Latham & Watkins is an international law firm organized as a limited liability partnership under Delaware law, with affiliated partnerships in several countries. The firm has a foreign legal consultant office in South Korea and works with a law office in Saudi Arabia. A recent OECD roundtable discussed the implications of e-commerce for competition policy and technological changes transforming business relationships. Concerns about algorithms enabling collusion are overblown, as machines are not close to learning to collude without direction, and individual business models and incentives make broad coordination unlikely. When it comes to online marketplaces and vertical restraints, sellers on marketplaces act as sellers to customers. Suppliers and platforms should be free to set fees paid by suppliers for

1. Latham & Watkins operates worldwide as a limited liability partnership organized under the laws of the State of Delaware (USA) with affiliated limited liability partnerships conducting the practice in France, Italy, Singapore, and the United Kingdom and as affiliated partnerships conducting the practice in Hong Kong and Japan.
Latham & Watkins operates in South Korea as a Foreign Legal Consultant Office. Latham & Watkins works in cooperation with the Law Office of Salman M. Al-Sudairi in the Kingdom of Saudi Arabia. © Copyright 2018 Latham & Watkins. All Rights Reserved.
OECD Roundtable
Implications of E-commerce for
Competition Policy
Technological disruption and competition
Paris, 6 June 2018
Lars Kjølbye

2. Technology is transforming relationships
TechnologySoftware
User
experience
Brand
Services
Hardware
Data/
analytics
Open
source/
crowd
source
Platform
Cloud
Advertising
Users and
customers
Industrial era “value chain”
Relationship-based
Connected era “value star”
Interrelationship-based

3. The algorithmic collusion hype
• As the OECD explains in a recent policy paper, algorithms are a hot topic because of
concerns that they “can make it easier for firms to achieve and sustain collusion without any
formal agreement or human interaction”.
• There should be more focus on understanding the technology, the engineering challenges
and competition in online markets. Machines learning to collude are not ‘around the corner.
Focus should be on machines designed to collude.
• Even if the Internet increases transparency and the use of pricing algorithms reduces
retaliation response time, it does not align incentives to collude. The drivers of each
individual firm’s incentives will be reflected in the calibration of the machine learning model
and the data that feeds it
• Companies deploy increasingly differentiated business and monetization models that affect their pricing
decision for individual products. This makes it less likely that there is alignment on the terms of coordination.
For instance, Amazon focuses of growing scale because it drivers share valuation. Traditional retailers like
Walmart focus on margins and profitability
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4. Distributors and ”true agents”
• The traditional view
• Distributors are independent resellers
of the supplier’s products. Art. 101(1)
applies to restrictions on the
distributors’ resale activities (e.g. RPM
and territorial/customer restrictions)
• Agents that do not bear any of the risks
resulting from the contracts negotiated
on behalf of the principal do not act as
resellers to third parties. Being the
seller, the principal is free to determine
the conditions of sale (VRG, ¶18)
• A digital disruption view
• Distributors and agents operate a
margin business and compete on
resale margins and commissions
• The supplier is free to determine the
price at which it sells to its resellers
and customers buying through its
agents
• The economic risk criterion is blurring
due to electronic contracting and
delivery
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5. Marketplaces and vertical restraints
• A (re)seller selling on an online marketplace is the seller
of the product vis-à-vis consumers
• The marketplace is an intermediation platform
connecting sellers and buyers
• The suppliers and the platform should be free to determine the fees
paid by the suppliers for the service
• The seller should be free to determine the prices at which its
products are sold
• The platform has a direct interest in the selling price because it
determines the commission. Fixing resale prices for commission
purposes is not RPM
• Competition concerns may arise in relation to product
competition between sellers (e-books) and service
competition between platforms (Vlaamse Reisbureaus)
Sellers
Online
Merchant
Consumers
sale
sale
Sellers
Online
Marketplace
Consumers
affiliation
affiliation
sale
Example: EC, Video games Example: EC, Consumer
electronics
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6. Marketplace/merchant competition
• On hybrid reseller/marketplace platforms merchants benefit from traffic generated by the
marketplace’s reseller business
• It draws consumers to the site and customers purchase in the same relevant market
• Unlike in Google Shopping, there is no leveraging between clearly distinct markets
• A merchant operating a marketplace is in a different situation than other retailers. It is
creating competition with its own resale business. Favoring own services to an extent
commercially compatible with operating a thriving marketplace provides incentives to invest
in the platform
• In the field of technology licensing it is accepted that a licensor is permitted to limit competition from licensees
with its own core business when the licensor exploits the licensed technology itself and sells products in
competition with the licensees
• Obligations to disclose conduct favoring of own merchant platform may discourage
investment in hybrid platforms that open up new channels to merchants
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