EU Commission’s Microsoft / LinkedIn Decision – watershed for competition and data?

On 6 December 2016, the European Commission approved the acquisition of LinkedIn by Microsoft, conditional on compliance with a series of commitments.  The full text of the decision has recently been published, affording some useful insight into the Commission’s reasoning.

The merger is one of a number of high profile technology cases in which data is the key asset. Cases such as this are challenging the Commission’s relaxed attitude to the potential effects on competition of deals involving significant volumes of data (for example, the Commission’s 2014 clearance decision of Facebook’s acquisition of WhatsApp – now the subject of an investigation into whether Facebook provided misleading information in the context of that merger review).  

Similarly, in the LinkedIn / Microsoft decision, the Commission’s assessment was that the post-merger combination of data (such as the individual career information, contact details and professional contacts of users) did not raise competition concerns.

The Commission identified two potential concerns: 

  1. The combination of data may increase the merged entity’s market power in the data market or increase barriers to entry / expansion for competitors who need this data in order to compete – forcing them to collect a larger dataset in order to compete with the merged entity; and 
  2. Even if the datasets are not combined, the companies may have been competing pre-merger on the basis of the data they control and that this competition could be eliminated by the merger. 
These concerns were dismissed by the Commission on a number of grounds, the most interesting being that the combination of their respective datasets is unlikely to result in raising the barriers to entry / expansion for other players as there will continue to be large amounts of internet user data available for advertising purposes which are not within Microsoft’s exclusive control.

The Commission’s approach contrasts with that of some commentators (and indeed some of the Commission’s own non-merger enforcement activities) which have highlighted the potential for platforms to gain an unassailable advantage over competitors in relation to data. 

Concerns of data ‘tipping points’ were among the reasons why French and German competition authorities have published a joint paper on data and competition law. 

Germany has amended its domestic competition law to increase the legal tools available to prevent market dominance and abuses in relation to data. These changes will come in to force later this year and include: 

  1. controversially) amending the German merger thresholds to require notification of deals involving innovative companies (like start-ups) with a transaction value of EUR 400 million; and
  2. introducing specific criteria for reviewing market power in (digital) multi-sided markets, for example allowing the Bundeskartellamt (BKA) to consider: concentration tendencies; the role of big data; economies of scale; user behaviour; and the possibilities to switch a platform.
The additional merger threshold is intended to allow the BKA to review mergers in which the transaction value is high but the parties’ turnover in Germany is below the existing EUR 25 million threshold; for example, when Facebook’s acquisition of WhatsApp for USD 22 billion was not notifiable in Germany (although it was reviewed by the Commission). 

France and Germany’s robust approach to competition concerns in relation to data is in contrast with the less interventionist position in the UK. This is demonstrated by recent UK government report on digital platforms which found that, “In many sectors, e.g. search engines or social networks, firm behaviour and survey evidence suggests that in the event of even a modest hike in costs users would expect to find an alternative and cease using the service. It is difficult to reconcile this behaviour, and this finding, with the sense that there is an important “moat” which prevents users switching to alternative services over time. Any moat that does exist only seems to be enough to keep them in one place if the platform continues to be free and improve its service over time.

Given the moves towards ex ante regulation of data in France and Germany, and given the ex post investigation into Facebook/WhatsApp, it remains to be seen whether future merger investigations will take a similarly permissive approach.

Collusion in the online economy – new competition law traps for the unwary?

We reported last year on the Eturas decision, in which the Court of Justice ruled that technical measures applied on an online platform gave rise to a potentially anti-competitive agreement.  The Lithuanian Court which had referred the matter to the CJEU then went on to consider liability, based on the participants’ knowledge of the relevant facts (for a review of this decision, see here).

But the risks posed by agreements over platform T&Cs are not the only thing for companies to be aware of.

The European Commission is now carrying out active enforcement in relation to geo-blocking, which can be achieved primarily through technical measures.  The Steam video games investigation is looking in particular at whether anti-piracy measures have an anti-competitive effect. 

