TABLE OF CONTENTS
INTRODUCTION 118 A. The Technology: Blockchain Toolbox 119 B. The Practice: Collusive Agreements' State of the Art 123 C. Blockchain and Collusive Agreements: New Challenges 126 II. THE BIRTH OF COLLUSIVE AGREEMENTS ON BLOCKCHAIN 128 A. Collusive Agreements Related to Blockchain 128 1. Collusive Agreements Related to Public Blockchain 128 2. Collusive Agreements Related to Private Blockchain 133 3. Collusive Agreements by Consensus Mechanisms 134 a. Regarding the Miners 135 b. Regarding the Core Developers 139 c. Regarding the Users 140 B. Collusive Agreements Using Blockchain 140 1. Collusive Agreements Using Blockchain Without 141 Smart Contracts 2. Collusive Agreements Using Blockchain with Smart 142 Contracts III. THE LIFE OF COLLUSIVE AGREEMENTS ON BLOCKCHAIN 143 A. The Visibility Effect for Colluders 144 1. Blockchain as a Way to Prevent Deviant Behaviors 144 2. Blockchain as a Way to Correct Deviant Behaviors 147 B. The "Opacity Effect" for Outsiders (IncludingAgencies) 149 1. Blockchain as a Way to Protect Colluders from 149 Detection 2. Blockchain as a Complication to Agencies' 151 Investigations IV. THE DEATH OF COLLUSIVE AGREEMENTS ON 154 BLOCKCHAIN A. The Use of Smart Contracts to Exit Collusive 154 Agreements 1. Smart Contracts as a Way to Force the Exclusion of a 154 Deviant Colluder 156 2. Smart Contracts as a Way to Manage a Company's Own Exit from the Collusion B. Smart Contracts vs. Leniency Applications 158 1. The Impact of Blockchain on Leniency Applications 158 2. Smart Contracts and Leniency: A Similar End 161 V. CONCLUSION 163 APPENDIX 1. TRUST BY SMART CONTRACTS THROUGH THE 166 EXISTENCE OF COLLUSION ONE OF THE GREATEST CHECKS ON CRIME IS NOT THE CRUELTY OF PUNISHMENTS, BUT THEIR INEVITABILITY…. THE CERTAINTY OF A CHASTISEMENT, EVEN IF IT BE MODERATE, WILL ALWAYS MAKE A GREATER IMPRESSION THAN THE FEAR OF A MORE TERRIBLE PUNISHMENT THAT IS UNITED WITH THE HOPE OF IMPUNITY... --CESARE BECCARIA (1) I. INTRODUCTION
Blockchain may transform transactions the same way the Internet altered the dissemination and nature of information. (2) If that were to be the case, all relationships between companies would change, including prohibited ones. For that reason, the stakes are crucial (3) and the absence of academic studies entirely dedicated to this issue must be remedied. These studies must be completed without further delay, as the ever-evolving nature of technology complicates the application of law to blockchain.
It is therefore essential that antitrust and competition laws stay up-to-date because these laws play a great role in shaping the power that flows from technologies and the way companies interact with each other. This Article aims to contribute to antitrust and competition law modernization by focusing on the interplay between blockchain and collusive agreements.
The Technology: Blockchain Toolbox
In this Article, I first intend to explain how the blockchain technology works and to describe its main characteristics. Although knowing how to code a new blockchain could be useful in better understanding the legal implications it creates, I believe that it is not an absolute necessity. The same is true for all scholarship studying the impact of the Internet: the most important thing is to understand what the technology can do.
