As part of an ongoing partnership between La Poste Group and TSE that spans almost three decades, the 11th Postal Economics Conference was held on April 7-8. Initially focused on regulation of the postal sector and 'universal service' in the context of market liberalization, the scope of the conference has since expanded to address many of the digital, media and e-commerce challenges facing society today. The relentless demand for the postal sector to adapt to the competitive environment and technological innovation is a key research focus for TSE’s new Infrastructure and Network Center. Here, we highlight contributions from leading decision-makers at the Toulouse event on the prospects for digital regulation, as well as some of the new research presented on sustainability concerns and the Covid-19 crisis.
Public authorities are increasingly motivated to rein in overpowerful digital platforms and develop an appropriate regulatory framework. The “GAFAM” tech giants are major drivers of positive change and economic growth, recognized Philippe Wahl (CEO, La Poste Group). But he also noted that the practices of dominant players – including “killer acquisitions” of potential competitors and exploitation of market power – can often be contrary to competition law. Similarly, Laure de la Raudière (President of Arcep, the French telecoms and postal regulator) observed that dominant platforms, in becoming indispensable to their users, can hold them captive and restrict freedom of choice. It is therefore crucial to intervene before competitive problems materialize. Given the characteristics of the sector, the size of the players, and the fact that financial penalties have not been dissuasive, she urged asymmetrical ex ante regulation at the European level.
Big Tech regulation
Speaking at this year’s event, Philippe Wahl underlined the major advances in regulation that have occurred since the previous Postal Economics Conference in 2018. The Digital Markets Act (DMA), which is now awaiting final approval by the European Parliament and Council, aims to tighten constraints on anti-competitive behavior by Big Tech “gatekeepers”. Pierre Régibeau (Chief Competition Economist, European Commission) emphasized that the DMA’s main objectives are to prevent "unfair" practices upstream, to reinforce transparency, and to facilitate the qualification of dominance. In parallel, the American Innovation and Online Choice Act is also advancing through the US legislative process.
In a constantly evolving and increasingly technical sector, Jean Tirole (TSE) emphasized the need for regulators to recruit qualified people, to equip themselves with the appropriate skills and tools. Yves Alexandre de Montjoye (Imperial College London) agrees and, emphasizes how machine learning and the interoperability of protocols and data will have to be the subject of particular attention, especially with regard to their ability to make data available while preserving privacy. For her part, Laure de la Raudière advocated the creation of an expert group to advise the European Commission on digital regulation, leaning on the experience of national telecoms regulators. She welcomed the DMA as a major step forward, but underlined the need to clarify technical details to prevent companies from circumventing their obligations. She also urged coherent articulation with existing regulatory frameworks.
Postal regulators must not stop there, believes Philippe Wahl. He highlighted the challenge of Amazon, which is both La Poste’s top customer and its top competitor. While Amazon has forced postal operators to adapt and innovate, he warned that society can be harmed in the absence of a level playing field. In 2014, the European Commission was alerted to the risks created by this imbalance, and incumbent postal operators continue to campaign for new players to face the same social and fiscal obligations. Laure de la Raudière added that regulators must not overlook competition from vertically integrated e-commerce platforms, which have developed their own distribution networks that “cherry pick” profitable delivery areas.
Pandemic post
Digital technology has had ambiguous effects on postal activity: email has driven down mail volumes, while e-commerce has driven up package delivery. The Covid-19 crisis has reinforced these trends, as demonstrated by two papers presented at the conference. TSE’s Catherine Cazals, Eric Gautier and Nour Meddahi, working with Antonin Arlandis (La Poste), found that the mail volumes of Deutsche Post DHL, La Poste Group and USPS would have been higher if the health crisis had not occurred, while parcel volumes would have been lower. Similarly, in a joint publication with Jonathan Pope and Soterios Soteri (Royal Mail), Catherine and her TSE colleague Thierry Magnac found that parcel volumes in the UK would have been 30-50% lower, without the pandemic.
Sustainable e-commerce
Laure de la Raudière was one of many voices emphasizing the need for regulators to reconcile the digital sector’s benefits with reduction of its environmental impact. As Eric Ballot (Mines ParisTech) observed, the external costs generated by EU freight amounted to €203.4 billion in 2016. And yet logistics flows continue to increase in response to demand for faster delivery and the multiplication of supply chains and distribution channels. To reach the Paris objectives of reducing CO2 emissions and address other negative externalities, we must change the way we consume and transport goods. According to Eric Ballot, this requires (i) improving our knowledge of the flow of goods, (ii) using technology wisely (“smart deliveries”, exploitation of real-time data via high-performance algorithms, development of new delivery solutions) (iii) and seeking economies of scale and synergies by consolidating flows and interconnecting networks.
Consumer information is particularly important, TSE’s Helmuth Cremer, Jean-Marie Lozachmeur and Estelle Malavolti suggested in a joint publication with La Poste economists Claire Borsenberger and Denis Joram. If consumers can observe the level of emissions generated by delivery of their online purchases, their “environmental awareness” provides operators with an incentive to reduce market inefficiencies. Regulatory intervention is therefore unnecessary – except possibly to guarantee the transmission of reliable information on emission levels – if consumers value the environmental damage generated by their consumption. Then, an emissions tax will be needed to reflect the marginal social harm that consumers underestimate.
More information regarding this event can be found here
Article published in TSE Reflect, May 2022