Chile Investigates Google and Apple

Is it time to put the Right to Competition in Latin America to the test?

With respect to Chile, the National Economic Attorney General is investigating whether Google and Apple are exerting unjustified market power

By Luis Gonzalo Salcedo Garrido (El Mostrador)

HAVANA TIMES – In October 2022, Chile’s National Economic Attorney General (Fiscalia Nacional Economica or FNE), the authority that monitors competition in the country, opened an investigation into the policies of Google and Apple. The objective of the investigation is to determine whether the obligations these companies impose for the use of their operating systems in mobile devices may or may not be altering the free functioning of the marketplace, to the detriment of the Right of Competition in Chile. The investigation includes aspects linked to the use of their “App Store” and “Google Play” to purchase and download applications.

In evaluating the denunciation presented against both companies last July, in order to determine the suitability of opening such a case, the FNE considered the evidence obtained during the stage of determining admissibility, and several antecedents associated with identical or similar conduct in jurisdictions such as the European Union, the United States, Germany, Holland, South Korea and Mexico. It should also be noted that similar investigations have been held in Brazil, the United Kingdom, India and Japan, among others.

With respect to the Chilean case, the FNE considers that Google and Apple may be exerting an unjustified use of market power, given that they presumably: 1) demand the use of their respective technological system of payment and billing when downloading and eventually acquiring goods and services within their platforms; 2) charge certain commissions to those offering other technological platforms. These strictures – in the FNE’s judgement – could be considered exploitive, or in some circumstances make it impossible for other systems to have direct contact with their clients, or for the clients to opt for different treatment of their data.

Given this panorama, it now falls on the FNE to speed up the formal investigation, and with it determine whether they definitively believe that the behavior of these companies has generated or could generate a significant effect on those developing or offering other technological platforms or digital payment systems, and/or on the final users, thus affecting the Chilean economy.

In other words, we will soon know what that entity definitively believes – and also, perhaps, the opinion of the Tribunal for the Defense of Free Competition – as to whether such conduct: a) should continue to be examined case by case in the light of the Right to Competition law currently in force; b) have exclusionary effects; c) can be generally considered exploitive; or d) none of the above. All of this will have huge implications for the country.

Their final position will offer both academics and regulators a lot more light on how prepared the Chilean Law of Competition is to confront some of the challenges of the present and near future, and to continue overseeing the markets. This approximation will serve Chile as an input in analyzing whether or not it’s a good time to bring this system up to date, and/or to regulate one or several markets.

It’s important to mention that the FNE has also opened the door to those offering alternative platforms or interested third parties who would like to take part in the investigation. They’ve been invited to offer antecedents or alerts about other conducts that, in their opinion, should also be analyzed. Given this, it will be interesting to see to how these third parties respond, and if any actions arise in terms of compensation for damages incurred, be it by consumers or businesspeople.

For now, considering how relevant this digital ecosystem has become, it’s probable that these cases in Chile, Brazil and Mexico, won’t be the last ones this decade in which a Latin American authority initiates legal procedures to confirm or discount whether the market for distribution of technology platforms – and their related markets – involves facts, acts, or conventions that impede, restrict or obstruct free competition or tend to produce said effects.

To guarantee economic efficiency, the authorities charged with the preliminary investigation of these markets in terms of the Right to Competition, should make use of their functions to bring together, as the FNE has already done, the elements needed to determine whether or not the case merits formal investigation. This exercise should be carried out soon in the jurisdictions where it’s not yet been done, or where it’s currently underway, and be developed with extreme care. The authorities must not only make every effort to protect markets, but also use their declarations to substantially clarify for the respective economic agents what is to be expected of them in environments such as these.

The creation of new markets often occurs via the disruption of the traditional markets – some regulated and others not. Such movement is extremely common in free market economies. Some business models, because they’re so innovative and have the potential to become very relevant in a relatively short time, obligate the competent authorities to make efforts to comprehend their dynamics at a deep level right away, or at most after a prudent lapse of time.  In many cases, the authorities are then expected to issue declarations that communicate their understanding of the market, and their position and criteria.

I’m not suggesting with this that charges should be drawn up against these companies. Instead, that it would be a good thing for the business class in general, including those companies, to have the authorities fully understand the functioning of the markets they’re participating in, especially when the companies are – or will soon be – so relevant for the economy.

A variety of outcomes could be forthcoming from each jurisdiction: to merely carry out market studies; to collect different records, once the preliminary inquiry is over, where the parties must exhaustively express their motives, for the agents’ clarity; to open investigations that later conclude there was no anti-competitive conduct; to open investigations that result in sanctions for those investigated; to open investigations, but end up filing them away because those under investigation agreed to assume a series of commitments, as has happened Google and Apple in several jurisdictions, all in the spirit of setting precedents.

Independent of these outcomes, our economies demand authorities that remain alert, sensitive and efficient, and work to understand the competitive dynamics that play out in particularly complex markets. Likewise, these authorities must not overlook any of the multiple legal tools offered by the Right to Competition – tools that allow them to guarantee their end goals.

Given all this, there are more than enough reasons to remain attentive to the FNE’s analysis and conclusions in relation to these markets; to similar rulings issued by the regular court judges in regards to eventual compensatory demands; and finally to those of the Tribunals for the Defense of Free Competition, if the case isn’t filed away beforehand. We should pay attention to these, and to the actions of all other competent or judicial authorities in the region.

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