Meet The Fellows – Simonetta Vezzoso

04 May 2016

Author: OpenForum Europe

Thanks for your time, Simonetta! Can you start by briefly introducing yourself as well as the work or the research that you’ve been involved in?

Briefly, I have an Italian law degree and a German PhD in the economics of innovation. I’ve been practising law in Milan at an international law office before moving to Munich, where I worked on some research projects at the Max Planck Institute for Innovations and also at a German law firm.

I teach International and EU competition policy and intellectual property at the University of Trento. My main research projects so far have been on competition policy from the perspective of the economics of innovation, on the interface between competition policy and intellectual property (e.g., the EU Microsoft case and the interoperability issue, standard setting, patents and sham litigation), on open source from the point of view of competition policy (e.g., the Sun-Oracle merger), and on limitations and exceptions in copyright law (e.g., e-learning, the Marrakesh Treaty).

More recently, I’ve been working on the EU Android case from the point of view of the economics of platforms and on the impact that big data could have on competition policy as a whole. My current projects are on online platforms and vertical restraints in competition policy and, generally, on strategies aiming at empowering consumers in the digital economy.

How is your work linked to Openness principles that we developed at OpenForum Europe and how is your work related to these principles as they apply to IP and Competition?

I’d say that most of my work has been basically centred on the problem of choice for consumers, that is OFE’s principle of user centricity. I strongly believe that consumers should be at the core of competition policy. The main issue here is how we place the consumers in the centre of our work from the point of view of competition policy. It has much to do with the way consumers are seen through the lenses of economics. While traditional economic theories actually have a very strange understanding of consumers, they see them as rational beings, almost superheroes. And of course, choice from that perspective is not much of an issue. I have been working also on economic theories like the economics of innovation and there is a better understanding of consumers. Nowadays I think economics is changing towards a much more realistic understanding of how consumers react and behave on the markets. But of course regulation is very slow to adapt to that. So my understanding is that economics should develop a much more holistic approach and should concentrate on both the supply and a realistic demand side.

If we move on to another principle mentioned there, which is of course very relevant from my perspective, which is of course competition, current economic theories are much focused on prices and quantities, and not so much on innovation – something that the principle mentions as well. Competition policies somehow are still struggling to appropriately deal with innovation. One example is the EU Microsoft case and the issue of interoperability and the interface to competition policies. Also I would say that competition policies are much too slow in reacting to some of the threats to the works of ICT markets nowadays but perhaps things are getting better.

The last principle I would mention is the importance of community, which is OFE’s fifth principle. This plays out differently and quite impressively in various economic and technological environments. In this respect, I was always much fascinated by the Open Source Community because I spent a lot of time studying how it works – the mechanics involved, how it evolves but also how it reacts to tensions coming from inside the community, but also from outside, especially other business models.

How do you link the Open Source community with the competition?

I studied this topic from the perspective of EU competition policy, in particular the merger between Oracle and Sun . In that case, one of the main issues involved Open Source because there was MySQL – database that is Open Source. It was quite clear that at that time, and I don’t know whether things have much progressed since, that competition policy was not quite able to deal with business models which for instance do not have any clear revenues. And that issue is increasingly important nowadays – of course it is not because of Open Source as such but it is the same problem – when we talk about platforms. Very often those platforms, say WhatsApp, don’t have any concrete revenues so it’s very difficult for competition policy, and especially for merger regulation, to deal with those platforms. And in general with markets in which consumers do not directly pay with money. Perhaps they pay with their personal data but not with money.

This idea of adapting competition to the new models bring us to next question. You said in 2013 when you deliver the speech at TEDx that “copyright and digital society are not much attuned”. We know that the Commission has published a Copyright Communication last December.  What are you current thoughts on your previous statement? Do you think the new reform is satisfactory enough or still missing something?

You all know that the exceptions landscape in Europe is patchy to say the least. There is a strong need of harmonisation.

You mentioned the long-awaited Copyright Communication and that’s a good starting point, especially because we come from many years of letargy, inactivity by the Commission, and something that has been obfuscated by an almost endless series of pretty useless public consultations and other similar endeavours. European citizens, undertakings, libraries, universities and so on, we all need a more modern and more European copyright framework. The Commission mentions it tries to tackle – and of course that is very good – the availability of multi-territorial licenses, which is a crucial issue, and also the portability of online content services. Still on the positive side of the Communication, it is the clear recognition that exceptions/limitations should be adapted to the digital and also to cross border environment. You all know that the exceptions landscape in Europe is patchy to say the least. There is a strong need of harmonisation. The InfoSoc Directive of 2001 had a list of exceptions and limitations but they had optional nature and they totally lack cross border effect. And perhaps I don’t know if it is interesting for you directly but on a slightly different tone, many of the difficulties in implementing exceptions and limitations cross border became quite clear to the negotiators of the Marrakesh Treaty which aims to facilitate access to published works for print disabled persons. The negotiations raised legal questions that were not previously tackled. And then especially because they had to apply the three-steps test on the exceptions and the test is complicated as such. Then of course very positive is the idea of introducing exceptions for text and data mining for scientific research. Then one of the hottest issues there which has been mentioned is the fact that we still don’t know exactly what’s the real content of the rights of communication to the public and of making available. It is much debated also by European Courts and this makes things very difficult when we think about platforms. Because we don’t know whether many actions platforms are engaging in are relevant from the point of copyright at all. There are many issues which are pretty much in the dark; one thing that complicates even more is that we have that exception in the e-commerce Directive, which is pretty old and would need to be updated. It is not capable of dealing with the new issues of the modern society.

