TY - JOUR
AU - Davilla, Marixenia
AB - I. Blockchain essentials A. What is Blockchain and how does it work? Blockchain1 is a technology that, similar to the World Wide Web (i.e., the Internet), was born by a desire to transact more freely, with less or no reliance on the State or third parties acting as intermediaries.2 Initially used in relation to Bitcoin,3 blockchain’s practical application has expanded significantly, and appears to be moving into the mainstream.4 Blockchain is believed to eventually become ubiquitous,5 particularly in light of the evolution of Artificial Intelligence, the Internet of Things, the ever growing importance of data, the need for secure storage, management and processing of large datasets, and the meteoric rise in the development and use of all things digital. It is against this background that the European Commission (the ‘Commission’) has launched a programme for the financing of blockchain-related projects.6 But what is blockchain, really? A blockchain is a type of distributed ledger technology (‘DLT’) that employs cryptography, mathematics, and algorithms to record and synchronise data in ‘chains of blocks’.7 Put simply, a blockchain is a database (or ledger), in which data are stored, shared, and synchronised across a distributed network of multiple nodes or computers,8 enabling parties that do not otherwise trust each other to transact on a peer-to-peer basis. Key Points Blockchain technology has been steadily gaining traction, with applications in numerous private and public fields far exceeding those of finance and digital payments. Because of its characteristics and potential pervasiveness, blockchain could also raise competition law issues that, albeit not novel, could be complex and challenging. This paper seeks to unravel some of that complexity by examining recent developments in applied blockchain technology, and exploring the most pertinent EU competition law issues. A variety of digital data can be exchanged in a blockchain, including money, contracts, data pertaining to the clearance of trading positions, the storage and transfer of insurance policies, land titles, medical records, administrative certificates, data concerning the sale and purchase of goods, services or any other asset that can be expressed into a digital form. The way in which blockchain works in practice can be illustrated by the following example: Party A requests to share with Party B digital records concerning the transport of goods. The transaction is broadcast to a distributed network of nodes or computers that in turn will validate it on the basis of an agreed set of rules (a ‘consensus’ mechanism). Once validated, this transaction will be combined with others into a new block that is inextricably linked to the previous and the following blocks. This ‘chain’ of blocks constitutes the blockchain. Each node or computer in the network shares the unique record that forms a blockchain, which is constantly updated and synchronised. See Figure 1. Figure 1 Open in new tabDownload slide How a blockchain works. Source: JRC Report (n 7), 14.9 Figure 1 Open in new tabDownload slide How a blockchain works. Source: JRC Report (n 7), 14.9 B. The different types, generations, and use cases of blockchain Blockchains can be distinguished into four main types Depending on the access rights of the users and their content: (i) public permissionless; (ii) public permissioned; (iii) private permissioned; and (iv) private permissionless.9 There are currently three generations of blockchain technology depending on their use cases:10 In Blockchain 1.0, every transaction is stored in the distributed ledger and is accessible to every participant in the network. Bitcoin is an iteration of Blockchain 1.0. and comprises the following technologies and processes: (i) mining;11 (ii) hashing; and (iii) the public ledger. The so-called ‘miners’ are entities solving the mathematical puzzle required to check the data and verify each block.12 Blockchain 2.0 introduced smart contracts.13 These are codes that can be trusted to self-execute if a set of pre-specified conditions are met. Smart contracts are considered to be immutable, trustless, and secure. Blockchain 3.0 is deployed in a much broader range of fields, including healthcare, supply chain, resource management, identification, smart city, the energy industry, and device management. Currently, the applications and use cases of blockchain technology are limitless.14 C. The key features of blockchain, and the other side of the coin The main features of blockchain are: (i) decentralisation; (ii) tamper-resistance; (iii) transparency; and (iv) security. Each of these is addressed in turn below. 1. Decentralisation Unlike traditional transactional systems, blockchain technology enables performance and execution of transactions without intermediaries. Trust between blockchain participants is established through a consensus mechanism, i.e., a set of rules used to verify, validate, and add transactions to the blockchain. The most widely used consensus mechanism is known as ‘proof of work’ (‘PoW’) that relies on the processing power of nodes or computers to solve a complex mathematical problem within the shortest time possible. Alternative consensus mechanisms, such as ‘proof of stake’ (‘PoS’) are also used in the context of cryptocurrencies.15 The PoS attributes mining power to the proportion of coins held by a miner.16 The absence of a central entity controlling the blockchain and the existence of multiple distributed nodes is believed to render blockchain much more resilient and safer from attacks compared to other types of databases and transaction platforms. For instance, in April 2021, an incident occurred on the Stellar blockchain causing the entirety of the node to go down. Despite this issue, Stellar remained online and continued processing transactions.17 In reality, however, few blockchains are truly decentralised. As regards public blockchains, such as Bitcoin and Ethereum, the process of mining is concentrated between a limited number of participants, including large scale mining pools.18 In such an environment, the risk of collusion or attack by a group of participants controlling most of the computational resources (‘51% risk attack’ also referred to as the ‘tragedy of commons’)19 is considerable.20 Like PoW, the PoS consensus mechanism could—at least in theory—also raise security concerns.21 As regards private permissioned blockchains, such as Ripple or Hyperledger, these follow a centralised or semi-centralised model, whereby a group of administrators is entrusted with preselecting participants and granting access to use the blockchain, thus retaining significant control over the blockchain. Arguably, this model re-introduces to some extent reliance on a third party, and could potentially lead to arbitrary selection decisions as well as an increase in transaction costs.22 Decentralisation can also be time-consuming, impractical, and costly. For instance, public permissionless blockchains such as Bitcoin or Ethereum reportedly have limited scalability and performance.23 In addition, the PoW mechanism requires high energy consumption. Notably, Bitcoin currently consumes approximately 110 Terawatt Hours per year, which amounts to 0.55% of global electricity consumption.24 2. Tamper-resistance Blockchain is not immutable, but tamper-resistant.25 This means that it is extremely hard to change or delete the record of transactions taking place in a blockchain. Changes could only be implemented through consensus or a ‘51% attack’. Blockchain also enables the non-repudiation and non-forgeability of the data and transactions stored therein by ensuring that there is a unique, historical version of that data that is agreed and shared amongst all blockchain participants. Moreover, any modification in the blockchain would be visible to all participants, making it nearly impossible to apply changes to the information stored on the blockchain that would go undetected by the other parties. 3. Transparency The degree of transparency offered by a specific blockchain differs between public (open) and private blockchains. In public blockchains, the ledger or blockchain is accessible to all participants. This means that anyone can connect to the network through the internet and access and/or update the ledger according to the consensus mechanism in place, and that transactions taking place on public blockchains are fully transparent and visible. By contrast, in private blockchains only a predefined set of participants can access and/or update the ledger and have visibility into the transaction. Transparency is advantageous in that it increases the auditability and trust in the network.26 However, transparency can also facilitate collusion to the extent that it enables access to competitively sensitive information, as discussed in Section II.A below. 