COMPETITION LAW OBSERVER

A blog by Centre for Competition law & Policy, NLU Jodhpur

EUROPE’S UNIVERSAL USB MANDATE: ANTI OR PRO COMPETITIVE

EUROPE’S UNIVERSAL USB MANDATE: ANTI OR PRO COMPETITIVE

Aditya Trivedi and Mrigank Patel

BACKGROUND:

In the contemporary time where science & technology, simultaneously, are moving at a rapid pace with each passing year, the advancement in technology surpasses years’ worth of previous innovation and development, making even the latest gadgets obsolete in such a short span of time. Consequently, electronic waste [“E-waste”] is emerging to be a significant threat to the economy and environment.

According to the European Commission [“EC”], more than 400 million mobile and other portable devices [“devices”] were sold in the European Economic Area [“EEA”] in 2020. For such devices, consumers had around 3 chargers, of which 2 were used regularly. However, because of the different ports/connectors of the chargers and the devices, 38% of the consumers faced compatibility issues and they had to buy different chargers for different devices resulting in increased expenditure. Consequently, consumers’ pockets took a hit of almost 2.4 billion euros annually, on chargers sold separately from the devices themselves. Alongside, in the chargers and connectors/ports industry [“Industry”], the purchase and sale of numerous chargers also resulted in piling up 11000 tonnes of e-waste every year.

To deal with this double-edged issue, the EC has been actively taking steps for over a decade. In 2009, EC pushed for adopting the first Memorandum of Understanding [“MoU”] to reduce mobile charging solutions from 30 to 3. The MoU expired in 2014, and post that, there has not been any concrete development. Nonetheless, on September 23, 2021, the EC proposed a standard charger for devices with a uniform charging speed.

PROPOSAL:

The EC put forward a legislative proposal for a revised ‘Radio Equipment Directive’ [“Proposal”] to establish a standard charging solution for all relevant devices. Under the said proposal, USB-C was declared the standard charging port/connector for all devices. It also proposed harmonized fast charging technology wherein all devices would support the same charging speed. The production and disposal of new chargers are estimated to reduce as consumers can purchase a new device without a new charger. This will reduce the massive amount of e-waste. Therefore, in this way, the EC intends to empower the consumers by providing them with enhanced ‘Right to Information’ in the form of the relevant information about charging performance, including fast charging features (if provided) and power requirements of the devices.

Currently, the proposal awaits approval from the European Parliament and the Council of the European Union. It will be adopted by the ordinary legislative procedure. For Competition/Antitrust concerns, the proposal encompasses both procompetitive and anticompetitive elements for the industry. Such elements are discussed as follows.

ANTI-COMPETITIVE CONCERNS:

1. Curbing Innovation and Scientific/Economic Development:

Once the EC’s proposal is passed, the Original Equipment Manufacturers [“OEMs”] engaged in the manufacturing of devices and chargers will have to provide standardized charging ports/connectors on their devices alongside standard chargers. This means that, even if an OEM develops more advanced and economically viable technology, it will have no option but to adhere to standard norms of USB-C. Consequently, critics also say that this is a stupid way to approach product design and standardization. With the development of science and technology, newer charging options might arrive soon. For instance, Xioami’s Mi Air Charge technology enables users to charge their devices remotely without any connectors/ports, let alone the requirement of cables. Moreover, the charging speed of the devices has been increasing with each passing year, like Oneplus’ Warp Charge, Samsung’s Fast Wireless Charging 2.0, Oppo’s flash and Air VOOC wireless flash charge etc. Therefore, the proposal, if approved, might not be of any use in future, considering scientific development and innovation. The tech giant Apple and some other critics contend that the decision also blocks innovation. It is an attempt to destroy competition and impose a product on the customers. The Commission, in response, says that there is a lot of scope for innovation in wireless chargers. Wireless chargers will not be affected, but the significant change would come for iPhones which currently have a proprietary lightning charging port. In this way, the proposal would not only limit the scientific/economic advancement but would also deter the competitors from innovating in charging interfaces for devices which indeed is anti-competitive.

2. Limitation of the market to producers:

The proposal essentially hits Apple because of its long-drawn reliance on lightning connectors/ports on the devices and chargers since 2013. According to Statista, Apple’s market share is around 15% which is substantial in the industry observing the market share of other competitors. After the implementation of this proposal, it would be illegal to sell an electronic device without a USB-C charging port. Consequently, Apple would have to switch to USB-C, which severely threatens to limit the market for its proprietary lightning charging solution. In contemporary times, micro-USB chargers are also in use, which would be abolished after the proposal. In this way, the proposal can adversely affect the competition in the industry, as producers would only be able to manufacture USB-C chargers and the market will revolve around the same. Whereas in the present scenario different types of chargers are being sold giving the opportunity to sellers to compete through introducing various chargers.