Meanwhile, the CMA last autumn issued a statement noting another practice potentially raising antitrust concerns.  This concerned agreements restricting the use of paid online search advertising (e.g. through use of Google AdWords).  The CMA suggested that restrictions on bidding for particular ad terms, or on negative matching (identifying terms for which ads should not be shown) may infringe the competition rules.  It appears that the CMA sees this in terms of potential effects on competition, rather than as a new form of object restriction, with the CMA stating that the practices are particularly likely to be problematic “where one or more similar agreements include parties that collectively represent a material share of the relevant markets and, in the context of brand bidding restrictions, as a result of negative matching obligations in relation to brand terms which an advertiser would not negatively match but for the agreement”.   It should therefore not be assumed that such a provision would in fact be restrictive of competition – but it is something which bears watching.  Indeed, the CMA is not the only competition authority to have lighted on this issue – a similar point is under investigation in the United States, where the FTC accuses 1-800 Contacts of “orchestrating a web of anticompetitive agreements with rival online contact lens sellers that suppress competition in certain online search advertising auctions”.

In conjunction with this statement, the CMA also announced a market study into digital comparison tools; it described the study as an opportunity to explore the nature of competition between price comparison websites and their relationship with service providers.  This may lead to further issues in this area; in the meantime, judgment in the Coty case, which considers contractual prohibitions on the use of certain online sales channels, such as price comparison websites, is due from the CJEU in the near future.

And then there’s the risk of good ol’-fashioned collusion, with a modern twist.  One thing that comes to mind is the new attention on the significance of privacy conditions for consumers.  Now that these are recognised as a parameter of competition (see here, for example), is there a risk that exchanging information about planned changes to privacy conditions / other online trading T&Cs, or actually agreeing a common strategy for these could amount to a breach of Article 101 or its national equivalents?   Or that an agreement between separate companies to adopt a common practice on such terms (in particular if it results in less protection for consumers) could amount to active collusion?  These are open questions for now, but companies should remember that – while benchmarking is often sensible – they should ultimately take their own decisions, and keep their own counsel, about such matters.

Coincidentally, the consumer arm of the CMA has just closed an investigation into the online terms and conditions of cloud service providers following changes agreed by a number of companies.  The closure statement notes that “the CMA remains interested in unfair terms and conditions, particularly in the digital economy”.  It should not be assumed that this interest is limited only to the parts of the CMA responsible for enforcement of consumer laws… 

Compulsory Licencing: the Brave New World for (non-personal) data in Europe?

The Commission has published its Data Economy Package for non-personal data*, which is the final building block of its Digital Single Market (DSM) strategy – see our previous posts on the DSM here, here; and here.

With its new package, the Commission aims to: 

  • review the rules and regulations impeding the free flow of non-personal data and present options to remove unjustified or disproportionate data location restrictions; and
  • outline legal issues regarding access to and transfer of data, data portability and liability of non-personal, machine-generated digital data.
The package includes a Consultation on Building the European Data Economy, a Communication and Staff Working Paper.

Why is the Commission acting on data?

The economic rationale is that the EU data economy was worth €272 billion in 2015, and is experiencing close to 6% growth a year.  It is estimated that it could be worth up to €643 billion by 2020, if appropriate policy and legal measures are taken. Data also forms the basis for many new technologies, such as the Internet of Things and robotics.  The Commission’s ambition is for the EU to have a single market for non-personal data, which the EU is a long way from achieving.  The Commission refers to the issues in terms of – the “free movement of data”, suggesting something akin to a fifth EU fundamental freedom. 

What action is the Commission proposing to take? 

The Consultation sets out options for addressing the legal barriers to the free flow of non-personal data, in particular in relation to:

  • data access and transfer;
  • unjustified localisation of data centres;
  • liability related to data-based products and services; and
  • data portability.
Some of the more eye-catching (and interventionist) options set out by the Commission are the introduction of:

  • legislation to define a set of non-mandatory contract rules for B2B contracts when allocating rights to access, use and re-use data;
  • creation of a sui generis data producer right for non-personal machine-generated data, with the aim of enhancing tradability; an obligation to license data generated by machines, tools or devices on fair, reasonable and non-discriminatory (FRAND) terms; and
  • technical standards to facilitate the exchange of data between different platforms.
The Consultation is also seeking evidence on whether anti-competitive practices are restricting access to data.  In particular, the Consultation refers to: the use of unfair business practices; the exploitation of bargaining power when negotiating licences; and abuses of a dominant position.  Interestingly, it also asks whether current competition law and its enforcement mechanisms sufficiently address the potentially anti-competitive behaviour of companies holding or using data.