4. Security Blockchain technology offers enhanced security in the manner in which data are stored, verified, and processed. As noted above, the data that are recorded and time-stamped in a blockchain cannot be modified, enabling the clear identification of the party making a specific transaction and the verification of the data recorded at a given point in time. The authenticity and integrity of data exchanges or transactions on the blockchain is ensured through public–private key cryptography.27 Each participant is assigned a distinct identity through a combination of public keys, which are shared widely with others in the network, and private keys, which are kept secret. Accordingly, messages encrypted with a public key, can be decrypted only with the private key of each recipient. Similarly, messages or transactions encrypted with a private key can be accessed only by those recipients with whom the owner of the private key shares the corresponding public key. But the security shield offered by blockchain is not impenetrable. For instance, cryptographic protocols offer pseudonymisation, not complete anonymisation.28 Cryptographic protocols such as ‘zero-knowledge proofs’ have been developed to enhance encryption and/or to conceal details about transactions.29 Moreover, blockchains are not immune to security risks due to bad key management by individuals or the hacking of keyword storage systems.30 Crucially, quantum computers with unprecedented computing power could, in future, pose a very credible and serious threat on the security of blockchain-based systems.31 This risk has led to the development of post-quantum cryptographic algorithms used to support the new generation of quantum-resistant ledgers.32 D. Blockchain consortia Since the inception of blockchain technology, a number of consortia—including between competitors—have developed blockchains, many of which are permissioned. Notable examples include: R3, a consortium counting north of 300 members, including some of the largest financial institutions. R3 has developed Corda, a DLT application development platform that has facilitated hundreds of blockchain networks across trade finance, insurance, capital markets and banking, and Conclave, a confidential computing platform for developing applications that enable multiple parties to securely share and analyse data.33 Marco Polo, a trade finance solution leveraging DLT piloted in September 2017 by BNP, Commerzbank, ING, the trade finance technology specialist TradeIX and R3. Since its launch, Marco Polo has attracted significant interest from the global banking community, with additional banks including Standard Chartered, DNB, and OP Financial Group joining.34 Tech giants like IBM35 and Microsoft36 have been developing and providing blockchain solutions to customers active in a multitude of sectors. TradeLens,37 a blockchain initiative for ocean shipping started by Maersk and IBM, signed up other global container vessel carriers. In the United States, federal approval is required for the creation of blockchain consortia amongst competitors, and TradeLens obtained such an approval.38 In Europe, TradeLens should presumably also be compatible with the Commission decision39 rendering legally binding commitments offered by fourteen container liner shipping companies.40 The Cardano Foundation and Scantrust announced a supply chain traceability and anticounterfeit blockchain aiming at enhancing transparency, promote trust, and assist brands with customer retention.41 E. Recent trends in NFTs, cryptocurrencies, and other types of DLT In the last couple of years, there have been a number of developments in the application of blockchain technology. One such noteworthy development is the increased use of non-fungible tokens (‘NFTs’).42 An NFT is a unit of data stored on a blockchain that certifies a digital asset such as photos, videos, audio, and other types of digital files to be unique and therefore not interchangeable.43 In essence, an NFT is a digital certificate of authenticity, a proof of ownership that is separate from copyright.44 Similar to other types of data stored in blockchains, any changes in ownership of an NFT are verified by a worldwide network and logged in public, and the chain of custody is marked in the file permanently making it practically impossible to falsify the digital asset. The NFT market value tripled in 2020, exceeding USD 250 million.45 In 2021, the use of NFTs has increased exponentially, particularly in relation to collectible digital assets in art, music, sports, and other types of entertainment. Most recently, the creator of the World Wide Web announced that he would be selling the code as an NFT.46 Furthermore, the COVID-19 crisis is believed to have amplified and accelerated paradigm shifts in digital currency and payments that were in motion already after the 2008 financial crisis.47 Bitcoin prices have skyrocketed following announcements by Tesla,48 PayPal,49 Mastercard,50 and BNY Mellon51 supporting the use of digital currency. What is more, in the context of a reference for a preliminary ruling, the Court of Justice affirmed Bitcoin’s nature as a virtual currency offering a direct means of payment between the operators that accept it.52 To date, Bitcoin appears to have solidified as the platform of choice for cryptocurrency trading and payments.53 That said, since the launch of Bitcoin, there has been a surge of alternative cryptocurrencies, including the 2019 failed release of Facebook’s Libra,54 and Elon Musk’s now seemingly favourite cryptocurrency, Dogecoin.55 Venezuela even launched the first sovereign cryptocurrency, Petro, apparently backed by oil.56 The recent health crisis has also been a catalyst for fintech innovation and the ever increasing demand for digital services, with online start-ups and digital platforms expanding their offering into credit and payments.57 This trend has fostered expectations of increased ‘co-opetition’ between financial and tech platforms with banks and regulated financial institutions. Moreover, Big Tech is expected to benefit from banks’ large customer base and access to data, as well as to issue global stablecoins.58 There is currently no uniform legal framework as regards cryptocurrency-based transactions and the transfer of tokenised digital assets. However, given the extreme volatility observed in cryptocurrency trading, particularly during the second half of 2020 and the first half of 2021, efforts for the adoption of regulation and scrutiny of cryptocurrency-based transactions have increased significantly. The US Treasury Secretary has repeatedly expressed the intention to adopt cryptocurrency regulation,59 that could also include consumer protection and environmental impact provisions.60 A number of European countries have recently announced their plans for the regulatory standardisation and institutional adoption of cryptocurrencies: Notably, legislation entered into force in summer 2021 in Germany enables so-called ‘Spezialfonds’ (funds similar to Luxembourg’s Special Investment Funds and Ireland’s Qualifying Investor Funds) to invest up to 20% of their portfolios in cryptocurrencies.61 The Bank of England announced on 7 June 2021 that, if payments with stablecoins start to become widely used, they should be regulated in the same way as payments handled by banks.62 Ireland effectively ended the anonymous cryptocurrency trading and purchases following the implementation of the EU’s Fifth Anti-Money Laundering Directive63 on 23 April 2021. Accordingly, businesses dealing primarily in cryptocurrency have a three-month period to register with the Central Bank, and must comply with the ‘know-your-customer’, anti-money laundering, and counter-terrorism financing requirements that are applicable to banks and financial institutions. Spain’s Ministry of Finance issued a warning that cryptocurrency-based transactions are taxable and that cryptocurrency holders must disclose their holdings.64 Unsurprisingly, litigation concerning blockchain technology, in particular cryptocurrencies, has increased exponentially in the past decade particularly in the United States.65 Antitrust litigation, however, as opposed to ‘unfair competition’ claims66 remains low: to date, there have been two known cases brought in the US courts pursuant to Section 1 of the Sherman Act.67 All of these developments suggest that blockchain technology, digital currencies and NFTs not only are here to stay but their use will likely continue to expand in the