Discriminating anti-discrimination requirements

Requiring a platform to adjust their algorithms to cease discriminating in how they rank suppliers is an increasingly used behavioural remedy. In a recent post I discussed why finding the counterfactual in these cases is not a trivial exercise. This post returns to the topic of anti-discrimination requirements in relation to ranking algorithms, to illustrate, with a simple example, how ill-considered remedies can make the algorithms continue to exhibit the same anti-competitive effects, even where the platform is demonstrably clear of any misbehaviour. With this post, I’d like to reiterate my more general earlier point, that information asymmetry is one of the main obstacles to designing effective remedies for anti-competitive outcomes emerging from autonomous systems, therefore there should be an increased requirement on the operator of the system to demonstrate not just that its design was changed in accordance with the wording of the remedy/commitment, but also that the system continues to exhibit the desired outcome.

Damage quantification in algorithmic abuse of dominance cases – the elusive counterfactual

(post also appeared on the Centre for Competition Policy blog)

On the 5^th of  February 2024 the Competition Appeal Tribunal published a ruling to determine the carriage dispute in relation to two applications to commence collective proceedings against Amazon regarding Amazon’s Buy Box.[1] Interestingly, the ruling (which went unanimously in favour of Mr Hammond’s application) included a short discussion of the counterfactual.[2] The proposed method for the determining the counterfactual in Mr Hammond’s opt-out class action included re-running Amazon’s original algorithm without the abuse (and logging the resulting outcome as the counterfactual). The CAT seemed sympathetic to this solution. I personally think the proposal in Mr Hammond’s application is a viable approach, and I do believe the CAT must be commended for understanding the novelty of the issue and being open to a method untested in courts. But this ruling draws attention to a much more general question: how to find the counterfactual in a case where the offence is related to conduct by an algorithm?

Champion, Contender, Gatekeeper, and Journeymen firms

Probably not a popular opinion, but for someone who loves boxing, the DMA ‘gatekeeper’ terminology feels totally odd (ok, not as odd as the widely-hated EU lingo ‘undertaking’ but still pretty odd). In boxing, a Gatekeeper is a decent fighter, a cut above Journeymen, but not quite the top, someone who doesn’t have the brilliance to go for title fights. The incumbent at the top is the Champion. But the most exciting group of fighters are the Contenders, fighters with the skills to contend for titles.

I quite fancy this taxonomy for firms in digital markets, because it lends a much more meaningful distinction between firms especially those that are not at the top yet. The Champions, pretty much the firms currently denominated as gatekeepers by the DMA, then the Contenders who really do have a chance to become Champions, and then the Gatekeepers and Journeymen, who are still useful, but not Champion material.

The Legal Definition of Self-Preferencing: Too Narrow, Too Broad, or Both?

Self-preferencing is usually defined as when a large digital platform treats its own (vertically integrated) products more favourably than those of its competitors.  Such behaviour may be harmful to consumers.[2]  Versions of this definition have now been embodied in EU and UK legislation which also makes such behaviour illegal for gatekeepers or businesses of strategic market status. However, is this definition of self-preferencing too narrow in that vertical integration may not be a prerequisite for essentially similar strategies to be profitable and similarly harmful? Or is it too broad because it does not specify consumer harm as a condition of illegality, even though self-preferencing often does not harm consumers?

Trustworthy Recommender Systems in the Marketplace

This is a master page to share papers from our Trustworthy Autonomous Systems Hub project on Trustworthy Recommender Systems in the Marketplace.

Online platforms are the virtual marketplace that bring together two sides of online markets, the customers and the suppliers. Customers on these platforms often face a plethora of choices; music streaming platforms offer access to 100 million songs and podcasts, YouTube hosts over 800 million videos, there are over 350 million products on Amazon including Marketplace, or 6.6 million listings on Booking.com. Evaluating these choices would amount to enormous search costs. To assist the customer in their choice, platforms deploy recommender systems (RS), which help reduce/eliminate these search costs by recommending items that match the customer’s preferences.

Public service broadcasting – a renewed need in the time of recommender systems?

Digitisation has entirely rewritten the way we consume audio and audviovisual content. Some of the market failures that characterised the analogue broadcasting era, have seemingly disappeared in a world where evaporating fixed costs mean that the most niche content is now available online. In this world, there are increasingly vocal arguments that there is no longer need for Public Service Broadcasting (PSB) if the market can also provide for even the most diverse audiences. But the large platforms which host vast amounts of digitalised content, may not quite be the land of milk and honey some had thought for consumers, and certainly not for the producers of content. The reason is to do with how the content is provided on the platform, through algorithmic recommendations, which are likely to suffer from biases. These biases have the tendency to create a world, that suffers from the same market failures (including the disproportionate underrepresentation of diverse, and niche content) that justified PSB in the analogue era. Because of these market failures, a new generation of PSB could have a critical role in ensuring the provision of online content that adheres to objectives, such as the provision of creative, high quality and distinctive output and services in a way that reflects, represents, and serves diverse communities.

Stephen Davies – Obituary

Steve Davies, my friend and my colleague passed away, leaving an unfillable gap in our hearts, and in the IO community.