So where are we headed?

To date, competition law has mandated the compulsory licensing of IP rights only in exceptional circumstances, where the owner has a dominant position and there are no alternatives to the technology.  The Commission is now considering a range of regulatory options, of which the most interventionist could require access to be granted to non-personal data in a far wider range of contexts (albeit without any proposal to amend the existing database right and the new Trade Secrets Directive). These issues are likely to be of considerable concern for any company holding large amounts of non-personal data.  The Consultation runs until 26 April 2017. 


* Non-personal data includes personal data, where it has been anonymised

The privacy & competition law overlap: new competition rules on big data?

A few days ago, we reported on the European Data Protection Supervisor’s (EDPS) Opinion on coherent enforcement of fundamental rights in the age of big data (see our post here, and the Opinion here). 

On Thursday 29 September, at a Conference organised by the EDPS and BEUC, Commissioner Vestager gave a speech on Big Data and Competition in which she echoed some of the points raised by the EDPS (see here).

She confirmed that the Commission is “exploring whether we need to start looking at mergers with valuable data involved, even though the company that owns it doesn’t have a large turnover” (because, for example, it has not yet managed to monetise its data). 

Noting that “the competition rules weren’t written with big data in mind”, she also stated that the Commission is conducting an impact assessment on whether national competition authorities need new powers to deal with big data, and hinted that a proposal for new EU legislation, likely a Directive, may be on the table early next year. 

The current prognosis (subject to the outcome of the pending legal challenges) is that the UK may well have triggered Article 50 by then, and may have ceased to be an EU Member State before any such Directive has to be implemented.  This gives rise to the potential for different approaches to the treatment of big data in competition enquiries between the EU and UK post Brexit.

Data Pooling

‘Big data’ tends to be perceived as a (potential) competition issue in the context of tech giants which hold an enormous amount of data.  In her speech, Commissioner Vestager noted that in addition to a single company data set, large amounts of data can also be amassed as a result of several companies pooling their data.  She suggested that this might even be beneficial for competition, enabling smaller companies to compete more effectively with big companies.

However, she also warned that certain risks accompanied this, noting that “companies have to make sure that the data they pool doesn’t give away too much about their business.  Otherwise, it might become too easy for them to coordinate their actions, rather than competing to cut prices and improve their products”.  And of course, if companies are controllers of personal data, they can only share that data subject to applicable data protection laws.

The Commissioner ended her speech by saying that she “will keep a close eye on how companies use data”.  For our part, we will continue to keep a close eye on the EU / UK authorities’ approach to data.

The privacy & competition law overlap: co-operation between enforcement agencies?

Last week, the European Data Protection Supervisor (EDPS) released an Opinion on coherent enforcement of fundamental rights in the age of big data (available here). It builds on a Preliminary Opinion issued by the EDPS in 2014, which aimed to launch a debate on how to apply the EU’s objectives and standards in areas such as data protection, consumer protection and competition more holistically. 

Recognising that the Commission’s wide-ranging Digital Single Market strategy presents an opportunity to launch a new, coherent approach, the EDPS makes recommendations (amongst others) for: (i) how merger controls should take personal data into account, and (ii) a voluntary network where regulatory bodies can share information (a Digital Clearing House). 

Is personal data an asset that should be considered in mergers?

The EDPS Opinion considers that the largest web-based service providers (Google, Amazon etc., some of the biggest companies in the world) “owe their success to the quantity and quality of personal data under their control as well as to the intellectual property required to analyse and to extract value from these data”.  And it’s true that gaining access to customers’ personal data has been a significant factor in some of the big tech acquisitions of the last couple of years (Facebook purchasing WhatsApp for example, or Microsoft’s pending acquisition of LinkedIn). 

In a speech in March this year (here), Commissioner Vestager highlighted the fact that data is an asset, and that it can be a company’s assets rather than turnover that make it an attractive target.  She warned that important deals which warrant review may be missed under the current system, as the acquisition of a company with access to – as yet unmonetised or undervalued – data may not meet the Commission’s turnover test (as with Facebook/WhatsApp, which only fell within the Commission’s remit due to Facebook’s Article 4(5) request).

The EDPS supports greater scrutiny of acquisitions of this sort, and recommends that the expertise of independent data authorities should be utilised to consider the effect of such acquisitions on consumer welfare. 

