The following are the outputs of the real-time captioning taken during the Fourteenth Annual Meeting of the Internet Governance Forum (IGF) in Berlin, Germany, from 25 to 29 November 2019. Although it is largely accurate, in some cases it may be incomplete or inaccurate due to inaudible passages or transcription errors. It is posted as an aid to understanding the proceedings at the event, but should not be treated as an authoritative record.
>> MODERATOR: Okay, ladies and gentlemen, I think let's get started. Very warm welcome today at the Internet Governance Forum. This forum is about Data Governance and Competition.
So thank you very much for attending, for having gotten up so early. I was informed that normally you arrive here at 12:00 in order to be really fresh and ready for the night. But I hope to get you started with this really interesting debate on competition and data.
My name is Philipp Steinberg. I'm Director General for Economic Policy in the Federal Ministry for Economics and Energy. And you might have guessed that I'm responsible for competition policy in Germany. And we are just about to release a recast of our competition law that will include some of the suggestions we going to hear about later on.
This topic, I think it's really very interesting, and really one of the topics which will gain even more importance, I think. It is about competition. It is about the digital economy. It is about the platform economy. Some of the buzz words you are all familiar with, of course, are network effects, superstar firms, winner takes all markets. And, of course, the tendency for competition, for monopolization and concentration.
Of course, these fundamental changes raise many concerns concerning the efficacy of the current competition policy and framework. And so basically, the debate here is, of course, is it necessary to update our competition law regulatory framework?
And I think it is not too daring to say that, of course, the competition law framework is vital for the functioning of our economies. And that is really one of the backbones of most states' regulatory framework.
So I'm really very happy to introduce very distinguished colleagues at a manel, not a panel. And I have to apologize at first, because you might have realized but it is quite male, our manel here. So I have to excuse Heike Schweitzer, who is, of course, you might have guessed it, she is female. But more importantly, she is a renowned expert on competition law in Germany. She is a member of the expert panel of the European Commission. And we have invited her, but unfortunately she is ill so I have to excuse her.
But still we have I think a lot to talk about. On my right-hand side, we have Martin Schallbruch. He is the Deputy Director of the Digital Society Institute at the European School of Management, Berlin, and cochair of the German Federal Commission Competition Law 4.0 which has just released its report.
And then also to my right-hand side, we have Philip Marsden. He's a Deputy chair of the enforcement design making committee of the Bank of England, he's a professor at College of Europe, and he's a member of the UK Digital Competition Expert Panel. One of the main reasons he is here. Of course, he holds many other functions, but because we don't have so much time I will skip them.
And then I turn to my left-hand side and we have Ioannis Lianos. He's Chair of global competition law and public policy at University College London, and he's also a coauthor of the BRICS-Report Digital Era Competition. And, once again, that's one of the main reasons we are here.
So this panel, of course, it's quite a challenge for all of us because we have one hour, and seven minutes have already elapsed. One hour actually to present the main, the key points of those reports the panel members have released.
So it is really about the key messages. If possible, really make it concise and make it clear because all of you, you have five minutes to present the main messages of your report. And you might have realized, I'm German so we like rules and we like to enforce them. So I will be very strict and I will enforce them.
So the idea is that you basically give us an idea of the main points because I named some of the buzz words already but, of course, it is interesting to see where do we find common ground how to regulate the digital economy, and where are differences between them maybe as well. We, of course, will have some time to get in discussion here on the panel.
Of course, I will open the panel up and then we can bring you in. And, of course, there are online participants as well. So I invite you all, of course, online as well to come in with your questions.
So I think we start with you, Ioannis, if that's okay. If you could share the main insights of your report with us. The panel is yours.
>> IOANNIS LIANOS: Sure, thank you very much for your invitation. Let me just say that I'm also the head of the Atlantic Competition Commission, but I'm not presenting here, of course, the views of the commission.
I will say that there are three main points that come out of the BRICS-Report which is a work of around 35 researchers from five BRICS countries. The first is that we believe that the simple economics of no classical price theory are not fit for purpose in the digital economy.
We are coming up from the perspective of complex economics. And why actually the simple economics do not work because, first, I think that the simple economics that we apply or implement on competition focus on market definition. However, so many of you are familiar with the multisided markets theory. And, of course, the presence of ecosystems in the context of the digital economy. Well, this is very reductive in the way of understanding and assessing our competition.
The second issue which we have problem with is the fact that well price, classical price theory focuses on price. However, many of the competitive strategies that we observe in digital markets are actually non-price related and therefore we need other tools in order to deal with those.
And, thirdly, I think that the current mainstream paradigm of competition focuses on consumer welfare and this is usually narrowly defined as consumer surplus. But we think that this is definitely very important, but I think this is only one of the dimensions which competition should focus on.
