Competition regulators take challenges of digital economy seriously

In 2017, Russia’s Federal Antimonopoly Service (FAS) dealt with and talked about digital markets a lot. “Today's markets differ considerably from those we had before; all industries are becoming digital,” says[1] the Deputy Head of FAS. The digital economy gives rise to goods with features that differ greatly from those of goods in the traditional market economy: these goods are intangible, have limitless reproducibility, zero replicating costs and global circulation. A number of landmark cases in which FAS applied its new approach to modern markets have impacted the antimonopoly law enforcement landscape in recent years.

In Google, FAS used a new approach to the calculation of a fine for the abuse of dominance committed. While a dominant position was established in the market for the distribution of the Google Play store, the fine was calculated on the basis of proceeds generated in adjoining markets.

Recently, the FAS again investigated the largest players in the search engine market, Google and Yandex. As a follow-up to the investigation by the European Commission, FAS initiated its own informal investigation of whether the search engine companies give any preference to their own online services in Russia when ranking the search results. FAS reports that no violation has been detected so far, but the monitoring will continue.

In evaluating the effects of a recent merger between Bayer and Monsanto, FAS stepped away from the traditional method of analyzing the consequences of economic concentrations on the basis of the cumulative market shares of the merging parties. Instead, FAS analyzed possible changes in all global agro-industrial markets and proceeded with a prospective analysis of the possible position of the combined company with unique innovative potential in digital agriculture. Having completed its analysis, FAS issued the merging parties with a number of completely new behavioral remedies.

Currently, FAS is running a number of investigations into antitrust violations committed with the use of digital technologies. A Russian subsidiary of LG Electronics, LG Electronics Rus, is suspected of having used algorithms with a view to coordinating prices among resellers of their smartphones. In another case, two bidders are suspected of having used special software (bidding bots) to maintain prices in tenders without any direct involvement by humans[2].

FAS acknowledges that that the current law is not fully adapted to the digital economy. Further development is expected, including the fine-tuning of provisions on proving a dominant position in modern markets, possible abolition of existing immunity for IP protection, and stipulating new criteria for economic concentrations in digital markets.