The popularization of the blockchain technology and cryptocurrencies created an urgent need for the development of regulating legislations that are inspired by a thorough understanding of this innovative technology. The autonomous and decentralized nature of the blockchain technology, and the fact that THE existence of a blockchain is totally independent of any control by federal institutions poses enormous challenges to government institutions and international bodies. Given the fact that a blockchain doesn’t fit under the definition of any governmental law, it can be regarded as “agnostic” to any legal jurisdiction; in other words, under most of the world’s legal jurisdictions blockchains are unregulated.
A recently published paper analyzed how cryptocurrencies, and the blockchain technology in general, are challenging antitrust and competition law. Throughout this article, we will go through some of the interesting points of view presented via this paper.
How Should Antitrust and Competition Law Adapt to Blockchains?
To estimate the possible intersections of antitrust and competition laws with blockchains, one would have to consider some of the blockchain applications that are still in the development phase. Private or permissioned blockchains, as opposed to bitcoin public or permissionless blockchain, are expected to be widely utilized in various applications in the near future. A private blockchain mandates strong collaboration and cooperation of its stakeholders. A blockchain requires a universal platform and unified processes to maintain its functionalities. As long as collaboration, among stakeholders of a given private blockchain, aims at boosting the efficiency of involved processes, or combines the efforts of the stakeholders themselves for an achievement which cannot be made individually by any of them, there would be no violation whatsoever of antitrust and competition laws.
It is inarguably predicted for blockchain based applications to be adopted across various sectors that interact with governmental institutions and economic entities. Such sectors include healthcare, stock trading, supply chains, real-estate and e-voting. Even though such blockchain based applications are still in their early stages of development, they have been attracting considerable attention during the past couple of years. A recent report by IBM’s Institute for Business Value stated that blockchains will mostly transform how organizations operate, generate revenue and interact with partners, clients and competitors alike. Given the level of collaboration and cooperation of stakeholders of private blockchains, they should be careful and consider possible violations of antitrust and competition law. On such blockchains, exchange of present and/or future pricing of a given product, or other similar forms of sensitive data, can represent a form of “price fixing” which is considered a violation of antitrust and competition law.
Within the ecosystem of a private blockchain, information exchanged between stakeholders should aid in achievement of the blockchain goals and not break any laws or regulations. As stated by the European Commission (paragraph 263 of horizontal cooperation agreements’ guidelines) “common standards, agreed to and applied by participants in a market, will generally be pro-competitive, as they allow to promote economic interpenetration”. Due to the fact that stakeholders of a given blockchain could be not only suppliers and partners, and also competitors, legislations should not limit competition, whether it exists among the stakeholders themselves, or with other organizations. Regulations and rules such as exclusive commitment to a single blockchain or denying competitor access to the public ledger require a thorough analysis and research to adapt these regulations to antitrust and competition law. Some authors have suggested that the public ledger technology is aiding in cartel management for trustless groups that have to work together.
In the near future, we will see blockchains that operate via a “learning-by-doing” approach that facilitates optimization of prices via means of data recorded on their ledgers. Such approach is not regulated by antitrust and competition law as it is not associated with any anticompetitive regulations or intentions among participants, however, the goal is to maximize profits.
Considering that today’s antitrust and competition law is mainly concerned with violations that have already taken place and that can be evidenced by obvious collusion and abuse of market power, this should change in the future and antitrust and competition law has to include more proactive regulations to make up for the asymmetry that exists between the information available to legislators and the actual information presently available about various aspects of the blockchain technology.