Is privacy a competition law issue?

Commissioner Vestager downplayed the importance of privacy and data for competition enforcement in a speech in Copenhagen on 9 September (text here).  She noted that “our first line of defence will always be rules that are designed specifically to guarantee our privacy” and that “we shouldn’t be suspicious of every company which holds a valuable set of data”.  However, she did leave the door open for competition enforcement action in this area, recognising that a company in control of a unique set of data may be able to use it to shut rivals out of the market.

The EDPS Opinion also considers the interface between competition and privacy, but with a particular emphasis on personal data.  It speculates that in the near future machine-learning algorithms may be able to exploit differences in consumers’ sensitiveness to price (identifiable from their personal data), enabling firms to segment the market into each individual consumer and charging according to his or her willingness to pay.

Should such an issue arise, it would prompt concerns from data protection authorities about whether personal data was being used in an appropriate way, and from competition authorities about the effect of such use on consumers and the market. 

Surely it makes sense for these authorities to share expertise on these matters?

Digital Clearing House

Even before machine-learning algorithms take over, it’s clear that there are occasions where competition and privacy overlap, and where regulators can help one another.  This already happens on occasion.  The EDPS points to examples such as: 

  • The French competition authority’s interim decision in September 2014 that GDF Suez had abused its dominant position by using personal data collected when it was a state monopoly to later offer a promotion on an open market. 
  • The UK Data Protection Authority advised the CMA on its proposal to invite households who had not switched energy suppliers for three years to opt out from having their details shared with rival suppliers.
  • Germany’s competition regulator, the Bundeskartellamt is currently investigating Facebook’s privacy policies with input from a number of other national authorities – as we reported here.
The EDPS seeks to build on this kind of co-operation, proposing a voluntary network of contact points in regulatory authorities at national and EU level who are responsible for regulation of the digital sector.  Such a network could discuss the most appropriate legal regime for pursuing specific cases or complaints, and could potentially use data protection and consumer protection standards to determine theories of harm relevant to merger control and exploitative abuse cases.

From a competition law perspective, this is not uncontroversial: the relevance of other laws to the competition regime has been rejected on a number of occasions in the past.  Introducing privacy standards could open the floodgates to a need to consider, for example, environmental considerations, or industrial or social policy.  Added to which, there would doubtless be a number of practical challenges to setting up such a network – the first which springs to mind is persuading the diverse authorities involved to listen to one another!

The Brexit shaped spanner in the works

It’s too early to tell what appetite there is across Europe for a Digital Clearing House, but any UK involvement may obviously be affected by Brexit.  Aside from the politics involved, UK authorities may have to apply different legal frameworks to the rest of Europe (see our competition blogs on Brexit here and here, and our colleagues’ blog on the data protection implications here).  We’ll also have to wait and see if the CMA shares the view of the EDPS on the importance of personal data.

Either way, we expect there to be significant developments in this area in the future.

Patent Licensing and the Internet of Things – a Solution?

The Internet of Things (IoT) – a term used to describe the interconnectivity of electronic devices via the internet or wi-fi – is no longer an entirely new phenomenon.  Smart fridges, meters, watches and countless other connectable gadgets which have the ability to store and exchange data have been at the forefront of discussions by tech experts over the last few years.  The next wave of additions to the the IoT includes driverless cars and smart cities – and more as yet unimaginable changes may follow.

Issues such as security and safety, data protection and regulation have added a dash of reality to the otherwise positive picture of the IoT.  Nevertheless, an increasing number of companies are incorporating some form of connectivity into their business plans.  The most recent Ericsson Mobility Report for example, forecasts that there will be approximately 28 billion connected devices by 2021, of which 16 billion will be related to the IoT. 

However, one area that may pose a significant barrier to companies wishing to break into the emerging market of the IoT is in the arrangements to be put in place for the licensing of relevant patents and software.  The market for connected devices could be at risk of being ‘held up’ by IP disputes.  One question that has not yet been comprehensively answered is how makers of connected devices can acquire the licences necessary for their IoT products in a simple and efficient way.  

A possible solution has recently been introduced by a new licensing platform called Avanci.  Backed by Ericsson, Qualcomm and Royal KPN (among others), Avanci builds on the traditional idea of the patent pool. It aims to offer flat rate licences on FRAND terms for a collection of standard essential wireless patents, with the aim of removing the need to negotiate multiple bilateral licences.  If it works, this could speed up the expansion and uptake of the IoT.

