Shaping Competition Policy in the Era of Digitisation

In the digital economy, business models are focused on ecosystems of platforms. The amount of data that can now be processed and the power of algorithms can bring great benefits to society but may also change the dynamics of competition to the detriment of consumers.

Firstly, data contributes substantially to the different direct and indirect network effects in digital markets and ultimately may support the creation or intensification of market power. Gaining a vast amount of consumer data can provide a competitive advantage to dominant players, not only in the development of new or superior services, but also in better targeting the consumer, e.g. by targeted advertisements and personalised pricing.

Secondly, there is an increased risk that self-learning algorithms analyse the market, develop competitive strategies and start matching prices, thus arriving at a (tacitly) collusive outcome.

Competition authorities should pay close attention to keep markets open and contestable to all competitors and prevent gatekeeper platforms from entering into anti-competitive practices. While the underlying principles of competition law remain equally valid in digital markets as in physical markets, the tools of competition law enforcement should be adapted to the characteristics and dynamic nature of digital markets.

ERT believes that it is very important for competition authorities to:

• analyse competition against the broader ecosystem of platforms and consider adapting the weighting of market definition in this process.
• extend product market definitions beyond the narrow functional definition of the product or service in question and take a more dynamic approach, preserving choice for the consumer.
• develop clearer guidelines on how to measure market power in the digital economy.
• look at potential harms beyond mere pricing effects, e.g. data and privacy should form part of a consumer welfare standard (including in the context of Terms & Conditions, the use of personal data and in-line advertising).
• pay attention to potential abuses at an early stage before markets tip.
• tackle the so-called killer acquisitions within the EU Merger Regulation and Art.102 of the Treaty on the Functioning of the EU.
• keep pace with technological and market developments which implies (i) launching investigations promptly and (ii) speeding up the enforcement mechanism in order to prevent competitive harm or the creation of entrenched monopolies.
• take a holistic approach to ensure a level playing field with competitors from outside of the EU by evaluating inequalities in competition on a global level. The Horizontal Cooperation Guidelines should not impede non-dominant companies from gaining the scale to compete with non-European dominant players having a global reach.

In order to ensure global competitiveness in the digital era, European companies need to be allowed to pool resources to achieve economies of scale.