Mette Alfter, Associate Director in Frontier’s competition team, took part in a panel discussion on ‘competition issues in the era of Artificial Intelligence’, at the International Institute of Communication’s Telecommunications and Media Forum in Brussels today.
Mette presented an overview of some of the key areas of debate. She first discussed the potential concern that the use of pricing algorithms might lead to (more) tacit collusion. She argued that overall, the only situation where the use of algorithms might cause a potential new concern is where several firms use the same or similar pricing software. Even here, one would need to understand how the profit maximising function is set up and whether it takes into account future behaviour in order to assess whether or not this is likely to lead to a collusive outcome.
She then explored potential concerns around the increasing importance of ‘Big Data’ – in particular, around large firms controlling significant quantities of customer data. The main issue is that markets in which Big Data plays a central role tend to exhibit network effects, which can lead ultimately to there being only one main player in the market. Some argue that competition law may struggle to address this because it is focused on preventing the extension of, rather than creation of, market power; and because markets in the digital space are often complex and lack transparency. An important immediate step for competition authorities, which many are already tackling, is to gain a better understanding of these markets fast.
Finally, Mette looked at the application of merger control in the online space. The key challenge is that in these markets, the main competitive constraint on companies might come from firms with different business models. Competition authorities might need to start thinking more about whether a merger between competitors with differentiated business models, as opposed to directly competing firms, could pose a problem. However it may well be difficult to foresee such competitive constraints at the time of a merger. A further challenge is whether competition authorities would be able to take action, given the precedent around the need to analyse closeness of competition.
Frontier regularly advises firms, regulators and competition authorities on competition issues across Europe.
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