On the Yandex case and the dual nature of digital ecosystems

Digital Markets
On the Yandex case and the dual nature of digital ecosystems
Photo: https://www.tcs.com/perspectives/articles/the-view-inside-seizing-opportunities-in-an-ecosystem-economy 20.01.2022 430

The case of the SERP features of Yandex refers to a new type of disputes in antitrust law, which arise from the peculiarities of the development of digital ecosystems. The difference between ecosystems and organizations of the industrial age is that their boundaries are more blurred, and the participants in the ecosystem are both inside and outside it at the same time. The coalition companies that opposed Yandex, in this case, are also members of the Yandex ecosystem (they depend on the search service for their work, and Yandex depends on indexed materials supplied by coalition members to be attractive to its users), but as well as its competitors. The dual nature of their relationship is a distinctive feature of the ecosystem model of business organizations in the digital economy. In this model, economic entities are united by a variety of weak ties that form the fabric of the digital ecosystem.

Challenge for the regulator

There is much debate in the antitrust world today about how to properly regulate these new relationships. A number of cases that have swept across jurisdictions from the U.S. to China in the past couple or three years all share one question: how to resolve disputes between participants in ecosystems that are simultaneously in a synergistic and competitive relationship? Disputes about fees in Apple's ecosystem, about how algorithms work in Meta, about product ranking in Amazon, the requirements for members of the Alibaba or Booking.com ecosystems, and the prioritizing their own services in the Google or Yandex ecosystems. Despite the different nuances, all of this is essentially about the rules of operation of digital ecosystems that bring together many different independent players (be they game developers or product retailers).

In the traditional antitrust of the industrial age, such disputes were relatively rare, since the boundaries of the firm were most often clear — and everything that was covered in the industrial economy by corporate or close contractual ties within a group of persons was perceived in antitrust law as a single economic entity. But in the digital ecosystem economy, the boundaries between internal and external have become so blurred that competition authorities are increasingly forced to deal with disputes between participants and organizers of ecosystems, which cannot be classified as a single business, but are interwoven by a multitude of often poorly formalized connections. These ties nevertheless create a sustainable economic organism, which is called an ecosystem, albeit a digital one. Resolving these ecosystem relationships is a new challenge for antitrust policy worldwide. 

On power and compromise 

So far, there are many difficulties with this. For example, in the European case against Google (commonly referred to as the Google Shopping case), similar to the case of the SERP features of Yandex, the antitrust response measures that the European Commission agreed with Google did not work and, by the admission of the head of the European antitrust regulator, Ms. Vestager, did not lead to an alignment between Google and the participants of its search ecosystem. 

The participants in the case of the Yandex SERP features went to a settlement agreement, which demonstrates the very aspect of codependency, inherent in the digital economy, which creates the conditions for compromise: "Yandex is also dependent on working with the coalition, and the relationship between the players is difficult to regulate by existing antitrust means. The second important characteristic of the reached settlement agreement was that the leaders of the respective market segments were on the side of the coalition, and their negotiating position was very strong. However, small players will not always be able to rely on market self-regulation, as happened in this case. They will rely only on state regulation, which means that the role of the FAS increases when digital giants like Yandex are on one side and small companies on the other. 

On the antitrust update

We observe the regulator's flexibility and its willingness to compromise when it understands the complexity of the antitrust dispute due to the novelty of economic relations. But at the same time, we see the need to change approaches to antimonopoly regulation so that the regulator has more tools and understandable procedures to protect competition in the ecosystem economy. Almost all leading law enforcement agencies have now taken this path: in Europe, a law is being adopted on the gatekeepers of the digital economy, China has a whole set of new rules for ecosystem operations that focus on transparency of algorithms and nondiscrimination of participants; the United States has a large package of initiatives aimed at regulating competition within ecosystems. I hope that in Russia, too, antitrust law will be adapted to these new conditions, so that the regulator can promptly apply measures to protect competition in the ecosystem economy without waiting for lengthy negotiations and compromise decisions by market participants. 

digital ecosystems 

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