You mention my TED talk. One thing I discussed there was the issue of the second-hand digital goods, which was mentioned in many earlier public consultations but we don’t find any trace of a possible solution mentioned in the Communication. Another thing which is missing is what we would desperately need at the European level is a general exception much in the style of US fair use provision. Interestingly perhaps is the fact that the Australian Competition Authority quite recently supported the introduction of a fair use provision into Australian copyright law. Because of course it is very good for innovation, because we cannot foresee everything beforehand.

Then on the second part, whether it is good for industry, whether citizens should be satisfied, it depends on the type of industry and the type of users, etc. There are some other issues which are of relevance to consumers, citizens, users, which are the for instance the issue of users generated content and which are not mentioned at all.

The last point is that the Commission has been working on this reform already for a while, I’m sure that by the time we have some concrete results, technology will have already moved on. And then this is the general problem for copyright legislation – it is always somehow doomed to lag behind and then we have to rely on the European Court and national courts for a timely evolution of copyright law, more than on legislation.

You have mentioned the E-Commerce Directive. We know that in 2000 there was a limitation of the intermediary liability in order to keep incentives for technology to develop. But now with the latest public consultations on online platforms and other initiatives there is this tendency to extend the responsibility of ISPs in terms of demanding them to be more active in policing content on their platforms. What are your views of how to practically reach a fair balance between all interests involved (like the Intellectual Property rights, freedom of expression, data protection and so on)?

The general problem for copyright legislation – it is always somehow doomed to lag behind and then we have to rely on the European Court and national courts for a timely evolution of copyright law, more than on legislation.

I’m afraid that a fair balance in this area is very difficult to strike. There are huge difficulties. The matter is increasingly complex because of what you’ve mentioned – the increasingly importance of fundamental rights in this area. Not only intellectual property if it’s a fundamental right at all, but data protection, freedom of expression, etc. It’s increasingly complex, difficult, I don’t see any clear solution to that. Online platforms are somewhat pervasive, increasingly important in our economy and therefore it is very important to come up with smart solutions. Those smart solutions should somehow safeguard incentives by those platforms to invest, to innovate. But also incentives by other parties to invest, innovate, create. It is very complex. My short answer is: there is not silver bullet here. There is already a lot of trial and error going on at the level of regulators, courts, and then there are quite a lot difficulties in trying to keep up with all those societal and economic changes. I haven’t seen much innovation as yet, in the 30 years I have been dealing with this matter. We’re living in the time of increasingly disruptive innovation changing our lives. One silver lining is that there is much experimentation going on everywhere in the world, not only in the EU and US, and then somehow we can learn from each other successes and especially of course from each other’s failures.

The next topic is about the sharing economy. It has been received with a lot of positivity and everybody considers it is the way forward for the innovation in Europe. From what we’ve witnessed in  for example the negotiations for the DSM Act in the EP, one side was in favour of the sharing economy evolution, while other side was more concerned about the social security and the rights of entrepreneurs? Do you think is all positive about sharing economy or are there concerns that companies should be aware of?

What the EU started calling the ‘collaborative economy’, is a very important trend, which has already been challenging many incumbent industries. Competition authorities have already sort of started dealing with the collaborative economy and their conclusions at the moment are that the effects are generally positive for consumers in the end, in terms of welfare. I am for instance a frequent user of the most popular ride sharing platform – BlaBlaCar. I could really appreciate how far they managed to create something which is very difficult among strangers, that is trust. They have developed a very successful business around it. There is a matter of serious concern though – once those platforms become successful, or as they say they “ignite”, there is a sort of mechanism which automatically reinforces that power. A sort of feedback loop. With regards to the ride sharing platform, this means that more riders means more passengers, if there are more passengers there are more riders so it is indirect network effects.

The platform I’m using has already started applying matching commissions on the car rides that it is intermediating. But the thing is that I don’t see any platform around, which is likely going to put any serious form of competitive pressure on this specific platform in order to avoid the inflation of commissions fees. One question would be, perhaps, some pressure that could not arise from the platform economy, but perhaps from more traditional incumbent transport industries, like railway or bus services. But then do they belong to the same market? Also an issue from the competition policy. Quite a lot of difficult issues ahead.

On the positive side, the newly adopted GDPR introduces the important right to data portability of personal information. This is a very interesting mechanism, because if it is correctly enforced and applied it could have some very positive effects on competition among platforms.

You mentioned BlaBlaCar, I was also speaking about Uber. Do you think in the case of Uber, which has been banned, many vocal arguments were about the concern that those drivers are not benefiting of social security and other benefits that employees do benefit of. Do you think is an actual social security concern or is it more trying to use this argument, but rather opposing this because of a competition issue?

