Transcript of background discussion "The 720 million Euro fine: France’s offensive against Big Tech"

Transcript

In our background discussion from November 25, 2021, Dr Stefan Heumann, SNV's co-director, spoke with Pascale Déchamps from the French competition authority (ADLC). Please find a recording and transcript of the event below.

This transcript has been edited for clarity.

The opionions expressed by Pascale Déchamps do not reflect the opionion or views of ADLC.

 

 


- Start of the transcript - 

Dr. Stefan Heumann, Member of the Management Board of SNV: Good morning. Hello, everyone. I am very happy to welcome you to our Background Discussion today. My name is Stefan Heumann. I'm the director of Stiftung Neue Verantwortung (SNV). SNV is an independent non-partisan and nonprofit think tank based in Berlin. We provide expertise and analyses at the intersection of technology and public policy. And you can find out more about our work on our website. This is also where you can sign up for a newsletter to receive our latest policy papers or get invitations to events like this one. The digital transformation and its impact on society, the economy, and the government is a key underlying theme for the work we do at SNV. You cannot understand digital transformation without talking about data and data economy. The term data economy reflects the idea that data has now become the central resource for the creation of economic value. At least this is how the stock market sees it. The companies with the highest market capitalization globally are all deeply engaged in the data economy. Collection or processing of data is at the core of new services and products they provide. And these companies have also developed highly sophisticated technologies and infrastructure for storing and analyzing data.

 The big tech companies have also created the dominant digital marketplaces within the data economy. These marketplaces are usually referred to as platforms whether it is Amazon as the digital market that started with books and now offers a wide range of consumer products, whether it is Uber that provides a new marketplace for mobility, or whether it is Facebook or Google that have been transforming the marketplace for advertising. 

The control of new digital marketplaces within the data economy is what makes these global tech companies so powerful. We usually think of Facebook as a social network, or Google as a search company but that's not how they make their vast profits. Their profits come from their prominent role in the online advertising marketplace. Here they can leverage their deep data-driven insights into consumer interests and innovative technology to target those consumers with advertisements. 

There are growing concerns that the success and the profits of big tech companies are not just built on innovation and great technology but also on the exploitation of their dominant position in digital markets. This is why we have seen a growing number of antitrust investigations, both in the US and in the EU in recent years. One case that is particularly interesting is the case of the French competition agencies, the Decision 21-D-11 of this summer. The case rested on an impressive and technologically savvy investigation of Google's practices in the advertising sector. The ruling mostly made headlines for the high fines imposed, but what is even more significant is that Google has chosen not to challenge the findings of the French Competition Agency in court and agreed to major changes in its business practices. In the end, it's not high fines that lead to more competition but changes to how these companies operate. For example, in an order to resolve the dispute, Google agreed to allow for more interoperability and data sharing with competitors and customers of its advertising technology. This indicates that the French Competition Agency brought a really strong case against Google and thus this case should provide important lessons for the enforcement of the competition in digital markets. 

To help us all make sense of this case and its broader implications, I am honored that we have Pascale Déchamps with us today. Pascale is an economist with extensive experience in the enforcement of competition. She's been the head of the unit in charge of antitrust matters in the digital and telecom sectors at the French Competition Authority since January 2021. Before joining the agency, she was a nongovernmental advisor to the French Competition Authority between 2017 and 2020. And she's listed in the international Who's Who of competition lawyers and economists of 2021. And in this year's Who's Who legal consulting experts, economic consulting competition economists. Pascale, thank you for joining us today.

Pascale Déchamps, Deputy General Rapporteur of the Autorité de la concurrence: Good morning. Thank you for the invitation.

Stefan Heumann: Hi, Pascale. Joining again. Thank you again for joining. Let me start with a brief clarification. The case we are discussing today involves a fine of €220 million. The fine mentioned in the title of our event and many media stories refers to the total fine of several cases the French Competition Agency brought against Google. But in my opinion, the fines are not what's interesting about the case. But before we go into the case, I would like to ask you for some context: Why is advertising technology so important in your opinion? It seems that many use quite an obscure technology that we don't directly as users interact with. But why is advertising technology so relevant in the digital marketplace? Maybe we start with that as an intro to the case. 

Pascale Déchamps: So, good morning, everyone. And thank you for the invitation. Yes, online advertising, I appreciate it's very much a black box for a lot of people. The reason why it's so important is that it's is the source of income for the free internet as we know it. So, we use all the services for free, as in no financial payment, and we get content, music, videos, shopping for free. When we shop, we pay for the products, of course, but you can get access to the whole range of price comparison websites, for example. So, in that sense, advertising is the core of the financing of the whole free internet. Now, the reason why it's come under the microscope of competition agencies around the world is because it's now dominated by a few players who have an extremely important position in those markets. And when you mentioned the market capitalization of some of those giants, of course, Google and Facebook in particular where we talk about the ethic segment are particularly large. And everybody knows that both of those companies' primary source of income, almost exclusive source of income is from online advertising.