The uptake of this initiative is yet to be seen. Its success is likely to depend upon a number of factors including:

  • Whether the licensors are able to find a mutually agreeable pricing structure;
  • Whether the price offered is acceptable to device manufacturers; 
  • The number of patent holders offering their backing to the initiative; and
  • The willingness of manufacturers to take a licence without forcing the patentees to resort to litigation and potentially costly FRAND disputes;
  • How the platform deals with the relationship between its prices and those applicable in any pre-existing bilateral deals.
It is already evident that some aspects of Avanci’s pricing may be controversial – for example, royalty rates will remain fixed regardless of how many patents are added to the platform.  This may sound like good value for licensees, but will it offer sufficient incentives for new licensors to join and make the platform a genuinely one-stop shop?  Or does it suggest that the early prices are likely to be rather high, to allow headroom for further patents to be added.  The use of fixed prices per device rather than percentage rates could also be contested by manufacturers of lower value devices, in particular if they are staring down the barrel of a patent infringement suit.

We will be continuing to monitor this fascinating space…

E-Commerce Sector Inquiry: Digital Content

Last week, the European Commission published its Preliminary Report in the e-commerce sector inquiry. The Report focusses on two main areas: goods and digital content.  In each case, the Report surveys the responses received to the requests for information sent over 
the past 15 months and sets out the Commission’s preliminary findings.  We reported on those findings on goods here, and now examine the preliminary conclusions on digital content, which focus in particular on audio-visual and music products.

Contractual restrictions in licensing agreements

Based on the market data received, the Commission concludes that contractual restrictions, in terms of licensed transmission technologies, timing of releases and licensed territories, are the norm in digital content markets.  Exclusivity is also widespread and can be granted along one or more of a number of different dimensions. For example:

  • Technological restrictions: Rights may be split according to method of transmission (e.g. satellite, online, mobile), whether content was streamed, downloaded or watched on a standard TV set; licences may also cover ancillary/usage rights on features such as catch-up services or use of multiple screens.
  • Temporal restrictions: This includes the use of “release windows” which can be the subject of complex negotiations with significant price differences depending on the period secured.  
  • Territorial restrictions: Here the concerns in relation to digital content closely mirror those identified in relation to goods (as we have discussed here).  ‘Geo-blocking’ is common, but causes are multiple.  For example, the Report finds that the main reasons why digital content providers do not typically make their services available in more than one territory are: (a) the cost of purchasing content for new territories, and (b) that the rights for the content are not available for licensing in some territories. Even those digital content providers that do make their services available in more than one Member State often offer different catalogues in each Member State, normally because they are unable to obtain licences for all of the Member States in which they are active. 
Where geo-blocking was used, many of the agreements submitted to the Commission contained clauses enabling the right holder to monitor the implementation of geo-blocking measures and to suspend distribution or even terminate the agreement if the measures weren’t implemented to its satisfaction. Almost 60% of digital content provider respondents are contractually required by right holders to geo-block, although the percentage varies considerably between licensing business models and Member States. In Italy, for example, only a minority of respondents reported that geo-blocking occurred, whereas in the UK the majority did so.

Overall, contractual restrictions of these kinds are found to be prevalent in a number of sectors investigated, and are often included in contracts of long duration.  (An exception is noted in relation to music content, where less use is made of exclusive licensing.)  The Commission notes the difficulties to which this can give rise for new entrants and smaller players.  The same is true of certain prevalent payment structures, such as requirement for advance payment, minimum guarantees and fixed/flat fees.  All of these are said to make it difficult to compete with large established providers.  (The results do also indicate that certain flexible payment arrangements have been used for certain types of digital products, which allow for payments proportionate to the number of users and facilitate competition. The Commission indicates that it is likely to encourage the wider use of such payment mechanisms, as they might promote risk sharing and streamlining of incentives along the supply chain.)

Lost in translation? 

As every good competition lawyer knows, contractual restrictions do not always translate into restrictions on competition.  The conclusion announced by the Commission, that it “will assess on a case-by-case basis whether enforcement action is necessary to ensure effective competition” is thus hardly surprising.  The question for companies active in the licensing or distribution of digital content will be to translate the Commission’s preliminary conclusions into a concrete risk assessment as to the status of existing licensing agreements and practices.