future. The following sections discuss some of the most pertinent EU competition and merger control issues that could arise in relation to blockchain, as well as the possible relevance of recent proposals to regulate digital platforms in the EU. II. EU competition issues arising in relation to Blockchain In assessing whether particular agreements or behaviour taking place through blockchain technology could infringe EU competition rules, it is useful to distinguish between the different types of blockchains, namely, public vs private, and permissionless vs permissioned blockchains. Further, a distinction may be drawn between the behaviour and actions taken by (i) the blockchain itself, i.e., those entities controlling the blockchain, (ii) the users of the blockchain and in particular downstream competitors, and (iii) third parties, notably, rivals of the blockchain such as banks and online platforms offering financial services or entities supplying inputs to the blockchain, such as developers of validation hardware/software.68 A. Collusion 1. Cartels, information exchange, and tacit coordination Prima facie, a blockchain appears to offer a fertile soil for collusion, provided of course that the criteria for applying Article 101(1) of the Treaty on the Functioning of the European Union (‘TFEU’)69 are met, that is, the existence of an agreement between undertakings, a decision by an association of undertakings or a concerted practice that has the object or effect of restricting competition in the common market. Collusion could, in theory, occur between the entities enabling the functioning of the blockchain, such as the blockchain administrators, the miners or mining pools who could influence the validation process to exclude rivals, fix prices or share customers or geographic markets. Questions may arise as to whether the miners qualify as ‘undertakings’, and whether they operate as individuals working as independent service suppliers, or in the capacity as employees or contractors of mining companies.70 Perhaps a more pertinent scenario would feature the users of a blockchain entering into a cartel through an anticompetitive agreement or a concerted practice.71 Smart contracts72 could also be used to facilitate collusion. For instance, a smart contract could incorporate instructions that would align competitors’ prices and costs, compensate them for complying with the collusive arrangement, and automatically punish any deviations from the collusive arrangement. Such arrangements could allow firms to soften price competition through low-price guarantees, most-favoured-nation clauses, or across platform parity agreements.73 As the potentially anticompetitive instruction will be memorialised in the code of a smart contract, it would be akin to a written collusive agreement that restricts competition by object. Collusion between the users of a blockchain could also materialise through the exchange of strategic information on the blockchain itself. Moreover, similar to a horizontal co-operation agreement, a blockchain consortium between rivals could also facilitate information exchange and affect their pricing decisions, not only in the product markets concerned by the blockchain but also in neighbouring or downstream markets.74 For example, if all or most of the companies competing for the supply of a specific good or service use the same blockchain to transact with their customers they could, theoretically, access strategic or competitively sensitive information of their rivals through the blockchain. This would enable competitors to align their behaviour in the form of price fixing, market sharing, or information exchange that reduces uncertainty about the competitors’ future behaviour, output or sales limitations, or pay for delay agreements. What is more, transparency in the blockchain would enable the blockchain users to detect any deviation by cartel participants. Information is considered to be strategic when it relates to prices (for example, actual prices, discounts, increases, reductions, or rebates), customer lists, production costs, quantities, turnovers, sales, capacities, qualities, marketing plans, risks, investments, technologies, and R&D programmes and their results. The strategic usefulness of data depends inter alia on its aggregation and age, as well as the market context and frequency of the exchange.75 In general, exchanges of company level data are more likely to be considered problematic. By contrast, the exchange of genuinely aggregated data is unlikely to give rise to restrictive effects on competition, unless it takes place in a tight oligopoly whereby even anonymous deviations from the collusive outcome could be easier to detect.76 Furthermore, in the absence of an explicit agreement to collude, the mere transparency offered by a market-wide blockchain, particularly in oligopolistic markets, may well reduce strategic uncertainty regarding competitors’ future operation in the market and facilitate tacit coordination between rival firms without them having any direct or indirect contact, or any (formal or informal) agreement. The risk of collusion or tacit coordination could be exacerbated by the use of algorithms. According to the 2019 Bundeskartellamt Report on Algorithms and Competition,77 potential competition concerns in such a scenario could, inter alia, depend on the content of the algorithmic alignment as well as market coverage. Notably, an alignment of prices or price parameters at code level will likely constitute a restriction of competition by object, whereas an alignment at data level would likely amount to information exchange. It is important to note, however, that companies are not deprived of the right to adapt themselves intelligently to the existing or anticipated conduct of their competitors.78 Accordingly, it is often extremely hard to determine whether the setting of a specific price by two rivals through the use of algorithms has an anticompetitive object or effect, or whether the algorithm naturally selected the competitively optimum price.79 Pursuant to EU court case law, one of the key questions in determining whether algorithmic communication amounts to an infringement of Article 101(1) TFEU is whether the competitors who are using the algorithm provided by a third party to set their prices are aware of that third party’s anticompetitive acts, or could at least reasonably have foreseen them.80 The risk of collusion appears greater in private or public permissioned blockchains created by consortia of companies competing in the same or neighbouring markets, or the users of which are competitors in concentrated industries. A permissioned blockchain could also be used to put into effect anticompetitive vertical arrangements between suppliers of an input and their distributors, for instance, by agreeing fixed or minimum resale prices or export bans. Albeit more limited, the risk of collusion also exists in public permissionless blockchains. As regards the entities enabling the functioning of the blockchain, such a risk could arise in circumstances in which the activity of mining and validating the blocks is highly concentrated or dependent upon a limited number of participants, including large scale mining pools. Absent such power, however, an attempt by miners or mining pools to influence the validation outcome of a public permissionless blockchain to achieve an anticompetitive objective appears unlikely given the decentralised nature of public blockchains and the need for consensus amongst the validators of the blocks in the chain.81 As regards the users of a public permissionless blockchain, as noted above, cryptographic protocols offer pseudonymisation, but not complete anonymisation, which could enable certain blockchain users to collude and identify any deviations from the collusive outcome. Detection and enforcement challenges as regards collusive arrangements concluded through private or public permissioned blockchains or smart contracts appear to be low. In those instances, it is easier to identify the central entity or consortium of entities governing the blockchain, the permissioned validators of the information and transactions that are recorded in the blockchain, and the parties to a collusive smart contract. Greater challenges may arise, however, in a scenario of collusion through public permissionless blockchains, in which the fundamental elements of Article 101(1) TFEU, namely, the notion of ‘undertaking’, the existence of an agreement and a concurrence of wills could be harder to establish.82 2. Possible ways to reduce the risk of collusion through a blockchain Albeit not novel, these issues are as interesting as they are