Happy New Year to the readers of this blog!
2020 was an eventful year for digital platforms – or, at least, the largest of them – with a combination of lawsuits, competition law investigations and regulatory proposals. When we set up our Platform Law Practice at Geradin Partners, we did not know we would be so busy advising on these issues, but this was certainly a good move.
2021 is likely to be equally interesting. Here are my predictions:
- Google will be facing an extremely difficult 2021 with a combination of (i) three major lawsuits in the United States (a lawsuit filed by the Department of Justice and 11 States on 20 October 2020 focusing on search, a second lawsuit filed by the State of Texas plus 9 other States on 16 December 2020 focusing on ad tech, and a third lawsuit filed by 38 States and territories on 17 December 2020 focusing on search and verticals), (ii) the Epic Games lawsuit regarding the Google Play Store (and other class actions brought by developers); (iii) antitrust investigations by DG COMP (on data-related practices), the French Competition Authority, the Italian Competition Authority and the UK Competition and Markets Authority (“CMA”) (on ad tech); and (iv) regulatory initiatives in the EU and the UK (more on these later).
- The Texas lawsuit will be particularly significant, as it adds a new dimension compared to other lawsuits and investigations: it reveals the existence of what looks like an anticompetitive agreement between Google and Facebook. According to the lawsuit, the agreement (entered into in 2018) was designed to eliminate Header Bidding (an alternative to the Google ad tech stack that was developed by publishers with rival ad tech intermediaries, and in which Facebook was planning on getting involved). In return for agreeing to significantly curtail its Header Bidding initiatives, Facebook would benefit from a series of advantages when bidding in Open Bidding (the tool developed by Google in response to Header Bidding). While Google and Facebook were until now frequently accused of engaging in abuses of dominance, the Texas lawsuit alleges they are also engaged in a cartel, which raises very serious concerns under competition law. A further issue for Google is that it seems that it would have hidden this agreement from regulators in Europe, although it could have been captured by the multiple RFIs sent by them to the company over the past few years.
- Besides the Epic Games lawsuit filed in Northern California, Apple will be subject to growing discontent by app developers, as they advocate to obtain significant changes to Apple’s App Store policies (in particular, the obligation to use Apple’s own in-app payment solution (“IAP”) and pay the 30% commission charged on apps selling “digital goods or services“). Their position could be strengthened in 2021, with the European Commission delivering an SO to Apple as a result of the investigation it opened following complaints by Spotify and Kobo.
- In 2021, I expect that there will be more enforcement action at the Member State level. As noted above, Google is subject to several investigations in France, Italy and the UK. Apple is also being investigated in the Netherlands, and Facebook is subject to a new investigation in Germany. Additional complaints have been filed against these companies, although they have not yet been made public. While enforcement at the EU level has the advantage of offering EU-wide remedies, there is only so much that DG COMP can do given its limited resources. In that context, enforcement at the national level will often make sense, especially since some National Competition Authorities (“NCAs”) are very well-resourced and keen to be involved in digital platform cases. And given that the proposal for a Digital Markets Act (examined below) does not recognise any enforcement role for the Member States, NCAs may have further incentives to get involved in platform cases.
- The recent proposal for a Digital Markets Act (“DMA”) will create a major headache for digital gatekeepers. The exact content of the DMA was a well-kept secret of the European Commission, but, as noted in an earlier post, I was impressed by the final proposal. While some had predicted that the proposal would likely be watered down following extensive lobbying by large platforms (including Google’s clumsy efforts to sideline Commissioner Breton), the truth of the matter is that the DMA proposal is more stringent than I expected, considering the range of obligations that will apply to digital gatekeepers as per articles 5 and 6. As the proposal goes through the various steps of the legislative procedure, we can expect lobbying expenses to increase in Brussels.
- 2021 will also be an interesting year in the UK, now that the UK Government has committed to create a Digital Markets Unit (“DMU”) within the CMA that is set to begin work in April, and that the Digital Markets Taskforce, led by the CMA, issued its advice regarding the setting of a pro-competition regime for digital markets in the UK, referred to as the “Strategic Market Status (“SMS”) regime”. As I discussed in an earlier post, the Advice is a serious piece of work, which makes sound recommendations. Now, the UK Government will need to propose legislation that will grant the DMU the powers it needs to implement and enforce the SMS regime based on the advice of the Digital Markets Taskforce. Whether this legislation will be proposed in 2021 is a good question considering the perfect storm of Brexit and Covid-19, combined with a Government whose priorities are not entirely clear.
- Given the above, 2021 will also be an interesting year for the CMA, which besides setting up the DMU, will also have to decide whether to take enforcement actions against digital gatekeepers – something it initially did not appear too keen on doing, as it felt that the issues raised by these gatekeepers would be better dealt with through Codes of Conduct. The CMA is currently looking at a complaint filed against Google’s Privacy Sandbox. The revelations made in the Texas lawsuits – which indicate that the concerns expressed in the CMA’s Final Report on Online Platforms and Digital Advertising may be more serious than initially thought (in particular, due to the agreement between Google and Facebook that the CMA was apparently not aware of despite the depth of its investigation) may reshuffle the cards.
- An important jurisdiction to pay attention to in 2021 is Australia. In 2019, the ACCC released its final report for the Digital Platforms Inquiry, and has now set up a specialist Digital Platforms Branch to conduct further work related to digital platform markets. In July 2020, the ACCC released a draft Mandatory Code of Conduct to address bargaining power imbalances between Australian news media businesses and digital platforms, specifically Google and Facebook, for public consultation. A Bill was introduced to Parliament (the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2020) on 9 December 2020 to implement the Code of Conduct. This Mandatory Bargaining Code could be a source of inspiration for other jurisdictions, in particular the UK. Given Rod Sims’ tough position on large digital platforms, it is likely that the ACCC will come up with other initiatives in 2021.
- The interface (or potential clash) between privacy and competition will be a very hot topic in 2021, as illustrated by the complaint filed by four trade associations against Apple’s decision to restrict access to the device’s Identifier for Advertisers (“IDFA”), which plays a key role in digital advertising. [Note: I am outside counsel to these associations] While Apple claims that this move is motivated by the need to give iOS users greater control over their personal data, the truth of the matter is that app developers in the EU are already subject to strict privacy laws (notably, the GDPR and the ePrivacy Directive), which hold them to a high standard and require them to comply with informational duties and to obtain valid user consent for the processing of their data. It is also important to consider that Apple’s intention may not be so pure given that it would stand to benefit from the reduced availability of the IDFA, as Apple does not use it for its fast growing advertising activities on the App Store. The complaint filed by the Marketers for an Open Web against Google’s Privacy Sandbox is another illustration of the tension between privacy and competition. While Google claims that this initiative is solely motivated by privacy reasons, its implementation is likely to have a negative impact on competition in the ad tech ecosystem.
- My last prediction is that, despite the legal challenges they are subject to, large digital platforms will continue to grow in 2021, especially since their services will continue to be in high demand given the Covid-19 pandemic. So far, the legal challenges these companies have faced have hardly eroded their revenues and market cap. Quite the contrary, large digital platforms have been doing very well in 2020 and there are no reasons to believe that this will change in the near future, especially since the lawsuits, investigations and regulatory initiatives discussed above will, at best, deliver their results in 2022-23 (or, perhaps, even later).