ANATOLY GOLOMOLZIN: ON COMBINING PROTECTION AND COMPETITON, AND CONSUMERS
Experts discussed methods and consequences of competition in the digital era at session on allowed and unacceptable practices
On 25 October 2019, the XI International Conference – “Antimonopoly Regulation in Russia”included a session – “Distorting mirror of the digital market: acceptable and unacceptable practices”. Its participants discussed methods and consequences of competition between global digital giants and local IT-firms, technological forms of unfair competition, restrictive practices of aggregators and the specifics of analyzing and approving mergers on digital markets.
Deputy Head of FASAnatoly Golomolzin looked into the questions – what kind of values and priorities laid the foundation of the antimonopoly policy and what do we protect on digital markets, is there a strategy fro developing regulation and what are the most important directions of FAS work on the digital markets?
Anatoly Golomolzin started with the fundamentals: “Human beings, their rights and liberties are the supreme value. Humans rather than simply turnover of goods and services have primacy on economic relations. Freedom, liberalism – are cornerstone philosophical and spiritual concepts, also significant for economic relations. Philosophers say that freedom is “justified” when it is determined by true spiritual values, and economists add them, stating that a genuine value system facilitates sustainable economic development” 1.
He believes that “it’s long overdue to get rid of some fallacies, for example, that freedom of enterprise is based exclusively or predominantly on the philosophy of economic individualism. Economic grounds for counterposing individuality and the society faded long time ago, from the outset of the industrial revolution and division of labour, and the significance of collective institutions became obvious. The modern level of information exchange and digital transformation under minimal transaction costs makes market multi-sided, interconnected and global”. многостороннимииглобальными».
“Building business on digital platforms, pools of intellectual property rights, big data, digital algorithms, direct marketing technologies, on the one hand, and transformation (under exponential information growth) of thinking, psychology and consumer perception, on the other hand, create principally new conditions on the markets”, pointed Deputy Head of FAS. “Digital economy generates brand new opportunities for economic development; at the same time, replacing “the invisible market hand” with the “digital market hand” is unacceptable”.
“In imperfect markets, unlimited freedom of operations of digital companies, possessing market power, can lead to adverse consequences; not only unequal conditions for competition between companies on the market but also to direct damages upon consumers. The question is, therefore, not only about indirect protection of consumer interests through competition protection but also about preventing direct infringement consumer interests”, believes Anatoly Golomolzin.
“Investigating antimonopoly cases or considering large mergers, the antimonopoly bodies not necessarily need to constantly reproduce philosophical and economic postulates”, explains Anatoly Golomolzin. “However, state competition policy should be based on them, and we must understand them for smart regulation”.
“Values and priorities are outlined in the basic legislative acts and documents that determine the government policy. They include, first of all, Article 2 of the Constitution of the Russian Federation and Articles 8 and 34 that develop its provisions with regard to enterprises. Value guidelines and priorities of the state antimonopoly policy are specified in the Orders of the President of Russia “On the strategy of an informational society” and “On the main directions of the state competition policy”. FAS practice on applying the Federal Law “On Protection of Competition” in the digital field is recognized both in Russia and abroad”, pointed out Anatoly Golomolzin.
Answering a question about the specifics of digital cases and why they cannot be processed en masse, Elena Zaeva, Head of FAS Department for Regulating Communications and Information Technologies, stated that violations on digital markets are identical to those on traditional markets, but are invisible. She compared these markets with an invisible road and invisible vehicles on it.
“Difficulties are in the evidentiary base. Rather that being hidden in contractual relations, violations involve such writing of algorithms that lead to these violations. FAS as the regulator should learn to read algorithms or outsource experts to conduct examination. Another aspect is that to check a platform, external experts must apply to its vendor for obtaining such rights. No doubt, they will not get them and draw a blank. It means that collecting and preserving the evidentiary bases are the main difficulties of digital cases”, explained Elena Zaeva.
The procedure for investigating cases in Russia has its advantages in comparison with other jurisdictions, continued Anatoly Golomolzin.
Deputy Head of FAS gave an example: “For instance, we investigated the case against Microsoft in 9 months (multi-year cases are a typical practice abroad), and the violation was proved. The institute of warnings also worked here. We issued a warning in the course of the investigation. The company was not fined, but at the same time restored competition not only in Russia but in the world in general”.
“What do regulators need investigating such cases? First, react promptly and adequately to violations as well as mergers and acquisitions dangerous for competition. Second, ensure interaction between antimonopoly regulators, particularly, within the CIS and EAEU, BRICS, on bilateral and multilateral basis in investigating cross-border cases. Good understanding of markets is also necessary and it can be achieved through a dialogue between regulators, markets participants and experts. The antimonopoly law should be improved, and the so called “fifth antimonopoly package” drafted by FAS on the basis of the best domestic and foreign practices and in view of the best achievements in this field, makes us prepared to the changing conditions of the digital world”, concluded Anatoly Golomolzin.
1 See Anatoly Golomolzin. Theoretical foundations of the state antimonopoly policy: issues of philosophical and economic doctrines // Russian Competition Law and Economy.- № 2 (18) 2019.- pp.6 – 17.