Now, what do these guys do? Facebook – and I'm going to talk just one minute about Facebook because this is not the topic of today – has both inventories, so they have space on which to sell to advertisers, and there is also an intermediation company on behalf of other publishers online. The case of Google is different because they have Google search for which there is a specific online advertising path and they are extremely large in what we call open display which is banners, videos, all kinds of layout advertising on the open web, either on desktop or on mobile applications. So, they play as the middleman. The technology behind what a publisher space so an inventory to be sold and advertiser that wants to show an advert, and the user, of course, which is then targeted by the advertising. The more targeted the advertising, the better for the advertiser and so the higher the price of the inventory space. And so, the more … I mean, today is not the point talking about whether targeted advertising is good or bad, we can leave it for Q&As if you're interested in my opinion. But in this setting, you have this intermediary that matches advertising demand from advertisers and advertising space supply from publishers. And it's the core engine of the free internet as we currently know it. 

Stefan Heumann: I would like to follow up with a brief question on this, Pascale. I think a lot of people understand that on Google search you can place ads there but I think what not everyone might be aware of is that Google also plays such an important role in terms of placement of ads on other websites we visit like news media websites of totally independent companies. And can you explain a little bit why Google has such a prominent role, not just in placing an advertisement on its products but also in sort of bringing together people who want to run advertisements and publishers, all kinds of media and companies that offer all kinds of services on the internet? How did Google become an important middleman for them in the advertising business?

Pascale Déchamps: So, Google bought in 2008 a company called DoubleClick. So, that was actually a transaction that was reviewed by the European Commission and cleared. And since then, they are the main company who does the auctions, what we call real-time bidding, RTB which are in real-time for a given space on the publisher's website and a given user, and what you know about the user who on the advertising side is willing to pay the highest price. This is done a million times per second across the globe for every single webpage or mobile application with advertising that people get to view this online auctioning works. And Google is the primary company that allows for this matching to happen and the auction to take place. 

And in fact, the case that we are going to talk about today is in that space of the auction and the publisher side of the auction. So, the advertiser runs a campaign and Google offers campaign management services. Then you have the auction for a particular space and Google offers the auction system. And on the publisher's side, its about how do you manage your inventory and therefore Google offers inventory management services. 

So, you've got a completely integrated line of services from Google on the app space. But the one that is most critical in terms of the functioning of the whole system is that exchange – so what we call a supplier side platform – where the auction takes place. And then you have vertically integrated services that come with it to actually access this auction. And Google is really on all levels and also on all levels of this supply chain, what we call the ad tech stack. And hey benefit from their position regarding YouTube, which actually has an integrated advertising space sale system. And that also creates a general situation of getting even bigger in the advertising space.

Stefan Heumann: Maybe this is a good introduction to the case because you've already started talking about the bidding and the auctions. And this is something, that this is not visible for internet users. So, how did the French Competition Authority become aware that there might be a problem there and that Google might be using its dominant or powerful position providing these services and preferencing itself?

Pascale Déchamps: So, in the mid-2010s around the world competition authorities started to get vibes that there was something that was going wrong. Google kept on getting bigger in the market that was growing and competitors were struggling to actually offer services on every level of the supply chain. Now, what really happened for us was that in 2016, we launched a sector market study which ended in 2018 with a report, we call it an “Avis”, an opinion. And in the process of coming up with that opinion, we learned a lot about the advertising markets, and also, we got to talk to a lot of the stakeholders in the industry, investors, publishers, advertisers, everybody basically was interrogated. And during the course of that inquiry, some concerns came up. Now, it was not the point of handling them during the market inquiry but it allowed us that after the opinion was closed to start investigating. Also, the companies that we interrogated during the market study, knew we have developed particular expertise in this area, and they came to us as the primary competition authority to say, look, you guys, you know about this market. Let me tell you exactly where the edits are that I'm having problems with and what type of problems I'm having. 

And that's the reason why the three complainers that we had in this case News Corp, Figaro, and Groupe Rossel, came to us instead of the commission or any other competition authority despite their concerns being much wider than French. Because they knew that there was particular expertise in the French Competition Authority. And in a way that's because of that market study and internal expertise being developed that we became a lot more aware of what the concerns could be in this market. 