We believe that issues like privacy, economic democracy, complex equality are important considerations in the context of the digital economy and obviously have motivated a lot of thinking lately with regards to populous antitrust.
The first message is that simple economics do not work. We have to deal with complex economics, and there is a lot of work in particular coming out of the edict of Santa Fe basically looking to different concepts like tipping points, leverage points, increasing in terms of scale and scope, path dependence and different tools like Asian-based modeling in order to implement competition in the digital era.
Now, the second I think message that we are pulling forward in the report is that competition authorities have been focusing a lot on inter-ecosystem competition, but we believe that in some context inter-ecosystem competition might not necessarily work because of the presence of strong network effects and the absence of multi-homing and therefore intra-ecosystem competition plays and should play a significant role when in competitional authorities who deal with intra-ecosystem competition.
And this brings me to the third main message of the report which is that we are focusing on value capture as well as value generation. I think most of the reports have been focusing on value generation. I think this very important and valid, increasing the size of the pie is important. But it is also important to see how the pie is allocated, and this is basically the value capture.
This brings forward different concepts of competition. What we call vertical competition. The competition between various companies present in the different segments of the value chain for the largest percentage of the value generated by the value chain.
And I think this is a dimension of competition that does not only focus on product markets but also on financial markets. And I think this is also significant aspect of our report, this focus on financialization, this idea that many of these companies get their value out of their position in financial markets and that a lot of the strategies are basically focusing on the perceptions they will provide to the financial markets. And, therefore, competition law assessment, if it has to be fit for the digital economy, has also to take into consideration financial markets and financialization. And I will end up here for my five minutes.
>> MODERATOR: Thank you very much. This is impressive. You would have had 40 seconds left. So that's impressive.
Just this was I think very, very interesting, of course, giving us an outline of how the economics are changing. Of course, I'm going to ask you later so you can already think about it, so what are the concrete implications for the regulatory competition and framework.
And but now I will turn to my very right-hand side to Martin Schallbruch and ask him what are the main conclusions of your work in the German Commission Competition Law 4.0 and to share the analysis of the concrete conclusions. And maybe you can say a word on data and access to data as well if that has played a role in your work.
>> MARTIN SCHALLBRUCH: Thank you, Philipp, it's good to be here. And competition law is one of the key priorities of the upcoming European Commission. And one of the tasks of our Commission Competition Law 4.0 was to contribute to the German and European debate about competition law and digital economy. So our idea was to give specific recommendation for German and European lawmakers regarding the development of competition law.
Philipp asked for key messages of our Commission. And one key message is that we do not see a need to change basic principles of European competition law to meet the new challenges of the digital economy. But we see a need to add some additional instruments to address the role of data, the role of the market dominant platforms, and the effectiveness of anti-trust enforcement.
Let me give you some of our specific recommendations regarding these three key issues of our report. The role of data. In the digital economy, better access to data is a competitive advantage. And this is very true especially for user data. User data access allows for analysis of user behavior, improvement of services, and creates strong lock-in effects and fluid uses, customer choices, and competition.
So one of our key approaches in our report is to strengthen consumer power regarding their own data. With two ideas, more -- in more detail presented in our report and published as well.
One idea is to transfer the concept of opening user accounts for third-party providers from the financial sector in Europe to other sectors. We have since payment service directed to an instrument in the financial sector that banks have to grant access to user accounts for third-party providers if and only if the customer requests to do so.
So opening up accounts, having the chance of easier MIT homing, having -- reducing lock-in effect. And we think in the Commission that we could transfer this concept to other long-term contractual relationships in the digital service market.
Second idea, to strengthen consumer power. And, on the other hand, granting more access to data is the establishment of so-called data trustees. Data trustees are companies which address a need of companies who want to access data of a large number of data subjects. Individual data is protected by the GDPR. And to get this data, for example, to innovate business models you need the consent of each individual data subject.
And data trustees would be of help because they could act as an intermediary to give companies data on behalf of the customers and in line with the data protection preferences and purposes the customer defines in advance.
For these two ideas are our major recommendations regarding data governance. And let me add two more recommendations regarding digital platform and anti-trust enforcement. The power of platforms from the view of our Commission is not only coming from network effects and economies of scale, but also by a very strong conglomerate effect. This conglomerate effect leads to positions that are difficult to contest and that are having a cross-market relevance.
Therefore, our advice and our recommendation is that we should establish rules for dominant online platforms. We recommend an EU regulation for dominant online platforms that target this specific situation of big conglomerate digital platforms. These rules could be rules prohibiting said preferencing of on-services, strengthening data portability, strengthening intra-operability, especially of internet services to these platforms.
