Inside CVC: Rupprecht Podszun on Antitrust, Regulation, and Europe's Innovation Mindset

Rupprecht Podszun holds the chair in German and European competition law at Heinrich Heine University Düsseldorf, sits on Germany's Monopolies Commission, and spent two years inside the Bundeskartellamt, the federal competition authority. He joins Philipp and Steve to make the case that two decades of antitrust enforcement never actually curbed Big Tech's power, and that Europe's Digital Markets Act is the regulatory answer to that failure, imperfect but underway. He explains why the real barrier to European innovation is less the law than the mindset behind it, pointing at a legal profession trained to spot risk rather than take it. He argues Europe should leapfrog rather than imitate, backing fundamental research and basic infrastructure over rebuilding the US AI stack, and steering more defense spending into AI and high tech. And he pushes back on the idea that competitiveness means subsidizing national champions, arguing the market, not government protection, should decide who wins. A case for swapping certainty-seeking for experimentation, in the boardroom and in Brussels.

Transcript

Copy Transcript Copied

Introduction

Welcome to Inside CVC. 

In this episode, we sit down with Doctor Rupprecht Podszun, a professor of competition law at Heinrich Heine University in Duesseldorf and a member of Germany's Monopolies Commission, which advises the federal government on competition policy. In this conversation, we talk about why two decades of antitrust enforcement failed to rein in big Tech, whether Europe's Digital Markets Act is working, the mindset holding back European innovation and what real reform could look like. We close on his advice for European boards change every person's position in the company and see what happens. 

Here's our conversation with Doctor Rupprecht Podszun. 

