ICT Markets and Regulation (ICT市场及规例)

Search Engines as an example (以搜索引擎为例)

Nanjing Workshop 2010

Co-Reach

Prof. A. WiebeUniversity of Göttingen

Economics and Law

Law -> Economics Economics as „imperial science“? (经济学作为’帝国科学’?)

Positive analysis (实证分析)

Normative analysis (规范分析)

Which economics? (哪种经济学?) Traditional welfare economics, efficiency, institutional

economics, transaction costs (传统的福利经济学，效率，制度

经济学，交易成本)

Economics -> Law Framework for markets (市场框架)

Enabling function

Impeding effect (阻碍作用)

Example: Copyright as a regulatory problem

Copyright law as balancing of interests (利益

的平衡)

Author – earn money and personal rightsUser – access and no payGeneral public – incentives to create

works

Rationale and normative analysis for IP: Property Rights-Approach

Information as public goodsProblem of Underproduction

Exklusivity through exclusive rightsWelfare loss through „Deadweight Loss“Problem of UnderutilisationRegulatory objective: Lowering of

transaction costsFine Tuning: incentive/distribution

What is the optimal protection?

Consequences of digital technology

Costless copying Network effects Higher transaction costs through enhanced

legal protection (通过加强法律保护的更高的交易成本)

Technical protection as complement/substitute (技术保障作为一种补充/替代

的手段)

Technology (DRM) as a substitute?

Avoid „Deadweight Loss“ by allowing for price discrimination (通过对价格歧视的允许从而避免“无谓损

失”)

Abolishing copyright limitations? Retreat from regulation/shift to contractual

level Information problem of legislator

But: DRM includes new market failures „Tragedy of the Anti-Commons“

Problem: economic research and empirical evidence

What can economics tell the law?

„If we didn‘t have a patent system it would be

irresponsible to introduce one, as we have one it

would be irresponsible to abolish it“ (“假如我们没有一个专利

系统,那么这是不负责任的倘若我们不引进一个(专利系统), 同样的,假如我

们有一个专利系统,那么这是不负责任的倘若我们取缔它”) (F.Machlup)

Empirical evidence Intellectual property principle as such?

Optimal level of protection?

Protection of the author?

Tendency: No significant incentives

Dependent on basic assumptions

Framework for market process –counterbalance market deficiencies (抗衡市场

缺陷)

Economic consequences of cartels, mergers, and dominant positions

Chief Economist in the EU GD Competition What is the underlying competition theory? What are the consequences of regulation?

Example Cartel Law: Market dominance and market regulation (市场主导和市场调节)

The Microsoft Decision

„A great day for companies and consumers in Europe“ (一个在欧洲的公司和消费者的非常不错的一天)

(Thomas Vinje)

„This decision finally opens the door for dynamic competition in the software business. No dependancy for users any more and no monopoly prices.“ (这一决定终于为

软件行业的动态竞争打开了大门)

Art. 82 EC: abuse of dominant position –legal requirements

Definition of relevant market – economic test

Dominant position – statutory presumptions

Discrimination/Impediment – legal evaluation

Material justification – legal evaluation

Situation in China

Cartel Law mostly used to defend against infringement suit (常用于:侵权诉讼)

Cases were solved our of court Art. 55 Anti-Monopoly statute No application on the use of intellectual

property but on misuse restricting or excluding competition (不施用于知识产权的使用,但是施用于滥用限制或排斥竞争)

Sec. 48(2) Patent Law 2008 contains compulsory licensing provision

Google and competition law

„To Exist means to be covered by a search engine“ (存在意味着被搜索引擎所覆盖)

Google and competition law –Possible infringements

Rejection of registration on a searchengine index

Exclusion or downgrading of ranking Admission to advertising programmes Extending market power to adjacent

markets („Microsoft-Syndrom“)

Examples

In January 2006 the website of BMW was escluded from the Google index pursuant to internal guidelines due to the use of Doorway-Pages (2006 年1月, BMW被谷歌的索引所不

包括在内，原因是…)

In 2005 Google excluded the Website kinderstart.com from its index without giving a reason; the website contained information on child development and an independent search engine (2005年，谷歌排除了其对kinderstart.com的索引,并且并未给出理由;该网站载有关于儿童发展与一个独立的搜索引擎信息)

Google and competition law –Market Definition

Is there a Market at all? Remunerated service Mediation of attention Copyright license Effects on third markets

Geographical Market Country versions

search engine services – Dominant Position

Art. 82 EC: Presumption at 50% § 19 German GWB: Presumption at 1/3

2005, Germany : Google 57%, Yahoo 11%, MSN 10%, AOL 9%

2005, U.S.A.: Google 49%, Yahoo 21%, MSN 11

Access to search engine services –Discrimination

Exclusion from Index

Downgrading in PageRank-> Equal treatment in implementation of

search algorithm (在实施搜索规则系统的平等)

Internal Quality Guidelines Business judgment/discretion Protection against certain „bad“ forms of search

engine optimization? Competition for quality needs leeway

Access to advertising services –Discrimination

Keyword Advertising, AdSense, cooperation with publishers

Market definition Search engine advertising “intermediation” of advertising on third party

pages Ad serving and management software

(DoubleClick) Local market definition

National markets

Access to advertising services –Discrimination

Dominant position U.S. 2005: Google 49% atKeyword

Advertising Worldwide 2006: AdSense 56%

Discrimination Rejecting access to advertising programme

Material justification Infringement of statutory rules

What about cases of doubt? Internal Guidelines

Wide discretion

Microsoft: Monopolizing adjacent markets

“Leveraging” Microsoft case

Rejection to deliver interface data Tying with MediaPlayer Technically founded leverage Network effects

Relevance for search engine markets? Only if tying leaves no choice

Internet Economy – is it different?

Are Monopolies equally dangerous? Specific features

Network effects Direct Indirect

Lock-in Economies of scale “winner-takes-it-all-markets” Innovative competition necessary

Dynamic competition through compatibility

Conclusions for cartel law

Reduce and avoid new market barriers Standardisation and compatibility

Limit leveraging tying as “leverage”

Search engines No tying Monopolies less enduring? Due to high investments considerable barriers to

market entry

Comm Dec Google/DoubleClick Market definition: 3 markets

Search engine advertising “intermediation” of ads on third party pages Ad serving and management software (DoubleClick)

Loss of potential competition on market for intermediation not critical

leverage intermediation – ad serving tools markets: Comm: restraint of intermediation market through prices for

tools not possible, as relevant competition on ad serving tools-market exists (通过工具的价格来对中介市场进行克制 是不可能的，因

为在广告服务工具市场上的相关竞争是存在的) Restrain on ad serving tools-market through tying not

profitable

Resume: relevant differences Microsoft/Google

Beyond efficiency: Public task of information provision?

Fundamental right: freedom of information and communication

Securing information access information provision on pure private basis is

critical

“Gatekeeper”-Function Need for “public” search engines? Active information policy

Resume for regulation

Information markets display market failures

Economics may explain and advise regulation also in internet economy (经济学在互联网经济的领

域中,也可以解释并建议调控措施)

Retreat from regulation is inefficient

Regulatory objectives extend beyond economic efficiency

Thank you for your attention!

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