And the third issue I would like to mention is the anti-trust enforcement. We have seen that impact based prohibitions and remedies typically take much too long. I think the Google shopping case took six years and was in the Commission, and now we are at the court and we haven't a court decision yet.
So we have to speed up the anti-trust enforcement. And the same situation as in other regulatory subjects concerning digital platforms true as well. Security, privacy and so on. Our idea and our recommendation is to create a European digital market transformation agency as support to anti-trust and other regulators to follow market developments, dependencies, ecosystems, assess such things as data power, data transfer standards, and intra-operability. Thank you.
>> MODERATOR: Thank you very much, indeed, Martin, for this very concise proposal I'm sure we will talk about.
But let me turn to Philip now, and I would like to ask you to share some of your insight from the UK digital competition expert.
>> PHILIP MARSDEN: Thank you.Thank you, Philipp. Well, why are we all here today?
Well, one narrative is that the sky is falling and competition authorities have allowed too many mergers, digital markets are tipping even with consumer benefits in terms of low prices or no price. There are many harms to suppliers, indirect harm to consumers, reduced choice, loss of privacy, these tech giants are all run by creeps.
This has fostered what I will call with my British accent a leave campaign, as in leave the currently relatively permissive law approach, leave the consumer welfare standard, take back control, make anti-trust great again. MAGA. This is populist led, it has a disdain for experts. In this view, experts and economic analysis have allowed too much power in the hands of too few.
So this narrative asks for more intervention, substantive changes to anti-trust, reversing the burden of proof in mergers for digital firms, focusing on structural harms and economic dependency. And there is authority at the European level for focusing on competitive structure, not just consumer welfare.
And there's some authority historically in the U.S., not so much MAGA as MAFA, make anti-trust fair again. Now there is another narrative, unsurprisingly, which is the remain narrative, and this narrative is expert led and it notes the benefits of digital developments and innovation for consumers and small business. This has two voices with one message. The message is stay calm, do nothing.
Right? There is no need to change anything. The first voice is from the large tech firms. They say nothing to look at here, competition is a click away, move along. And, by the way, be grateful for all the innovation you have on your little glass rectangle that you are all playing with right now. Maybe tweak a few things, maybe look at potential harm, dynamic competition. Maybe give the competition authorities a bit more money.
And at the same time, the competition authorities -- some competition authorities are also saying don't do too much here, don't take back control, don't break up companies, just give us a few more resources, otherwise you might harm innovation. So remain expert-led. Remain evidence led. Remain part of the consumer welfare beliefs.
So we were asked by Her Majesty the Queen to try to find common ground between leave and remain. Try to take the beliefs from both sides and bring them together. And so what we basically noticed in our evidence and our hearings was that the sky isn't falling. There is huge benefits from digital and from innovation. But equally, a lot of the theories of harm are very familiar to us and traditional competition law analysis of leveraging and exclusion can handle many of these problems but not all of them.
And so what we felt, it is not true that we should move along. Competition is clearly not a click away. Data is not sunshine, not in the world of walled gardens. And competition is usually for the market. But what we need to do is introduce in our view some changes to competition law relating to focusing on a balance of harm's approach for merger control. Relating to speeding up interim measures, relating to looking more at competition and potential competition.
But in particular, we should introduce a procompetitive ex-antiregulatory structure in which we find a way of -- in a room about this size with about this many people with tech giants, venture capital firms, complainants, consumer groups to identify a code of conduct for behavior that we don't want to see the digital players doing.
And then we enforce this through a digital markets unit. So this is ex-anti competition regulation that would focus on firms with strategic market status. And to be clear, this is lower than a dominance threshold. This is a faster moving intervention than a 12-year abuse of dominance case. But this is to get ahead of the problems.
And when we've talked to many of these tech giants, they indeed have said well, actually, many of the things you are asking for in terms of preventing self-preferencing, preventing exclusivities, making sure that firms can't prohibit you from multi-homing, these are a lot of the things that the tech giants say they are already doing already.
So if that's true -- and I don't believe it is -- but if that's true, then these firms could sign up to these kinds of principles. So that's what we're proposing to complement anti-trust, to also have ex-anti-regulation enforced by a unit that is engaging with the tech giants, learning by doing, and have a very, very quick enforcement mechanism of a few weeks and not many, many years.
Thank you, Philipp.
>> MODERATOR: Thank you very much indeed, Philip. That is brilliant. Of course, using the examples you used and, of course, it is always a pleasure to listen to the beautiful Oxford English accent.
So I think -- let's start with -- I mean, I think there was one interesting element of the interventions of all of you, but especially of Philip and Martin, arguing, if I understood it correctly, to go beyond anti-trust law. You called -- Philip, of course you said we need to make anti-trust law big again and we have to enforce it correctly.