A blockchain is an open and distributed ledger recording all sorts of transactions between users. With a blockchain, the ledger is maintained across the computers of all blockchain users through a peer-to-peer network. As a result, a blockchain can do virtually everything that a computer does, but with four characteristics that differentiate it. (4)
First, blockchain is decentralized. This is because blockchains are distributed ledger systems, meaning that no single user controls the information or the data on the blockchain, and that no one is in charge of maintaining its proper functioning. More specifically, public blockchains have no proper governance outside of the consensus mechanism. (5) Its creators do not control who accesses, uses, and exits the blockchain. (6) Because there is no central point of failure, blockchains are said to be secure and reliable by nature. (7) Additionally, blockchains function on peer-to-peer transmission, which also contributes to making blockchain a decentralized technology. All information exchanged on blockchains is conveyed between each user--in technical terms, between each node (a computer connected to the network). (8)
Second, blockchain relies on unstoppable code. (9) The first key feature in this respect is the consensus mechanism, which is the general agreement under which the blockchain operates. As of today, the most commonly used consensus mechanisms are Proof of Work, Proof of Stake, Proof of Burn, Proof of Authority, Proof of Capacity, and Proof of Storage, but new ones are being introduced frequently. Depending on which consensus mechanism is chosen, users will make different uses of computational logic on blockchain. All transactions happening on blockchain may be programmed and automated by smart contracts, (10) defined as "a computerized transaction protocol that executes the terms of a contract," (11) or in other words, "a program enforce[ing] the contract built into the code." (12) When users set up such algorithms that automatically trigger transactions between nodes, the transactions are validated according to the chosen consensus mechanism.
Third, blockchains are pseudonymous. Each node has a unique alphanumeric address, called the public key, which consists of a specified number of characters. (13) This key is derived from a private key that each user stores outside the network. As a consequence, this private key cannot be seized, which protects users' identities. Even if the private key is given away by one user, it does not reveal its "real life" identity. (14) Moreover, blockchains can also be used to hide the meaning of transactions: only the exchange of tokens is made public, not the reason why they were exchanged in the first place. The same is true for cash, but not for credit and debit card payments, in which banks know the identities of the transacting parties. In short, "nobody knows you're a dog" (15) on a blockchain, and this is all the more true if colluders combine their blockchains with other mechanisms to further protect their identities and the content of their transactions. such mechanisms can be "off-chain" or "sidechain." (16) "Off-chain" mechanisms are used to store confidential information separately on another system with access control restrictions. They can be useful for colluders in restricting access to transaction details to authorized parties only. "sidechains" are parallel blockchains working alongside the primary blockchain. They will complicate the work of antitrust and competition agencies in analyzing potential anti-competitive behaviors.
Fourth and last, blockchains are immutable. This is reflected by the fact that records cannot be easily modified along the way. (17) All transactions on blockchain typically reference previous transaction outputs as well as new transaction inputs. (18) Transactions are submitted to the blockchain, and once they are buried under enough confirmations that the contained information is accurate, they become irreversible (19) and can in principle be seen by all users with no restriction to access. Without the guarantee of immutability, blockchain is nothing more than a service similar to on-demand cloud computing platforms such as Amazon Web Services ("AWS"), "which is already much more user friendly and a thousand times cheaper." (20) Precisely because blockchain is immutable, different mechanisms, called consensus mechanisms, may be used to sort out which information and transactions are recorded on the blockchain. (21) This creates trust, as everything on a blockchain has been verified at some point in time. (22)
These different characteristics of blockchain lead to different uses of the technology. (23) The first (blockchain 1.0) is crypto-currency, in which blockchain tokens are traded outside of the sole blockchain system. (24) The second (blockchain 2.0) is smart contracts, in which blockchain is used to implement automated transactions between users by executing pre-defined algorithms. (25) The third (blockchain 3.0) encompasses all other uses of blockchain, including peer-to-peer ridesharing, social media, online research, and more. (26) These three usages of blockchain come with different challenges for antitrust authorities, with collusive agreements as a major challenge.
The Practice: Collusive Agreements' State of the Art
The antitrust and competition law literature on monopolization and abuses of dominant positions is highly polarized as some authors dispute the harmful nature of such practices. (27) This is not the case with the literature dealing with collusive agreements. It has been said that "[n]o modern development in antitrust law is more striking than the global acceptance of a norm that condemns cartels as the markets most dangerous competitive vice." (28)
Here, the term "collusive agreements" "describe[s] the economic nature of the behavior rather than how it might be categorized under the law." (29) They encompass agreements and concerted practices, as well as cartels and vertical agreements. These concepts refer to different forms of anti-competitive practices and constitute the vast majority of cases decided by the Federal Trade Commission ("FTC"), the Department of Justice ("DOJ"), and the European Commission, other than merger investigations. In the absence of clear definitions, a broad meaning has been given to the terms "agreement," "decision," and "concerted practice," (30) which generates a large amount of litigation. For this reason among others, the European Commission has not sanctioned any abuse of dominance between 1991 and 2004, (31) focusing all of its attention...