Stefan Heumann: Can you say a little bit more about how you conduct such an investigation? For example, we're curious, did the French Competition Authority, for example, try to participate in the bidding to sort of see what's happening there? Or, you know, did you ask to get data from these auctions? Can you just say a little bit more about how did you build and understanding of how the technology works on what might be going wrong there? Because I've looked at your decision -- you know, for anyone who's interested, it's publicly available. But I also have to say it's very challenging to understand and it's a really deep dive into how auctions work. And I was just curious how you were able to investigate this and what kind of methods you used to understand how these auctions exactly work?

Pascale Déchamps: So, it's a combination of several things. First, we had a particularly sophisticated complainant in the form of News Corp. Now, you probably know News Corp, right, because they are so big internationally. They're actually pretty small in France. And so, you know, they came with some French newspapers so that actually there was a French relation. But the reality is that they are much wider than simply France. And there are a lot of these publishers that are sufficiently big that they try to develop their own technology to bid. And so, they were actually confronted firsthand with some of the challenges of trying to do your own technology and trying to make it speak with Google technology. 

Now, another thing that really helped us was that we had some competitors at Google, some survivors who were really, of course, quite keen to talk to us, you know. And they helped us understand exactly how the machine worked. Now, of course, we also have investigatory powers so we sent questionnaires and we requested the bidding data in order to assess some of the hypotheses that we were putting together in terms of theories of harm. So, we ended up with gigabytes of data that we analyzed and tried to see, you know, can we actually see an effect somewhere. So, and the reason why we were able to ask and get that data was also that we knew it existed, right. It's a typical problem actually of competition authorities is that you don't know what to ask. But in this particular case, we knew exactly what to ask because the complainants and the competitors told us this is actually how it should look like.  So, I mean, one way or another, they had this, that's for sure. So, all in all, that's what also allowed us to get quite details. In combination with internal expertise, we actually have engineers here who are specialists in the ad tech industry. 

So, when you combine all this, you actually end up with this technical case, I agree with you. And it ended up being technical in the decision also because of the type of legal framework we were in – not necessarily the purpose of today. But because it's a settlement agreement, the decision has to be a fairly strict transcription of the settlement agreement. And the settlement is detailed. So, you can't just then have a decision that would say something else because they settled so they agreed to x, they didn't agree to x twisted, right. So, that's also the reason why the decision ends up being so technical. 

Stefan Heumann: Can you maybe elaborate a little bit on the technical expertise that you built at the French Competition Authority. I mean, I think everybody would understand that you have lawyers, and that you have economists. But now you're dealing with very sophisticated technology that is running behind the scenes and that is running these edits, changes. And you mentioned that you have engineers, are those people who used to work in the industry? How big is such a team? Just could you elaborate a little bit how the technical capacity at your agency looks like?

Pascale Déchamps: So, we have people who know about these markets from the sector inquiry more in terms of how it works from an intellectual perspective. But then we also have a few individuals who know how it works from a computer science perspective. And there are not many of them. We wish there were a couple more. But so, we had one of the two people who actually run the case is such a person in this particular case. And now, since October 2020, we have a team of four dedicated to the digital sector. And so, there are four of them. And they have data scientists, computer engineers, and a lawyer also that specializes in digital challenges from the competitional perspective. So, this is a cross-sector support team. So, they don't actually run the cases themselves but a bit like the chief economist team, you know, the competition authorities, they provide support for any particular technical digital case across the units. So, from my unit in particular, because I deal with that tech, it's part of my core sector coverage but also the media team that handles, for example, the publisher relationships between Google and publishers on the publisher rights spaces, not the ad tech part. So, they provide support like this across teams.

Stefan Heumann: It's really impressive and I think it also shows in the decision and maybe -- or that probably is also the reason why Google didn't challenge this or has decided not to challenge this decision in court like they challenged all I think of the EU Commission's antitrust investigations in court but not this one. So, maybe you explain also a little bit what you found. And I think what's really what I said initially what's really crucial also is, you know, what the conclusions you draw from it, and what kind of changes you have been pushing for that Google implements?

Pascale Déchamps: The problem that we found was that Google was doing some self-preferencing. Now, that's very fashionable today, especially since the General Court has issued a judgment after Google shut the decision of the Commission from 2017. The judgment came out last week or the week before where they said, yes, you can run an anti-competitive theory of harm based on self-preferencing. So, in a way, we did it knowing that this was something that could be done back in June. And the idea is that Google being strong in the Publisher Ad Server (which is the entry point for publishers where you actually manage your inventory) would treat on a preferential basis Google's auction platform (Google's SSP which is called Google Ad Exchange) and vice versa. Now, in two different forms. One particular way of showing that self-preferencing, which is very intuitive, is that the Ad Server would send the request to approach to many platforms, including Google's, and would receive the prices from those platforms, and then it would tell Google's platform the price of others. So, that Google platform's price could be adjusted depending on the intensity of the competition. So, Google's platform had what we call the right of the last look, and if they had a buyer who would marginally beat the price of any other platform then they would get to win. Of course, that doesn't create a leveled playing field, right? If you are running the first race toward the end line between 10 people and then it's only the winner of that one that races against another one who already knows the time they need to beat, then you can't consider that this is a fair competition. So, that worked one way. And the other way was some technical restrictions in the interoperabilities you were saying in the introduction between the two services. 