Of course, there was some agreement on making -- on speeding it up and on interim measures. But then both of you said, you said we need this pro competitive ex-anti regulation mechanism. And martin, if I understood him correctly, argued for -- he said basically well, we need regulatory law as well actually regulating big platforms concerning self-preferencing and intra-operability and so on.
So maybe you could elaborate a little bit. So isn't that a little bit contradictory? On the one hand, you said we need to make competition law, competition policy more effective, but that is not enough and we need to go beyond competition law. So maybe, Philip, do you want to start again?
>> PHILIP MARSDEN: Shall I start first? Okay.
So first hashtag of the talk, hashtag intra-operability stimulates competition. Intra-operability stimulates competition. Competition law isn't really about intra-operability. Competition law is about ex post analysis, takes many years and many experts trying to work out if harm has happened.
What we need to do, I feel, is to get ahead of some problems. So many of our recommendations to improve anti-trust law were to help us catch up with the digital giants. But our pro competitive regulatory suggestions are not just a catchup. They are to get ahead of problems.
One of the things is to build into the systems intra-operability and data portability so that the technical structure of open markets and the original plans for the internet where you have closed systems on top of open systems is more disintermediated, if you will. And many of the technical experts in this room will know a lot more than I do about this. But the idea is to introduce a layer in which competition can happen and new products can develop.
And we did this in our UK retail banking study where we looked at an oligopoly essentially of large banks and we tried to not break them up, though there was a strong political recommendation that we break them up, but instead open them up through open data, open APIs, intra-operability and data portability.
And that has, indeed, fostered new consumer choice rules digitally and made the incumbent banks feel the heat of competition.
>> MODERATOR: Thank you very much. Martin?
>> MARTIN SCHALLBRUCH: I think we totally agree with the idea of having a pro competitive ex-antiregulatory environment.I fully agree with that.
And but this environment has not necessarily been introduced -- implemented in the competition law at all.
The competition -- the question of competition on platforms and competition off platforms is dealt with in different regulations such as privacy regulations and the right of data portability such as liability of platforms. Regulation around liability is affecting competition, security regulation, media regulation and so on. We have a lot of competitive effect or competition effects in different kinds of regulation.
And if we look at our idea of having a better regulatory environment with ex-anti rules, we have to have a more holistic view. And I found this holistic view in the BRICS-Report also. A more holistic view on the role of digital platforms and on the different regulatory environments we have in competition law and in regulatory law.
And one idea of our ex-antisystem for dominant digital platforms is to have some of the major means for more competitions within the competition law. And from my perspective, and I'm a computer scientist, intra-operability and data portability are very core ideas of fostering competition. And that should be -- not only be ruled out by sector regulation but also be a part of the general competition relationship.
>> MODERATOR: Okay. Thank you very much, indeed, Martin. I think a lot of agreement on the right-hand side.
So, Ioannis, you have actually the big picture of how the economics change. You said simple economics don't work. So what do you make out of those concrete positions or what are your concrete propositions to deal with those developments?
>> IOANNIS LIANOS: Sure. So in our report we obviously take the approach that has been suggested before in terms of the more mainstream approach to promote intra-operability, to adopt interim measures, to lower probably the extent of the judicial review in these very rapidly developing markets.
But I would like just to basically make three points. The first one is that the main problem we have is that there has been a period of value extraction without proper rules, without proper institutions. This is what led basically to the situation we have now.
And I do agree that competition law on its own cannot provide an answer to the problem. So what we have been pulling forward in our report is what I call a toolkit approach. And obviously the toolkit approach will depend from jurisdiction to jurisdiction. It will depend on the development of the digital economy, but also on the institutional capabilities that each jurisdiction has.
But more generally speaking, I think that the first question one should ask is do we have -- in the specific market or specific context do we have a winner takes most or a winner takes all game?
Now if it is a winner takes most game, that means that competition might still work in this particular context. But if it is a winner takes all game, then we need probably to think about the presence of a natural monopoly and possibly more kind of utility style regulation.
And we make some suggestions about that. We, for instance, indicate that that could probably take the form of limiting the amount of advertising on platforms or it could be on somehow imposing payments to be made to users for the use of their data.
The second I think important issue, and which actually comes up to the issue of data, is that one of the main problems we have I think in the current context is that we have a missing market. We have a data missing market.
What does it mean? It means that when basically Google is selling -- and I take this example -- is selling predictions to advertisers. And obviously there is a market there. But on the other side, there is an exchange between the users and Google. But there actually we don't really have a market because users do not have property rights. So therefore we don't really have an understanding about the valuation by the users of how much this data is valued.