Interview

Professor, welcome to Inside CVC. Fantastic conversation we've got planned for today. How are you doing? I'm fine. Thanks, Steve and Philip for for having me. That's great. Oh, wonderful. Competitiveness. Such an important topic and covers such a span. There are a lot of countries, particularly in the Western economies, that are really facing a lot of competition out of China and other parts of the world. And so the the notion of competitiveness, I think, is going to be one that is exceptionally important and interesting to our audience. Why don't we start today's conversation with a little bit about your background, though, a career inside Germany's antitrust authority enforcing the rules. And then you made a switch, and now you're on the academic and research side. What was the catalyst behind that change? Um, before going into research, I thought that it is quite important to, to get some practical experience with how things are actually working on the ground, uh, uh, outside the ivory tower before locking in there. Uh, and, uh, and that's why I thought, uh, working at the agency that does the enforcement, the Bundeskartellamt, which is the German competition watchdog, um, was a great experience. And it was so I stayed for two years, did a lot of fantastic, fascinating cases with great colleagues And, um, my academic supervisor always said, uh, this ruined you for academia because you got too much practical view of it. But I, I like it. And of course he didn't mean it in a very serious way, but, but, um, yeah, I think that's important that you change sides from, from time to time. And then you became the president of the Academic Society for Competition Law. What's the biggest disagreement happening between the world's top, what I'll call competition scholars, these individuals like yourself that study competitiveness. Um, the I think you have to distinguish a bit between the US on the one hand, and Europe on the other hand. And of course most other countries, um, the South American, Asian countries as well. Uh, so the debate in the United States is a bit more polarized than in other, in other areas, I would say, um, it seems to be characteristic of US debates these days, But I think the key feature that we've always been debating is how much economics do we use when applying the law? This is something that we've been discussing for for decades. And then, of course, the question also is, what kind of economics do you put into the enforcement of competition policy? So do you spend more with, say, Chicago economics of the nineteen eighties? If I this is now, of course, very sort of broad categories. Or are you more subscribing to other theories? Do you narrow down to a consumer welfare goal which is more in line with traditional US? Um I o theory or do you also include other goals in competition policy? So this is a debate that we have fought over the past years. What are the real goals that we try to achieve when using the tools of competition law? And there is one interesting aspect to that, I think, and that is that governments, policy makers, civil society, etc. have seen that competition law is one of the very few tools and instruments where you can really hit the big companies with a with an effect. So it's another. In other areas it's much more difficult or. This is always impressive for everyone to see. Oh wow, there's Warner, Paramount or something, two really important players. And then competition law steps and antitrust steps. And something happens on the with these companies, even though they're so powerful and and that makes people sort of greedy and they want to put their ideas into competition law as well. Uh, and so, so they say, hey, you've got these great tools and instruments, it seems. Why not integrate privacy concerns, sustainability concerns, democracy concerns into that. And that is one debate that we are fighting over. And I think there is a lot to say from a legal perspective, whether that's in in it or not. That is probably the one debate that over the past year it has become the most prominent. And those of you in the US probably have heard of Lina Khan, who was the chairwoman of the Federal Trade Commission during the Biden administration. She stood for a very inclusive, very broad approach to antitrust, which is completely different to other approaches that had been fostered in the United States before. And that is, of course, also mirrored in the academic debates. It is a pleasure to have you on. Thank you for your time today. So one of these, um, you know, first acts, uh, which came to play in Europe was the Digital Market Act, um, which kind of created the first wave of gatekeepers, um, towards other digital, um, corporations. Can you talk a bit about if this actually changed anything, how companies are competing? Um, and um, is it more about spending on compliance? I love how you framed that question. Um, let me first say that, and this also relates to the, to the question by Steve before that the Digital Markets Act in the EU is probably the answer to the failures of antitrust. Even I mean, I said antitrust is such a powerful tool, or it is often perceived as such a powerful tool. But actually, in the big tech sector, antitrust largely failed. So for twenty years, these have been the most highly concentrated markets, incredibly powerful companies that build a, say, digital infrastructure that you have to use where you are dependent on. And usually people will say, oh, do away with that. We have competition for exactly what is happening in this sector. Uh, companies exploiting customers, excluding competitors, etc. this is now my perception of it or the, the perception of competition always on that. Of course, you may disagree. Um, and then we applied competition law, but it never brought us anywhere to be frank. So we did, particularly in Europe, we did year long proceedings against Google on the self-preferencing in the search engine, for instance, or on on Apple regarding the the access to the play, to the to the app store, stuff like that. And antitrust largely failed. And that is, uh, so we didn't really alter what is going on. So that is why Europe decided. Let's try a different venue. Let's try the Digital Markets Act, which is much more a regulatory tool, not as in competition law where we say, okay, it's an ex post. Uh, you hit them after they've done bad sanctioning tools. So this is now trying