French Competition Authority proposes competition reforms for digital platforms

Written on 2 Apr 2020

The increased prominence of online services in the face of Covid-19 underlines the issues flagged by the French Competition Authority in its contribution on digital economy. The FCA put proposals for a better framework for so-called "structuring platforms” from a competition law perspective.

On 21 February 2020, the French Competition Authority (“FCA”) released its contribution to the ongoing debate about whether and how competition law needs to adapt to face the challenges of digital markets. In its contribution the FCA provides suggestions on the way “structuring platforms” may be better caught and controlled by competition law. The FCA considers that current competition law framework is already applicable to such platforms but should be more effective and flexible to be able to adapt to fast market changes. The FCA then breaks new ground by suggesting a definition for these “structuring platforms” to broaden the definition of the dominant position. This should according to the FCA, be taken into account in a new merger control threshold.

Background

The development of these new services is based on digital technologies such as algorithms, cloud, artificial intelligence, blockchain, and new global digital platforms. Platforms for online sales for physical commerce, online reservations, or sharing of properties for holidays, have disrupted certain sectors of the traditional economy. This evolution has led to new challenges in the implementation of competition law.

The practices of major online players are the subject of several international competition investigations, particularly in the United States and in the European Union. More widely, digital technology has become a fundamental part of the program of the European Commission which is eager to overhaul, along with the European countries, its legislative framework.

Among the FCA’s main observations, it underlines that national competition authorities must be able to intervene quickly and meet deadlines in order to be able to respond to rapid market developments.

Definition of structuring platforms

In its contribution, the FCA innovates and submits a definition of a structuring digital platform, being an organisation:

  • that provides online intermediation services aimed at exchanging, buying or selling goods, content or services; and
  • which holds structuring market power:
    • because of its size, financial capacity, user community and/or data holdings;
    • enabling it to control access or to significantly affect the functioning of the market(s) in which it operates;
    • with regard to its competitors, users and/or third undertakings which depend for their economic activity on access to the services it offers.

The FCA considers that the established concepts of competition law are still a relevant approach to structuring platforms, but that developments of anticompetitive practices and merger control regulations should be contemplated specifically in relation to structuring platforms. 

Structuring platforms and anticompetitive practices

The FCA envisages a few adaptations to the current legal framework to encompass structuring platforms, notably to:

  • Broaden the concept of dominance to include these so-called structuring platforms, which have considerable market power where they are primarily active, but also in neighbouring markets, due to their status as “gatekeepers“.
  • Redefine the concept of “essential facilities” or adapt it to the digital economy to include, for example, the unavoidability of certain databases, user communities, or ecosystems.
  • Compile a list of practices giving rise to competition concerns specific to the structuring platforms. The FCA intends to encompass practices such as the use of data in a dominated market to make access more difficult, or practices hindering the use of “multi-homing”.

The main objective of these proposals is to set up a framed and dynamic case-by-case analysis of the structuring platforms allowing adjustment for future development of these platforms. 

Structuring platforms and merger control

The FCA notes there is currently a lack of control over certain transactions which fall below the current threshold but are nevertheless likely to give rise to competition concerns. The FCA considers three new solutions to address this issue:

  • First, the FCA proposes to introduce an obligation to inform the European Commission and/or the national competition authorities concerned of all mergers, within the meaning of Article 3 of Regulation no 139/2004, implemented by structuring platforms in the European Union territory, so that competition regulators could keep an eye on these transactions;
  • Second, the FCA has suggested a new notification mechanism based on a common observation of the market by national competition authorities, according to which a competition authority could require the parties to notify a merger, either ex ante or ex post, where all three following conditions are met:
    • all the undertakings or groups of natural or legal persons that are parties to the operation have a worldwide turnover exceeding €150m;
    • the operation raises “substantial competition concerns” identified in the territory concerned; and, where appropriate
    • the operation does not fall within the competence of the European Commission.
  • Voluntary notification by concerned undertakings would be another possibility, which would allow platforms to remove doubts about possible intervention by competition authorities.

What’s next ?

Release of this contribution came alongside the publication by the European Commission on 19 February  2020 of a roadmap to “Shape Europe’s digital future” and the launch on 21 February 2020 of a working group by the French Minister of Economy on the economic regulation of digital platforms.

In this time of crisis, while the shops’ roller shutters are closed digital platforms are alluring more than ever.

The European actors debate on how competition law can embrace the digital economy and, hopefully, will rapidly give rise to a precise analytical framework free of any legal uncertainty.