As part of the UK’s G7 presidency, its competition regulator, the Competition and Markets Authority (CMA), is sponsoring discussions on promoting competition in digital markets between the G7 competition regulators and the regulators of the ‘guest economies’, Australia, India, South Africa and South Korea (collectively ‘the 13’, because some jurisdictions have more than one competition related regulator). On 29 November 2021, the CMA released a ‘compendium’ which is catalogues investigations and enforcement action by ‘the 13’ on digital issues and sets out some commonalities.

The compendium frames its discussion with the following observation:

“The congruence of competition agency concerns and approaches to digital markets is unprecedented in the decades of experience with global antitrust enforcement and policy. While some degree of similarity in objectives or sectoral concerns has existed in the past, this is the first time in the history of competition law and policy that so many competition authorities, and in many cases governments, have prioritised examination and investigation of the same markets and the same or similar conduct.”

What’s different with digital?

The policy conundrum, as ‘the 13’ see it, is that the very characteristics of digital markets responsible for their growth – and their value to consumers – also can lead to firms gaining a large and powerful position. They identify these characteristics to be: (i) network effects; (ii) multi-sided markets; and (iii) the role of data.
While these are the ‘usual suspects’ identified in most competition analysis of digital markets, ‘the 13’ make three further points:

• Features such as the multi-sided nature of online platforms and the provision of services at zero monetary price can be difficult for courts and agencies to fit within traditional frameworks such as market definition. The scale and importance of data, the difficulty in understanding the operation of algorithms, and other complexities mean authorities may need new tools, capabilities, and approaches to investigate and understand anti-competitive behaviour in digital markets
• Whilst competition authorities are active in tackling the market power of the most powerful digital firms, many of these investigations and associated remedial challenges have not sufficiently restored competition. ‘The 13’ say this suggests the need for reforms to existing laws, and in some cases for new complementary regulation, to address competition concerns more effectively in digital.
• Finally, given the global nature of the largest digital firms, and the interaction between competition and wider policy areas like data protection, consumer protection, and media sustainability, there is an increasing need for regulators and policy makers to work together across disciplines and jurisdictions.

Proposals for legislative changes

The compendium notes that governments in most of the 11 jurisdictions are considering legislative reform, and that “[w]hile the reforms and reform proposals vary in content and scope, most facilitate easier or faster agency intervention or contemplate new regulatory regimes”.

In Japan, the enactment of the Act on Improving Transparency and Fairness of Digital Platforms allows powerful digital platforms to be designated as “specified digital platform providers”, which then makes them subject to specific regulations aimed at increasing transparency and fairness in markets such as online retail marketplaces and app stores. Similarly, the Italian competition authority has advocated for new legislation to regulate digital gatekeepers allowing them to intervene more swiftly when certain black-listed conducts are implemented.

In its contribution, the French competition authority, Autorité de la concurrence, says at the outset that competition law (as we know it) provides a “particularly effective means of maintaining the competitive dynamics of the digital economy… because competition law is malleable and its concepts can be adapted to new practices without the need for legislative action. The Autorité then goes onto suggest extending the traditional concept of ‘dominance’ to cover “certain players who are in a position of near-dominance or on the verge of tipping the market” – the ‘structuring’ platforms or gatekeepers, devising an ex ante list of draw up a list of practices that raise competition concerns specific to these players, the regulator then being able to intervene on an urgent basis if a player engages in conduct on this list, and reversing the onus of proof so that the player would have to show the conduct was pro-competitive. That's quite a degree of malleablillity!

The ‘13’ also say that merger processes need to be strengthened, with an ex ante focus. In current pre-notification regimes, tech mergers may not be caught where a large player is buying a very small player because the current triggers separately apply to each firm. In South Africa, the competition authority can reach out and require pre-notification of mergers which escape the triggers. The UK Government is consulting on whether the CMA would oversee a bespoke merger regime allowing for greater scrutiny of mergers involving a subset of the largest digital firms.

Reinforcing institutions

The ‘13’ emphasise the importance of competition authorities building up their expertise in digital markets. Many of them, as the ACCC has done, have set up specialist digital units.

But the ‘13’ go further and foreshadow a heavier use of sector wide market studies “because digital markets are constantly evolving and in some cases the issues presented are novel, meaning there is a lack of case law and precedent to follow [so that] these novel issues require new methods of analysis, ways of approaching them and an increase in institutional knowledge.”

Along the lines of the ACCC’s Digital Platforms Inquiry, the Japanese competition authority has conducted a series of factfinding surveys and published reports on business-to-business transactions in online retail platforms, app stores and on digital advertising and has begun fact-finding surveys on cloud services and on mobile OS (operating systems) and mobile app distribution. The European Commission is conducting a study of IOT markets, with a preliminary report issued in June 2021.

The search for a unified theory of data

The ‘13’ note that ‘[c]ompetition issues rarely occur in a vacuum and many of the issues highlighted are inextricably linked with other policy areas..[t]his crossover consistently appears in the work of G7 and guest competition agencies in areas such as data privacy and protection, consumer protection, and media sustainability..”

The compendium notes the need for closer co-operation between consumer and privacy agencies. In Italy, the consumer, competition and privacy regulators have gone further and proposed to parliament a single framework addressing the issues raised by big data. In the UK, the CMA published a joint statement with the Information Commissioner’s Office (ICO), the UK’s data protection authority, underlining the strong synergies that exist between the aims of competition and data protection and how the regulators can work collaboratively to overcome any perceived tensions in their objectives.

But in other jurisdictions, it looks more like “eeny, meeny, miny, mo” between competition, consumer and privacy powers to deal with digital data issues.

Did they miss something?

In all of this, ‘the 13’ failed to ask themselves the fundamental question whether the current institutional model of a ‘command and control’ competition authority may itself be disrupted as much the economy it seeks to regulate. Instead, ‘the 13’ take the current institutional model as a ‘given’ in the new economy, and this tends to mean they will answer the challenges of the new economy in terms of the added powers and resources they think they should be given.

The Furman Report on Unlocking Digital Competition commissioned by the UK Government back in 2019 was prepared to think a little more outside the box. While endorsing the need for more ex ante guidance and more responsive intervention to match the speed of the digital economy, Furman’s proposed approach was as follows here. 

“The approach should combine participation and consultation with the scope for regulatory enforcement … It should only intervene where doing so is effective and proportionate to achieve competitive aims. Where this is the case, the Panel wants to introduce a system where industry has greater clarity and confidence over what constitutes acceptable practice and the rules that apply. The best way of achieving these outcomes is through introduction of a digital platform code of conduct … developed collaboratively … with platforms and other affected parties. This will provide the opportunity to clarify what constitutes unfair or unacceptable conduct.”

In fairness, competition authorities, including the ACCC, have proposed using industry codes, but the Furman report is a good reminder that solutions need to be considered in more nuanced terms than ‘give us more powers and we’ll fix it’.

Read more: Compendium of approaches to improving competition in digital markets