So, the commitments tried to get into the direction of creating again a level playing field between competing SSPs and between competing ad servers. Now, one of the challenges is that in the meantime, even though our investigation only took two years, the reality is that Google now got 95% market share in the ad server, even though in France we had a thriving market. So, you know, even with the commitments it's not necessarily obvious that you'll restore the competition in this market. On the SSP, it's not as dramatic but it's still pretty bleak as in, you know, once you've gone far enough in destroying the competition with your practices, the restorative remedy is a difficult one to design.

Stefan Heumann: So, just to follow up on what you just explained in terms of the self-preferencing that Google had and basically having more information than the other participants in the auctions due to its position as, you know, providing sort of the auction place and then also participating itself in the auction. What was important to you in terms of changes you wanted to request from Google in order to ensure that there would be a fairer competition in the future?

Pascale Déchamps: I have to say a word on the legal proceedings that we've covered here because it's just a little bit special. Because this is not a commitment decision, it's the settlement decision. I appreciate the distinctions are a bit fine. But the reality is that they were found to be in breach of the law. It's actually a decision with sanctions, right. One part is the fine. And in that process, it is said that in exchange for a reduction in fine, they'd be willing to do some stuff to actually make things better. The reality is from the moment that they are found to be guilty of infringing the law, they're supposed to change their behavior, right. You can't continue, otherwise, you're still in infringement, right? So, they anyway have to do something about it to be now in conformity with the law. Now, in that process, they told us, that they'd rather have commitments in addition to that settlement procedure because they'd like to discuss with us what exactly good looks like. And so, we discussed with them. There were technical challenges to some of the things we wanted to see. And so, you know, they came up with this package that is also available in English, by the way, on the website about what they intend to do. Now, there is some better interoperability, there's the fact that it will make available the same information to third parties the ones they will make available to themselves, some restrictions to the Right to Last Look, that one's actually a bit tricky because technically it's very difficult to circumvent. So, there are some, you know, the fact that they will not access competitor prices if also the competitors don't have it. It's a question of ensuring that you have a leveled playing field. Of course, we don't want to end up with a cartel instead so, you know, you need to make sure that you've got transparency but not too much transparency. 

So, there's a whole range of technical things that they've agreed to do to go the right direction. We don't know it's enough. We're going to have to see if it's enough. But in any case, they have to be in conformity with the law. So, if it's not enough, they're going to have to do more. So, it's something that we're going to have to give time to the market a bit to tell us whether that's actually having the impact that it should have. There's a whole calendar, the whole schedule to implement the commitments. In fact, some of them will be live in 2022 because of the development time and cost that it is to put in place. So, some of it is already in place and some of it will be rolled out in the coming months. 

So, we are following up with Google and their trustee in a lot of detail to check whether they are actually doing and how they are implementing the commitments they took.

Stefan Heumann: So, it's not that your work is done after you made a decision.

Pascale Déchamps: There's a trustee though. There's a trustee. And when selecting the trustee, technical expertise in the auction system was one of the parameters that we paid more attention to because trustees typically are consultants. They are not particularly technically savvy. And then they partner up with some technical people. And so, we have at least some reassurance that there's someone who actually speaks the language of those engineers at Google but also at third parties in order to ensure that what is done is in line with what's been agreed. 

Stefan Heumann: I see that we get questions submitted. So, I’ll turn to those in a moment. And maybe end our conversation with a final question for you. As you know, we have across the EU a discussion of what kind of regulation and enforcement we need for competition in digital markets. And it’s a big discussion around the digital markets act on the EU level. On the one hand, of course, it’s important to get the regulation right, but the other part of it’s, of course, the enforcement. And since you’ve been very deeply involved with the enforcement side, I would like to ask you what do you think are key learnings from your work at the French Competition Authority, in particularly this case that are really relevant for the enforcement of competition, particularly in digital markets and with tech companies? 

