Fair, Reasonable and Non-discrimination Obligations

Market dynamics are sometimes not sufficient to discipline players with market power. This is the case of the traditional network industries and also of digital platforms. In these circumstances, users must be protected from exploitative practices.

A set of behavioral obligations can be imposed upon digital platforms with market power in order to rule out exploitative abuses; that is, unfair conditions imposed upon users, such as excessive pricing, tying, and so on. In such cases, platforms could be forced to trade with users under fair, reasonable, and non-discriminatory (“FRAND”) conditions.

FRAND conditions, and the FRAND acronym, evolved around patent licenses, in particular for standard setting.45 The European Commission46 and the Court of Justice of the European Union have supported FRAND remedies in mergers and the refusal to contract under such terms as proof of abuse of a dominant position.47 A FRAND framework has been proposed for the regulation of digital platforms.48

Of course, there is a long tradition of FRAND-like sector-specific regulation in the traditional network industries as regards network access conditions. What is specific to access regulation is the role of sector specific regulators to set the FRAND conditions (or in other terms objective, transparent, proportionate, and non-discriminatory access conditions).49

Non-discrimination seems to be the most immediate obligation to be imposed upon digital platforms with market power, particularly as they vertically integrate and start competing with other intermediated businesses. Objectivity can be imposed on all platforms considered to be superintermediaries, based on the obligation to protect the users’ interests.

Competition law has also been used to impose non-discrimination in the Google Search (Shopping) Case and there are a number of open cases regarding discrimination against Apple, Google, and Amazon. However, an ex-ante regulatory non-discrimination obligation could support a more straightforward enforcement.

On one hand, a regulatory obligation could explicitly impose both an external and an internal non-discrimination obligation. While competition law has been traditionally understood to impose external non-discrimination (discrimination between third parties) as abusive, internal discrimination (discrimination between third parties and the service provider itself) has been considered to be prohibited only in exceptional circumstances, mostly in the case of essential facilities in vertically integrated industries. However, traditional network regulation has explicitly imposed internal and external nondiscrimination obligations. A recent example is the European Electronic Communications Code: “Obligations of non-discrimination shall ensure, in particular, that the undertaking applies equivalent conditions in equivalent circumstances to other providers of equivalent services, and provides services and information to others under the same conditions and of the same quality as it provides for its own services, or those of its subsidiaries or partners.”50

On the other hand, a regulatory obligation could define the specific differentiations that are considered non-discriminatory. Non-discrimination does not mean that services are provided to all users on exactly the same terms. Objective reasons can justify different treatment. However, the definition of the borderline between objective and non-objective differentiation is prone to conflict.

Fair and reasonable contracting terms in the form of regulatory obligations could also be imposed upon dominant digital platforms. Such obligations could apply to all the contractual conditions that bind platforms and users (in particular business users). For instance, such obligations could outlaw exclusivity clauses prohibiting multi-homing. They could also limit excessive prices, such as the allegedly excessive fees imposed by Apple and Google in their app stores.

A full, continuous, and concentrated control of FRAND network access conditions has been implemented in most countries in most infrastructures. Independent regulatory authorities have been established, with different powers to control access conditions, from solving access disputes when they arise, to the ex ante definition of access conditions in the form of regulated offers previously approved by the authorities, or even defined by the authorities themselves.

A FRAND regime for dominant digital platforms would not necessarily require a fully developed regulatory framework, as is the case for the traditional network industries. A lighter framework could be defined, in the form of an obligation to agree on industry codes of conduct in which the dominant platforms and the users would define the FRAND conditions. Mechanisms could be defined for regulatory intervention where agreements cannot be reached or where the codes of conduct are not respected by the dominant firm. In favor of such an approach is the information asymmetry existing at the moment, as authorities have a limited understanding of the functioning of the platforms.51 On the contrary, personalized algorithmic ranking and matching might make it difficult for users to control the effective application of FRAND frameworks, requiring the intervention of public authorities to introduce transparency into the algorithms (see the next chapter).

 
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