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Issues Paper on Digital Ecosystems, Big Data and Algorithms

SÉRVULO PUBLICATIONS 09 Jul 2019

The digitalization of the economy led to the emergence of new business models based on multi-sided platforms. In 2018, 94% of Portuguese internet users have made at least one online purchase within a wide range of product categories (Nielsen, 2018). Due to the rising importance of this matter the Portuguese Competition Authority (PCA) has published an Issues Paper on the application of competition law to the specificities of Digital Ecosystems, Big Data and Algorithms. In brief, the PCA analyses the role of big data as a factor that enhances the network effects and which is crucial to the digital ecosystems of products/services.

One of the challenges for competition policy is that incumbent platforms may adopt exclusionary strategies, for example, by restricting their rivals’ access to the data they need in order to carry out their activities.

At the sectoral level, the Second Payment Service Directive (PSD2) regulates the access to data in the digital era. PSD2, implemented in Portugal in November 2018, imposes obligations on banks to provide FinTech operators with access to client data in order to provide certain payment services, upon the client’s request. In this regard, we have analysed, in a previous update, the PCA’s FinTech Issues Paper, in particular the risks of foreclosure by banks of FinTech operators access to client data and the PCA’s recommendations to mitigate them.

Big data contributes to the expansion of pricing, monitoring or recommendation algorithms. There are positive effects, such as the enhancement of product discovery and price comparison, or the decrease of transaction and search costs. However, big data may also facilitate collusion in the market, in particular on prices.

As we have anticipated, “alongside its normal activity in traditional sectors, the PCA is paying close attention to new exclusionary practices in the digital economy. Interestingly, businesses that undertake such practices should not be exempted from liability for the use of algorithms or artificial intelligence likely to result in anticompetitive conduct. This means that the PCA is not afraid to act in the digital environment where the use of technology facilitates anticompetitive behaviour” (for further developments see our chapter on “The Cartels and Leniency Review – 2019”).

Companies should be conscious of the opportunities and dangers this new era brings given the severity of sanctions for competition law infringements, both at public and private enforcement level. Compliance will reward those who are compliant!

Alberto Saavedra

as@servulo.com

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Alberto Saavedra