I think this is really an important element in the missing element in the picture that we have. So probably we need to think about ways to increase commodification of data or even of retention in that context. And obviously provide users possibility to transfer data or transfer more generally their attention.
The other element I think which is quite foreign is to understand that in the current context we have important digital platforms that exercise monopsony power in labor markets.
We have, obviously, a number of freelancers, artists, journalists that are basically working for these platforms and apparently do not necessarily get a fair share of the value. And obviously that is because of the monopsony power of the digital platform. So therefore we need probably to think about the existence and the creation of cultivating powers through, for instance, collective bargaining of these freelancers or sole users.
And finally, I think that we need to develop competition law that takes into account not just price but also other dimensions of well being. And in particular, privacy or a complex equality.
And I think this can be done by adding certain concepts to the existing toolkit. For instance, when we think about the exploitation, abuses, well, I mean we can probably add different forms of exploitation. Manipulation. It could be attention theft, some actually have put forward as an idea. So that could be different forms of exploitation that we can enforce through competition law.
And secondly, and final element is that we probably need to think differently about power. We have been focusing too much probably on market power, which is very much based on the idea that we need to have, you know, competition between substitutes. But as I mentioned before, an important dimension of competition in these value chains, digital value chains, is vertical competition.
So we need to develop a theory of vertical power. And I think the various reports have been putting forward some possible dimensions of these vertical power theory. For instance, in the Furman report, the Furman report put forth the study of strategic market position. Or the German reports that Heike Schweitzer and her colleagues completed has actually put forward this idea of intermediation power.
So I think all that somehow shows that power is more related to the position of a specific platform in a network, so its positional power is based on status. And this is something that the current metric of market power does not take into account.
>> MODERATOR: Thank you very much. Indeed, I would like to stick a little bit with the last question here for the panel, and then I will open it up. So think of your questions, please, online and offline.
So, of course, data. I think data is one of the most debated buzz words. And when I witnessed some of the discussions actually, sometimes I think, without no offense to anybody, but still there is a lot of uncertainty and unsecurity and there is a lot of we have to do, we should do. And, of course, there are many different approaches.
We have the GDPR with it regulations. You have competition law. You have the calls for regulation for what Martin Schallbruch called data trustees. So there's almost a little bit of confusion, you know. Everybody agrees that data is important, the new resource for the digital age.
So what -- if you could try to be brief, what is the role of competition policy, competition law, and what is the role or what other regulatory instruments or other instruments in general do we need? Maybe Martin you will start off, please.
>> MARTIN SCHALLBRUCH: Well, you probably know that in Germany we have a strong political discussion about opening data of big companies for other companies, for competitors. One of the ruling parties, the SPD, made the recommendation of having data for all laws so giving companies access to data of their competitors.
And we have had a strong debate about that on our commission. And we found that opening the data of companies is always a problem of reducing innovation of this company. Data is somehow the source for innovation. And if you too early open data access, you have the block for innovation within the company.
So we did not come to a solution that this one size fits all approach may work. Our idea is to have some kind of I like the word of a toolkit approach. So to define some more specific instruments for data access.
Of course, we have the instrument under the existing competition law that data access denies can be treated as an abuse of dominance. This could be made a little bit more effective, and I think Germany is doing well with that with the new draft of the German Competition Act. Germany is trying to build this in a more effective way.
And there are some more tools. I mentioned tools such as data trustees or opening a user account, obligations for platforms as market dominant platforms could have an enhanced role in data sharing.
We have some experiences with sector regulation and opening data such as the energy sector where data is open about energy production and energy transport and across the new business models.
And one important aspect we identified in our commission is the role the -- the raising role of public data, open data of public authorities, of government, of public rule sectors such as healthcare or energy or mobility can help to foster competition. We made some hearings with small and medium enterprises who said we would like to have an easier access to open data from governments and more standardized platforms, a broader open portal or something else to access public data because public data such as mobility data is always a help for developing business models.
>> MODERATOR: Thank you very much for this explanation.
So, Philip, the obligation to share data and what data, would that be comprised by your pro competitive ex-antiregulation mechanism or do we need a specific regulation or specific mechanisms, instruments to impose this obligation to share data?
>> PHILIP MARSDEN: Thank you. What I perceive is a digital markets unit that is engaging with the tech giants and the key complainants and the consumer groups to identify, indeed, what data is the most important data to share.
And remember, of course, a lot of the tech firms will be a bit inconsistent with their arguments in resisting this. Some of them will say it's not about the data, data is everywhere, it is about the engineers. So, you know, then I always ask them so what is the problem with releasing some of the data if it is not about the data? And they say oh, you will change our fundamental business model and you are killing innovation incentives blah, blah, blah. And then other times they'll say well, the data is actually really crucial to us and, you know, this is where we make our money from it.