Steve was like an academic father to me, and much more than that. We first met in 2006 when I joined UEA as a PhD student. I remember the first time we talked, over lunch, he totally grilled my proposal (something on merger remedies) and I kept thinking, wow this guy’s a whole new level of smart than what I had been used to before. He was a born economist. Anyone can learn technical tricks, acquire the maths, or the skills to write code, but only a few have the vision and intelligence for economics that Steve had. The things that others would work on for months and years to notice, he would see in seconds. His students loved him, and he didn’t need a blackboard to explain economics, which to me is the biggest professional compliment one can give.

We became friends very quickly, which was not surprising given that our research had many overlaps, but that wasn’t all. Supporting the same team helped a lot, of course. I remember the first time I went to Arsenal with him, a December 2006 game against Pompey. It was strange game, Arsenal came back from 2-0 down, followed by an exhaustive post-match analysis over a few pints, which started a long tradition of me doing the driving, and him sorting out the tickets. Most importantly though, I think we became such close friends because we were very similar in so many ways. Neither of us could easily suffer fools, and neither of us ever tried to conceal that. We could both be quite temperamental about our work, but luckily, it always happened that when I was upset, he was calm, and vice versa. We saw the world in a very similar way. Maybe through different ideological lenses, but certainly with a shared understanding of the things that count.

Over the years of our friendship, I learnt a lot from Steve. Academically, of course, he was a great source to learn from, but I am also convinced that his friendship has made me a better person. He was ever the optimist. I remember the many times we had a new idea, and that ‘twinkle in the eye’ (one of his favourite expressions) that we have just unearthed something special to work on, his excitement, the planning, the calculations, and the work. It was his optimism and his conviction that we were doing something immensely valuable that kept us going. Both of us had the innate ability to not take ourselves too seriously, but he helped me perfect this. I can still hear the way he used to tell me when I was upset about something: ‘Pete, life’s too short to worry about this.’ And he would always point out what really mattered. Not work, work goes away, and people will come up with better ideas, and then those ideas will also go out of fashion. No, Steve always made sure I didn’t forget what really mattered was family, friends, and life.

I think a true measure of how close to someone you are, is when you learn to communicate with them even when they’re not there. Even when we were working separately, on different things, I would often hear his voice as I was typing up a new paper: ‘oh no Pete, now you’re being too cryptic again’, or in a tone of profound approval ‘Pete, after all these years you still manage to surprise me’. Academia can be a lonely place. I never really felt supported in anything I was working on, and I’m sure most of us in academia feel similarly. In this impersonal and frigid world, Steve was a spectacular exception. He never ceased to be positive about what I was doing. His endless encouragement kept me going over the years. Without him, I would have long given up on academia, and although he’s no longer here physically, I’m sure he’ll stay with me in spirit to keep fuelling me with his unconditional faith and support.

Steve, my dear friend, rest in peace. I will really miss you.

A cherished memory with Steve, Anna Rita Bennato, and Franco Mariuzzo, enjoying a pint after a long meeting at DG COMP in Brussels.

When market concentration increases, poorer households are the worst hit

An intensively researched theoretical and empirical question in industrial organisation is the relationship between market concentration and prices. There is ample evidence showing that increasing concentration is associated with increased prices, and that more competition lowers prices. This effect has often been linked more directly to market exit and entry. But is the change in prices the same for every consumer?

Our work offers evidence of the distributional effect of changing market concentration. Areas with lower income experience a larger increase in petrol stations’ price margin as a result of market exit. On the other hand, entry does not benefit the same low-income areas with a larger reduction in the margin than in high-income areas. We argue that these findings are due to differences in how much consumers in different demographic groups engage with the market. Our findings give support to the argument that antitrust could help address inequality while staying true to its mission of promoting competition, provided that priorities are given to not only fixing supply-side problems but also to exploring demand-side remedies.

Should we sustainability audit academic research?

The past decades have seen a rapid rise in the number of academic conferences. Travelling to these conferences now constitutes a sizable part of business tourism. By facilitating knowledge generation, these trips can be hugely beneficial for society, but at the same they also turned academia into a significant contributor to climate change. With the rise in the number of academics producing research, the variation in the level of the conferences and the presented academic works (the gap between influential and non-influential conferences/research) has also largely increased. As a result, many academics travel millions of miles around the globe to present work, much of which later fail to have any influence whatsoever. To address this problem, I argue that academic institutions should start the sustainability auditing of their research output. To start with, more transparency could be introduced – for example by publishing travel mileage related to research output – to improve our understanding of the social costs (such as carbon emission) and benefits of academic research.

Competing on sustainability

Morrisons announced last month that all their food will be sourced from carbon neutral farms by 2030 (10 years before the 2040 net-zero commitment of the National Farmers’ Union). This has immediately triggered speculation as to whether, and how quickly, their rivals will follow suit. Although it may not be outright obvious, Morrisons’ move raises a number of interesting questions for competition policy, especially given that its announcement is not unique, and we are witnessing a growing number of markets where firms are increasingly competing not only on factors such as price, or quality, but on sustainability as well. As sustainability is gaining more central attention in competition policy, it is useful to ask how much of our conventional wisdom from competition economics we can use to understand the market incentives behind businesses’ sustainability investments. This thought experiment is useful for regulators to understand in which industries regulation might be necessary, and where market forces and competition may be more effective in delivering more sustainable business behaviour.