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E-commerce and Competition – CHOWDHURY – June 2018 OECD discussion

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This presentation by Avantika CHOWDHURY, Partner, Oxera, was made during the discussion “E-commerce and Competition” held at the 129th meeting of the OECD Competition Committee on 6 June 2018. More papers and presentations on the topic can be found out at oe.cd/2gv.

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E-commerce and Competition – CHOWDHURY – June 2018 OECD discussion

  1. 1. Strictly confidential © Oxera, 2018. Unilateral conduct and regulatory tools OECD Roundtable: Implications of E-commerce for Competition Policy Avantika Chowdhury 6 June 2018, Paris
  2. 2. Strictly confidential Multi-sided platforms Increased importance with growth of e-commerce 2 Merchants/ retailers Consumers No capacity constraint online to limit network effects
  3. 3. Strictly confidential Risk of harmful unilateral conduct by platforms 3 • potential concerns: • exclusion of rivals: refusal to deal, discrimination, favouring own business, demotion of rivals, margin squeeze, predation, bundling, MFNs, exclusivity • exploitation (trading partners): unfair terms • exploitation (consumers): personalised pricing, unfair terms • risk depends on market power: network effects can strengthen market power, but can also facilitate new (innovative) entry • ‘winner-takes-all’ or ‘competition one-click-away’? E.g. Myspace • multi-homing as constraint • downward spiral fuelled by network effects
  4. 4. Strictly confidential Varying effects on consumer outcomes 4 Likelihood of efficiency benefits to consumers Closeness to consumers Bundling (Google vs Streetmap) Delisting rivals (Google scraping FTC 2013) Foreclosure of other platforms through exclusive deals (Onlinepizza Sweden) Exploitative terms to/margin squeeze of postal operators by Amazon? Unfair terms to merchants by marketplace ‘Walled gardens’ in online advertising? Favouring own business (Google Shopping EC, FTC)
  5. 5. Google cases: the debate on consumer harm Strictly confidential 5 Google is dominant in the search engine market Distorted effect on traffic Abuse of dominance in the CSS market 1 GS is more visible than its rivals July 2017 • Visibility drives traffic • Rival CSSs suffer from decreased traffic and it reduces innovation • thus consumers are harmed • Consumers not locked-in; can visit other CSSs/ merchant platforms directly (growth of eBay, Amazon) • Consumers not necessarily harmed: need to assess pro- and anti-competitive effects US FTC 2013 decision: closed investigation • Changes to Google’s algorithms result in search bias and might harm competitors • However, there is no evidence of consumers’ harm as Google’s product innovation and users’ experience improvements might compensate. Google is dominant in the search engine market 1 Streetmap vs Google UK High Court judgment: no abuse • Streetmap had a ‘dramatic loss of traffic’ following the launch of Google map service at the top of its search results page in 2007. • The introduction of Google maps improve Google’s offering and strengthening its position on the map market is objectively justified 2
  6. 6. Strictly confidential The centrality of data Use and provision of data by platforms 6 • data is both a cause for concern and a source of potential benefits • in search (better search results but debate re replicability without access), advertising (targeted ads but lack of transparency for advertisers), retailing (better product recommendations but personalised pricing) • additional concerns of privacy • how does data affect competition and consumer outcomes? depends on specific case and two key characteristics of data • cost of data acquisition: social graph versus personal details • depreciation rate: long-term personality traits versus message content (hotel booking versus Rolex watch)
  7. 7. Strictly confidential Online advertising market 7 • are there benefits of ‘walled gardens’ or a level of vertical integration in this market? Should Google and Facebook provide consumer data to other advertising platforms and to advertisers? • impact on platform competition? varying degrees of necessity of data; social graph and purchasing history may be hard to acquire and therefore provision may increase competition • impact on advertisers? More choice and possibly lower advertisement costs; better understanding of return on investment (RoI) • impact on consumers? Less privacy; more targeted ads and hence time saving (however, doubts over impact of online advertising); lower prices from lower advertisement costs? More personalised pricing? • impact on consumers ambiguous • is competition law best placed to tackle concerns? Possibly not • other tools well suited in this, and many ecommerce settings: privacy laws, consumer protection, regulation (e.g. Commission’s P2B proposals)

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