Pascale Déchamps: Yes, I think probably the one key learning is that you need to have the technical expertise in house at the competition authority. This is not necessarily something that we do very often in markets. We typically know enough about how they work and that we need to work across sectors. Now, we need to have some understanding of the regulation and regulating markets, of course, that's really important. But you don't need to have gone into the intricacies of a telecom company like the technical part to actually know how it works and to ask the relevant questions. For this industry, in order to understand whether what you're being told, first, you concur with it as opposed to you just say, "well, you've said that and I'm going to believe it but I have no way of checking“. So, first to verify the information that you’re given and also to understand where technically the problem is as opposed to it’s simply a matter of principle. You’ve got to develop that internal expertise in those markets. 

And I do hope that the commission, given that they're going to be the sole enforcer of the DMA, recruits a team that includes people who are going to be able to get their hands dirty in understanding in order to know what data to ask but also in understanding how to do sandbox algorithm testing and also how to actually, you know, read the code or the documents that go with the code that explain what that thing actually does. At some point, it is going to be a matter of having the internal expertise which is not your vanilla economist or lawyer, and the recruitment of people like that is not necessarily something that's extremely easy for a public agency because these are people who are also in very high demand from people like the Googles and Facebooks of this world who pay them extremely well. So, and well done for them, right. I'm simply not contesting that. What I'm saying is that when you actually need to have this expertise on the other side, it's not easy recruitment to do.

Stefan Heumann: Yeah. I think we see that challenge across a lot of regulatory agencies and also in data protection or other fields what's really relevant is to have also deep technical expertise and capacities. And we're just at the beginning of really building that up. I would like to turn to the questions that are coming in. And a former colleague of ours and yours, I think also. Aline Blankertz is posing this question: “Pascale, which impact do you expect the settlement will have on consumers, or more generally speaking how would a more competitive ad tech marketplace benefits consumers?”

Pascale Déchamps: Yes, that's a very good question. I haven't actually discussed effects yet. So, we look at the effects of the practices. And the practices were having detrimental effects for publishers because they weren't able to charge as much for their space as they could have because Google was dampening the competition for buying. We found that there was no particular effect on advertisers, they were neither worse off nor better off. And, of course, Google was getting a lot more money than they should have. 

Now, why do we care for consumers? As I said earlier, the free internet is funded through advertising. If the intermediaries are taking a bigger share than they should, the publishers get less, and so there's less content for consumers. So, in a way, when you have the publishers and the consumers who tell the advertisement to go as much as possible in the hands of the publishers so that you have either less advertisement for consumers who actually find that a hindrance typically – so, they want less advertising because that's not the reason why they are on the website typically. And so, if you have less advertising because it's worth more individually for publishers is an option or you get a better service. The publishers have more money to do better journalism or better any other kind of service, whether it's cooking recipes or, you know, videos of cats. So, you've got that in a way that that link to consumers is indirect because the consumers have no direct stake in the ad tech part. But there is that link. 

Now, there is also another one for consumers – but it's a more removed one and that would actually need a different discussion – which is that if you have competition in the ad tech space, that competition can also be on ways to improve the consumer experience. And one angle of that is better privacy. Now, if you have a competition between technologies and one dimension is consumers would prefer more privacy if I as an ad-tech participant offer better privacy, you may find yourself with more support from publishers or advertisers who want to go in a privacy-friendly setting. So, if you don't have competition, there's no one to actually talk about those different dimensions. If you have competition, you have differentiation, and that way you can actually also bring benefits to consumers – still indirectly but, you know, at the end of the day, we get to see the advertisements. We'd see less of it, more relevant, and not as intrusive as probably what we've got.

Stefan Heumann: I think that's an extremely important point that in the end, this is also harming the consumers or us as internet users on the stream. I would like to bring up the question from Ingo Dachwitz, he's a journalist at Netzpolitik, a news organization that is focused on digital rights and technology. "Good morning. Thanks for the interesting insights," he says. "I have a bunch of questions. Since you mentioned the general question of targeted advertising as a problem in itself, I'd be interested in your opinion here. And is it possible for some publishers to shift to context-based advertising in the current market situation?"

Pascale Déchamps: So, I think if I start with the second question, it can help answer the first question. In the course of our various investigations, we came up with a rough number that if you use context advertising its about 50% less income for publishers than a targeted ad. – So, for those who don't know those terms (context advertising): these are advertising that doesn't make use of a user profile, so do not make use of personal information on the user in front of the website. The only thing you know as an advertiser is that it's e.g. news about some sports from yesterday in Germany. So, you can imagine that the people reading it are going to have some kind of profile but you don't actually know who's sitting behind their computer or their mobile phone. Now, for that context: Is targeted advertising good or bad? You know, if we don't want to give our personal information, then probably you can consider it bad because we believe that it's being unduly exploited. On the other hand, if we're not ready to pay for content with actual money, then there's no free internet. So, what would you have with half the money that goes in advertising on the internet? There are a number of services that would simply stop to exist. Or there are some services that would have a much lower quality.