So it would be nicer to have a conversation, a real debate about this. Another hashtag, Hashtag follow the data. Hashtag follow the money, right? The data is related to our attention which is related to our engagement. Those are the kinds of markets I'm interested in looking at -- engagement and attention markets, which is where they are competing for and where they're making their advertising Euros.
So when we said open up the banking data, which is some of the most commercially and financially and sensitive information that we all have, our own, you know, financial status, et cetera like that, we were not saying release the data into an iPad or into a USB stick. We were saying can some of these companies that are entering the market or seeking to enter the market access some of the data of the incumbents to train their algorithms and to be able to operate new products with consumer consent.
We were not saying release the data so that the sky will fall. And all I'm saying is if we don't try to introduce some of these models, something much worse will come down the pipe. What we are actually introducing is not something that is actually going to make the sky fall in and destroy the business models. It will just help them evolve and adjust.
You know, if we don't find a way of addressing these kinds of imbalances in power and find new ways of introducing competition, I feel a much colder regulatory winter will come through. Hashtag winter is coming, right? So we need to do something to make sure that it's not a scary regulatory winter, it's something that actually engages companies to become more competitive themselves.
>> MODERATOR: Thank you very much. Beautiful pictures.
So, Ioannis, you talked about the lack of a market for data and asked for commodification of data. So does this imply you will remain within the framework of competition law, competition policy, or would you saw we need to go beyond as well?
>> IOANNIS LIANOS: Well, as I mentioned before, I'm in favor of the toolkit approach, competition forms part of that.
Let me say why data is important. Data is important because of the importance of learning effects.
I think we have focused a lot on network effects, but I think the most important issue in digital markets is the learning effects.
And why is that? I mean learning obviously effects take place generally and they're quite positive. Now if you are in a particular industry, you know better about this industry, obviously you have an advantage, you have a competitive advantage. So it's more difficult for someone to take you out.
But I think the digital economy, the learning comes out of data and the development of algorithms that actually make your learning even more powerful. Which probably leads to a difficulty for other companies to enter this market once you have developed really quite important learning. So data is important from that perspective.
Now, data, as you mentioned, is everywhere. So it's an unrivaled source. And to a certain extent there are only certain categories of data where we have some scarcity. In particular when you have important regulation. For instance, for medical data. There obviously is a scarce resource. But generally speaking, for lifestyle data is available and usually people can actually have access to that through different sources.
However, as Philip mentioned, the important issue here is the scarcity of attention. And I think, you know, we need to move a little bit the debate towards attention markets or personalized markets which is actually quite important in the context of a personalization we will see happening also with regards to the Internet of Things.
Of course, you know, where is the competition problem you will ask me. And I will say there is a competitional problem in the setting of these specific markets.
Let me basically give you an example. When you are using a search engine, let's take for example Google or social media, let's take the example of Facebook, you are actually using this and you have to accept that you will provide your data.
So to a certain extent there is an agreement that basically enables you to have access to the service by providing your data. And obviously that provides huge advantages to the users.
But one will ask, would it be possible to have such a configuration if the market of social media or the market of search engine was competitive? Would it be possible, for instance, to think that in case we have different competitors in these markets maybe some users could have actually been paid in order to provide their data. Maybe some users will have preferred to pay but not to provide their data or their privacy. And finally, maybe some users will have probably, you know, use their data in order to actually enjoy the service.
So what I'm actually saying is that we cannot really see now the preferences of the users expressed in the market. You know, having these three options and we can think of different others because of the setting of the market and because of the fact that we have a super dominant firm that basically imposes its choice.
What actually I think becomes a competitional problem there is to enable, you know, to the consumers to choose according to their preferences and to provide basically the various choices in the marketplace. And that actually is definitely the task the competition rules should follow.
>> MODERATOR: Thank you very much. That was very clear and inspiring. I mean, of course, there are some saying, well, the users could choose today but they don't want to. Maybe this is a topic for debate over questions from the audience online or offline.
Are there any remarks, questions? I see a question over there. So I don't know, maybe you have to come -- there is a mic coming to you.
>> AUDIENCE: Thank you for this very interesting discussion. I want to talk about the issue of innovation, and you said people say that exclusive data power is necessary for innovation.
But what about the counter factual, what about all of the innovation that is not taking place today because of the exclusive data power. What about the scores of startups that are bought up before they can even compete by these companies. No one is regulating that.
And secondly, I want to talk about data as a nonrival resource. I would think that at an ecosystem level, and there is some academic work on this, it is actually a rival industry source because given the platform model it would be, given the fact that networks, network effects reinforce your data power. And the other way around, data ends up becoming a rivalrous resource at the ecosystem level.