to, to be a bit more proactive in the, in the starting phase. That was the European idea. So designating gatekeepers, which are basically the big tech companies, uh, Microsoft, Apple, Amazon, uh, meta, etc., you name them. Um, and then try to, um, try to give them behavioral sort of paths that they have to follow so as to open up their ecosystems so that businesses and consumers can, you make better use of what's happening? It's not so much about competition. It's not so much about, um, we want three other search engines or. So I think that that is very clear that this doesn't happen due to the network effect, but it's much more about do other companies even stand a chance in this environment, or do they just have to, um, take it as it is and, and, and, uh, and eat whatever they put on the plates. And, and that was the basic core idea of the DMA. Um, now, since you asked whether that has worked or not, I think it is a, it is a process. So you cannot expect that you enact a law. And the next day, after a designation of these companies as gatekeepers that are liable to to follow these rules, everything changes. I mean, this is you don't get Google to change things within a day or so. This is not how business works. Of course, they have legal rights, so they defend themselves against what comes up, etc., which is a process, but I think the process has started. I think that we have already seen some changes in behavior. And one other thing that I find is even possibly more important is that these companies understand they are on the watch list. So they, they, they they are they are sort of under scrutiny from a competition from a regulatory perspective and under heavy scrutiny because fines are heavy. Um, the power of the European Commission is still strong. If you want to do business in Europe with four hundred and fifty million customers, you have to adhere to these rules. Of course, that sends a signal. And so possibly they don't do everything that maybe otherwise they would have done. And then there is one other effect that is quite interesting, and that is that this encourages, um, jurisdictions around the world. So it's not just a European thing anymore, but every country on earth that has a working government and that has to deal with, uh, digital currently is thinking about the question, what do we do? You see this in Japan? You see this in South Korea. You see that in Brazil, in all other countries. And of course, they take the digital markets act as one example that they can sort of relate to or what they see. Does it work? Does it not work, what does work well, etc.. And this is an ongoing process. So, so I think there hasn't been a lot of change through the Digital Markets Act. Maybe not exactly. Not not not purely in the sense of, yeah, they now have to do this way or that way, and they may not have and they have to have a choice screen if they open, if you install the iPhone for the first time or stuff like that, maybe that's not the most important point. Maybe the more important point is we show that there is a global movement to put the the big tech companies under under much more scrutiny than before. And that's even true for the US. I mean, let's let's make an assumption, you know, for some of the big tech, uh, maybe Europe, um, you know, was not in the lead position, right? Apple, Google, Facebook, um, they, they grew fast in the United States and Europe may have missed to play catch up. And now we are kind of like in the situation that we are using these technologies and we need to regulate them. But let's come to let's come to an area where at least where I'm sitting, and I think Steve and I are both connected to that very deeply in the automotive space where we would say, you know, we are, you know, the the beginning of automotive and, and Europe stands for strong automotive industry. And so we recently had a guest on, on the show who kind of like talked about how Europe fell behind on autonomous driving. One of the core areas where I would say we should be leading, we should be number one. And what he told us was that Europe challenge is, of course, not the technology, but it's really about culture regulation and the tendency to seek certainty before acting. So as someone who helps write rules. So is this a fair hit or is this an unfair one? Before I get all the blame now from you, I'm not writing the rules. I'm not even helping very much in doing that. So I'm just don't blame you. Of course not. It's just, um. That is a fair hit, I would say. And, um, so I think it's not even the rules so much that are the problem, but it's the mindset of people. So, um, this tendency as you have described it in that quote, um, that people, I think you said something like try to get certainty before they do anything. So they don't bring that, um, they don't bring that car onto the street, uh, before they are one hundred percent safe that they are allowed to do that and that they, that everything goes neatly, etc., etc.. Um, I think that's a cultural mindset that we have to work on. So it's not a pro-innovation mindset, not an experimental mindset that we find, but it's a very law driven, um, uh, restrained mindset. Uh, I fully agree that that is a huge problem. And I shouldn't be saying this as a law professor, and I hope none of my students ever hears this, but, um, but, uh, probably we have too many lawyers in these companies. We have too many lawyers in government who are very good at identifying risks and building obstacles to doing things. So, um, so probably it's also the fault of, of us lawyers. So I didn't want to take the blame, but now I do. Um, not so much for writing the rules, but for, um, teaching or for giving people a mindset, which is not so, uh, experimental as, as elsewhere not so entrepreneurial. If you may say, I'm a bit unsure how you change that. Of course it has to do with the rules. Of course we can do, we can slash a lot of rules. We can probably do away with a lot of stuff, but in the end, it is not the not the problem of government. It's not the problem of of courts or agencies. It is the it is a problem in the boardrooms of companies if they don't sort of keep going with the combustion engine Instead of pushing for immobility and radically changing their way of production. Doesn't. Doesn't, though the the ability to drive innovation quickly to get through sort of the well understood valley of death, as you get from