This year, CUTS invited the Geneva community to celebrate the World Competition Day by exploring the interaction between the digital economy and competition policy. The digital economy is a major driver of economic growth in the 21st century and is fuelled by the rapid emergence of digital innovations. While digital markets have the potential to foster competition and innovation, some of their characteristics can also enhance the risk of certain anticompetitive practices. In this context, the event analysed contemporary competition law and policy challenges faced in the digital economy and e-commerce, including in developing countries.
This year, CUTS invited the Geneva community to celebrate the World Competition Day by exploring the interaction between the digital economy and competition policy. The digital economy is a major driver of economic growth in the 21st century and is fuelled by the rapid emergence of digital innovations. While digital markets have the potential to foster competition and innovation, some of their characteristics can also enhance the risk of certain anticompetitive practices. In this context, the event released a study analysing contemporary competition law and policy challenges faced in the digital economy and e-commerce, including in developing countries.
In his opening remarks, Hannu Wager, Senior Counsellor, Intellectual Property, Government Procurement and Competition Division, World Trade Organization (WTO) recalled that while competition-related work has been put on hold by the WTO General Council in 2004, related aspects continue to be addressed in Trade Policy Reviews among other regular activities. He also noted that this year’s WTO World Trade Report highligted the relevance of competition policy for digital trade..
“Digital innovation has resulted in the emergence of new “winner-takes-all” dynamics. In particular, the emergence of tech giants such as Amazon, Alibaba and Google raises important potential concerns about market dominance. Many governments and regulatory authorities are turning to competition policy to address perceived excesses of market power and/or to ensure a level playing field for smaller firms”, he quoted..
Presenting highlights from his new study on “Competition Concerns in Cross-border E-Commerce: Implications for Developing Countries” (https://goo.gl/j7wDMC), Philippe Brusick, Former Head of Competition Branch of UNCTAD, and Chairperson of the General Assembly, CUTS International, Geneva, reviewed anticompetitive practices arising in the digital economy. These include horizontal and vertical restraints, unilateral conduct by dominant firms, as well as anticompetitive concentrations. .
While the digital markets-powered digital economy may foster competition and innovation through more products and market players, some of its characteristics can also enhance the risk of certain anticompetitive practices. A typical concern is the prevalence of network effects whereby the size of a platform is a major competitive advantage, hence increasing risks associated with market dominance. Other concerns include the emergence of multi-sided internet platforms that facilitate transactions between different types of users have made it more difficult for competition authorities to define the relevant market. Also, the increasing use of artificial intelligence, e.g. on price comparison websites, may facilitate not only conscious price collusion by firms but also unintended price collusion through automatic price-parallellism decisions by algorithms..
“Existing competition law might need to be adapted to the types of challenges faced by competition authorities in the digital economy,” Mr. Brusick said..
This was echoed by Ebru Gökçe Dessemond, Economist at UNCTAD, who noted that a number of competition authorities are engaged in updating their enforcement tools. A case in point is the recent revision of the German Competition Law, which now categorises digital platforms as markets even if they seem to provide free services to users. In a recent breakthrough decision, the German Bundeskartellamt also decided that Facebook had a dominant position in Germany for social networks, because of their network effect, which enabled it to impose unclear and unfair trading conditions of user data.
“This is interesting because it amounts to say there was abuse of dominance towards consumers, i.e. suppliers, rather than players down the value chain such as advertisers. It also considers that the unfair price paid by consumers is not in money but in the amount of personal data they are obliged to give to be part of the dominant platform,” she remarked..
Nadezhda Sporysheva, Economic Analyst at the Intellectual Property, Government Procurement and Competition Policy Division of the WTO emphasised the following characteristics as being intrinsic to competition law enforcement in digital markets: (i) data as a primary competitive asset; (ii) privacy as an important component during the merger reviews; and (iii) the definition of the relevant market and market power. In particular, as digital markets often involve nominally free products, a key competitive factor concerns control over data. She remarked that competition in digital markets is influenced by additional forces that are largely absent in conventional markets, namely network effects and externalities, ‘scale without mass’ and switching costs, which tend to result in market concentration and barriers to entry into the relevant markets..
“The cross-border dimension of the activity of digital firms can result in cross-jurisdictional spillovers in therms of competition enforment,” she added. This has been exemplified by cases of conflicting stances across jurisdictions towards abuses of dominant position and merger or their impact across national markets, as shown by the Microsoft case in China..
Earlier in the discussion, Philippe Brusick recalled that the celebration of December 5 as World Competition Day has long been advocated by CUTS with the support of numerous competition authorities. International Days are observed to draw the attention of the society at large on issues critical for human development. The date refers to the adoption of the first-ever Set of Principles on Competition Policy by the UN General Assembly on December 5, 1980. “To this day, the UN Set remains the only multilateral agreement on competition,” he recalled..