Competitive Aspects of PSI Re-use Bruxelles, January 24 th, 2012

LAPSI, Bruxelles 24/01/ PRELIMINARY REMARKS AS TO THE ANALYSIS OF COMPETITIVE ISSUES Industrial policy choices promote structural changes in some sectors … identified as strategic sectors. They set: 1. the boundaries of the competitive arena and who are its characters; 2. the relevant goals that these characters and markets have to pursue; and 3. The rules of the competitive game. Massive and Future oriented Antitrust actions consist in surgical interventions against identified business practices (i.e. restrictive agreements and abuses of dominance) that happen within precise markets… Highly fact-specific, based on well-identified market scenarios and more present oriented Industrial policy perspectiveAntitrust perspective OPEN DATA STRATEGY

LAPSI, Bruxelles 24/01/ COMPETITIVE ARENA and GOALS (1/2) … Both Directive 2003/98 and the Proposal acknowledge… Market of PSI generation Markets of PSI re-use Public sector bodies Private companies … and want to encourage private sector firms to fully exploit the economic potential of PSI, by removing major barriers to re-use Competitive Arena Correct? Policy Goal while fulfilling their public task, produce, collect or hold a wealth of information and content of great value – a value that now is even increasing because of the digital revolution produce value-added goods, combining PSI with other inputs Such precious information will be there anyway … regardless the charging/ licensing policy set by the directive and the proposal Is this assumption well- founded? Does it applies to any kind of PSI?

LAPSI, Bruxelles 24/01/ As a matter of fact, Directive 2003/1998 and the Proposal do not ban public sector bodies to re-use their own PSI, that is, to produce their own value-added goods. Moreover, As a matter of fact, Directive 2003/1998 and the Proposal do not ban private sector firms to move upstream, that is, to produce information goods that are equivalent to PSI (Facebook and Google are two examples)… Therefore, there are other market scenarios … COMPETITIVE ARENA and GOALS (2/2) … Public sector bodies Private companies Public sector bodies Private companies Public sector bodies Private companies Public sector bodies Private companies From the industrial policy perspective, we should understand whether the rules of the competitive game set by the Directive and the Proposal take one or more of these scenarios into consideration, and whether they choose one of them as a goal

LAPSI, Bruxelles 24/01/ ANTICOMPETITIVE PRACTICES … Markets of PSI re-use Public sector bodies Market of PSI generation Public sector bodies From the analysis of case law … No access, via High charges ex 102(a) Explicit unjustified refusals to supply ex 102(b) Anticompetitive foreclosure of private companies ex 102(b) via Predatory prices – Dumping prices – Cross subsidization Margin squeeze – Price discrimination – Rebates Private companies

LAPSI, Bruxelles 24/01/ Recommend the enforcement of antitrust law against public sector bodies that abuse of their market power! Indeed, on the basis of the existing law, we know that when public sector bodies hold a dominant position they are subject to Article 102 of TFEU, but for the case where their conduct consists in an «operation of services of general economic interest», as provided for by Article 106 of TFEU. Yet, such an enforcement action could be costly and burdensome for private sector firms acting against public sector bodies… CURRENT QUASI-SOLUTION

LAPSI, Bruxelles 24/01/ Both Directive 2003/98 and the Proposal try to provide an optimal legal framework to facilitate and incentivize re-use. They want to secure: The RULES of the COMPETITIVE GAME … The ease of use of PSI and the ban of unjustified refusals as well as delayed supply of PSI – see Art. 2(6), Art. 4, Art. 5 and Art. 9 Openness to all potential re-users – see Art. 11(1) – with equal opportunity for public sector bodies and private firms – see Art. 10(2) Non unnecessarily restrictive, non discriminatory and non-exclusive licensing conditions – see Art. 8, 10(1), and 11(2); and Transparent charging policy principles and rules – see Art. 6 and Art. 7 Novelties: Independent Authority Burden of proof rule Some changes, although not always coherent with the antitrust logic…

LAPSI, Bruxelles 24/01/ CHARGING POLICY PRINCIPLES (1/2) PSI free of charge Zero windfall for public sector bodies Default rule – Art. 6(1) P = MC (for reproduction and dissemination) Financial crisis requires public sector bodies to find other sources of revenue; moreover, taxpayers cannot be asked to pay for services that are reuse-specific Re-users pay only for services that facilitate re-use. But..who pays for digitization? The Needed exploitation of IPRs exception considers the case where the exploitation of IPRs allows public sector bodies to substantially cover the costs of pursuing their public task. But … who are these public sector bodies? The museums, archives and libraries exception considers that prices equal to marginal costs may discourage these public sector bodies to maintain/improve their high quality raw-data; and that these institutions need further sources of income. Anyway, there is a ceiling for the total income … Exceptions – Art. 6(2) and (3) Museums Archives Libraries Needed exploitation of IPRs Ceiling– Art. 6(4) Total income Given taxpayers money…

LAPSI, Bruxelles 24/01/ The proposed Art. 6 acknowledges that PSI in not a MONOLITH: it introduces flexibility. Moreover, With Art. 6(3) exception it creates room for a new phenomenon that may take place thanks to digitization … Some public sector bodies – such as museums, archives, libraries (university libraries included), and research institutions – may re-use their own PSI to gain a new source of revenue and, thus, maintain/ improve the quality of the information that they hold. Yet Why the default rule and its exceptions are not directly connected to the amount of economic resources that public bodies actually need to keep on generating PSI? Such a rule would better fit the dynamic process for the generation of PSI ? Given this new charging policy, will private sector companies have enough incentives to remain/enter into the upstream market? CHARGING POLICY PRINCIPLES (2/2) …

LAPSI, Bruxelles 24/01/ Corporate separation for public entities the public sector entity fulfilling its public task the public sector entity that competes against private firms in order to guarantee, via separated account books, transparency as to the costs of the release of PSI Arguments against: (1) It could be costly and, hence, it could reduce the incentives of public bodies to re-use PSI themselves (2) Cross-subsidization helps public sector bodies financing the production of PSI. It is not always true that public sector bodies would always produce the same volume (and quality) of PSI. The adoption of different tools for lowering the risk of anticompetitive practices FURTHER SUGGESTED SOLUTION Not for museums, archives, libraries (university libraries included), and research institutions

LAPSI, Bruxelles 24/01/2012 IN SUM Markets of PSI re-use Public sector bodies Market of PSI generation Public sector bodies Private companies The Directive and the proposal move from … … and rule over the competition between public sector bodies and private sector companies with specific provisions … giving a lot of space to private sector firms being dowstream, increasing space to public sector bodies going downstream, but forgetting about private companies that could be interested in moving upstream Something more could be done in order to reduce ex ante incentives to distort competition and make some rules more coherent with the antitrust approach

LAPSI, Bruxelles 24/01/ Thank you