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Summary

The Forum on Challenges to Competition in the Digital Environment, organized by the Mexican Institute of Federal Telecommunications (IFT), was held in Mexico City on Nov. 7–8. The event featured high-level and interesting debates, where competition authorities from several countries, scholars, and representatives from the private sector discussed how the fast-moving nature of digital platforms is affecting competition. Digital platforms have characteristics that differentiate them from traditional markets. Their exponential take-up, the high degree of innovation underlying their business models, and the challenges they raise in the areas of competition, privacy, and regulatory perspective are much discussed in the various industries in which they operate. Challenging areas highlighted during the event included the value of data, the use of algorithms and artificial intelligence in collusion practices, the ways in which traditional market share calculation might not be relevant anymore, and mergers and acquisitions in the new competitive environment.

Digital economy generates new antitrust challenges

There is a trend toward concentration in digital markets, involving technological giants such as Google, Apple, Facebook, and Amazon. Antitrust regulatory bodies are therefore facing the dilemma of preventing this type of company from abusing their dominance without inducing a negative impact on innovation and competition. Authorities face a paradox, because these companies, which have revolutionized markets and empowered consumers, are now being questioned for the scope of their market power and the possibility that they are using it to the detriment of consumers.

The record-breaking $5.1bn antitrust fine imposed by the EU on Google for abuse of its dominance shows how much the regulatory climate has changed for the big digital platforms. The situation is complex, because the traditional division between policies focused on competition and other public policies is becoming less clear, as with policies aimed at protecting consumer rights or consumer information privacy.

Event participants debated how the antitrust framework should be rethought in a so-called data economy. The role of data is evolving daily, and its competitive importance may vary between markets. In some cases, data may be a powerful asset for digital platforms such as search and social networks. In industries where dominant players are strengthening their positions, debate is growing about how essential data is. There is a risk that the high perceived or actual costs to a consumer of switching services – for example, switching from Facebook to another social network, or from an iPhone to an Android device – will have negative effects on market competition. Data portability is part of the debate, but is only part of a much broader scope of possible impacts.

Another main topic discussed at the event was the ways in which technology enables firms to collude and hide their activities from enforcers. The US Department of Justice (DOJ) obtained two guilty pleas in a case about a conspiracy to fix the prices of customized promotional products sold on Amazon Marketplace. Its investigations revealed that the conspirators used social media platforms and encrypted messaging applications to reach agreements and implement them. A related challenge is the use of new technologies – such as algorithms or artificial intelligence – to implement antitrust conspiracies. For example, in a separate case, the DOJ investigated a conspiracy involving the use of an algorithm to fix the price of posters sold on Amazon Marketplace.

The ways in which mergers in the TMT sector are regulated will be key to the future landscape. The growth of the digital economy, the increasing importance of the internet, and technological advances in telecommunications have had an impact on how regulators are analyzing some mergers, and many have been more permissive than in the past.

The examples above show the complexity of debate taking place in the industry and indicate that there is a growing awareness of new forms of market dominance and competition, and the impact that a small number of big players can have on digital markets – such as social media, e-commerce, search, and online advertising – at a global level. New tools and new approaches at the international level should be pursued to address the new challenges of the digital economy.

Appendix

Further reading

"Too big to flail? Why Facebook and Google will survive the growing regulatory backlash", CES003-000259 (August 2018)

2019 Trends to Watch: Regulation, GLB005-000077 (August 2018)

Author

Sonia Agnese, Senior Analyst, Latin America

sonia.agnese@ovum.com

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