E-Commerce and the Digital Economy

CUTS Celebrates World Competition Day in Geneva: Digital Markets under Spotlight

“Today couldn’t be a better day to celebrate the World Competition Day”, said Philippe Brusick, Former Head of the Competition and Consumer Protection Policies Branch at UNCTAD and the President of CUTS International, Geneva, General Assembly, today in Geneva while speaking at an event organised by CUTS International in celebration of the World Competition Day.

“Indeed, on 5th of December 1980 the United Nations adopted the UN Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices, which to date remains the only multilaterally agreed instrument on Competition Policy and paved the way for enormous progress on consumer welfare”, he added.

This year, celebrations addressed the theme “Ensuring Effective Competition in an Increasingly Online World.” The online economy is increasingly witnessing consolidation with a few large players left to cater to large swaths of consumers. In this context, it is important to understand how best competition and regulatory regimes can best deliver on their mandate.

Experts on the panel noted that digital markets present unique features that are posing new questions and challenges for competition authorities around the world. Digital platforms are often multi-sided markets, where network effects take a central importance to quickly attract more users than rivals and gain a data advantage. This encourages firms to pursue growth over profits, and engage in a “winner-takes-all” race where they fight for the market rather than in the market. As a result, digital markets tend to be monopolistic.

Pricing structures online are also different, since zero-pricing on one side of a platform is a common strategy used to attract users on the side of a platform. Online shopping and algorithms have also enabled digital firms to personalise prices based on the perceived readiness of a consumer to pay. In addition, digital businesses are also characterised by large initial investments which may act as barriers for new entrants, as well as the tendency of tech giants to diversify into conglomerates.

These unique features have led competition agencies to grapple with new questions and challenges, particularly as defining the relevant market of a platform – and hence its market power and potential abuse of it – is not easy. For instance, is Uber a transportation service provider or a mere “matchmaker” like a flight comparator? Such questions are important to determine the laws applicable to platforms, not only for competition but also labour, tax etc. Moreover, traditional market definition tools are based on prices, and tend to become less relevant in the age of zero pricing.

Similarly, the “consumer welfare” standard traditionally used by competition authorities seeks to ensure that consumers are not charged unfair prices as a result of anti-competitive practices. Data and zero pricing have long been absent from the picture, despite their critical role on competitive relationships. Recently however, some authorities have engaged in adapting their regime, such as the new German Competition Law which now clarifies that even free services can constitute a market. The law also introduced a list of new data-related criteria for assessing market power in multi-sided markets.

Panellists also stressed the need for ensuring predictability and coherent enforcement across jurisdictions globally. Indeed, while digital markets are borderless, global firms are subject to over 130 different competition regimes. It was recalled that no international set of competition rules exists to date. Nevertheless, some elements of competition can be found in certain WTO agreements, and recent proposals by a few members in the context of the WTO joint statement initiative on e-commerce have shown interest in addressing competition aspects.

On the panel were Philippe Brusick, Former Head of Competition Branch of UNCTAD, and Chairperson of the General Assembly, CUTS International, Geneva; Julien Grollier, Senior Programme Officer, CUTS International, Geneva; Nadezhda Sporysheva, Legal/Economic Analyst, Intellectual Property, Government Procurement and Competition Policy Division, WTO; Ahsan Ali, Trade Policy Analyst, Council and TNC Division, WTO Secretariat; Justine Lan, Economic Affairs Officer, Development Division, WTO Secretariat; and Ebru Gokce Dessemond, Legal Officer, Competition and Consumer Policies Branch, International Trade Division, UNCTAD.

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