And in fact, that tradeoff between you pay or you give your personal information is a tradeoff that some websites already offer. I mean, I don't know if that's the case in Germany for your law but I know that in France, there are a number of services like, for example, if you want to look up cinema listings, there's a well-known website that's called AlloCiné. And they tell you, you either accept our full cookies or you pay 2 €. Is your personal data worth 2 €? And I guess that's the question every user gets to ask themselves when they see the thing. 

There's a whole polemic around that whether you can actually sell – because that's really what it is – your personal data that way because you're supposed to have, you know, a fundamental right on your personal data. You know, it's still very much open for debate. And even the privacy regulators across Europe are still grappling with that concept of enlightened consent. Can you give enlightened consent if you're being offered money? So, people think that if you're not faced with the actual trade off from the publisher's perspective as in if you don't actually give me something, I'm going to stop the service. If you don't actually know about that, then how can you have enlightened consent? For some others, you should be able to say whether you want to share your personal information or not with no strings attached. And these are really two different schools of thought. But at the end of the day, we've got to finance the free internet. Now, if we're ready for the impact that lower income would have on that ecosystem, then okay. I mean, fine. I have absolutely no problems with it. But we need to make sure that we do this with our eyes open as opposed to thinking that we stop giving our data and the free internet stays the same. I think that's a bit of a myth.

Stefan Heumann: That's a big debate for sure. But we want to look now also internationally as I'm sure aware and follow that closely, there's also an interesting antitrust investigation and it's happening currently in the United States. And someon from our audience is asking have you looked at the case of Texas and several other US states against Google and can you profit from the internal documents unearthed by the US investigations? I think some of the stuff is already in the public domain but there must be much more. So, maybe you can also talk maybe also a little bit about how much you are in contact, for example, with colleagues in the US and how you see that relationship between the investigations over there and in the EU.

Pascale Déchamps: So, for the particular case that we're talking about today, the timings meant that actually that Texas thing came toward the very end. So, in a way, our investigation was almost over already when all those things happened. Now, there's also something that's worth knowing is that we looked at a very particular bit of the ad tech stack, which is on the publisher side, so on the publisher end of the exchange, but you've got the whole advertiser side and possibly also you've got the consumer side, especially in terms of privacy concerns. That was not our case. And the Commission opened a number of investigations in those parts of the ad tech stack. So, the rest of the ad tech stack for Google is in the hands of the Commission.

And the Texas complaint is primarily on the advertising side. So, in a way, it relates more to cases that are with the European Commission than the cases that were with us. That doesn't mean it's not interesting. And we do talk to US colleagues once in a while. But given that on this particular angle, the primary link is with the Commission, we typically would go to the Commission on this particular one. 

Stefan Heumann: But maybe that's a brief follow-up from me here. Is there the opportunity for you to ask for assistance or do you have sort of that kind of relationship with US authorities that they would provide you additional information or are that those things happen really separately and apart from each other?

Pascale Déchamps: There's a cooperation agreement between the US and the Commission, and then national member states which is used regularly on cases and depending on how formal we want to be about it and it depends on whether you actually want a piece of evidence we're trying to support. That's the highest threshold you can ever get. But you could also have discussions about, you know, what theories of harm are you running, what types of data could you put your hands on. These are the things that can be discussed in the context of those confidential bilateral discussions. I don't think I can say a lot more than that. 

Stefan Heumann: Okay. We'll turn to another question from our audience, that is about the DMA: “I will be interested in hearing your thoughts about the upcoming regulation, especially the DMA. Do we need new rules or should we focus more on the effective enforcement of the current rules already in place?"

Pascale Déchamps: I mean, it could take all day, I guess. That one's a big, really big can of worms. I mean, I'm in a competition law enforcement agency at the national level. So, of course, I'm going to tell you that the competition law works. I mean, even more so when you use inter-measures like we do fairly extensively here. And you have good procedures like the one we have discussed today, two years to actually solve a case. It's quite different to the seven or 10 years that could take the Commission. So, I guess it depends on the angle that you take to the competition law. 

That the DMA goes beyond competition law. It introduces a bunch of other concerns. In that setting, it is a much more appropriate tool than the competition law. Because we try to use competition law to address things that are not competition law concerns and with different success depending on cases. Because if it's not a competition law concern, and in fact, you know, the German Facebook case is an example of how far can you actually take competition law when it's at the boundary with other types of laws. 

