This presentation by Mark Simpson, Partner, Norton Rose Fulbright, was made during the discussion “Blockchain and Competition” held at the 129th meeting of the OECD Competition Committee on 8 June 2018. More papers and presentations on the topic can be found out at oe.cd/2gx.

1. OECD: Blockchain and Competition Policy
Blockchain and Anticompetitive Collusion
Mark Simpson
Partner
Norton Rose Fulbright LLP
8 June 2018

2. Agenda
2
• Context & Concepts
• Competitor collaboration: what is the concern?
• Establishing a blockchain platform
• Operating a blockchain platform
• New opportunities for collusion?
• Options for regulators

3. Overview: different types of blockchain exist
3
Public Blockchain
(“Permissionless”)
Private Blockchain
(“Permissioned”)
Consortium
Blockchain
Access Open Authorisation only Authorisation
only
Validators Permissionless,
anonymous
Permissioned,
identified
Permissioned,
identified
Approval
Process
Consensus (proof of
work / proof of
stake)
Voting by approved
participants
Voting by
approved
participants
Permissionless,
Public, Shared
Systems
(eg Bitcoin)
Permissioned,
Public, Shared
Systems
Permissioned,
Private, Shared
Systems
Today’s Typical
Systems
Centralised
Ledgers
Distributed Ledger Technology Covers a Broad Set of
Usages
Different ledger technologies vary in their
‘degrees of centralisation’
UK Government Chief Scientific Adviser, Government
Office for Science, Distributed Ledger Technology:
Beyond Blockchain, 2016
100%
Decentralised
100%
Centralised

4. The “Consortium Blockchain” concept
4
Sector Automotive
Industry
Trade Finance Freight &
Logistics
Name Ocean Shipping
Logistics
Consortium
Participants
Application Making mobility
services more
efficient, affordable,
greener, safer, and
less congested
Managing, tracking
and protecting trade
finance transactions
between SMEs
Digitalisation of
international logistics
movements

5. Competitor collaboration: what is the concern?
5
People of the same trade seldom meet together,
even for merriment and diversion, but the
conversation ends in a conspiracy against the
public, or in some contrivance to raise prices.
Adam Smith, The Wealth of Nations (1776)
But accessing information is fundamental for markets to function and enabling pro-
competitive outcomes which tend to increase general consumer welfare:
• Solving information asymmetries;
• Increasing internal efficiencies through effective benchmarking;
• Efficient management of inventories;
• Improve choice for consumers

6. Establishing a blockchain platform
6
Enhanced
opportunities
for collusion:
• Critical mass of
competitors
involved;
• Monitoring
compliance.
Blockchain
consortia can
face divergent
incentives…
Procompetitive
objectives:
• Improved
provenance;
• Efficient
transactions;
• Wider range of
services.
Spillover Risk…
• Blockchain consortia often involve direct competitors, increasing chance of collusion
in same or related markets;
• Situation similar to planning discussions for classic R&D joint ventures – mitigation
strategies may involve:
 Seeking advice from external advisors;
 Clean teams and information sharing protocols;
 Vetting of information by external advisors or non-competing participants;
• Collective boycott – what is the extent of participants’ obligations to engage with
others seeking admission to the consortium?
• Standard setting – could agreed standards foreclose competing technology and / or
be discriminatory?

7. Operating a blockchain platform
7
Information Exchange…
• Blockchains can increase market transparency, as each participant possesses a
complete copy of the ledger, which contains details of all transactions
• Competitive sensitivity increased by near-instantaneous recording on transactions
• However, the nature of the information actually stored on the (publicly) accessible
ledger varies between applications (increased privacy via zero knowledge proof)
• Consortia blockchains can grant different permissions to classes of participants
Block 1 Block 3Block 2
Block
Header
Time Stamp
Messages
Hash
Block
Header
Time Stamp
Messages
Hash
Block
Header
Time Stamp
Messages
Hash
Transaction data
is stored on the
ledger in hashed
form, but can be
decrypted by
participants
Transaction data
is not stored on
the ledger, but
rather “pointer”
hashes link to
addresses of off-
blockchain storage
locations
A
B
Or…
Key question: what information is visible on the ledger?

8. Blockchain
Technology
Smart Contracts
Could be used to
implement
anticompetitive
agreements via a
blockchain platform
e.g. price fixing, RPM
Pricing Algorithms
Already subject to
investigation by
competition
regulators:
• CMA – Online
sales of posters
and frames (2016)
• EC – investigation
of Pioneer,
Philips, Asus
(2017 - )
Collusion between
Miners
• Economies of
scale have led to
concentration of
mining power in
hands of few
players:
CR5 = c. 70%
• Incentive to
collude to
implement “51%
attack”?
Collusion between
Blockchains
• First mover
advantage and
pursuit of network
effects makes
collusion
unlikely?
8
New opportunities for collusion?
Cryptocurrency
Manipulation
May 2018: DoJ
begins criminal
investigation into
traders allegedly
manipulating
cryptocurrencies via
techniques such as
“spoofing” and
“wash trading”

9. Various options for regulators…
New Rule-based
Regimes?
New (Principles-
based) Guidance?
Regulatory Sandbox?
9
• E.g. New block
exemption regulation
for blockchain consortia
with x% share of
horizontal market
• But firm rules likely to be
rapidly superseded by
new applications
• E.g. updates to
Guidelines on horizontal
co-operation
agreements with
Commission’s view on
when transparency is
likely to raise concerns
• Some form of
commentary appropriate
to promote innovation and
avoid stifling pro-
competitive benefits
• Obligation on parties to
self-assess should remain
• I.e. environment for
businesses to test
innovative products
without risk of being
‘punished’ by regulators
• Deployed by UK’s
Financial Conduct
Authority in respect of
financial services
regulated activities
• More appropriate for ex
ante regulation than ex
post regulation? (if the
former, could a
competition sandbox
apply to merger control of
blockchain consortia?)