In the eight episode of our podcast series Competition Law in Digital Markets in Latin America “Future of Competition Policy in Latin America”, Thibault Schrepel talks about the role and purpose of antitrust, Intellectual Property and Privacy Rules in Digital Markets.
This podcast starts by reviewing relevant papers on the effects that regulatory policies like the GDPR have in companies, competition and if it actually makes more harm than good in small firms. Thus, it becomes relevant to analyze whether if it is more important for policy makers like in the EU to protect consumers privacy or the market´s competitiveness and consumer welfare.
When talking about algorithmic competition, he finds that there´s no evidence that can prove that computers have the capacity to determine that the best way to maximize profits is colluding. This statement should be a relevant matter for policy makers and enforcers on reconsidering what their attention should be focused on in terms of trying to identify and prevent anticompetitive practices nowadays.
“Firms exposed to the GDPR experience an 8% decline in profits, and the decline in profits of small companies is almost double than the average, meaning 16%.”
“GDPR induced the exits of about a third of available apps and entry of new apps fell by half.”
“Half of the applications that you could have had were never put out there because of the GDPR. You may say this is good because those apps would have been bad (…) but you see here that because you want to protect privacy it is actually declining the competitive pressure, and this is specially hurting the small companies because for them it is harder to comply.”
“If you have a start-up of four employees and you need to comply with GDPR and by the way if you are in Europe, you also have now the DMA, the DSA, Data Act, Data Governance Act and so on and so forth, you may want to hire at least one, two if not ten lawyers but remember, the company only has four employees.”
“Those niche companies need access to data in order to target better its niche costumers.”
“If there is a tradeoff, we want policymakers and enforcers to tell us that there is a tradeoff and then they can make a political and/or informed scientific decision about how to address the tradeoff.”
So far what I would say is that what we observed is that there are potentially disproportionate efforts being put by competition agencies trying to detect practices when we have little evidence (…)”
“So, we actually need to investigate and monitor the practices that are most likely to be implemented or harmful.”
“As far as I know there are very little cases if not actually zero when it comes to computers decided by themselves that the best way to maximize profit was to collude.”
“Should we give our attention to that when we have actually lots of other practices out there?”
“What’s very interesting from a competition perspective is that there is a decorrelation between the network effect and your ability as an entity to leverage that effect in a way to hurt other businesses and consumers.”
“At the blockchain layer what you do not have is a centralized power with just one entity.”
Consumer protection, competition law, privacy, innovation, and IP rights all purse to guarantee consumers rights, general welfare, and market dynamics. The laws and toolkits to protect their rights may not seem as conflicting one or another in theory, but practice has showed that there is a trade-off.
Investigations and research by academics have shown the impact of privacy regulations on competition dynamics and innovation. The reasons to regulate may be legitimate but the impact on the market’s dynamics are also to be considered.
These lessons should be considered in developing countries. Developed economies may choose to reduce competition or innovation to foster other rights. This is why the purpose of regulation is very important and also to encompass such purpose with metrics which show the effectivity of regulation.
An example is algorithmic competition. There appears to be no evidence of real events happening, and the outcome for the general economy of the resources of agencies focusing on such practices is yet to be measured.
Associate Professor of Law at the Vrije Universiteit Amsterdam and Faculty Affiliate at Stanford University
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