So, in the context of having more concerns than simply the competition law and also trying to streamline faster intervention is a good instrument. Whether it will really solve all our problems? I don't think so. Because you have to go through all the different steps to show the gatekeepers that you are actually implementing the provisions of Articles 5 and 6, and you have to test what it means in practice that you don't give yourself preference for various reasons. 

Stefan Heumann: All right. And I think also one of the problems in enforcement and just common for me is also is that for observers it takes years and a very long time to actually bring decisions and especially if they get challenged at court, you know, it takes it seems from our perspective, it seems to take forever until it gets effective enforcement in place. 

But I would go to I think this is my colleague Julian Jaursch: "Do you think the Commission is going forward to present a draft law on political advertising today? And regarding targeting, there will be a ban on the use of sensitive personal data. But if users give consent, the use of this data is still allowed. What do you make of such a “ban”? Can such laws for certain areas of the ad market be helpful in your opinion?"

Pascale Déchamps: That's a very difficult one. I mean, this relates to in a way choices of society that we have altogether. And in fact, you can have differences in different countries about the perception of if it’s okay to use personal, and even more controversial is, of course, sensitive information in advertising. In France, it's already illegal to use race, political tendencies,  and a number of other things for advertising because it's prohibited to discriminate on that basis.  So, but in other countries, it's not the case. And should it be allowed to use sensitive information to target political messages? I mean, it's a choice for society. I don't think my opinion in a way is any more relevant than anybody else's of the 57 participants or you and me. I don't think that my position today gives me a particular perspective on this issue that is more valid than any one of us. 

In terms of the ad tech part, I think the further you go, so the more restrictive you are with the type of data that's been exchanged, the less valuable the advertising market becomes. But it doesn't have to be extremely valuable, right. It doesn't have to be free for all like it's been for some time, right? There's probably some kind of middle ground that we can find. But as I said earlier, to ban targeted advertising, we need to be aware of the consequences. If we're happy to live with it, then so be it. If it's a general democratic consensus, then I'm happy to, you know, I think we would all be happy to live by it. But it has to be with the understanding of what 50% less income in the ad tech industry would mean on the free internet. Note that this 50% is a rough estimate. I mean, don't necessarily quote me on that because it's a very difficult one to estimate. And depending on who you ask, it's, of course, a lot more or a lot less, depending on who's talking. So, that's a rough number that we've come up in the course of our investigations. But it would have to be evidenced.

Stefan Heumann: I would like to go next to Eliot from Privacy International. And he's saying, "Thank you, Pascale, for these insights. You mentioned how competition can support privacy-friendly competitors which is deeply needed in the surveillance-based market that online advertising currently is. But how would such competitors arise if we are pushing for interoperability on systems such as RTB that heavily relies on personal data to function? And some companies that offer contextual advertising can comply with IAB standards because they refuse to use certain personal data and are de facto excluded from part of this market?” 

Pascale Déchamps: So, the first question is if some of the remedies that we find to diminish competition in this market are to impose more data to be exchanged, how does that help privacy? And I think that's actually a tension that is at the heart of some of the competition concerns at the moment, across a number of cases. 

Now, when we say data being exchanged, it can mean very different things depending on the context. But it's not because you use a real-time bidding system that you necessarily put in jeopardy personal data from users, or that you actually exploit any more than you would otherwise on a direct link. Real-time bidding can be used also for not-targeted advertising. So, we need to not conflict between the two. It's actually just the pure auction system. It is also used for contextual advertising. So, it's just that the more targeted, the more information you have on the user on the other side of the line, the more valuable the advertising, the space, the inventory is. And so, you tend to try to conflate all the information that you can so that the advertisers would be willing to pay more. But it's not because of the auction system, right. It's something that goes in the auction system. 

As to the second question. I think that there are a number of challenges with the way the industry is structured at the moment that actually prevents companies from being more privacy-friendly than what is the current framework. So, that is something that I think also privacy regulators work on. And you've probably seen that IAB is actually being sued in Belgium because the privacy regulators are saying they are not complying with the GDPR, which is a bit of a paradox, right, because they actually set up the consent form that is supposed to allow a lot of websites to gather legal consent. So, they are in the crosshairs also themselves to say, look, you guys, I know you've set together a code of conduct but we believe you didn't go quite as far as we were hoping you would to actually make sure that it's compliant. This is a very live challenge that is not solved at the moment. But in this particular space, I'm just going to make a very short reference to our decision in the appellate West case of March this year. This is an interim measure decision in the context of the ad tracking transparency framework that pop-up, for those of you with an iPhone that pop-up that comes up when you open a new application that says if you want other companies to track your activity when you use this app. 