challenging. Ensuring compliance with the applicable competition laws requires continuing diligence and vigilance both amongst the entities operating a blockchain and amongst industry participants in a blockchain. In particular, participants in blockchain consortia must ensure that the way in which they set their prices, quantities, distribution, and other contractual terms for the sale of their products or services remains independent of those of the competitors that are also participants in the same blockchain, and if they suspect that the blockchain is used as a means of collusion, they must take steps to actively distance themselves. Similarly, the owners of firms using a blockchain must have direct access to the information on that blockchain to ensure the proper oversight on their subsidiaries and foreign holdings, and the implementation of compliance programs.83 Compliance with competition rules on the blockchain itself is feasible through a number of ways. For instance, instead of storing and sharing strategic information on the blockchain, such data could be stored ‘off-chain’ or in other databases and linked to the blockchain through a hash reference or pointer, while access to the original data could be restricted to authorised parties. Alternatively, a blockchain could have a built-in off-chain decentralised database. One example is the European Financial Transparency Gateway (‘EFTG’),84 a pilot project developed to further the EU Capital Markets Union initiative by increasing financial transparency and facilitating investors’ access to regulated financial information, in line with the Transparency Directive85 and the European Electronic Access Point (‘EEAP’) Regulation.86 DLTs were used to build a distributed and decentralised platform system tailored to the business needs of Member State entities referred to as officially appointed mechanisms (‘OAMs’) in fulfilling the legal obligation to implement an EEAP. See Figure 2. Figure 2 Open in new tabDownload slide The EFTG architecture. Figure 2 Open in new tabDownload slide The EFTG architecture. Alternatively, a hybrid or private blockchain could be used that enables the configuration of different levels of access to the information stored on the blockchain on a case by case basis, depending on whether it pertains to competitively strategic, personal, or other sensitive data. One possible way to ensure compliance and avoid uncertainty would be to grant competition agencies access to permissioned blockchains, for instance, by creating their own node.87 This would enable authorities to monitor trading prices in real-time and identify any suspicious trends, as well as to obtain the necessary data when investigating a conduct or merger. It is highly questionable, however, whether such upfront type of intervention would be necessary, proportionate, and more generally warranted as a matter of principle and ethics: company and private data would be under constant monitoring by the State, which would annihilate the very purpose of blockchain and potentially render it unusable. B. Abuse of a dominant position Similar to other digital platforms, blockchain technology may also raise abuse of dominance issues. Such behaviour could manifest itself in exclusionary88 or exploitative types of abuse, and could either affect the competitiveness of the blockchain itself or reduce rivals’ access to an essential blockchain. For example, incumbent financial services providers such as banks, transport carriers, or insurance companies could engage in rent seeking89 behaviours by trying to influence governmental agencies in order to delay blockchain adoption, raise rivals’ costs, blocking transactions taking place in cryptocurrency or through a blockchain, or engaging in vexatious litigation.90 Assuming that such incumbents are found to enjoy a dominant position in a properly defined antitrust market, engaging in such actions could be considered as an abuse under Article 102 TFEU. Similarly, the incumbent payment or sales platform could force merchants to charge consumers the same fee concerning blockchain transactions as that charged for transactions taking place on the digital platform using fiat currency. That would reduce the merchants’ ability to attract customers to use blockchain payment methods, which could, in turn, raise the costs of new entrants using blockchain technology and preventing them from expanding their scale which is necessary for them to grow and compete effectively on the market. Predatory pricing practices or exclusivity rebates could also be envisaged. For instance, the incumbent payment or sales platform or a dominant blockchain could offer their services below cost to induce customers’ loyalty and grow its scale at the expense of rival blockchain platforms. The Article 102 Guidance Paper provides the Commission’s methodology in assessing such practices.91 In essence, the Commission will examine whether the prices charged by the dominant blockchain to its customers for the provision of its services covers a certain relevant cost measure such that an as efficient rival (i.e., a rival offering services similar to those offered by the dominant blockchain in terms of technology and costs) would be able to profitably compete. A number of challenges may arise in determining whether a dominant firm engages in below cost pricing that could result in anticompetitive foreclosure, an issue neither novel nor unique to blockchain technology. In addition, an entity owning a private permissioned blockchain that has become an essential input for rivals to compete in the market or a blockchain consortium the members of which jointly control such a blockchain could exclude rivals or raise their costs of rivals outside of the consortium by refusing rivals’ access to such an essential input. It must be noted, however, that for such a refusal to constitute an abuse of a dominant position under Article 102 TFEU a number of strict cumulative criteria must be met. A company cannot, as a matter of principle, be forced to grant access to or license proprietary software to third parties92 unless it is dominant in a relevant upstream market and the following cumulative criteria are satisfied: (i) Access to the blockchain technology in question is objectively necessary for rivals to be able to compete effectively on the downstream market; (ii) The refusal to grant access to the blockchain is likely to lead to the elimination of effective competition on the downstream market; and (iii) The refusal is likely to lead to consumer harm.93 Exploitative types of abuse could also be envisaged. For instance, assuming that a given blockchain, cryptocurrency or cryptocurrency exchange has become the dominant platform on which to transact or the dominant payment method or exchange platform, then, in the absence of a competitive threat by an equally attractive blockchain or platform, the dominant blockchain could raise its fees at exploitative levels despite not being the most competitive solution from a technological perspective. Nevertheless, excessive pricing appears highly unlikely at this early stage of blockchain technology adoption with new blockchains, forks of blockchains, and new cryptocurrencies sprouting by the day and challenging Bitcoin’s position. Importantly, given the inherent difficulty in determining what price level is excessive, it is unsurprising that the Commission has pursued very few such cases in recent years.94 Similar exclusionary and exploitative types of abuse could also affect dominant suppliers of upstream inputs that are required for blockchains to operate, such as companies supplying hardware that is required for mining tokens or mining companies providing their services to various blockchains. Moreover, vertically integrated companies that are dominant in the supply of mining hardware and compete with blockchains using such hardware or with companies active in the supply of products or services that are offered through a blockchain could also be involved in margin squeeze or leveraging practices from the upstream onto the downstream markets. Again, none of these issues is novel. The Article 102 Guidance Paper and the Commission’s enforcement practice in cases concerning digital platforms whose business models rely heavily on user data, notably, the recent Google, Apple, Amazon, and Facebook cases,95 could be used as a reference point in assessing possible abuse of dominance issues pertaining to blockchain and cryptocurrency. III. Standardisation of blockchain technology The development of standards pertaining to blockchain technology is ongoing and is considered critical to its further expansion and use. A number of standard setting organisations (‘SSOs’) are currently exploring the standardisation and/or the further development and dissemination of blockchain technology. For instance: The Institute of Electrical and Electronics Engineers (‘IEEE’) has formed several blockchain groups,96 including: (i) Project 2418.1 to develop a standard framework for the use of blockchain in Internet-of-Things applications;97 (ii) P2418.3—Standard for the Framework of Distributed Ledger Technology (DLT) Use in Agriculture;98 and (iii) Project 2418.5 to develop a guide for interoperability of blockchains for energy transaction applications.99 The International Standards Organisation (‘ISO’) has created Technical Committee 307 (‘ISO/TC 307’) to examine the need for the adoption of a technical standard for interoperability concerning blockchain and DLT more general.100 The Blockchain in Transportation Alliance (‘BiTA’) formed in 2017 and counting nearly 500 members spanning the transportation, logistics, supply chain, freight, technology, and blockchain sectors101 focuses on the use of blockchain in freight payments, asset history, chain of custody, smart contracts, and other related uses. Hyperledger is a blockchain standard project and associated code base that is hosted by the Linux Foundation and focuses on finance, banking, Internet-of-Things, and manufacturing.102 The Enterprise Ethereum Alliance has released an architecture stack that forms the basis for an open-source, standards-based specification with the objective to advance the adoption of Ethereum solutions for commercial, permissioned networks (referred to as ‘Enterprise Ethereum’).103 The Commission considers that standardisation agreements normally increase competition, enhance quality, ensure interoperability and compatibility, and lower output and sales costs.104 Nevertheless, standard-setting can, in certain circumstances, give rise to competition concerns. This could be the case, for instance, when it results in the reduction of price competition, the foreclosure of innovative technologies and the exclusion of, or discrimination against, certain companies by preventing them of effective access to the standard.105 To avoid such risks, SSOs, as well as participants in SSOs should ensure that the standard-setting agreement and relevant framework does not contain any provisions that could restrict competition law. This can be achieved by ensuring that participation in standard-setting is unrestricted and the procedure for adopting the standard in question is transparent, the standardisation agreements contain no obligation to comply with the standard and provide access to the standard on fair, reasonable, and non-discriminatory (‘FRAND’) terms.106 The purpose of FRAND commitments is to prevent holders of IPRs declared as being essential to the development of a specific standard from refusing to license third parties or requesting unfair or unreasonable fees (in other words excessive fees) after the industry has been locked-in to the standard or by charging discriminatory royalty fees.107 Nevertheless, standardisation does not eliminate the risk of the creation of a dominant position in the standardised technology,108 the risk of ‘patent wars’,109 or disputes arising in relation to the exercise of a dominant SEP holder’s right to seek injunctions and/or product recalls against a party that is infringing its SEPs. In this regard, the fairly recent preliminary ruling of the Court of Justice in Huawei/ZTE110 has sought to establish the legal standard for a FRAND defence in EU competition law as a basis for resisting injunction requests in respect of alleged infringement of an SEP and to clarify the process and steps to be followed by dominant SEP holders prior to submitting an injunction so as not to be considered as abusing a dominant position under Article 102 TFEU. However, that judgment has also been criticised for having adopted a formalistic and stylised test that is largely divorced from business reality and licencing negotiations, and for diverging from the Commission’s decisions in Motorola and Samsung as it imposes on the implementer/infringer more obligations than had been proposed by the Commission in those cases.111 Participants in the blockchain standardisation process and SEP holders should thus enjoy patent peace while it lasts whilst being prepared to engage in lengthy litigation, if necessary. IV. Merger control The EU Merger Regulation112 applies to transactions concerning blockchain technology provided that the notification thresholds are met. To date, the Commission has examined concentrations in the blockchain space, mostly joint ventures (‘JVs’) that were cleared through simplified procedures. For instance, in MUFG HD/AKAMAI/JV,113 the Commission assessed the notification of an agreement between Mitsubishi UFJ Financial Group, Inc. and Akamai Technologies, Inc. by which the parties acquired joint control of a newly created JV for the provision of a blockchain-based online payment network in Japan. In IBM/MAERSK/GTD JV,114 the Commission examined the creation of the GTD Operations LLC JV, active in the development and commercialisation of a trade digitisation solution for the global shipping supply chain that will provide end to end shipment visibility and document management for global trade. The recent Archipels115 case marks the first instance in which the Commission assessed on substance the creation of a JV (Archipels)116 by a private blockchain consortium (between the Caisse des Dépôts et Consignations (‘CDC’), EDF, Engie, and La Poste). In assessing whether Archipels’ possible exclusive access to EDF’s and Engie’s data could lead to input foreclosure, the Commission applied the methodology provided by the Non-horizontal Merger Guidelines.117 Having examined the specificity of the data in question as an input for downstream rivals, the Commission considered whether EDF and Engie had the ability and the incentive to refuse access to their customer’s data, to charge higher prices or to degrade the quality of the data provided to Archipels’ competitors.118 Although EDF and Engie were found to jointly hold a significant share of the data in question, the Commission held that it would be unlikely that they would be able to foreclose Archipels’ rivals as a significant portion of alternative data sources remained available. As regards their incentives to foreclose downstream rivals, internal documents provided by the parties showed that EDF and Engie intended to monetise their data, including by selling access to Archipels’ competitors. Accordingly, the Commission concluded that the vertical ties between EDF, Engie and Archipels would not give rise to serious competition concerns. It is noteworthy, however, that in a similar but problematic case, the Commission would likely require that the parties offer structural data access remedies.119 V. Upcoming regulation of digital platforms could also affect blockchains On 15 December 2020, the Commission published a proposal for the Digital Markets Act (‘DMA’)120 and the Digital Services Act (‘DSA’)121 that are expected to be adopted in mid-2022 and enter into force by 2023. These proposals represent an enormous shift of the Commission’s regulatory powers in digital markets and significantly increase the regulatory burden on designated companies. The draft DMA targets so called ‘unfair’ practices by large online platforms (‘gatekeepers’) that fall outside or cannot be effectively addressed by existing EU antitrust rules, and is without prejudice to the application of Articles 101 and 102 TFEU.122 The DMA’s definition of ‘gatekeepers’123 and ‘core platform services’124 could, at least in theory, also capture blockchains. However, this appears highly unlikely at present, unless the blockchain in question is owned by one of the tech giants, namely, Google, Apple, Facebook, or Amazon. The draft DMA identifies seven ex ante prohibited practices125 and 11 problematic practices126 that require further examination and potential ex post prohibition when gatekeepers engage in them. Fines of up to 10% of global turnover,127 periodic penalties128 and structural separation129 are provided in case of systematic non-compliance. The Directorate-General for Communications Networks, Content and Technology will be in charge of enforcing the DMA, although there may be some enforcement overlap with the Directorate-General for Competition in cases of an abuse of a dominant position by a ‘gatekeeper’. The draft DSA concerns intermediaries, online platforms and very large online platforms with more than 45 million active users,130 and focuses on transparency and consumer protection.131 Fines of up to 6% of global turnover and restriction of access