UK Government weighs in on the Commission's proposals

In brief

As foreshadowed in our article Hot topics in competition - what is on the radar for 2016?, the digital economy is shaping up to be a key issue in 2016 in relation to enforcement action and policy planning in the digital sphere.

In January 2016, the UK Government published its responses to two EU consultations, both launched on 24 September 2015, on:

• digital platforms, and
• tackling unjustified geo-blocking

It takes a critical stance on digital platforms, favouring competition enforcement over any proposals to regulate them, but is aligned with the European Commission on the need to prevent unjustified geo-blocking in the digital marketplace.

In detail

UK Government favours competition enforcement over regulation for digital platforms

On 19 January 2016, the UK Government published its response to the European Commission’s public consultation on digital platforms.

The Government emphasises the diverse characteristics of platforms and the range of services that they provide. It therefore warns against attempts to shoehorn them into a single definition of “platform” and then use that definition as the basis for any regulatory action. In its view, platforms should be considered in the context of the wider economy. For that reason, the Government favours competition enforcement over regulation, calling for the Commission to launch competition investigations into specific companies or sector inquiries into sectors where potential problems are identified before taking any steps to introduce regulation. In the Government’s view, the competition regime is an effective way to address abuse of market dominance, which lies at the heart of several issues in the consultation.

However, to support the online ecosystem, the competition regime needs to move faster. To do this, the Commission should look to streamline the competition enforcement system and to enhance its information-gathering powers, the Government suggests. It therefore challenges the Commission to deliver a fast moving competition system, capable of dealing with fast changing markets and preventing abuse of market dominance, but not shielding businesses from their competitors

Geo-blocking

On 21 January 2016, the UK Government made public its response to the Commission’s consultation on geo-blocking, defined by the Commission as measures that that result in consumers "being blocked upfront from accessing a specific webpage or content on a webpage". The Government strongly supports tackling unjustified geo-blocking and certain instances of price discrimination. It takes the view that consumers should not be prevented from viewing the prices offered to customers in other EU Member States, and supports a ban on geo-blocking measures. The Government would support the introduction of rules banning ways (and means) of discriminatory geo-blocking and other restrictions, as well as the discriminatory blocking of access to websites across borders.

The response also calls for action to end unjustified price discrimination where the price charged to consumers differs based on their location or nationality or where consumers are blocked from completing a transaction at a particular price. The Government did acknowledge, however, that, on occasion, supply-side factors (for example delivery costs, regulatory expenses and different tax rates) might justify price differences.

The Government considers that the best way of ensuring effective intervention at EU level would be a combination of

• monitoring and facilitating enforcement by the Commission
• monitoring and enforcement by national enforcers, and
• an effective cross-border cooperation mechanism.

The issue of geo-blocking a clear EU priority

Margrethe Vestager, the EU Competition Commissioner, has her sights firmly set on enforcement in relation to geo-blocking. In a speech at the Digital-Life-Design (DLD) conference in Munich on 17 January 2016 that was largely focussed on big data, she took the opportunity to confirm that an issues paper on geo-blocking will be published by the Commission before Easter. This announcement was made the day before Sky UK and six major US movie studios attended a three day oral hearing in Brussels in relation to the Commission’s ongoing probe into alleged geo-blocking of pay for TV subscriptions.

The Commission has previously expressed the view that it does not consider that a change in the competition law toolbox is required in order to deal with current issues. Indeed, the Commissioner expressed her hope at the DLD conference that a whole new competition rule book will not be needed in the context of dealing with Big Data. Competition laws can contribute to digital markets being level and open she argued, but cannot be expected to solve every problem on their own.

A preliminary report in relation to the e-commerce inquiry is expected to be published by the Commission for consultation in May 2016. However, Ms Vestager made clear that she wishes to open up the debate on geo-blocking before then. In this, she has the support of the European Parliament, which in a resolution passed on 19 January 2016, included a recommendation to the Commission that it make proposals to bring an end to unjustified geo-blocking practices, so as to improve EU consumers' access to goods and services sold online.

Conclusion

The ramifications of the Commission’s Digital Single Market Strategy continue to evolve. The Commission is now reviewing responses to the two consultations. A comprehensive assessment of the role of platforms and intermediaries is expected during the first part of 2016. As we know from Ms Vestager’s speech, the Commission is moving forward quickly in the priority area of geo-blocking in the digital marketplace. Whether the geo-blocking issues raised by the Commission and the preliminary findings of the e-commerce inquiry and consultation on platforms will lead to regulation, further investigations or a mixture of the two, remains to be seen.

More investigations might force the Commission to address some of the gaps in the current competition law toolbox (notwithstanding the Commission's stated position). One issue on which clarity would be welcome is an indication of how, for example, the Commission would assess any restrictions that a supplier wishes to impose on the use of search engines or third party platforms. Beyond individual questions, however, is the wider issue of the Commission’s enforcement system, as raised by the UK Government. If it is responsive to the UK views, we could see moves to enhance its information gathering powers and speed up its procedures. What is clear from the UK Government’s responses is an appetite for further antitrust probes in the digital sector, already under scrutiny at both UK and European level. We await further developments with interest.