>> MODERATOR: Thank you very much. Indeed, Ioannis needs to leave in five minutes, so we will let him go. I will say thank you now.
But you might have a chance to answer that. I would take another question or remark, if there is one. Yeah. The gentleman over here.
>> AUDIENCE: Thank you very much for this nice --
>> MODERATOR: You might introduce yourself briefly as well.
>> AUDIENCE: Sorry?
>> MODERATOR: You might introduce yourself briefly as well if you want to.
>> AUDIENCE: I'm a member of Parliament in Lebanon. And I'm the head of the IT committee in the parliament.
I was just thinking you took into consideration the management of the data and the data governance and how regulation should be managing the data.
However, I would like to go into another view and have a view on the regulation by itself. Knowing that the regulation is part of a very big burden on companies. And this is like sometimes regulation by itself, and GDPR specifically is, a big burden for companies and is creating disbalancing in competition.
Like, for example, if we apply the GDPR on Facebook, Google or Amazon on the big companies, they have the possibility of paying the fines and they are like -- they are okay with the regulation.
But if we go into small and medium companies, they are much more vulnerable on fines and penalties of the GDPR. So there is a lot of competition.
The security by design that is imposed by GDPR is much more heavy for these small companies than for the large one. And at the same time, by putting such regulation, we are killing a little bit the free service of the internet. So I just want to know what is your opinion about this, and how can regulation also help for better competition. Thank you.
>> MODERATOR: Thank you very much. And I would take a third and last one, intervention or question if there is one. The gentleman over there. Yeah.
>> BARRACK OTIENO: Thank you, Chair. My name is Barrack Otieno, and I'm representing the Kenya IGF. Interesting conversation. Something that we are also facing back at home. Although I was looking at it from a different perspective.
For us, it is more a case of big telcos with the large pools of data that they are able to play around with from an innovative standpoint. And the industry is crying foul, that should they be broken up because of the monopolistic tendencies. Because they are playing around with innovative solutions, and some of them are really coming out to be big money makers.
So I don't know from a developing country perspective whether regulatory sandboxes would be something to pursue. I know in the EU your market is much more developed.
And so I'm looking at it, you have regulations in place, but what of countries that do not have regulations? Should we go for regulatory sandboxes?
>> MODERATOR: Okay, thank you very much. Fascinating questions.
So I would turn to Ioannis. You just pick the questions you want to, innovation not taking place, on data, on the burden of regulation, or on the big telcos.
>> IOANNIS LIANOS: All right. Unfortunately, I have a limited time. So I would just -- basically I agree with what you mentioned before, discussing the network effects in the context of outside inter-ecosystem competition. But once you are intra-ecosystem you might have network effects with regards to data.
The second issue with regards to mergers and acquisitions, I think this is a huge debate right now. There have been hundreds of mergers and acquisitions in this area. Some actually relying on empirical work done in the pharma sector have put forward this idea that this might be -- some of them at least might be killer acquisitions or might be some form of killer zone.
What does it mean? It means that the digital platforms when they see some company that might be a potential competitor, they instead of basically waiting to -- for that competitor to develop, they basically buy that competitor.
Now possibly there have been some mergers that have been specified by this specific strategy. But at the same time, I would say we have to be very careful there because for many of the startups it seems that being bought by a major platform is also a way to monetize the effort and the innovation that has been put forward.
And I think there we really need to be extremely careful to understand when we have issues of potential competition and when actually we don't have issues of potential competition.
There I think the competition laws and economics are not developed that much with regards to what we perceive as potential competition and the metrics for that.
And finally, I think it is quite important to have in mind also that the funding obviously is there. But funding is not always what is really missing. I mean generally, companies when they are asking for funding, they are also asking for quality certification. So there are some specific firms that specialize in funding digital technologies that provide quality certification.
In particular in the Silicon Valley. That is why, you know, you have a lot of Chinese firms going to Silicon Valley. There are huge capital markets in China as well. But still, you know, they prefer to go to Silicon Valley. Why is that? Because of the quality certification element.
Therefore, there you might have some form of buyer to entry that might develop and this is something we look in more detail in our report with regards to financialization issue. Thank you very much for this invitation. I'm afraid I need to go.
>> MODERATOR: Thank you, Ioannis, and good luck on your way to the airport. Right now it should be okay.
So the question where a lady asked about innovation not taking place because of the big players. And then the question from the gentleman of the burden of regulation, GDPR and especially the burden for small companies. So wouldn't that be a problem. And then the question from the gentleman here on big telcos and regulatory sandboxes especially but maybe not exclusively for less developed companies. Martin?
