UK Competition & Markets Authority on Online Platform Regulation

by on October 30, 2015 · 0 comments

I wanted to draw your attention to this important address on online platform regulation by Alex Chisholm, the head of UK’s Competition and Markets Authority. That’s the non-ministerial department in the UK responsible for competition policy issues. Chisholm delivered the address on October 27th at the Bundesnetzagentur conference in Bonn. It’s a terrific speech that other policymakers would be wise to read and mimic to ensure that antitrust and competition policy decisions don’t derail the many benefits of the Information Revolution.

“Today, as regulators, we have the responsibility but also the great historical privilege of playing an influential role in the deployment throughout the economy of the latest of these defining technological eras,” Chisholm began. “As regulators, we must try to minimise the inevitable mismatch between how we’ve done things before and the opportunities and risks of the new,” he argued.

He continued on to specify three recommendations for those crafting policy on this front:

  1. “First, blanket solutions should be avoided. Instead an evidence-based assessment of potential adverse effects of specific industry features or practices should be carried out before either ex ante regulatory or ex post enforcement tools are deployed. In either case this should be closely targeted to the specific harm identified, and every care given to avoid disproportionate actions and unwelcome side-effects. In that respect, online platforms and the digital economy do not differ from any other sector: there is no need to reinvent the regulatory wheel.
  2. Secondly, the significant risks associated with premature, broad-brush ex ante legislation or rule-making point towards a need to shift away from sector-specific regulation to ex post antitrust enforcement, which is better adapted to the period we’re in, with its fast-changing technology and evolving market reactions.
  3. Thirdly, as regulators, policymakers, businesses and consumers, we all need to adapt our practices to harvest the benefits of the new while containing its costs and risks.”

That’s an excellent framework that can and should guide future antitrust and competition policy decisions by policymakers across the globe. But Chisholm wasn’t done. Here are some of my other favorite highlights from his address:

  • On avoiding “one-size-fits-all” regulation: “[T]here is no ‘digital one size fits all’. . .  [O]penness is not necessarily always good for competition, nor are closed systems always bad.”
  • On dealing with the pace of change: “Leaving aside costs of compliance, protecting consumers by virtue of ex ante regulation is inherently difficult in digital markets where consumer preferences evolve fast and in a less predictable manner.”
  • On the difficulty of forecasting: “Where ex ante regulation is introduced, it therefore risks harming innovation by locking in existing standards and discouraging or preventing more disruptive innovations. The evolution of digital markets has been particularly difficult to predict.”
  • On how to level the playing field: “Finally, consider deregulation. If policymakers were to seek to avoid every hypothetical consumer harm through pre-emptive ex ante regulation, they would likely prevent many best-case scenarios entailing significant consumer benefits from ever coming about. Policymakers and regulators should be open to the idea that a review of existing regulation and its suitability in the context of online platforms may in certain cases actually result in a withdrawal of such regulation – creating a reasonably level playing field by ‘levelling down’ as opposed to ‘levelling up’.”

I really appreciate those last few points, and they are very much consistent with the recommendations set forth in my recent book on Permissionless Innovation. In the book, I argued that, “Trying to preemptively plan for every hypothetical worst-case scenario means that many best-case scenarios will never come about.”

I was pleased to see the book cited in Chisholm’s speech, as well as some work that Mercatus scholars had done on how to level the proverbial playing field within sectors undergoing rapid technological and regulatory change. Chris Koopman, Matt Mitchell, and I have argue that, while regulatory asymmetries represent a legitimate policy problem,

the solution is not to punish new innovations by simply rolling old regulatory regimes onto new technologies and sectors. The better alternative is to level the playing field by “deregulating down” to put everyone on equal footing, not by “regulating up” to achieve parity. Policymakers should relax old rules on incumbents as new entrants and new technologies challenge the status quo. By extension, new entrants should only face minimal regulatory requirements as more onerous and unnecessary restrictions on incumbents are relaxed.

Anyway, make sure to read Alex Chisholm’s entire speech. It’s very much worth your time. Incidentally, I think his vision is very much consistent with that of  Maureen K. Ohlhausen, a Commissioner with the Federal Trade Commission (FTC). I have written extensively here and elsewhere about Commissioner Ohlhausen’s laudable vision for wise tech policy-making, most recently in this essay.


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