basic and applied research to full commercialization, doesn't a regulatory environment that allows for that competitiveness as well as balance the competition law that you're describing? How do you square sort of that, that balance saying, yes, we have to provide the competition law, etc. but we also understand that that has a direct impact on foreign companies investing in our markets and choosing to build here. That has a direct impact to driving innovation in these wonderful ecosystems that include universities and and researchers and labs and all of that. How do you kind of square those two sides of the coin? I agree that you you certainly have a point there. And I'm, I'm always, uh, speaking in favor of what we call regulatory sandboxes or room for experiment. So do away with the rules for five years and let's see what happens. Right. And monitor that and, and, and let's, let's just try an experiment. Um, but still, I believe that it's not primarily the legal environment, the regulatory environment, but it's primarily the creativity and the, and the, of course, also the finances, etc., that the funding within companies, which can, to a certain degree be encouraged and, or, uh, pushed forward by, by politics, by rules, but not, not to, to a full degree. So let's look at the incentives. So what are the incentives for people to innovate? What does it mean for someone in a say in a big, um, automotive company. What does that person have as an incentive to, to do something completely differently from before? Right. And of course, then we have to talk about labor law because labor law is maybe too rigid in Germany or in Europe, stuff like that. But but the first steps have to be taken. Um, uh, within the companies, I'm pretty convinced of that. And, um, and maybe one more, um, uh, one more thought on, on that, uh, we, we did this, uh, government commission on AI and competition or competitiveness, whatever you prefer. Not the same thing, but okay. Um, and, um, and there, the big European companies, there were major, major companies represented like real industrial giants in that, in that, in that group. And they, they ask us, so how do we get better laws? And I always said, well, you are lobbying these politicians so much, you should know how to get better laws. And, and it's used sort of who's making the rules or writing the rules much more so than, than me as a tiny little government adviser in some, some respect. Uh, and they said, well, we don't, we don't know either what's happening on the European level, for instance, and how we get all these European regulations. So I think that is also quite interesting that we that we have to understand what are the incentives for people to make these laws, um, and to try to influence the people who are working on these rules to, to set their incentives. Right? So I think that is, that is much, much more research needed on the political economy of making rules in Europe. Um, to understand why do we ever get more rules, even though everyone says even the big companies agree to say, yes, we need less bureaucracy, we need to deregulate. But it doesn't have happen, even though they have probably much better access to government than I have. You said something there. I want to go back to you said competition and competitiveness are different. Is there something deeper there? Is there. Can you explain that a little bit? Yeah. I mean, um, sure. Competitiveness and is often used as a term in the European discourse where we say we want to make our companies competitive for the world market. Mhm. Which means we pamper them, we subsidize them, we, we protect them so that they have better access or that they are stronger to export something to Brazil or so. And, uh, people like me who come from the competition angle say, oh, no, no, no, no, I don't want government subsidies. I want tough competition. And if they succeed in competition, they should be able to succeed on the Brazilian market as well. Um, and that's a different philosophy to a, to a certain degree, which is currently playing out a lot in Europe with some governments and some scholars say we need to build national champions or European champions under the heading of competitiveness, which sounds good to me, but which means this is heavily, heavily government sponsored, where I would always say, let the market decide and let's let's hope that the market gets the right incentives for these companies to grow and, and, and, uh, be successful, you know, on that, that topic, we have had guests talk about broadly, I'll call European sovereignty. Right. And, and, and one gentleman, Martin Hullin, introduced us to Eurostat, which is essentially building a European digital infrastructure. Uh, not only, I think from a terms of a competition, maybe competition, competitive point of view, my sense and from that competition, from that conversation, there was also a bit of a national security supply chain resilience conversation in that as well. Um, does this sort of aggressive platform regulation actually build that kind of resilience? Um, or does it just protect and create maybe more complexity, more regulation, more, more barriers in Europe? I would separate these two things. So platform regulation certainly does not build a better infrastructure, better digital infrastructure. So it opens up chances for some companies, which is great. We need that. But if we are talking about cloud or computer. So I think that's a different matter. And in this regard, I'm always a bit skeptical with these plans to build huge European infrastructure. I mean, I think we need some let me say, basic infrastructure. We certainly need more compute than we currently have. We certainly need more facilities of. But but we will not be able to produce within a couple of years what the US have achieved so far and what private companies in the US are investing is enormous in comparison to what Europe can invest in the near future, in the realistic sense. So I would I would not try to to rebuild the the the stack, the AI stack, as in the US. My strategy would be a different one. I would a try to have some sort of counterweight to to the current US or Chinese um, points. So if you have a company like ASML, uh, which is important and necessary for everyone working in the field because they are the only ones, a Dutch company, the only ones who produce the machinery that is important for some kind of