to platforms are foreseen in case of non-compliance. National regulators assisted by proposed European Board for Digital Services (‘EBDS’) will be responsible for applying the DSA. Like the DMA, the DSA could, theoretically, also capture blockchains, although this appears unlikely at present. A. Epilogue Assuming that blockchain technology will continue to evolve and expand in various fields, it will most certainly raise complex competition law issues. Albeit highly technical, those issues would most likely be neither truly novel nor unique. What is of concern—if not daunting—is that technology advances at such a high pace that antitrust watchdogs and courts may be ill-equipped to monitor any possible infringements of the applicable competition rules. Crucially, the ex post application of the EU antitrust rules in lengthy investigations may prove inefficient, and the administration of justice somewhat belated. Is regulation then the solution? Even assuming it were feasible,132 strict competition regulation at this fairly early stage of adoption of blockchain technology seems to be dangerously premature, for it would risk defeating the very purpose of blockchain and stifling innovation.133 Similarly, requiring companies and consortia to grant the Commission access to any public or private permissioned blockchains ex ante would likely raise proportionality and ethical concerns. In light of the above, in the foreseeable future, the Commission will likely continue applying the existing antitrust and merger control framework to future cases pertaining to blockchain technology, possibly also through creative theories of harm, in conjunction with interim measures orders, where required.134 The application of EU competition rules to blockchain technology is expected to be as interesting as it will be challenging. Footnotes 1 Blockchain has even been thought as potentially signifying the ‘death of antitrust’. See Thibault Schrepel, ‘Is blockchain the death of antitrust law? The blockchain antitrust paradox’ (2019) 3 Georgetown Law Technology Review 281. 2 See, e.g., Ethereum’s manifesto (available at https://ethereum.org/en/) stating the following: ‘A fairer financial system: Today, billions of people can’t open bank accounts, others have their payments blocked. Ethereum’s decentralized finance (DeFi) system never sleeps or discriminates. With just an internet connection, you can send, receive, borrow, earn interest, and even stream funds anywhere in the world’. See also Ioannis Lianos, ‘Blockchain Competition’ (2018) Centre for Law, Economics and Society, Research Paper Series: 8/2018. 3 The first digital currency launched in 2009. See https://bitcoin.org/en/. 4 J.P. Morgan Perspectives ‘Blockchain, digital currency and cryptocurrency: Moving into the mainstream?’ (21 February 2020). 5 Brad Finney, ‘Blockchain and antitrust: New tech meets old regs’ (2018) Transactions 19 Tennessee Journal of Business Law. 6 Commission, Shaping Europe’s digital future, Blockchain funding and investment, available at https://digital-strategy.ec.europa.eu/en/policies/blockchain-funding. See also Commission, Blockchain Strategy, available at https://digital-strategy.ec.europa.eu/en/node/34/printable/pdf, stating the Commission’s intention to develop an EU strategy on blockchain and build a blockchain infrastructure for public services through the creation of the European Blockchain Partnership initiative. 7 Commission Joint Research Centre (‘JRC’) Report ‘Blockchain now and tomorrow: Assessing multidimensional impacts of distributed ledger technologies’ (2019). Although all types of blockchain are DLTs, not all DLTs are blockchains. 8 See, e.g., Aaron Wright and Primavera De Filippi, ‘Decentralized blockchain technology and the rise of lex cryptographia’ (2015), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2580664; Rosamond Hutt, ‘All you need to know about blockchain, explained simply’, (2016) World Economic Forum; and https://www.youtube.com/watch?v=6WG7D47tGb0&t=4s. 9 JRC Report (n 7), 14. 10 See Akram et al, ‘Adoption of blockchain technology in various realms: Opportunities and challenges’ (2020) Wiley Online Library. See also Thibault Schrepel ‘Collusion by blockchain and smart contracts’ (2019) Harvard Journal of Law & Technology vol 33. 11 On average, 144 blocks are mined per day and there are 6.25 bitcoins per block. See https://www.buybitcoinworldwide.com/mining/profitability/. 12 Miners receive 6.25 Bitcoins as a reward. See https://www.buybitcoinworldwide.com/mining/profitability and https://www.buybitcoinworldwide.com/how-many-bitcoins-are-there/. 13 Ethereum is an example of a blockchain running on smart contracts. See https://ethereum.org/en/developers/docs/smart-contracts/. 14 Akram et al (n 10), 4. 15 Bitcoin and Litecoin (LTC) use the PoW method. Nxt (NXT) uses the PoS method. Some coins like Peercoin (PPC) use a mixed system where both methods are incorporated. Currently, Ethereum (ETH) is in the process of switching to a PoS system. See ‘Proof of Stake (PoS)’ Investopedia, available at https://www.investopedia.com/terms/p/proof-stake-pos.asp#:∼:text=Proof%20of%20Work%20 (POW)%20requires,coins%20held%20by%20a%20miner. See also Kazuhiro Gomi, ‘Are Blockchains Vulnerable, Slow And Unfair?’ Forbes (21 June 2021). 16 Investopedia PoS page (n 15). 17 Michael McSweenee, ‘Stellar hit by transaction issues, developers say “network is still online” despite node outage’ The Block (6 April 2021), available at https://www.theblockcrypto.com/linked/100649/stellar-network-stoppage-developers-investigation. 18 See Olga Kharif, ‘Bitcoin’s Network Operations Are Controlled by Five Companies’ Bloomberg (31 January 2020); Raynor de Best, ‘Market share of 15 Bitcoin (BTC) mining pools on April 14, 2021’ Statista (14 April 2021); Schrepel (n 10); and Lianos (n 2). 19 Investopedia PoS page (n 15). 20 JRC Report (n 7), 16. 21 However, such a risk appears less likely. This is because with a PoS, the attacker would need to obtain 51% of the cryptocurrency to carry out a 51% attack. Clearly, it would not be in the best interest of a miner with a 51% stake in the coin to attack a network in which they hold a majority share. 22 Chris Pike and Antonio Capobianco, ‘Antitrust and the trust machine’ OECD (2020). 23 See, e.g., David Schatsky et al, ‘Blockchain and the five vectors of progress’ Deloitte Insights (28 September 2018). See also Kenny L., ‘The Blockchain Scalability Problem & the Race for Visa-Like Transaction Speed’ Towards Data Science (30 January 2019). 24 Nic Carter, ‘How Much Energy Does Bitcoin Actually Consume?’ Harvard Business Review (5 May 2021). This concern was highlighted recently by one of Bitcoin’s most vocal and influential supporters, Elon Musk, Tesla’s founder and CEO, who announced on 13 May 2021 that Tesla had suspended vehicle purchases using Bitcoin due to concerns raised by the increased use of fossil fuels for Bitcoin mining and transactions (see https://twitter.com/elonmusk/status/1392602041025843203). The PoS mechanism is thought to be less energy intensive. This is because, instead of using energy to answer PoW puzzles, a PoS miner is limited to mining a percentage of transactions that is reflective of their ownership stake. For instance, a miner who owns 3% of the coins available can theoretically mine only 3% of the blocks (see Investopedia PoS page (n 15)). 25 JRC Report (n 7). 26 Ibid. 27 Ibid. 28 Francisco José de Haro-Olm et al., ‘Blockchain from the Perspective of Privacy and Anonymisation: A Systematic Literature Review’, (2020) MDPI Journals Sensors, 20, 7171; available at https://doi.org/10.3390/s20247171, noting that ‘pseudonymisation is not a method of anonymisation, but a technique that reduces the linkage of a data set with the original identity to which it belongs’. See also Steven Goldfeder et al., ‘When the cookie meets the blockchain: Privacy risks of web payments via cryptocurrencies’ (2017), available at https://arxiv.org/abs/1708.04748. This means that, while Bitcoin transactions are not linked to the users’ identities, they can, in certain, circumstances be de-anonymised. 29 ‘Zero-knowledge proofs’ is a set of tools that allow a piece of information to be validated without the need to expose the data that demonstrate it. This can be achieved through a series of cryptographic algorithms on the basis of which a ‘tester’ can mathematically demonstrate to a ‘verifier’ that a computational statement is correct without revealing any data. See Teresa Alameda, ‘Zero Knowledge Proof: how to maintain privacy in a data-based world’ BBVA (23 June 2020), available at https://www.bbva.com/en/zero-knowledge-proof-how-to-maintain-privacy-in-a-data-based-world/. 