenges of an aging population. We see self-employed that want to earn living wages and wonder whether this is allowed to enter into minimum-price agreements. In these situations, we are open to their concerns and provide guidance, with a flexible and creative approach responding to new demands of a changing society.

Third, I believe we should expand our toolbox. Competition authorities could contribute to trust through timely interventions when markets don’t function properly with entirely new or improved tools. I therefore welcome the proposal by the President-elect of the European Commission Ms. Von der Leyen to broaden the role of Commissioner Vestager in the digital economy in the next few years, combining policy with enforcement tools and to ensure competition policy and rules are fit for the modern economy.

Especially in dealing with the digital economy, I see room for new tools and for improvements. It would be useful if competition authorities gave more guidance to companies in the digital economy. There are new questions as a result of new types of behavior. Guidance gives us an opportunity to combine the benefits online parties yield while ensuring outcomes remain fair.

I also believe that the toolbox of competition authorities could be expanded by adding a tool for intervening in dominant online platform behavior. One drawback of the current enforcement toolkit is that ex-post enforcement is slow and does not sufficiently prevent harm. After all these markets run fast. They are often characterized by winner-takes-all dynamics, strong network effects, and high barriers to entry. Ex-post enforcement can be too little too late. You don’t want tools to cure yesterday’s problems.

We envisage a tool that allows competition authorities to impose proportionate remedies on dominant companies aimed at preventing competition problems, rather than relying on after-the fact enforcement. The non-punitive nature of the tool could improve the chances of a settlement with the dominant company, as they are not accused of any wrongdoing, and will not face damage claims. My ambition is to discuss and improve this idea in the coming months, in line with a proposal by the Dutch government, in close cooperation with the European Commission and other competition agencies. I expect such an improvement will further contribute to the trust people should have that governments and competition authorities are in control, and are able to withstand Big Tech.

Fourth, there is a need for us to team up with other agencies, particularly in the field of consumer protection, privacy and sector regulators. We should try to come up with a unified, or at least an aligned approach. Because there are trade-offs to be made between competition, privacy, consumer protection and sectoral ambitions. Together with the new European Commission, I believe we should further improve cooperation. Without a common approach, we will never reach the desired level of trust.

My ambition is to be able to update you on the progress we have made next year. I believe that we, as a community being here together, have the capacity to work on improving trust of our people in markets. Let’s ensure that we remain even more relevant than we are today; not as a result of a hard reset of the concept of capitalism as the newspapers might suggest, but because we’ve proven that our competition principles are sufficiently flexible and fit for the future.

Thank you.