Competition policy in the digital economy: towards a new theory of harm

The seminar, organised with the support of the Friends of e-Conomics, will explore the challenges to competition policy arising from the digital economy. On one hand, digital services and their network effects promote concentration of markets. On the other hand, end users may receive digital services through multiple channels, which makes markets contestable and means that entrants can challenge market power. This combination of network effects and contestability give the digital economy a dynamic that is fundamentally different from other, more traditional sectors.

In the digital economy it is difficult to distinguish anti-competitive motives from normal business strategies. Wrongly labelling behaviour as being anti-competitive may have adverse effects on the dynamics in the market and this could have serious adverse effects on innovation. When applying competition law, competition authorities face several challenges – the analytical steps and instruments used for assessing the relevant market and dominance, starting with market definition, followed by an analysis of market power and establishing anti-competitive behaviour. Digital firms, however, constantly redefine the boundaries of the market by competing largely on the basis of innovation. It follows that in digital markets, the traditional step-by-step analytical approach does not work because of strong dynamic feedback effects running from firm behaviour to market structure. For the same reasons, market shares or profit margins are less useful for determining market power.

Some key questions that will be addressed in the seminar include:

What defines dominance in the digital economy?
How can we measure it?
How can we define abuse of market dominance?

The seminar will focus on two key aspects:

1. The relevant market

Today, digital platforms challenge each other in “core retail markets” as their business models evolve. Examples include the way in which WhatsApp developed the potential to become a platform for advertisers and become a threat to Facebook, or how Google’s click-based advertising model evolved from pay-per-click, to pay-per-duration-of-stay, to pay-per-buy, so that Google became a competitor to Amazon. These examples raise questions about the difficulty in identifying the relevant market and assessing dominance. In such cases traditional approaches may not work and a more business model oriented approach might be more appropriate.

2. Towards a new theory of harm

While the traditional theory of harm focuses on anti-competitive behaviour in B2B relations (and less so on excessive prices vis-à-vis consumers), a new theory of harm may need to focus more on B2C relations as well as B2B relations, and in particular the control over data as a source of market power and how this can be used anti-competitively. For instance, while a Facebook subscription may have become a must-have for end-users, could the take-it-or-leave-it nature of the subscription with respect to providing personal data be regarded as an abusive practice? On the one hand it is similar to excessive pricing vis-à-vis consumers (end-users pay with data); on the other hand it is similar to excessive pricing vis-à-vis suppliers of inputs (end-users sell data). The dominance in the control over data strengthens the position of the platform with regard to advertisers, content providers and retailers.

Registration and coffee from 09.30 – Meeting from 10.00 to 13.00 – Participation in this event is free of charge.