optical fabric, uh, for, for some kind of technology there. Uh, these are our strongholds and we should sort of try to build such strongholds and employ these strongholds. If others try to, to try to put the kill switch on or whatever. Um, and on the other hand, um, and be, I think we need a certain basic infrastructure and we should invest in that and, and see, um, which I find most important is to invest heavily into research so as to be on the next wave on top of the next wave. So I would much more believe into leapfrogging instead of imitating what is currently going on in the US. So let me challenge you on that. Um, so I mean, I would say that Europe has been and is still at the cutting edge on many, many developments in the world. Right? I mean, I don't know if we look into the top ten brightest people in AI. I think most of them are coming out of Europe and even Germany. Uh, we are leading in things like fusion. We are leading in things like, um, um, yeah. Quant. Uh, I mean, there's a lot of things were being number one, but people are leaving at some point because they seem not to get the support. I don't want to talk about funding it itself. Uh, but they seem not to find that there is the same growth opportunities and in other parts, particularly in the United States. And I think now more and more people are also looking over to the East. So how is that? What is what is your answer to that? And what can we do to keep the people here or even getting them back and have the top talent be back in Europe. Very good question, Philip, and I agree that this is this is a major thing, and this is what I'm hearing as well, that research in Europe is still Ace and still can't compete with with what's going on in the US and China. Um, what makes people leave? I mean, I think it mostly has to do with scaling and, and funding. That's at least my understanding. You probably know better than I do. Um, but that means we need to have better, um, possibilities for scaling up. Uh, which means we probably have to integrate the European market much better than, uh, than in comparison to right now, which means there is still too much going to too many borders between Portugal and France and Poland and Germany, etc.. Um, then of course, your personal environment, the money you earn as a researcher in Germany, etc. that you can earn with companies. I think that's also personal incentive, which is which is very important. And of course, funding for certain things. I just don't believe that. So when I when I said that earlier, I would would go for leapfrogging instead of trying to imitate. What I mean is we will not be able to remedy this problem within a short period of time. So this needs some long term strategy and investment. And that is something where I where I see that European governments are currently not doing enough, um, to, to really think ahead, uh, a couple of years. So, uh, Yann LeCun, the Turing Award winner, was with us in one of our AI commission sessions. And he said, what we are seeing right now playing out in, in AI commercially is exactly the research that we did twenty years ago, fundamental research. And so if you want to be ahead in twenty years, you need to invest into fundamental research right now. And I think we often see the the exact opposite at the moment, cutting down on research because governments try to save money, put everything into defence, which is great, but then they do it in traditional defence instead of high tech and AI defence etc. so I think these are the the levels where you have to work on. And um, and then if you have great minds and great ideas, I still believe that the European environment are something worth to go for. I mean, there is a reason why a lot of companies go to Munich and build their centres there or to Zurich, etc., because it's fantastic to live there. It's wonderful places and still we have some quality there, which we probably have to play out and preserve as well. Staying. Staying with with that, with that topic. If you look at it from a investment lens, you know, corporate venture capital, but, but also, um, generally acquisition of startups, do you have the feeling that European corporates and European middle market companies, which are probably even more important than family business is that they actually have the I don't want to use the word power, but kind of like the, the willpower to actually make some aggressive investments or even acquisitions in some of the next things which are coming. Or are they completely lacking behind some of the more bigger platform plays, like in Microsoft, like a Google. Um, so that a lot of the IP gets bought away from Europe too early. And we would actually need to activate our own corporate middle market family businesses to, to bolster some of what we're building here. Yeah, yeah, this is my understanding. I mean, I'm not an expert in what's happening in family owned businesses or these foundations. Each domain or so that we that we have a lot. Uh, I'm not an expert in that, but my understanding is that they are very risk averse in their investment strategy. So that's what people tell me. I mean, you probably know better than I do. Given the speed of these technologies. AI right? can the regulatory framework keep up with as fast as this technology is evolving? Good point. I mean, generally we have if I discuss legal questions or the law, I mean, we have certain principles that we hold near and dear, of course regulating the details. And this is one of the failures of the Digital Markets Act that we discussed before the DMA was introduced, right before ChatGPT became available, a large scale. So um, so it does not contain at the, at the time, people were not worrying about AI because it had not yet hit the scene as, as it has now. Uh, and that's of course always lagging behind. And now if you try to regulate the tiny details. Of course you have to fail, right? You cannot you cannot sort of keep up with that. But if you look at the general principles, what are the core ideas of the law? Those who cause harm are liable to pay for pay, some compensation, or you should not exploit your customers. You should not, um, exclude competitors or hinder competition if you're in a powerful position, stuff like that, which is a very general scale, I think. Yeah, of course, these principles are still valid and they haven't changed over the past years and we can still work