While the last few years have seen the interface of patent and antitrust law ignite a number of new legal, industry and policy developments, it is likely that the year ahead will see the re-emergence of a number of key themes in antitrust enforcement in digital markets – data, interoperability and incentives for innovation – at the forefront of agencies’ prioritisation for antitrust enforcement. Antitrust authorities globally are expected to step up their focus on potential concerns in digital markets as political concerns and pressures regarding data security, network effects and potential barriers to entry mount. 

Much of the global agenda in this area in the recent past has been led from Europe, with high profile – and controversial – investigations concerning Google and the enforcement of standard essential patents attracting other enforcers globally. The appointment of a specific Vice-President, Andris Ansip, responsible for the “Digital Single Market” project and the political priority given to digital markets by President Juncker in his Guidelines to Digital Economy Commissioner, Günther Oettinger, and Competition Commissioner Margrethe Vestager, are a clear signal that the European focus on digital markets is likely to increase during 2015. 

As the headlines report calls from the European Parliament to break up Google, political intervention in antitrust enforcement appears more real than ever.

Data – gatekeepers, networks and barriers to entry

The ‘two-sided’ business model of functionalities such as search or operating systems offered for ‘free’ underpinned by monetised services, is fast coming under pressure as antitrust authorities become more sophisticated in their analysis of the relationship between ‘big data’ and competition. 

These “network effects” - and whether they arise from the operation of competitive forces or market power - are coming under ever-closer scrutiny

Antitrust authorities are increasingly concerned that, as users make greater use of ‘free’ services and contribute greater amounts of user data to the position of the platform,  the better able the platform is to offer a more relevant and user-friendly service.  In turn, this attracts a greater number of users in a ‘virtuous circle’.  The more users a platform is able to attract, the more attractive it is as an advertising space worth paying for or as a system that developers will wish to write applications for. 

Interoperability – opening up ‘open source’ systems

And the digital debate does not stop in Europe. For example, in common with their European counterparts, Chinese competition authorities have been paying close attention to restrictions on the ability of manufacturers to customise the Android operating system. The intensity of the scrutiny of digital business models, particularly of major US-based companies, leads some to speculate that wider considerations, such as the protection of perceived national interests or wider concerns about data security are driving the enforcement agenda and influencing the outcomes sought by regulators far beyond the realms of ‘traditional’ antitrust analysis as it has been understood up to now.

Last year, a white paper from China’s Ministry of Industry and Information Technology, reported its view that Google had too much control over the Android operating system and signalled support for the emergence of a home-grown mobile operating system. The white paper also signalled a clear desire from China to reduce its dependence on foreign standards.

Innovation - regulating new business models

Continued disruptive innovation also brings digital business models face to face with more ‘traditional’ forms of regulation, such as in the fields of payment and content. Traditional payment and content businesses have faced years of intense antitrust and other regulatory investigations in the recent past. Several leading authorities (including in Germany and the UK) are focusing their resources on the digital sector and the impact of new business models on competition and consumers. At the same time, industry participants are acutely aware of the need for regulation not to stifle innovation and the development of new solutions.

The overlay of existing antitrust scrutiny and evolving regulatory standards creates an increasingly complex terrain through which those developing new and innovative business models must navigate

Looking ahead to 2015

Digital markets can expect further intensified global antitrust scrutiny from authorities who have a growing confidence to broaden their focus and, in some cases, are prepared to employ novel and far-reaching theories in their investigations.  Antitrust agencies are likely to work in tandem with policy objectives pursued by other regulators.  We can expect: 

  • greater and bolder moves to impose structural changes to reduce barriers to entry and associated network effects of ‘big data’ gatekeepers - including a greater role for the European Data Protection Supervisor (EDPS) regarding the processing of personal data and potentially intrusive measures to re-structure business models.  Commercial strategies for maximising the use of data will need to be risk-assessed and stress-tested to take account of potential regulatory intervention;
  • growing global attention on business models in the digital space with the potential for a greater number of unconventional outcomes including a greater emphasis on public policy or national interest considerations.  Digital businesses will need to assess whether they may be exposed to the influence of powerful local regulators or lobbies and to familiarise themselves with the regulatory and political landscape to avoid unexpected intrusions in their arrangements; 
  • an increasingly complex regulatory landscape as ‘traditional’ regulators, for example of financial services or consumer protection increasingly expand their activities to cover digital businesses and models.  Businesses developing digital business models will need to take account of the views and approaches of a number of regulators, including the information sharing powers available to competition and other regulatory authorities; and
  • growing scrutiny over data privacy and security rules, with plans to increase fines for non-compliance with EU data protection laws to 5 per cent of annual global turnover, and new reporting obligations for cyber security incidents to public authorities.