>> MARTIN SCHALLBRUCH: Thank you. I would like to pick two, two of the questions.
The first question was about exclusive data power. The view of our commission is that it is too early to have a general rule for opening data access because you need a period of time where the innovator, the company which innovates, has exclusive data power.
But, of course, exclusive data power has to be limited. And I have described some of the limitations. One limitation is that the access to user data should be steered by the user at the first hand. The second limitation is that dominant platforms should open more data. And third limitation is, of course, abuse of dominance positions in other market could also be the reason for orders to grant data access.
And the last thing is that all data that was produced by public money should be opened. Not only data within the public service, but also data that was generated, let me say in the sector of healthcare or mobility where we have public licenses.
Second question I would like to pick is the question about regulatory sandboxes. We have seen in our work that there are a lot of very similar competition problems in very different sectors of the economy. And therefore we propose some changes in sector regulation that introduced more instruments that foster competition.
And this kind of sector regulation from my perspective could be a good place for having regulatory sandbox concepts in place. For example, regarding the question of intra-operability or regarding the question of data access, which somehow could be a test in one sector that could be -- if successful, transfer to other sectors such as the transfer of the regulation for financial sector, PSD2 that I would like to transfer to other sectors, too.
>> PHILIP MARSDEN: I completely agree. I will try to answer some of the questions very briefly through an example.
Relating in a way to the counter factual question we had ad the beginning. So when we did out banking study, our retail banking study in the UK, we were given a lot of political pressure to break up the main financial platforms.
We decided, as I mentioned, to open them up through open APIs and data portability. And, indeed, needed a regulatory sandbox to be able to implement that, all right. And then we were asked by government, well, wouldn't you have had a faster result if you had broken up these banks, right? What is your test for success?
You know, you've released some of this data and seen some new competition in the market but we don't see consumers switching, and we want to see consumers switching amongst the platforms.
We said to them our remedy and our test for success is not switching because British people switch their spouses more frequently than they switch their banks. Our remedy is not divorce. It is engagement.
Our remedy is not leave Facebook, delete Facebook, delete Instagram, delete Twitter. It's none of that. There are benefits to engage better and to make these big platforms even more innovative.
Now, The platforms will say, frankly, there is a lot of innovation, just relax, and what you are prosing will chill innovation. No, it won't. What we are trying to get them to do is to be, believe it or not, a little bit less lazy. Some will say they're not lazy, are you kidding, Google and Facebook and Twitter, they're amazing.
No, but there are tons of studies that show that when you get into monopolistic or oligopolistic markets, investment patterns change, people get a little lazy. Microsoft basically ignored internet explorer when it was the dominant provider of the operating system. And so it needed Mozilla and others to come about to be able to compete. And that required regulatory intervention.
So my final point about this is there is tons of research to show that we need to have a better and we could have a better ecosystem if we allowed more intra-operability and data portability and, indeed, faster competition interventions.
The research all cites -- there's the Swedish research which is very famous, which is the winner takes it all from Abba. There's American research from Silicon Valley -- you can check out any time you like but you can never leave, all right, the Eagles.
And finally, the Scottish train spotting choose life. That's what we want. More choice. More consumer choice. More choice amongst platforms and more choice for different merchants. And so let's have a lust for life, as Iggy Pop says.
>> MODERATOR: This is impressive, not only the content but also the way you present it. I think it will remain with us even after this session.
So obviously I think we have seen that this debate has shown us, once again, if you hadn't known before that the debate is fascinating and that the question of data governance and competition, it will remain with us.
There was agreement that we need some kind of toolbox, I think that is quite clear. There was a lot of emphasis on expanding choice and on intra-operability. Being pro competitive. A lot of agreement, I think, of course making competition law great again, but not limiting ourselves to competition law.
We need to go beyond competition law, if necessary. As well, you probably need to do some innovation and introduction of this -- of an ex-anti mechanism or ex-anti mechanisms. Actually, we tried to do that in Germany, actually drawing on your proposition and to try to introduce something similar, let's say, in our competition law which is going to be difficult because actually the big tech concerns, they are a little bit reluctant to like that.
So we're going to see what is going to come out of it. Thank you very much, indeed, to the panel, to the remaining panel but, of course, even though he has left to Ioannis. Thank you very much, Martin and Philip for having taken the time to discuss this fascinating topic with us.
And thank you, dear audience, very much for having taken the time, for having asked questions. And, of course, also the online community. I don't see you, but thank you very much for having listened.
So I wish you a good continuation of this Internet Governance Forum, and I hope to see you soon again in some discussions on some panel. And, of course, I'm very happy to exchange opinions and views with us. So thank you very much and have a good day. Goodbye.