with them. So keeping up is probably much more a procedural, a formal question, rather than a substantive one. We understand what's going on. We're pretty good at that I think at the moment already. Um, but our procedures are lengthy. If you look at how long courts take in Europe before they decide a case, of course, that comes too late, right. We have proceedings going on against Google for ten years or fifteen years with the European Commission and then the court before we have a final judgment in the matter. Of course, ten years in in digital is like the centuries in, in, in, in the history of mankind or so. Right. So, so what I want to say is we have to be much smarter and swifter in the style of enforcement if we really want to do something about it. And, um, if we really want to keep some of these legal principles, um, valid, if I say that, I mean, I know that everyone is talking about deregulation. And of course, I fully agree that we need deregulation, particularly on the details and particularly in areas like data protection or, or AI protection, etc.. Um, but on the other hand, I think we also always have to make clear to ourselves that our societies should be governed by what we call the rule of law, by some certain principles of democracy, of basic rights, etc. and that, of course, companies that become so powerful that they control a lot of what is going on in our societies that they can, with one snip of their fingers, ruin countries or put countries off of basic infrastructures. Of course, we have to make sure that we are still on top of things in democratic societies. And that's also one point. I mean, with all this talk about deregulation, which I fully agree on and many, very, very many respects, I always believe in the supremacy that the law and politics claim over business, even though business looks like such a fancy, great thing. So you've talked about reform. You've talked about things that have been tried and failed. What would you change? What does real reform look like in the next two to three years? How do you get there? One thing that is very easy to do is that we use the defense funds, the money that we raise for defense at the moment, that we invest that much more in AI and and tech, right? So we see a huge rise in spending there. But in Germany, at least, I'm not sure about other countries, but in Germany we see, um, that we spend less, uh, relatively sane, um, on, on um, high tech and AI in this field. So which is a, which is a bad development. So you can use that as strategic investment into this sector. And of course we need investment. Of course we need governments incentivizing AI and high tech. And we should use these funds for that. The second is something we already discussed invest in fundamental research, make perfect conditions for research, and for transfer from research into commercialization, which is still burdensome process and some, um, in some areas. And then the larger shift that I would wish to see is to move from ex ante regulation in AI and similar fields to exposed liability. So that means don't try to regulate everything. Don't try to regulate every detail of the car before the car ever hits the street, but make sure that the brakes are working so that the very basic requirements are met. But then let's try. Let's experiment. And then we punish the people later on if something went wrong. Uh, that is sort of more the US approach to regulation. Uh, let's try and if it goes wrong, you get a lot of compensation. Of course, we need a minimum standard, but we should not go beyond that minimum standard, or we should not try to be perfect in regulation before being, uh, before having the goods or the technology on the street. Before, before I want to close us out. Um, for the founders and investors listening who build or fund things in Europe, what's the one thing about how competition law actually works that you wish they understood before they made a decision based on assumptions instead. Don't be afraid and just do it. And if ever someone comes up and drags you to court or to competition agency, get a good lawyer. Enough. I love the short answer. So maybe just one last question and we ask them a lot of our guests. So if you would be sitting in front of the board and the executive team of a big European corporation, what would you tell them to become more competitive? We talked a bit about the culture we have. What would you tell them to make sure that they position themselves and make sure that Europe is competitive for the next two or three decades? Lovely that you ask that to a civil servant in German state employment. I'm telling you all important, we all have the power to make change. I think the I. What I would do, what I would say is change every person's position in the company. Everyone. So everyone has to take up a new post. Uh, now and then let's see what happens. Because I think that routine's path dependencies are very strong and you have to change your mind. You have to change yourself. You have to push yourself to change all the time. This is why I love research, by the way, because you are always coming to new boundaries. You can always reinvent yourself and say, if you're an engineer who has worked on on a certain part of the engine for seven years, is now moving to, let's say, marketing, controlling or some other tech, uh, related issue which is not working on this engine. I think a lot of things could happen that you and then you will probably also find out who's really important in what position and what do you really need one hundred percent? And when could you really have change? Great advice. I'm one hundred percent aligned with that, with that thinking. Thank you so much. Thank you so much for joining and for sharing your perspective. It was a great pleasure. Thank you so much, Professor Podszun. Thank you very much. Pleasure to meet you. Uh, terrific conversation. Very, very interesting. Um, be a great episode. So thank you. Thanks. 

Conclusion

You've been listening to Inside CVC, the podcast of the CVC Open Innovation Summit. The summit brings together corporate board leaders, investors, entrepreneurs, policy makers and innovators across Europe, the Americas and Asia to connect capital innovation and strategy. To learn more about the community and upcoming gatherings, visit cvc-summit.com and follow Inside CVC wherever you listen to your podcasts. We'll see you next time.