3. Limiting Consumers’ Choices and making existing chargers obsolete:

Despite having access to battery information of devices and chargers, consumers would lose the ‘Right to Choose.’ According to a report, in 2018, around 29% of phone chargers sold in Europe were USB-C, 21% lightning, and around half of the market was covered by micro-USB standard chargers. Post the implementation of the proposal, there would be no choice left but to have one charging solution, which may harm consumers’ interests. Additionally, Thierry Breton, the European commissioner for trade stated “What are we offering? More freedom, fewer costs, and less electronic waste.” By the statement, it can be concurred that the proposal primarily aims to reduce e-waste, however, it might as well be in contrast with the aim because the existing non-USB-C chargers, either sold or unsold, would become obsolete, resulting in nothing but e-waste. Thus, apart from having some anti-competitive elements, the proposal is also ironical to an extent.

PRO-COMPETITIVE:

1. Removal of Entry Barriers:

Entry Barriers refer to the factors which prevent or stop the new entrants into a market/industry, let alone doing business in the said market/industry. These barriers act as hurdles for firms/companies who wish to enter into a particular market/industry. These Entry Barriers can be high costs of manufacture, licensing and regulatory prerequisites, economic advantages enjoyed by the dominant firm but not all, etc.

In the Industry, licensing requirements are a significant barrier. The two widely used platforms, namely USB (governed by USB-IF) and lightning (governed by Apple), have their own set of licensing requirements. For manufacturing the former, there’s a prerequisite of a Vendor ID, and for the latter, an MFi (Made for iPhone/iPod/iPad) certification/approval is required.

Consequently, to enter into the industry and manufacture both USB and lightning connectors [“Products”], the requirements of such licenses call for heavy capital employment, which in turn acts as entry barriers. However, the current proposal for one single standard connector would reduce the licensing costs and other requirements attached to manufacturing multiple connectors or charging solutions. In this way, the reduction of the cost would result in lesser capital requisite to comply with the licensing requirements. Consequently, it would be much easier to enter the market. Thus, the barriers to entry would decrease, and competition among manufacturers would rise.

2. Accrual of Benefits to Consumers:

Accrual refers to increase; thus, the term ‘Accrual of Benefits to Consumers’ means an increased benefit to the consumers. The primary aim of Competition Law is to protect the competition and not the competitors, and ultimately because of such competition, the consumers are to be benefitted, which in turn is the ultimate objective. Thus, the accrual of such benefits of consumers is pivotal.[1]

In contemporary times, people own multiple mobile devices. However, the dissimilarity of their charging ports/connectors alongside the discontinuation of the supply of chargers with the purchase of mobile devices by the majority of brands has resulted in a steep rise in the expenditure of consumers. This is a grave issue as consumers were forced to pay much more than necessary.

Contrastingly, because of the current proposal of one charging connector/port for all devices alongside one uniform charging speed, the consumers’ expenditure on chargers would reduce substantially and provide them great economic benefit. Furthermore, because of a standard charger with uniform charging speed for all the devices, some homogeneity of goods can be achieved, if not the actual perfect competition in the industry. This homogeneity would result in significant improvement in allocative efficiency, which in turn lower the prices further for consumers in general. Ultimately, interoperability of the chargers in all the devices would also negate the need to have multiple chargers for different devices. The reduction in expenditure & prices and the interoperability are considered to benefit consumers and put them to great advantage[2] and thus can be termed pro-competitive.

CONCLUSION:

The proposal has both pro-competitive and anti-competitive concerns. On one hand, the proposal pitches for the removal of entry barriers and accrual of benefit to consumers, which are very pro-competitive. Whereas it also threatens the closure of markets for non-USB-C chargers, deters innovation, scientific & economic development, and limits consumers’ choices, which are, in fact, severely anti-competitive. Thus, it cannot be said that the proposal is purely inclined towards being pro-competitive or anti-competitive. Owing to such ambiguity and the gamut of concerns affecting a large number of consumers and multibillion-dollar OEMs, it’s indeed going to be a complex condition for the EC to deal with. Currently, the proposal awaits approval from the European Parliament, and it will be interesting to note whether it passes it as it is or suggests modifications to the mandate.

Another interesting point to note here is how Apple plans out its move against the proposal as arguably it would be affected the most if the proposal is accepted and a legislation is passed. Would the Tech giant shift entirely to wireless charging, ditching the lightning port, or would it accept USB-C as per the norms?

[1] Richard Whish and David Bailey, Competition Law, (7th ed., OUP 2012) 196.

[2] Id, at 610.

Aditya Trivedi is a fourth-year student at National Law University and Judicial Academy Assam and Mrigank Patel is a fourth-year student at Hidayatullah National Law University, Raipur.

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