ADVANCE COMPETITION LAW

PROJECT

ARTICLE REVIEW

Submitted to - Dr. Harpreet Kaur/ Dr. Abha Paul

Submitted by - Kshitiz Garg

Roll no. 38LLM22

Article review of "Vertical Restraints in an Online World: Competition Authorities Gear up Their
Enforcement Approach in the Digital Economy by Marc Israel, Jacquelyn MacLennan & Jan
Jeram”

In the past decade, the digital economy has transformed the way businesses operate and
compete. The rise of e-commerce platforms and online marketplaces has led to a significant
increase in cross-border trade, resulting in new challenges for competition authorities.
Vertical restraints, which are contractual restrictions imposed by firms operating at different
levels of the supply chain, have become an important focus of competition authorities in the
digital economy.
The article titled "Vertical Restraints in an Online World: Competition Authorities Gear up
Their Enforcement Approach in the Digital Economy" provides a detailed analysis of the
challenges faced by competition authorities in the digital economy. The digital economy has
transformed the way businesses operate and has created new challenges for competition
authorities in enforcing competition law. The article highlights the importance of adapting
enforcement approaches to match the unique characteristics of the digital economy and the
need for awareness and education for businesses to ensure compliance with competition law.
In conventional markets, companies would usually directly negotiate with their suppliers and
customers, thereby providing competition regulators with critical insights into the market.
However, in the digital age, online platforms serve as intermediaries between buyers and
sellers, resulting in a lack of transparency for competition authorities to obtain relevant
information about the market. This lack of transparency in online markets poses a significant
challenge to competition authorities.Competition authorities in the digital economy face
several challenges, with the first being the overwhelming dominance of online platforms.
These platforms, such as Facebook, Amazon, and Google, have established themselves as
significant players in their respective markets, wielding substantial market power. With such
power, these platforms can engage in anticompetitive practices like self-preferencing,
exclusionary conduct, and tying. In the past, traditional enforcement methods used to address
vertical restraints were based on a case-by-case analysis. However, with the rise of online
platforms and marketplaces in the digital age, these traditional methods have become less
effective. Therefore, it is crucial for competition authorities to develop new methodologies
and enforcement tools to tackle the challenges posed by the digital economy. One of the
significant challenges faced by competition authorities is the lack of transparency in the
online market, which makes it difficult to access relevant information about the market.
To address the challenges posed by the digital economy, competition authorities need to
adopt new enforcement approaches. One such approach involves the use of data-driven
techniques to monitor online markets. These techniques utilize algorithms and machine
learning to analyze large amounts of data and detect potential antitrust violations. For
instance, web scraping tools can be utilized by competition authorities to gather data on
prices, product descriptions, and ratings from online marketplaces. The use of data-driven
techniques is becoming increasingly popular among competition authorities to monitor online
markets.
However, the use of data-driven techniques brings along new challenges for competition
authorities. One of the challenges is the reliability and accuracy of the data. Online markets
are dynamic, and the data collected at one point may not represent the market as a whole.
Thus, competition authorities must develop new methodologies and tools to ensure the
accuracy and reliability of the data.
The complexity of algorithms used by online platforms poses another challenge for
competition authorities in the digital economy. These algorithms can be obscure and difficult
to comprehend, making it hard for competition authorities to identify anticompetitive
practices. To overcome this challenge, competition authorities need to collaborate with
industry experts and academics to develop new methods and tools to scrutinize the algorithms
used by online platforms.
The second challenge faced by competition authorities in the digital economy is the
complexity of vertical restraints. In the traditional markets, vertical restraints were usually
simple, such as exclusive dealing or resale price maintenance. However, in the digital
economy, vertical restraints can take many forms, such as platform fees, data sharing
agreements, and algorithmic preferences.
The article gives several examples of vertical restraints in the digital economy. For instance,
online marketplaces, such as Amazon and eBay, charge platform fees to sellers for using their
platform. These fees can be a percentage of the sale price or a fixed fee per item sold. While
platform fees are generally seen as beneficial for competition, they can also be used to
exclude competitors or raise entry barriers.The article also emphasizes that competition
authorities need to be equipped with new enforcement approaches to tackle these challenges.
One such approach is to utilize data-driven techniques to monitor online markets. These
techniques involve using algorithms and machine learning to examine vast amounts of data
and detect potential antitrust violations. For example, competition authorities can employ
web scraping tools to accumulate data on prices, product descriptions, and ratings from
online marketplaces. The article highlights that competition authorities are increasingly
relying on data-driven techniques to monitor online markets. Nevertheless, using data-driven
techniques presents new challenges for competition authorities, including the accuracy and
reliability of the data. Online markets are dynamic and continuously changing, and the data
collected at one point may not be representative of the entire market. Therefore, competition
authorities need to develop new methodologies and tools to ensure the accuracy and
reliability of the data.
Another example of vertical restraints in the digital economy is the use of data sharing
agreements by online platforms. Due to the significant amount of data on consumer behavior
and market trends that online platforms have access to, they can use this data to gain an
advantage over their competitors and exclude them. However, these agreements can raise
antitrust concerns if they result in sharing sensitive business information.
To overcome these challenges, competition authorities need to develop a deeper
understanding of the digital economy and the unique characteristics of online markets. They
can achieve this through close collaboration with industry experts and academics to develop
new tools and methodologies to analyze complex vertical restraints.
The article also emphasizes the importance of raising awareness and educating businesses on
complying with competition law. Many businesses in the digital economy may be unaware of
their obligations under competition law or may lack the resources to comply with them.
Therefore, competition authorities need to work closely with businesses to provide guidance
and support to ensure they comply with competition law.
The main challenges faced by the competition authorities in vertical restraints in online
markets according to me can be summed up as:
• The digital economy presents challenges to the enforcement of vertical restraints due to its
unique characteristics, such as multisided markets and interdependence among different
sides, which make it difficult for antitrust authorities to determine the relevant market and
assess the impact of vertical restraints.
• The lack of consensus on the definition of multisided markets further complicates the
development of standardized methodologies and tools for analyzing complex vertical
restraints in the digital economy.
• Market definition is problematic in the digital economy due to its economic and statistical
complexity, which makes it challenging for antitrust authorities to identify the relevant
market in antitrust cases.
• Many businesses operating in the digital economy may not be aware of their obligations
under competition law, or they may lack the resources to comply with these obligations. This
lack of awareness makes it challenging for antitrust authorities to ensure compliance with
competition law in the digital economy.
• The economic analysis of vertical restraints is important for antitrust analysis. However,
some industry characteristics, such as economies of scale and network effects, can affect the
conclusions of an economic analysis of vertical restraints.