The thing is that I don’t see any platform around, which is likely going to put any serious form of competitive pressure on this specific platform in order to avoid the inflation of commissions fees.

I would say a little bit of both. I’m quite convinced that our legislation needs to adapt to the sharing economy. That happens very often when we have new technologies, that you need regulation to adapt. But in the case of Uber drivers, I think they have some good points saying they don’t have enough social protection. How far should that go? If they should be considered exactly like other employees, that’s another question. Perhaps we need some specific rules covering this new job description I would say. It is something pretty new to regulate. Definitely those arguments are used in a way that perhaps should convince regulators, but very often local authorities more than competition authorities. Competition authorities are, at the moment, much in favour of the sharing economy and are supporting it in various ways.

Why do they support it?

Because they see they benefits of the sharing economy for consumers. Let’s take as an example the taxi industry. Because of lobbying, political influences at the local level very often, competition authorities have been complaining about those regulations for at least the last 30 years, saying ‘we should change them’, ‘we should infuse more competition into that market’ and were totally enable to do that. From that perspective they are in favour of the sharing economy because it is challenging in a positive way an entrenched industry. The effect of Uber, of BlaBlaCar has definitely been quite positive so far.

Do you think it is for the law to tell the entrepreneurs that they should be concerned about their social security? Because the drivers can choose in the case of Uber or any sharing economy.  People involved can choose not benefit of traditional social protection. But it seems that decision makers sometimes want to give them more rights than the enterprisers want to take. What do you think about this?

I think the regulators should step in, perhaps with some light touches, but it should not be only let in the hands of the entrepreneurs of the EU economy to decide what the rights of the workers should be.

Of course there is a tension there. I think that Uber drivers and other categories of micro-entrepreneurs should somehow be protected by the law not perhaps as much, but it should be granted sort of protection of the core interests. A sort of minimal legal protection should be given to them. But then the question is how much is correct to provide them with? It doesn’t make sense in my opinion just to apply to them the normal protection afforded by labour law to other types of employees. As you said, they also have the choice, perhaps they use their spare time, they fall in another category of workers somehow. I think the regulators should step in, perhaps with some light touches, but it should not be only let in the hands of the entrepreneurs of the EU economy to decide what the rights of the workers should be. It’s sort of legal void, I would say.

Let’s move to the Internet of Things and Big Data. What do you think are the primary opportunities and risks that you have identified or you aware of?

Big Data is really having a quite a transformative impact on our economy and our lives. Algorithms are everywhere. They’re getting things smarter. They’re able to predict things like human behaviour, market prices, etc. They’re able to take decisions automatically, without or very little intervention by humans. So it’s very important for regulators to get increasingly familiar with algorithms and they should not shy away from looking inside what it’s nowadays called a “black box”. Some of those issues are already emerging for instance in the area of competition policy where anticompetitive practices are increasingly implemented algorithmically. The question is – is there any human intervention there? What about the issue of liability for automatic decisions? Perhaps we need some algorithmic regulation already.

Perhaps we need some algorithmic regulation already.

With regard to the Internet of Things, it is a bit different in that it raises some immediate and very hot issues in terms of data protection. In that respect, I’m quite positively impressed by the work done by the very dynamic data protection authorities in the EU. They are quite active. And that is quite in contrast to competition authorities, at least so far.Of course these are much younger regulators, they are somewhat willing and capable to act swiftly. Perhaps competition authorities have some more difficulties in doing that because of the role of economic analysis, etc. Data protection authorities will increasingly have power and also power to impose rather hefty fines on infringers. I’m quite in favour of all those new technologies. There are some regulatory issues again that we cannot ignore.

Also when we look deeper into it, from the point of view of competition policy, those are ecosystems very often, and there are issues such as i.e. interoperability and other competition issues that are likely to become increasingly important in that part of our economy.

Before wrapping up, I want to ask whether you have any resources or articles that you would like to point our readers to on e-commerce, sharing economy and other topics we covered in this interview?

Well, I’ve been writing about most of the issues we’ve been touching upon. I think there is a list of my publications somewhere on the Internet. I don’t know. I’ve been writing on Big Data, competition policy, e-learning, but I could not indicate one special resource.

I hope we will be transitioning perhaps towards a more so-called “intention-based economy” where undertakings take increasingly seriously consumers real desires and intentions.

Perhaps I would like to make one last point. We’ve been discussing digital technologies. One fascinating trend I’m currently working on is to think about the ways that regulations and technologies could sort of empower consumers. For instance, we think about algorithms and Big Data. I would say what those clever algorithm and Big Data could be employed also to the direct benefit of consumers in digital markets, by helping them making difficult choices about highly complex or differentiated products or service, like in finances, insurance, baking, or to make simple choices like your next holidays destination.

I hope we are moving beyond the current version of the Big Data economy as we know it, which is sort of exploiting personal data in the interest of platforms and other undertakings. I hope we will be transitioning perhaps towards a more so-called “intention-based economy” where undertakings take increasingly seriously consumers real desires and intentions.