Dutch competition authority takes a closer look at online video platforms

The Dutch Authority for Consumers and Markets launches a market study into online platforms that stream videos and movies, such as YouTube and Facebook or Dutch platforms such as NLziet or Dumpert.

In brief

The Dutch Authority for Consumers and Markets (ACM) wants to take a closer look at the business models of companies which are active on the online video platform market. Not only will the ACM look into the actual platforms, but also into the businesses connected to them, such as media agencies, digital marketplaces and producers of content for these platforms. Together with the launch of this market study, the ACM has published a paper on the competition law issues relating to online platforms more generally.

In detail

The ACM market study will focus on the fast growing market of online platforms that stream videos. The study will investigate issues such as the terms and conditions, business models of these platforms, advertisement options, revenues from advertisements, collection and use of personal data for personalized advertisements and distribution of online videos. The first results of the market study are expected by the end of 2016.

In parallel, the ACM discusses in its paper “Big platforms, big problems?” the benefits and potential issues of online platforms for consumers and competition.

The ACM acknowledges the benefits that online platforms bring to consumers and businesses in terms of product innovation, convenience and a more personalised service. However, despite these advantages, competition authorities have been keeping a close eye on online platforms. The reason is that the network effects which are at the core of a successful online platform can easily lead to substantial market power. Network effects create winners and losers and at a certain point, a successful platform may encounter very little competition from potential rivals. This in turn can lead to market power and inefficiencies such as high prices or a lack of innovation. Dominant platforms can even abuse their position, for instance by foreclosing competitors or harming consumers.

In its paper the ACM highlights two specific questions. In the first instance, it explores whether, in the online platform market, data can be a source of market power. The ACM notes that data is critical in order to compete successfully on the market, but it adds that data does not necessarily lead to market power. It all depends on the type of data, its reproducibility, “shelf life” etc. Where access to data is crucial for market access, the essential facilities doctrine could apply, although this has not yet been explored by competition authorities.

Secondly, the ACM observes that access to data is inextricably linked to privacy issues. A consumers’ choice for a certain online platform may be influenced by privacy considerations. However, this is not always the case, since consumers do not necessarily pay much attention to their own privacy in an online context. The ACM suggests a possible link between privacy compliance and market power. According to the ACM, dominant online platforms are more likely to be in a position to collect more data than necessary from their users which they can then use to their own benefit. And just like excessive pricing can be an abusive conduct, so can excessive privacy conditions. The ACM notes, however, that this theory has its own challenges. Several "willingness to pay" investigations have already shown that consumer preferences relating to privacy options or conditions are context-specific and dependent also on individual choices. The ACM concludes that privacy protection is unlikely to play a major role in competition law enforcement.

In the final part of its paper, the ACM discusses the merits and drawbacks of ex ante as opposed to ex post intervention in this particular sector. The ACM is very sceptical about online platform regulation, but it also acknowledges that ex post intervention has its own challenges. Market definition is one of them, but the biggest challenge for the ACM is to establish a credible theory of harm. In this context, the ACM again points to the many advantages that online platforms offer and the dynamic nature of online markets.

The ACM concludes that it needs to gain more knowledge by means of market studies. The market study it has just launched in relation to online video platforms will probably be followed by other studies. The market studies will support the ACM’s future enforcement policy. However, the ACM also makes it clear that whenever it believes that there is a competition issue, it will act promptly.

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