Anatoly Golomolzin about protection from the dangers of replacing the “invisible market hand” with the “digital” one

16-06-2017 | 08:52

On 24 May 2017, the International Working Group on Research of Competition Issues in the ICT Sector met for the 8th time in Istanbul (Turkey). The delegation of the Federal Antimonopoly Service (FAS Russia) was led by Deputy Head of FAS Anatoly Golomolzin.

Representatives of competition authorities from different countries discussed antimonopoly regulation under current convergence of telecommunications, media and information technologies. Anatoly Golomolzin, who is also the co-chairman of the International Working Group, made a kick-off report.

Anatoly Golomolzin reminded about successful fulfillment of the tasks facing the predecessor of the ICT Working Group – the Roaming Working Group. “Prices for the communications services in international roaming have been reduced manifold (voice and sms – by 4 - 8 times, data transfer – by 20 - 40 times), the scope of services has increased proportionally, ensuring the balance of the interests between providers and their subscribers by protecting and developing competition. The European Union achieved similar results through direct tariff regulation, which, by the way, was accompanied with the growth of communications services in roaming to some countries – non-EU members as well as the growth of tariffs for cellular communications services in some EU countries”.

For instance, the Head of Austria Federal Competition Authority, Theodor Tanner, described a current survey on increasing the tariffs for cellular communications by up to 30%. The reason for the alleged violation is intensified concentration due to a merger on the markets of EC and Austria, as a consequence of which cellular operators were able to raise up prices under the forced-up market power.

At the same time, as mentioned by Deputy Head of Kirgizia competition body, K. Tailakov, collaboration under the frame of the Headquarters for Joint Investigations in the CIS and the Roaming Working Group reduced prices for the communications services by up to 13%. It was pointed out that within the bounds of the common policy of the Eurasian Economic Union a decision was made to deregulate tariffs for cellular communications services due to the high level of competition on the market of such services in Kyrgyzstan, after which the tariff level has not changed.

Talking about the agenda of the ICT Working Group, Anatoly Golomolzin emphasized that “under the modern conditions of dynamically developing markets in the digital economy it is essential to consider the current convergence processes. In particular, convergence between telephony, data transfer, TV- and radio-broadcasting, OTT-services. In these conditions, on the one hand, the government policy should be consistent and built up on the new basic principles, such as the principle of technological neutrality or the principle of network neutrality.   On the other hand, the government policy should be flexible - the basic principles should be developed in line with the procedures of coordinating common understanding of the essence and directions of developing new markets with use of new technologies”. Examples of best practices for establishing and following the basic principles were given.

“Another direction of convergence concerns overwhelming adoption of ICT systems and tools in all fields of economic activity and life. The matter is about digital economy when the process of mutual penetration of virtual and real worlds prevails. Here success, in some cases due to emergence or reinforcement of market power, is determined by access to large data bases on consumers, direct marketing, use of digital algorithms, the intellectual property rights, artificial intelligence and much more. It requires the antimonopoly bodies to change approaches to antimonopoly enforcement as well as the basic approaches, particularly, to the market analysis methodology”, emphasized Anatoly Golomolzin.

The second part of the Working Group meeting focused on the basic characteristics and economic analysis of digital markets. Participants discussed specifics of analyzing such markets that emerge due to special characteristics of such goods and their turnover, the complexity of defining markets and expediency of alienating methodological approaches to material carriers, where intangible goods are inseparably connected with a material carrier, and to analysis of the markets, where digital goods reveal their consumer value beside particular hardware.

A representative of Turkish Competition Authority, Recep Gündüz, explained definition of relevant markets under the convergence conditions, the changing structure of consumption of telecommunications services, different points of view about the effects for competition from convergence in the field of telecommunications.

Theodor Tanner described several types of “package” services and gave examples of such relevant markets as well as assessment of providing convergence services upon competition and upon advantages for consumers.

Head of FAS Department for Regulation of Telecommunications and Information Technology, Elena Zaeva, informed the Working Group members about a survey of the market of application stores for mobile devices that FAS carried out investigating the case against “Google”. In her opinion, it is the preferences and  the buyers’ conduct of end-consumers that determine goods turnover on the markets of operational systems, application stores and application software. “We identified relationship between these markets, and in view of those relationships we defined product and geographic market boundaries, as well as the market shares of economic entities”, reported Elena Zaeva.

A representative of School of Management and Law (Zurich, Switzerland) Fabio Babey discussed performance of media-markets, paying attention to the effects from digitalization of such markets, shifting of media to the Internet, particularly, reinforcement of the trends for targeted placement of advertisements in media.

Deputy Head of Turkish Competition Authority Ferhat Topkaya illustrated with an example how big digital companies form an interest to their products from early childhood in toddles that haven’t even learned how to speak.

In this context, Anatoly Golomolzin pointed out: “Markets are experiencing significant changes, which bring not only undeniable benefits but also create certain threats. When the invisible market hand is replaced with the “digital” market hand, digital giants may not only study consumer preferences, they can change them, change the value system. The key feature of digital markets is their global nature; that is why to protect competition, form the conditions for its efficient development, coordinated efforts of antimonopoly bodies are necessary under the frame of international cooperation, ongoing exchange of effective practices, elaborating common positions on defining markets, exposing and suppressing violations, and determining the rules of market performance”.

Summing up the meeting, Anatoly Golomolzin underlined that “the object of economic analysis is not only the turnover of goods (works, services) as such; it focuses on human beings, with their culture and values. The specifics of the work of the ICT Working Group is that is unites around 30 members from different countries and continents, aimed at developing competitive relations. In view of the accumulated experience of our joint efforts we can expect significant results”.

Reference:

The ICT Working Group was formed upon a FAS initiative together with Turkish Competition Authority in 2012. At that period, it was the “International Working Group for Research of Competition Issues in the Market of International Telecommunications (Roaming)”. Representatives of competition authorities and sectoral regulators from more than 30 countries took part in the meetings of the Working Group. The major objective was to enhance transparency and competition on telecommunications markets in the countries, involved in the Working Group activities, and to reduce tariffs in roaming. Thus, by the end of 2016 the objectives of the Working Group was reached successfully, and at the  7th session of the Working Group at the International Event «The Russian Competition Week» on 26 September 2016 in the Moscow region its members decided to expand the scope of activities of the Roaming Working Group to develop competition in the field of information and communications technologies (ICT). The expediency of expanding the activities of the Working Group was related to the wave of international cases against transnational digital companies on violating the antimonopoly law. To increase enforcement efficiency at both the national and international levels  it is necessary to eliminate the gaps in the competition law related to “digital” market analysis, improving efficiency of cooperation between the antimonopoly bodies throughout the world, particularly, cross-border investigations, etc.