30 ENISA Report, ‘Distributed Ledger Technology & Cybersecurity Improving information security in the financial sector’ (2016). See also Gomi (n 15). 31 Aleksey K. Fedorov et al., ‘Quantum computers put blockchain security at risk’ Nature (19 November 2018) vol 563, Issue 7732, 465–467. See also J.P. Morgan Perspectives 2020 Report (n 4). 32 Daniel Bernstein and Tania Lange, ‘Post-quantum cryptography’ Nature (2017) 549, 188–194. 33 See www.r3ccev.com. 34 See https://txfblob.blob.core.windows.net/assets/Marco_Polo_20170220.pdf. See also J.P. Morgan Perspectives 2020 Report (n 4), 19, listing key blockchain consortia in the field of finance. 35 See, e.g., https://www.ibm.com/blockchain/use-cases/success-stories/ and https://www.cnbc.com/2017/06/26/ibm-building-blockchain-for-seven-major-banks-trade-finance.html. 36 See https://azure.microsoft.com/en-us/solutions/blockchain/. 37 See https://www.tradelens.com/. 38 The Federal Maritime Commission granted its approval on 6 February 2020. See https://www2.fmc.gov/FMC.Agreements.Web/Public/AgreementHistory/26452. CSX, a railroad, also joined TradeLens in November 2019. See https://www.csx.com/index.cfm/about-us/media/press-releases/csx-leads-railroad-industry-by-joining-tradelens-global-shipping-information-platform/. Should other US railroads seek to join the consortium, the deal would be scrutinised by the US authorities. 39 Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty [2003] OJ L1/1. 40 Commission Decision of 7 July 2016 in Container Shipping (Case AT.39850) issued pursuant to Article 9 of Regulation 1/2003. In that case, the Commission had concerns that the shipping companies’ practice of publishing their intentions on future price increases may have raised prices on the market for container liner shipping services on routes to and from Europe, in breach of Article 101 TFEU. 41 See Elliott Hill, ‘Cardano reveals its first supply chain solution in with Scantrust’ Cardano Foundation (6 April 2021), available at https://cardanofoundation.org/en/news/cardano-reveals-its-first-supply-chain-solution-in-association-with-scantrust/. 42 Most NFTs are part of Ethereum, although other blockchains, such as FLOW, Bitcoin Cash and Tezos also support NFTs. See https://en.wikipedia.org/wiki/Non-fungible_token. 43 Sam Dean, ‘What are NFTs? Who is Beeple? A digital art craze explained’ Los Angeles Times (11 March 2021). See also Gomi (n 15). 44 Access to copies of the original file is not restricted to the NFT owner but is available to third parties. 45 Ryan Duffy, ‘The NFT Market Tripled Last Year, and It’s Gaining Even More Momentum in 2021’ Morning Brew (22 February 2021). 46 Guy Faulconbridge, ‘World Wide Web code that changed the world up for auction as NFT’ Reuters (15 June 2021). 47 J.P. Morgan Perspectives, ‘Digital transformation and the rise of fintech: Blockchain, bitcoin and digital finance 2021’ (18 February 2021) citing Joyce Chang et al. ‘Pandemic Accelerates Paradigm Shifts’ (8 July 2020). 48 See J.P. Morgan Perspectives 2021 Report (n 47), 7: Bitcoin prices increased by 27% following Tesla’s announcement of 8 February 2021 that it invested USD 1.5 billion of its cash reserve on Bitcoin. 49 On 10 February 2021, Mastercard announced a plan to allow merchants to receive payments in cryptocurrency. See https://www.mastercard.com/news/perspectives/2021/why-mastercard-is-bringing-crypto-onto-our-network/. 50 See https://www.paypal.com/us/smarthelp/article/cryptocurrency-on-paypal-faq-faq4398?app=searchAutoComplete. 51 On 11 February 2021, BNY Mellon announced the creation of a new unit for the development of a platform for multi-asset custody and administration of traditional and digital assets. See https://www.bnymellon.com/us/en/about-us/newsroom/press-release/bny-mellon-forms-new-digital-assets-unit-to-build-industrypercent27s-first-multi-asset-digital-platform-130169.html. 52 Case C-264/14 Skatteverket v David Hedqvist, EU:C:2015:718, para 42. 53 J.P. Morgan Perspectives 2020 Report (n 4), 12. 54 Libra is a permissioned but public blockchain, originally with plans to become permissionless in future, although these have now been abandoned. The consortia operating Libra at launch included Uber, Lyft, Spotify, Visa, Mastercard, Paypal, eBay, Vodafone, and Booking.com/Priceline. 55 See https://en.wikipedia.org/wiki/Dogecoin. 56 Petro has been used as a reference price for domestic transactions, as well as to distribute social spending, pensions and bonus payments to government employees. Far from gaining international traction, however, Petro has been described as ‘another (hyperinflationary) fiat currency’. See J.P. Morgan Perspectives 2020 Report (n 4). 57 J.P. Morgan Perspectives 2021 Report (n 47). 58 Stablecoins are a form of cryptocurrency usually pegged to a traditional currency. Currently, there are approximately 200 stablecoins. See https://101blockchains.com/list-of-stablecoins/. 59 See, e.g., Siddharth Venkataramakrishnan, ‘Cryptocurrency markets slide as Yellen leads mounting regulatory scrutiny US Treasury secretary urges “quick” action to address stablecoin market’ Financial Times (London, 20 July 2021). 60 For instance, New York State Senator Kevin Parker proposed a bill according to which Bitcoin mining facilities will only be allowed to operate after review of their environmental impact. See Nathan Place, ‘New York wants to halt Bitcoin mining until its environmental impact is assessed’, The Independent (New York, 5 May 2021). 61 Available at https://dserver.bundestag.de/btd/19/276/1927631.pdf. 62 David Milliken and Tom Wilson, ‘BoE says “stablecoin” payments need same rules as banks’ Reuters (8 June 2021). 63 Naomi O’Leary, ‘EU to ban cryptocurrency anonymity in anti-money laundering plan’ The Irish Times (20 July 2021). 64 Scott Chipolina, ‘Spanish Tax Agency Issues Warning To Cryptocurrency Holders’ Decrypt (Madrid, 13 April 2021). 65 Thibault Schrepel, ‘Analyzing one decade of blockchain litigation’, Concurrentialiste (27 April 2020). 66 Pursuant to Section 5(a) of the FTC Act or pursuant to California’s Unfair Competition Law (the Lanham Act). 67 See United American Corp. v. Bitmain Inc., et al., Case No. 1-18-cv-25106 (S.D. Fla.) and commentary by Konstantinos Stylianou, ‘What can the first blockchain antitrust case teach us about the crypto-economy?’ (26 April 2019) Harvard Journal of Law and Technology. See also Gallagher v. Bitcointalk.org, Case No. 3:18-cv-05892 (S.D. Cal.), and Schrepel (n 65). 68 Pike and Capobianco (n 22). 69 Consolidated version of the Treaty on the Functioning of the European Union (TFEU) [2012] OJ C 326/1. 70 With reference to Case C-118/85 Commission v Italy, EU:C:1987:283, para 7, Lianos (n 2) notes the functional approach of EU competition law in assessing the concept of ‘economic activity’, focusing more on the ‘activity’ itself rather than the ‘entity’. See also Pike and Capobianco (n 22). 71 I.e., ‘a form of coordination by which practical cooperation between competitors is knowingly substituted for the risks of competition’. See, e.g., Case C-8/08 T-Mobile Netherlands BV and others v Raad van bestuur van de Nederlandse Mededingingsautoriteit, EU:C:2009:343, para 26. 72 It is important to note, however, that smart contracts can be procompetitive, inter alia, by mitigating the risk of hold-up. This issue could arise when the parties to an agreement are required to make relationship-specific investments, but neither wants to be the first to do so for fear of being ‘held up’ by the other party who could extract all the value created by the relationship. 73 See ‘Blockchain Technology and Competition Policy—Issues paper by the Secretariat’, OECD (8 June 2018); Schrepel (n 1); Lianos (n 2); Pike and Capobianco (n 22). 74 Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements [2011] OJ C 11 (‘Horizontal Co-operation Guidelines’), para 71. A blockchain consortium that could qualify as an ‘association of undertakings’ within the meaning of Article 101(1) TFEU. 75 Id, para 86. 76 Id, para 89. 77 ‘Algorithms and Competition’ Bundeskartellamt (November 2019), available at https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Berichte/Algorithms_and_Competition_Working-Paper.pdf?__blob=publicationFile&v=5. 78 Horizontal Co-operation Guidelines (n 74), para 61. 79 See, e.g., Bundeskartellamt Report (n 77), IV stating, inter alia, that: ‘[i]n light of the uncertainties concerning potential shapes of “algorithmic communication”, […] it seems to be too early to clearly delineate which potential types of interaction constitute illegal behaviour. Moreover, […] under the current case law, Art. 101 TFEU does not prohibit conscious parallel behaviour. Thus, situations in which an algorithm merely unilaterally observes, analyses, and reacts to the publicly observable behaviour of the competitors’ algorithms might have to be categorised as intelligent adaptations to the market rather than coordination.’ 