We actually had a complaint saying this is going to destroy the online advertising market on iPhones. And so, you know, we investigated as to whether the privacy-enhancing provisions that Apple was bringing forward were counterbalancing the anti-competitive effects that it could have. And the French Competitive Authority saying that the pop-up was actually fine because they didn't see the anti-competitive effect in fact. So, it's an interesting case to also look at in the context of privacy versus competition in the context of some companies who want to use privacy for good or not so good reasons as a tool to prevent competition.

Stefan Heumann: Thank you, everyone, for really these great questions. I would like -- we have five minutes, and I hope we can get still to two of them. I would like to bring one up now again from Ingo Dachwitz because it's interesting from a German perspective and just builds on what you talked about, this complicated relationship between competition and privacy. And he's asking, "What do you think of the approach of the German competition authorities to tackle big tech, combining data protection law and competition law and kind of thinking or bringing that together in their investigation?" What are your thoughts on that?

Pascale Déchamps: I find that appealing and intriguing. I think what I would like to see is the enforcement of it. You know, what does a decision like this looks like using that framework? Because actually, we're talking to our German colleagues from the Bundeskanzleramt. In some of the cases, you know, they told us about what the framework allows them to do that we can't do because we have to still go through the hoops and loops of all the demonstration of and the abuse of the dominant position. So, I'm intrigued to see what comes out of it on the other end, beyond the legal framework, what does the decision look like, and what are the ways of appealing and how does the protection of defendant's rights is that taken into account in such a context. But in a way, it's closer to what the DMA is suggesting than it is to competition law. So, it's an interesting experiment as well in the meantime that we discuss what the DMA looks like and, you know, while we actually start to implement it. It's a bit of a head start to cut off some of the things that take a lot of time in investigations for reasons that people now believe are bad reasons. What markets? Is there a dominant position? In a way we cut through that, say, you're a gatekeeper and that's it. You're in and we don't even look at what really the market situation is.

Stefan Heumann: There are some more questions in the pipeline but we are running out of time. So, you have basically three minutes for your take on the ECG decision concerning Google shopping. “Do you think the reasoning is sound and clear enough or do you think there are still some unclear aspects concerning self-preferencing?”

Pascale Déchamps: Three minutes, that would be really heroic. I think that it is extremely welcomed as someone put it last week in another conference. They said: “if the court had said no, it would have been the end almost of the competition law enforcement in the sector.” And I think the DMA would have certainly found yet a new revival, to say clearly there's a complete failure of competition law to address concerns of this market. So, from that perspective, it's the safe of also a stream of cases. It doesn't clear the self-preferencing, it goes other ways, from favoring your own systems, I mean, it chooses different words. But that it is a sound theory of harm when the circumstances are right. 

From an economist's perspective, at heart, I find that extremely appealing. I find that's a good framework. It puts some legal precedents that were unhelpful at times in a pretty tight box to say actually, you know, that these precedents apply. And, you know, and then it sort of goes on to explain that you don't actually have to count the dead bodies but you need to show that people could be dead as a result of the practices, then that's enough. And I also find that in terms of burden of proof appealing if the competition agency actually does their homework to say that it's not simply possible, right, that there might be dead bodies because it's always possible there might be dead bodies. Just crossing the street, I might be dead in two minutes. That doesn't make it a good theory of harm. Now, so you still need to show that it is, you know, it is a potential consequence of the practices that you are finding illegal. Now, I have also some points that I find a bit unhelpful in the judgment. It's very long so it's difficult to like it all. But, you know, I think I'm going to stop here because they are minor and irrelative to the things I've already discussed. But I think it's a very welcomed clarification and also support for the way the Commission's been going in this direction. 

Stefan Heumann: Thank you, Pascale. And very well-timed as we're approaching the end of the hour. And I think the questions and the one that we still have in the pipeline that we, unfortunately, can't get to show that this is an ongoing conversation. The DMA, you know, will just, you know, be the next chapter I think in the discussions around, you know, how do we regulate digital markets and how do we enforce competition. And I think this conversation today has also shown that this is not just about regulation but actually enforcement is critical. 

And so, we really thank you, Pascale, for sharing your insights and for your work that you're doing at the French Competition Authority, and for tackling also the interesting questions that came up in our conversation from the audience. I would like to thank everyone for participating and asking these great questions. Thank you very much.

Pascale Déchamps: Thank you, Stefan. And thank you to SNV as well for having me this morning. Thank you for the questions. Have a good day.

- End of Transcript -

December 01, 2021
Authors: 

Dr. Stefan Heumann (SNV) und Pascale Déchamps (ADLC)

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