The key points of the article can be summed up as :

• The article focuses on vertical restraints, which are contractual arrangements between
firms at different levels in a supply chain.
• In the digital age, vertical restraints can take many forms, such as data sharing
agreements and algorithmic preferences.
• Competition authorities are increasingly focusing on vertical restraints in the digital
economy.
• Enforcement of vertical restraints has become more complex in the digital economy
due to its unique characteristics.
• To address these challenges, competition authorities need to develop a deeper
understanding of the digital economy and the unique characteristics of online markets.
• Collaboration with industry experts and academics is necessary to develop new
methodologies and tools to analyze complex vertical restraints.
• Awareness and education for businesses is crucial to ensure compliance with
competition law in the digital economy.
 • The economics of vertical restraints establish an economic foundation for the antitrust
analysis of these arrangements.
• Some industry characteristics, such as economies of scale and network effects, can
affect the conclusions of an economic analysis of vertical restraints.
• Many issues that are important in the analysis of vertical mergers are also important in
the analysis of vertical restraints, with some overlap between the two topics.

In conclusion, The article offers important perspectives on the difficulties confronted by

competition authorities and businesses in the digital economy. It emphasizes the necessity for
competition authorities to modify their enforcement strategies to align with the distinct
features of the digital economy and the significance of educating businesses on the
compliance of competition law. By tackling these challenges, competition authorities can
guarantee fair competition and an equitable playing field in the digital economy.