Exploring Recontracting in Antitrust Regulations
Dive into the complexities of recontracting in antitrust and market power regulations, discussing issues like self-preferencing, leveraging, and pricing strategies by major players like Google, Amazon, and Apple. Explore the implications, legal standards, and regulatory tradeoffs surrounding this topic.
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Presentation Transcript
Platform Recontracting 21 Sept 2022 Nicolas Petit (ongoing joint work w/ Friso Bostoen)
5 tales of recontracting Google self-preferencing Amazon use of 1/3 party seller data Apple ATT Disney launch of Disney+ w/ ads, while the monthly price of Disney+ w/o ads Uber 5% price across UK 2
Recontracting in antitrust and market power regulation Rule of reason Categorical doctrines w/o fit to conduct Leveraging, tying, excessive pricing Ex, Google Shopping (EU), App Store (CMA) False negative (de facto)? Per se Static rules w/o heed to context DMA False positive (de jure) Ex, Disney+ competition to incumbent Netflix 3
Remedies to recontracting Regulation (EU) 2019/1150, Art 3: reasonable notice period (min 15 days) Bundeskartellamt, Case B2-88/18, Amazon (Case Summary), 17 July 2019 (15 days) 4
Regulatory tradeoffs Benefits Costs Disincentives to anticompetitive exploitation and exclusion Excessive restriction of monetization competition and innovation 5
Defining legal standards for (opportunistic) recontracting Propositions Implications High probability that ordinary business behavior contributes both private (rational) and social welfare But high likelihood that in the universe of widespread business practices, there are unreasonable ones System of law for the marginal case Work with broad rules that allow the rules to oversee as much behavior as possible in terms of its applicability, and on the other hand with discriminating standard that focus actual application of the law on opportunism, guile, or abuse 6
Additional constraints The rule of law principle, meaning prospectivity, clarity, publicity, and permanency; And administrative efficiency, meaning is the standard focuses the law optimally, by complementing other areas of the law, without competing or conflicting with them, creating redundancy or inconsistency (eg, consumer protection or unfair trading practices laws) 7
Case law on recontracting EU US Aspen Skiing History of prior dealing allows inference of strategic behavior, distinct from usual business operation Dispositive, but risk of false positives => Trinko Microsoft Not dispositive 8
Towards more discriminating standards Normal case Marginal case Filter it would not be rational to discriminate unfairly against third- party apps. If the third-party app offers better quality, Apple has no incentive to hinder the app in any way , Apple Focus law on recontracting conduct that is not self defeating due to platform market power (not managerial inefficiency) Test (evidence) of market power conduct Market power (network effects) Increasing returns (growth) Relation specific investments (switching costs) Information asymmetries amgst users (noise /weak signal) Ratchet effect Irreversibility 9
Towards more discriminating standards (cont d) Normal case Marginal case Filter In terms of launch on Facebook, that's earlier stage. On the monetization front, we're just starting to roll out ads in Instagram. So it's earlier on that front, and we really haven't gotten to a monetization point with Reels on Facebook , FB Quarterly Earnings, Dec 2021 Focus law on rapacious recontracting conduct, by circumstancial evidence and counter evidence Tests (RoR) Managerial inefficiencies (size) Congruence w/ established strategy (AMZN low price, and entering in product category) Regulatory framework (AMZN vertical integration, bc impossible to RPM)? Optimization justification ie loss mitigation or pure profit maximization? Industry wide trends? 10
Type of antitrust or regulatory rule? Prohibition of recontracting Substantive rule declaring recontracting conduct unlawful Sticky users with low incentives to leave platform No improvement in competition Regulation of recontracting Procedural rule making recontracting effectively self defeating (FRAND cases?) Recontracting event triggers contractual (release) or technical (interoperability) remedy for users Opportunities towards competitors 11
Additional issues Should the law be equally concerned with Exclusionary and exploitative recontracting? Innovation and transaction platforms (Cusumano et al, 2019)? Business users and end users? ToC, SdKs, fees, product design? 12
Rule or standard for abusive conduct? Standard Rule Hard to define, but flexible Easier to define, but is it flexible enough? Proving Contract (incl soft): expectations, reliance, commitment Rescision (incl soft): no notice, negotiation, discussion 13
Cost and benefits of platform specific approach to recontracting > Current antitrust and regulation > Contract law Benefit through less false positives and negatives? More timely intervention in sync w/ recontracting event Costly to administer? Overcome inapplicability of contract law Contract law does not have a public agency Higher mobilization opportunities w/ public agencies acting, not just parties in context of economic imbalance 14