This is of course only a preliminary report, on which comments are requested.  Past sector inquiries (such as that in the pharmaceutical sector) suggest, however, that amendments after the first report are likely to be around tone and details rather than on the substance.  The data gathered by the Commission will already be under intensive analysis and case teams may already have been put together to start to pursue individual cases.  

It appears likely that such cases will be one of two main types:

  • Geo-blocking cases in which a breach of Article 101 is identified, akin to the ongoing Hollywood Studios investigation (as to which, see here), the outcome of which is likely to turn on eventual review by the EU courts (or potential further commitment decisions of the type entered into by Paramount).  
  • Abuse of dominance cases based around foreclosure of new entrants.  In principle, such cases could be brought against either content providers or rights holders, depending on the source of market power.  The Commission will want to try to focus such cases around the use of contractual provisions (e.g. the use of long-term exclusivity) rather than on refusal to license per se, where the existing law is likely to make new cases in this complex field very difficult.
It is early days, but we question how many abuse of dominance cases of this kind are likely. The Report suggests that many of the perceived market access problems arise from widespread structural issues, rather than the conduct of individual undertakings.  As content markets are currently likely to be national in scope (due to language requirements, if nothing else), it may be for national competition authorities to take the lead in this.  The Commission can of course also sponsor new legislation, as it has already done in relation to geo-blocking as it relates to goods (see here).  If that is on the agenda, a number of rounds of further consultation can be expected.  Stakeholders are invited to submit responses to this particular Report by 18 November 2016. 

May Day! Competition policy: trade war by other means?

          
May 2016 was an important month for competition policy developments. We have reviewed the three key developments together, as they demonstrate the different policy drivers on the European Commission and national competition authorities: 

While the Commission’s policy anchors are the single market imperative and innovation, national competition authorities are more attuned to domestic political concerns. In the case of the French and German authorities, could their twin assault on big data be seen as a continuation of political protectionism by other means? 

25 May was a significant day for the Commission’s Digital Single Market Strategy (on which we commented on the Bristows ‘Cookie Jar’), with the publication of proposals for three new Regulations to:

  • tackle unjustified geo-blocking and other forms of discrimination on the grounds of nationality, residence or establishment;
  • improve cross-border parcel delivery services and increase the transparency of prices while reducing delivery costs; and
  • strengthen the enforcement of consumers' rights and provide guidance to clarify what qualifies as an unfair commercial practice in the digital world. This does not impose any new obligations on retailers, but rather is intended to improve the ability of consumers to enforce the EU Consumer Protection Regulation 2007 through national courts.
The proposed geo-blocking Regulation will ensure that:

  • Consumers visiting an online site from any EU Member State will no longer be prevented from ordering and taking advantage of retailers’ international delivery options where these are generally available; and
  • Consumers will be able to visit the country specific site of their choice.  In other words, a UK consumer can choose to visit, e.g. retailer.fr to take advantage of different purchasing options/prices on that site.  Retailers will not be able automatically to re-route customers (in this example back to the UK site) without the customer’s consent and even where consent is given, the domain must remain available.
However, notable by their absence are any proposals to tackle the geo-blocking of audio visual services. This is in stark contrast to the Commission’s original intention when the DSM strategy was launched in March 2015. This means that for the foreseeable future there will be no general right of EU citizens to access sports events broadcast under exclusive territorial licences in other Member States.

In tandem with these initiatives, Commissioner Vestager gave a speech on 24 May which set out the Commission’s view that competition supports innovation. Notably she said that to encourage innovation, there is a need for both competition and rewards for innovators. 

She went on to say that the Commission does not object to standards, provided they are set up in the right way. However, when standard essential patent holders try to go back on their promises to offer their technology to everyone on fair terms, that can be a serious problem for competition. 

French and German competition authorities also published a joint paper on data and competition law on 10 May. This considers the extent to which data confers market power, the types of data-related conduct that may give rise to abuse, and the interaction between competition and data protection/privacy rules. 

In particular, the paper looks at: (1) whether the collection, processing and use of data may lead to market power; (2) the types of data-related conduct that are potentially anti-competitive; and (3) whether personal data protection rules take precedence over competition law rules.

