Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.
Issue link: https://digital.carswellmedia.com/i/1163340
LEXPERT MAGAZINE | Q3 2019 35 tigations in the digital economy, including against the Toronto Real Estate Board, or TREB, over restrictions on the use and dis- play of real estate data. We were able to stop TREB from with- holding its real estate data from agents who wanted to use that data to offer innovative online services to their clients. Aer a lengthy court battle, the Bureau prevailed, ending TREB's anti-competitive restrictions on data, and their ability to thwart competitors. Since this litigation ended almost a year ago, we have seen the entry of new firms and business models across Canada that are leveraging this data to enhance com- petition and consumer choice in the real estate sector. e TREB case has implications for com- petition well beyond real estate in Toronto. e Bureau's victory in this case sent a strong message that firms operating in Can- ada should not use their power to impose anticompetitive restrictions that thwart entry and growth of innovative businesses. at message is all the more important in an era where new technology enables dis- ruptive entry and growth. However, the ongoing debate in compe- tition circles these days is whether our tradi- tional competition enforcement approach- es and tools still make sense in a world of big data. e increasing power of data in our econ- omy, and the control that a relatively small handful of digital platforms have over it, has prompted a rethink of the effectiveness of traditional approaches to antitrust. Much of the debate concerns the leading platforms' control over massive amounts of data, and whether this control has en- trenched their market dominance, render- ing them virtually unassailable. Some argue that the tech giants operat- ing these platforms serve as gatekeepers to the broader digital economy that allows them to exclude rivals and discriminate in favour of their own products and services. Public debate has ranged widely on how, if at all, competition policy should adapt. On one end of the spectrum, there are calls to regulate these tech firms as utilities or break them up. On the other end, some argue there is nothing to worry about because these large tech firms maintain their position through continued innovation and popular prod- ucts, and in any event, competition is only one click away. is important public debate and any ensuing adjustments to competition policy need to be informed by facts and evidence. Critical to understanding the role of data in fuelling the rise of tech giants is a sound understanding of two fundamental con- cepts — how platforms operate and the role of network effects. A digital platform connects different users through an access point, which they have created. ink search engines or social networks that connect users with advertisers; users benefit from free services in exchange for their data, which the platforms then mon- etize through advertising, or ride-hailing services and online marketplaces that connect buyers and sellers, and take a sales commission. Increasingly, the driving force behind these platforms is the value of user data. More users equals more data, and with it, the ability to improve algorithms, grow and monetize the platform. is idea of the appeal of a platform in- creasing as more people use it is called "net- work effects" — a defining feature in the digital economy. For example, a social media platform is more valuable to a user when more of her acquaintances use that same platform. Or a user of a traffic app may benefit when more people use that platform, pro- viding more data to the app, and allowing the app to provide better traffic advice. is matters in competition law enforce- ment because network effects can be both an efficiency that benefits consumers and a barrier to entry that may limit competition. Indeed, if platforms become more valuable to users as they grow, this helps explain why we are seeing digital giants emerge. Nf X, a successful Silicon Valley venture capital firm, recently sought to put an actual number on the amount of value network ef- COMPETITION FEATURES fects have created in the digital economy. It estimated that, over the past 23 years, network effects have accounted for approx- imately 70% of the value creation in the technology industry. An influential Harvard Business Review article published earlier this year titled "Why Some Platforms rive and Others Don't" also examined the circumstances in which network effects can insulate a plat- form from competition. If data and network effects are fuelling an environment where markets have a ten- dency to tip to a single winner, then compe- tition policy needs to understand this new reality. Not only do we need to closely monitor against anti-competitive conduct, but we need to ensure that we have the right tools in place to act. In fact, the Bureau has been study- ing these issues to make sure we're well equipped for the digital era. A key and enduring principle of com- petition law is that big doesn't necessarily mean bad. Becoming big by competing on the mer- its is the reward a firm should reap for suc- cessfully introducing an innovative product or service. We should not punish this success be- cause imposing a penalty for excellence removes the incentive to pursue excellence. While we believe that the core principles of competition law are generally up to the task of dealing with Big Data and the digital economy, we cannot be complacent. We need to ensure our tools are mod- ern, that we participate in the ongoing de- bates, and stay attuned to the technolog y industry. When looking at global conduct of digital giants, we believe in the increasing need of a globally co-ordinated approach to enforcement. is attention to competition and its role in the digital economy was recently highlighted by Navdeep Bains, Minister of Innovation, Science and Economic Development in the Government's new Digital Charter. Bains also recently sent a welcome letter