As part of its increased focus on the operation of Big Tech – where platforms use a wide range of measures, including intellectual property, privacy data and algorithms to improve their competitive position – the Fair Trade Commission (FTC) has released the draft White Paper on Competition Policy in the Digital Economy for comment. This primarily advises on the FTC’s policy position and future directions for competition concerns with respect to digital platform operators.

The FTC – which is also planning seminars and public hearings – is expected to finalise the white paper once it has received comments from the public.

In this draft white paper, the FTC indicates that its focus on competition enforcement will include the following issues and efforts.

Table 1: Defining relevant markets and assessing market power in the digital economy

Potential difficulties
  • How to define the relevant markets, especially two/multi-sided platforms and zero-price products/services.
  • How to assess market power if a product/service prices at zero.

Current enforcement
  • Define two relevant markets if it is a two-sided non-transaction platform and one relevant market if it is a two-sided transaction platform, and use amended tests including small but significant and non-transitory increase in price (SSNIP), small but significant non-transitory decrease in quality (SSNDQ) or small non-transitory but significant increase in cost (SSNIC) if a product/service prices at zero.
  • Consider competitive indicators of market dynamics to evaluate market power.

Future directions
  • Observe developments of the latest international cases and theories.
  • Improve the collection of digital economic data.

Table 2: Abuses of dominance in business practices of online platforms

Potential difficulties
  • Self-preferencing – whether platform operators have lawful self-preferencing and how to supervise rectifications of this.
  • Tying – whether there are two respective products, especially where there are cross subsidies.
  • Predatory pricing/illegal inducement to low prices – whether this is reasonableness.
  • Price discrimination – whether personalised pricing and loyalty discounts are subject to the Fair Trade Act.
  • Most favoured nation clauses – whether vertical concerted actions are subject to the Fair Trade Act.
  • Resale price maintenance (RPM) – whether a high degree of market power should be considered and whether RPM brings about any positive effect.
  • Restrictions on online sales – how to assess indirect network effects, the industry lifecycle of platforms and territorial restrictions.
  • The interaction of data privacy and market competition – whether to intervene in infringements of personal privacy.
  • News media bargains – whether to intervene in negotiations between platforms and news media.

Current enforcement
  • Self-preferencing – assess whether the product/service is an essential facility and entrust professionals with supervision.
  • Tying – determine illegal tying only if the market power of the main products extends to the market of tied products and there are concerns with regard to competition.
  • Predatory pricing/illegal inducement to low prices – evaluate market power, frequency of the act, total profit and loss and competitors’ market share.
  • Price discrimination – consider the market position, network effects and essential facilities of platforms.
  • Most favoured nation clauses – determine vertical restriction by the criteria of 15% market share.
  • RPM – value competition among brands and assess whether RPM encourages quality of pre-sale service.
  • Restrictions on online sales – comprehensively consider commercial modes and influences on consumers.
  • Interaction between data privacy and market competition – there may not be intervention in infringements of personal privacy unless market competition is affected.
  • News media bargains – cooperate with the group led by the Executive Yuan.

Future directions
  • Self-preferencing – further study the operation of platforms and clarify self-preferencing.
  • Tying – review cases thoroughly with regard to their nature, network effects, economies of scale and influences on consumers.
  • Predatory pricing/illegal inducement to low prices – reevaluate that businesses will compensate their losses through supracompetitive pricing after predatory pricing and avoid misjudging benefits produced by low prices.
  • Price discrimination – clarify the operation and costs of personalised pricing.
  • Most favoured nation clauses – flexibly revise the determination criteria and discuss whether to regulate horizontal concerted actions with vertical transactions.
  • RPM – include market power as a determination factor.
  • Restrictions on online sales: refer to experiences of the United States and the European Union;
  • Interaction between data privacy and market competition – same as current enforcement.
  • News media bargains – proactively take relevant measures to help news media negotiate with platforms.

Table 3: Killer acquisitions and data privacy acquisitions

Potential difficulties
  • How to determine whether acquired start-ups will become Big Tech competitors.
  • Whether killer acquisitions will have a negative effect on innovation.
  • Whether to view privacy protection as non-price competition of service quality.
 
  • Apply past experiences to determination and refer to the Facebook case in the United States.
  • View privacy as service quality in the determination.

Future directions
  • Apply potential competition theory to killer acquisitions.
  • Consider positive development of killer acquisitions.
  • Assess privacy protection and competition promotion simultaneously.

Table 4: Legality of algorithm-facilitated concerted actions

Potential difficulties
  • How to prove the existence of collusion.
  • Whether algorithms may become a tool for concerted actions.
 
  • Invite professionals to review algorithms.

Future directions
  • Conduct more market research and industry investigation.
  • Improve the dissemination of laws and relevant enforcement.

Table 5: False and misleading online advertising

Potential difficulties
  • Whether online advertising that targets a specific audience and online endorsements and testimonials are subject to the Fair Trade Act.
  • Decide how to appraise the exploitation of search engine optimisation techniques.
 
  • Apply the Fair Trade Act to false and misleading online advertising.
  • List false and misleading online advertising as a key enforcement aim.

Future directions
  • Elevate the capacity of investigation.
  • Enhance the regulatory intensity.

Jane Wang, Martina Yu-Ting Ma

Formosa Transnational