Lurking in the background is the German competition authority’s investigation into Facebook’s data protection policies and the French competition authority’s sector inquiry into the use of big data in the online advertising market.

Of recent years, there has been some uncertainty over whether the issue of ‘big data’ was really a competition issue.  It seems that at least the French and German authorities would disagree.

The Commission has seen the future and it is standardised!

For those of you who are interested in standardisation, a post about action by the Commission generally, rather than just DG Comp.
A couple of weeks ago the Commission has published a Communication to a whole host of other EU institutions (including the Parliament and the Council as well as the ECSC and the Committee of the Regions), setting out its Information Communication Technology (ICT) standardisation priorities. This forms part of the broader Digital Single Market (‘DSM’) strategy. If you are interested, have a look at our sister site, Cookie Jar for a broad perspective on all things DSM.

The objective is to ensure that ICT standards in Europe and globally facilitate the interoperability of digital technologies, which the Communication regards as essential for an effective DSM. To help achieve this the Commission intends to focus on improving standards in five strategic areas: 5G, cloud computing, internet of things, data technologies, and cybersecurity.

A key focus for the Commission is the role of ICT standards for 5G networks to ensure interoperability, security, privacy and data protection, and it intends to develop a 5G Action Plan for EU-wide development of 5G networks beyond 2020. The paper also highlights the role of ICT standards for sharing data across national borders (e.g. in relation to spare parts between vehicle manufacturers and scientific research).

The Communication argues that the proliferation of standards has created uncertainty about: what patents are standard essential patents (‘SEPs’); who owns which standard essential patent (SEP); the cost of licensing intellectual property rights; and the methodology for valuing SEP licences. 

So what happens now? 

The Commission intends to: 
  • Take steps to improve the efficiency of the standard-setting process by working with the wider standard-setting community. 
  • Regularly review and monitor progress for updating ICT standards.
  • Improve EU financial support for standard setting.
  • Ensure fair and non-discriminatory access to standards based on a balanced IPR policy with FRAND licensing terms, which take into account a variety of competing needs: 
    • fair return on R&D investment; 
    • a sustainable standardisation process; 
    • a competitive technology market; and potential barriers to entry for SMEs; and 
    • a fast, predictable, efficient and globally acceptable approach to technology licencing, which ensures a fair return on investment for SEP holders and fair access to SEPs for innovators. 
  • Strengthen the EU presence in international cooperation on ICT standards, in particular with the US, China, Japan and South Korea. 
It will probably come as no surprise to regular readers of this blog that the comments about FRAND caused us to pay particular attention as FRAND developments are key theme of this blog: see our previous posts here, here, here and here.

How about open source? 

It is interesting that the Communication makes no reference to open source, royalty free licencing of SEPs. This is in marked contrast to the Commission’s 2004 European Interoperability Framework for pan-European e-government services, which at the time considered that open source technology standards required intellectual property included in standards to be made available on a royalty-free basis.

Germany’s competition probe into Facebook’s T&Cs, precedent or outlier?

The German Competition Authority (BKA) has opened an investigation into Facebook “on suspicion of having abused its market power by infringing data protection rules”.   

The BKA’s press release indicates it is taking an expansive view of its competition law powers, “There is an initial suspicion that Facebook's conditions of use are in violation of data protection provisions. Not every law infringement on the part of a dominant company is also relevant under competition law. However, in the case in question Facebook’s use of unlawful terms and conditions could represent an abusive imposition of unfair conditions on users”.

This attempt to use competition law, in order regulate privacy, appears to put the BKA in conflict with the European Commission’s position: that it that it has not yet found competition problems in relation to ‘big data’ and that of the Court of Justice of the European Union: “any possible issues relating to the sensitivity of personal data are not, as such, a matter for competition law”. 

The BKA is also tacking in a different direction to the UK’s Competition and Markets Authority (CMA), which regards potentially unfair terms and conditions as a matter for enforcement under EU rules on unfair contractual terms, rather than competition law. 

It is too soon to tell whether the BKA’s interventionist approach to data protection will be followed by other national competition authorities. Here at the CLIP Board we suggest this is unlikely, rather the BKA’s investigation may be better seen in the context of German’s troubled historical relationship to personal information. However, we do anticipate increased competition scrutiny of potential foreclosure concerns in relation to dominant platforms and access to proprietary data.