Competition by design

Algorithms are the fundamental ingredient of online businesses such as search engines, marketplaces, peer-to peer platforms and social networks. They have already deeply affected the way individuals shop, communicate, and interact with one another. In pursuit of automation-driven efficiencies and market opportunities, firms are increasingly implementing algorithmic solutions that allow them to engage more effectively in commercial activity. In particular, algorithms can be an important source of innovation, allowing companies to develop non-traditional business models and extract more value from data, in order to improve product quality and customisation. Admittedly, advanced algorithms can be powerful tools in the hands of market players, and the challenges posed by algorithms are not entirely new problems for competition enforcers. Whereas the issues of algorithmic transparency and accountability are common to other areas of law and policy, there are further and more specific implications for competition policy. Price-setting algorithms in particular have drawn the attention of academics and policy makers. The current discussions and in-depth reflections, however, are not exclusively on the topic of pricing algorithm and collusion, but include a broader range of questions that are possibly going to inform effective competition policy in the age of algorithms. Against the background of increasingly algorithm-based markets, the paper aims to explore the potential for effective competition policy of the notion of “competition by design”, as broadly derived from the related concept of “data protection by design,” which is enshrined in the upcoming General Data Protection Regulation. EU Competition Commissioner Margarethe Vestager made clear in a series of recent public interventions that firms applying algorithms need to think from the start about how to keep them compliant with competition law (“algorithms will have to go to law school before they are let out”). While the idea of competition compliance by design might be gaining some foothold in the mind-sets of some competition authorities, there are currently no clear indications how it could be integrated into the already complex competition policy fabric. The paper concludes that algorithm design thinking could be a promising new tool at the disposal of competition authorities in the digital economy.