80 See, e.g., Case C-542/14 SIA ‘VM Remonts’ (formerly SIA ‘DIV un KO’) and Others v Konkurences padome, EU:C:2016:578 and Case C-74/14 ‘Eturas’ UAB and Others v Lietuvos Respublikos konkurencijos taryba, EU:C:2016:42. 81 Pike and Capobianco (n 22). 82 Schrepel (n 1); Lianos (n 2). 83 OECD Issues Paper (n 73). 84 Commission, ‘Capital Markets Union’, available at https://ec.europa.eu/newsroom/fisma/items/656332/en. See also JRC Report (n 7), 46. 85 Directive 2013/50/EU of the European Parliament and of the Council of 22 October 2013 amending Directive 2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading and Commission Directive 2007/14/EC laying down detailed rules for the implementation of certain provisions of Directive 2004/109/EC [2013] OJ L294/13. 86 Commission Delegated Regulation 2016/1437/EU of 19 May 2016 supplementing Directive 2004/109/EC of the European Parliament and of the Council with regard to regulatory technical standards on access to regulated information at Union level [2016] OJ L234/1. 87 Almudena Arcelus et al, ‘Mitigating antitrust concerns when competitors share data using blockchain technology’ (2021) Harvard Journal of Law and Technology, vol 34, Digest Spring 2021. See also Pike and Capobianco (n 22). 88 As regards price-based exclusionary conduct, see Guidance on the Commission’s priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings [2009] OJ C 45/7 (‘Article 102 Guidance Paper’). 89 See, e.g., Christine McDaniel and Hanna C. Norberg, ‘Can Blockchain Technology Facilitate International Trade?’ (2019) Mercatus Research, Mercatus Center at George Mason University, available at https://www.mercatus.org/system/files/mcdaniel-blockchain-trade-mercatus-research-v2.pdf; and Alastair Berg et al. ‘Crypto Public Choice’ (30 August 2018), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3236025. 90 See, e.g., Cases T-119/09 Protégé International Ltd v European Commission, EU:T:2012:421; T-111/96 ITT Promedia v Commission, EU:T:1998:183; and T-321/05 AstraZeneca v Commission, EU:T:2010:266. 91 Article 102 Guidance Paper (n 88), paras 63 et seq. 92 Id, para 75. 93 Id, para 81. 94 The most recent excessive pricing case pursued was Commission Decision of 10 February 2021 in Aspen (Case AT.40394) resulting in the adoption of commitments pursuant to Article 9 of Regulation 1/2003. In that case, the Commission accepted commitments by Aspen to reduce prices for six off-patent cancer medicines by 73% addressing excessive pricing concerns. 95 See, e.g., Commission Decision of 20 September 2019 in Google (Android) (Case AT.40099), Commission opening of proceedings of 16 June 2020 in Apple—App Store Practices (e-books/audiobooks) (Case AT.40652) and in Apple—App Mobile Payment (Case AT.40452); Commission opening of proceedings of 10 November 2020 in Amazon Buy Box (Case AT.40703), and most recently, Commission opening of proceedings of 4 June 2021 in Facebook leveraging (Case AT.40684). 96 See https://blockchain.ieee.org/standards. 97 See https://standards.ieee.org/project/2418_1.html. 98 See https://standards.ieee.org/project/2418_3.html. 99 See https://standards.ieee.org/project/2418_5.html. 100 See ISO Technical Committee 307—Blockchain and distributed ledger technologies, https://www.iso.org/committee/6266604.htm. 101 See https://www.bita.studio/members. 102 See ISO Technical Committee 307—Blockchain and distributed ledger technologies, available at https://www.iso.org/committee/6266604.htm. 103 Ibid. 104 Horizontal Co-operation Guidelines (n 74), para 263. 105 Id, para 264. 106 Id, para 280. 107 Id, para 287. 108 According to the Commission’s practice in the electronic communications industry, individual SEPs have been considered to form a separate product market. See, e.g., Commission decisions of 29 April 2014 in Motorola-Enforcement of GPRS standard essential patents (‘Motorola’) (Case COMP/39.985) and Samsung-Enforcement of UMTS standard essential patents (‘Samsung’) (Case COMP/39.939). 109 Ibid. 110 See Case C-170/13 Huawei Technologies, EU:C:2015:477. 111 See Miguel Rato and Mark English, ‘An Assessment of Injunctions, Patents, and Standards following the Court of Justice’s Huawei/ZTE Ruling’ (2012) Journal of European Competition Law & Practice. 112 Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings [2004] OJ L 24/1. 113 Commission Decision of 17 January 2019 in MUFG HD/AKAMAI/JV (Case M.9214). The case was cleared following a simplified procedure. 114 Commission Decision of 23 March 2018 in IBM/MAERSK/GTD JV (Case M.8742). The case was also cleared following a simplified procedure. Presumably, this case concerns the creation of the blockchain that is the subject matter of the TradeLens alliance referred to at n 38 above. 115 Commission Decision of 11 August 2020 in CDC/EDF/ENGIE/LA POSTE (‘Archipels’) (Case COMP/M.9619). See also Antoine Babinet and David Dubois, ‘Archipels’ Case: EU’s First Merger Control Analysis of a Private Blockchain Consortium’ (2021) Journal of European Competition Law & Practice. 116 Archipels is a private permissioned blockchain providing a centralised repository of encrypted digital stamps on documents such as electricity and phone bills, rental agreements, and tax declarations that are typically used to certify documents required by financial institutions and insurance companies in the context of ‘Know Your Customer’ (‘KYC’) services provided by European banking and insurance regulations to prevent money laundering or terrorist financing. 117 Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertakings (2008/C 265/07) (‘Non-horizontal Merger Guidelines’). See Archipels, para 66. 118 See Archipels, paras 67 et seq. 119 See Babinet and Dubois (n 115). 120 Proposal for a Regulation of the European Parliament and of the Council on contestable and fair markets in the digital sector (Digital Markets Act) COM/2020/842 final. 121 Proposal for a Regulation of the European Parliament and of the Council on a Single Market For Digital Services (Digital Services Act) and amending Directive 2000/31/EC COM/2020/825 final. 122 DMA, recitals 5 and 10. 123 Id, Article 3. The DMA applies to gatekeeper platforms where the platform service: (a) is provided in at least three European member states and annual European turnover of the platform undertaking is at least EUR 6.5 bn in the last three years or has a market capitalisation of at least EUR 65 bn in the last financial year; (b) has more than 45 million active end users and 10,000 yearly active business users in the EU in last financial year; and (c) meets (a) and (b) in the last three years. 124 Id, Article 2(2), for instance ‘online intermediation services’. 125 Id, Article 5. These include: (i) self-preferencing; (ii) preventing consumers from connecting to businesses outside the gatekeeper’s platform; (iii) preventing users from migrating to rival products/services; and (iv) preventing users from un-installing any pre-installed software or app if they so wish. 126 Id, Article 6. 127 Id, Article 26. 128 Id, Article 27. 129 Id, recital 64. 130 DSA, recital 35, Articles 1(3) and 25(1). 131 For instance, the draft DSA provides for measures to counter illegal goods/services/online content; obligations on traceability of business users in online market places; the possibility to challenge platforms’ content moderation decisions; transparency measures for online platforms on a variety of issues, including on the algorithms used for recommendations; obligations for very large platforms to prevent the misuse of their systems by taking risk-based action and by independent audits of their risk management systems; access for researchers to key data of the largest platforms; and oversight structure to address the complexity of the online space. 132 For instance, Lianos (n 2) considers blockchain to be ‘unregulatable’. 133 See also Primavera de Filippi & Aaron Weight, Blockchain and the law: The Rule of code (Harvard University Press 2018). 134 See, e.g., Commission Decision of 16 October 2019 in Broadcom (Case AT.40608). Author notes Counsel at Quinn Emanuel Urquhart & Sullivan LLP, Brussels (marixeniadavilla@quinnemanuel.com). This work reflects the views of the author. There are no conflicts of interest to declare © The Author(s) 2022. Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model)
TI - Unravelling the Complexity of Blockchain and EU Competition Law
JF - Journal of European Competition Law & Practice
DO - 10.1093/jeclap/lpab078
DA - 2022-01-05
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