More Vulnerable Consumers of the More Digital World ICF Workshop İstanbul, 9 March 2020 Hatice YAVUZ Chief Competition Expert Turkish Competition Authority (TCA) 1
OUTLINE I NTRODUCTION I W HAT ARE CONSUMERS PAYING TO II DIGITAL PLATFORMS ? H OW CAN CONSUMERS BE HARMED ? III H OW TO RE - DESIGN THE TOOLS FOR IV EVALUATION AND INTERVENTION ? 2
OUTLINE I NTRODUCTION I W HAT ARE CONSUMERS PAYING TO II DIGITAL PLATFORMS ? H OW CAN CONSUMERS BE HARMED ? III H OW TO RE - DESIGN THE TOOLS FOR IV EVALUATION AND INTERVENTION ? 3
A CONTINUUM OF DIGITILIZATION … N OT A DIGITAL WORLD BUT A MORE DIGITAL WORLD 4
C ONSUMERS ARE THE MAIN PILLARS OF THE MULTI - SIDED STRUCTURE Other parties try to integrate to the platforms (ads, payment, data analytics, etc) Platforms match these two and/or produce Suppliers produce since consumers demand Consumers demand a product or service 5
W HEN DIGITAL PLATFORMS TOUCH TO THE ANTITRUST LAWS … • Suppliers High platform • Platforms prices, Innovation, Exclusion Self preferencing Quality, practices of Exploitation Low or zero platforms, pricing, Foreclosure of the Customized vertical assets of services the platforms Privacy Network effects, ? More prone to manipulation and addiction, Loss of privacy, Under information • Competition • Consumers Consumer Harm Authorities 6
OUTLINE I NTRODUCTION I W HAT ARE CONSUMERS PAYING TO II DIGITAL PLATFORMS ? H OW CAN CONSUMERS BE HARMED ? III H OW TO RE - DESIGN THE TOOLS FOR IV EVALUATION AND INTERVENTION ? 7
W HAT ARE CONSUMERS PAYING TO DIGITAL PLATFORMS ? ˝ ZERO PRICE ˝ does not mean paying nothing A PAYMENT SYSTEM of ATTENTION & DATA in return to SERVICE In monetary terms: Generally one party is subsidizing other parties Cos of Network Effects 8
OUTLINE I NTRODUCTION I W HAT ARE CONSUMERS PAYING TO II DIGITAL PLATFORMS ? H OW CAN CONSUMERS BE HARMED ? III H OW TO RE - DESIGN THE TOOLS FOR IV EVALUATION AND INTERVENTION ? 9
R ESTRICTION OF THE CONSUMERS ’ PREFERENCES Manipulation of rankings Can be both exlusionary and exploitative Google Adroid decision: Pre-installation of Google Search and Chrome 10
C OSTLY MULTI - HOMING High High Markets are generally tipping when: network switching Costly Multi-homing effects costs High network effects Limited differentiation High price differentiation High economies of scale / barriers to entry More More tippy locked in markets effect Google Adsense Less decision: multi- Premium Placement homing condition 11
D ECLINE IN QUALITY OF GOODS / SERVICES AND IN THE PACE OF INNOVATION Privacy, data security, less ads, Stronger How to measure more innovation, quality of correlation quality in a digital goods/services between vs. quality and environment? Price innovation • EU decisions ( Microsoft 2004, 2007, Google Android, Google Adsense) • Stigler Report (2019), • The European Consumer Organisation- More and BEUC (2019), More • Auer, D. (2018), Structuralist faster competitors Innovation: A Shaky Legal Presumption innovation In Need Of An Overhaul • Diez . F.D,, Leigh, D. ve Tambunlertchai, S. (2018), Global Market Power and its Macroeconomic Implications 12
I NCREASING ONLINE ADS COSTS A continuous transition to and increasing use of online CONSUMERS advertising: are paying Search ads Who is Video ads Display ads (banner, textlink, rich media, EU Google Shopping paying this etc.) Decision cost? Native ads + Re-marketing Stigler Report Re-targeting Web-push/notifications Affiliate Etc. Are we ready for potential pricing (excessive/predatory pricing, margin squeeze) cases in online ads markets? 13
I NCREASING EXPOSURE TO ONLINE ADS https://www.clickz.com/55-of-users-dont-recognise-ppc-ads-in-google- search-results/104838/ 14
M ISUSE OF BEHAVIORAL MISTAKES AND ADDICTION OF CONSUMERS Is it because of: The quality and true preferences? • Increasing use of a or Addiction? digital platform Lack of self-control ? • Why? ‘ We are increasing consumer welfare since (increasing use of social media, a they use us more ’ child’s buying decision of a game character, a teenager’s buying of diet products?) ‘ The number of clicks on ads may not correlate with greater welfare if higher volume of clicks is obtained by exploiting lack of self-control and addictive behaviors. ’ Stigler Report 15
M ISUSE OF PERSONAL / BIG DATA Exploitative Exclusionary M & A’s Competition and Data Protection • Excessive use • Prevention of • What is the Rules and Authorities of data access to data data can complement each • Under • Bundling of • How much other information data to data value attribute (seperate grounds for analytical tools to the data • Use of data for intervention) other services • Discriminatory • Vertical effects practices of having data • Etc. Bundeskartellamt • Exclusivity • Etc. and Dusseldorf agreements on High Regional the use of data Court’s Facebook • Etc. Decision 16
OUTLINE I NTRODUCTION I W HAT ARE CONSUMERS PAYING TO II DIGITAL PLATFORMS ? H OW CAN CONSUMERS BE HARMED ? III H OW TO RE - DESIGN THE TOOLS FOR IV EVALUATION AND INTERVENTION ? 17
A SPECTRUM OF PROPOSALS TO DEAL WITH THE PROBLEM Digital Authority Conducting More use of Increasing market behavioral (only regulation or both researches analytical economics regulation and Competition and defining and data capacities of antitrust?) more instead of Court CA’s (with non- transparent traditional competitional rules price models roles?) 18
THANK YOU 19
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