Competition (antitrust) law and policy are a small but important piece of the puzzle that is “platform governance.” Platform governance is multi-dimensional, encompassing policy issues that may range from artificial intelligence and algorithmic bias to hate speech, privacy and beyond. Just like there is almost no area of society or daily life that digitalization has not touched, there is almost no area of public policy that digitalization and, thus, platform governance do not implicate.
Competition law and policy have come to the fore in the last decade, especially in the latter part. Although platform governance is multi-dimensional and requires governance under a variety of public policies, the technology companies that are behind the vast majority of digital products and services that have become the foci of the discourse on new modes of governance can be counted on the fingers of one hand — perhaps two if one includes the major technology platforms from China. Where such a small number of economic players have such large economic and societal influence, “market power” and related concerns (ranging from exclusion of innovative rivals to exploitation of consumers) become an important piece of the puzzle. That is, indeed, where competition law and policy come into play (World Economic Forum 2019).
The thesis of this essay is that many of the challenges that current antitrust reform proposals seek to tackle are not new challenges. Rather, they are challenges that predate digitalization and the rise to prominence of digital platforms. Fundamental questions about competition law and economics, and their application to different business practices in different contexts, as well as important questions about what competition law does and should aim to achieve, have been around for as long as competition law has existed. The questions were unanswered pre-digitalization, and some are probably unanswerable in the way policy makers seem to want them to be answered. Thus, many of the current challenges are not the outcome of digitalization or specific to digital platforms. What appears to be happening is that some of the questions have become unavoidable for policy makers due to the economic power of the digital platforms involved and the societal importance of the various products, services and practices of these large digital platforms.
The problem with attributing the challenges and the causes of reform to digitalization or to the practices of certain digital platforms is that it misguides the policy discourse and undermines the complexity and difficulty of finding answers to some of these questions. In fact, this approach potentially leads to asking the wrong questions by diverting attention away from the questions that should be asked. Further, the attribution of the problems to digitalization or to the practices of certain digital platforms turns a debate that must be had first at a fundamental and technical level — from at least the legal, economic and technological perspectives — into one that is heavily politicized (Kelly 2019) and driven mainly by self-interested rhetoric. Such a politicized and rhetoric-driven debate risks being guided by concerns other than that of finding solutions that balance and serve the interests of society at large at the lowest cost possible.
In recent years, a frenzy has developed in competition law and policy circles throughout the world concerning so-called digital markets. This frenzy results mostly from a desire to “do something about the big tech,” but also, more broadly, from a perceived enforcement gap in the context of large incumbent online platforms. Digitalization and globalization — and recently the COVID-19 pandemic — have made certain online platforms and their products and services integral to the lives of billions of global citizens and the operations of many businesses, big and small, across the range of sectors in the economy. The perceived competition enforcement gap — which, arguably, gives big tech untamed economic, social and, according to some, political power — has led to calls for reforming or amending competition laws or their enforcement mechanisms in major jurisdictions, such as the United States (Nadler and Cicilline 2020) and the European Union (Crémer, de Montjoye and Schweitzer 2019). Besides amending competition laws or enforcement mechanisms, law makers and policy makers around the world are also exploring ex ante regulations to complement or substitute competition laws and new regulators (Competition and Markets Authority 2021a) for digital markets, and soft or hard laws applicable specifically to a subset of online platforms that are deemed particularly important1 for access to parts of the digital economy where the large incumbents are deemed “gatekeepers.”
The dominant discourse in the current competition law and policy and regulation debate is that digitalization and online platforms, in particular, have thrown up new problems for competition law, economics and policy, and that none of these or the competition enforcers have risen to the challenge (Stigler Center for the Study of the Economy and the State 2019). Hence, there is the need to do something different and new (such as create novel and different rules for the digital economy or specific rules for the gatekeepers and so forth). Most of the current policy proposals proceed on the basis that competition law has failed to deliver what was expected of it in the digital economy and, thus, it must be rewritten, in part or in full, or it must be superseded or complemented by ex ante regulation where needed. Ex ante regulation is, of course, the antithesis of competition law because one would only have to “regulate” when the market and competition fail.
Before new laws hit the books and new authorities are created, a reality check is needed to understand the root cause of the apparent “failures” of existing laws.
At a time of such impending, wide-ranging reform, it is important to take a step back to separate the old challenges from the new in order to understand and rationalize fully the direction of travel. This approach is also necessary to separate the “noise” in the current policy and academic discourse on competition law and policy in digital markets from actual causes for concern in these markets. Before new laws hit the books and new authorities are created, a reality check is needed to understand the root cause of the apparent “failures” of existing laws, for whom they have failed, and the causal relationship between those failures and the business models and practices of the entities that will be subjected to the new governance models. Only after conducting that reality check can one examine the potential effectiveness of the proposed governance models to eliminate or identify the problems for which they are adopted.
The competition law questions that are relevant to the approach to competition on digital markets include what the “relevant market” involves, where platforms are intermediaries to parties on two different sides of a market and how that impacts the effects of a given practice adopted by the platform on competition (Organisation for Economic Co-operation and Development 2022). Other questions include what constitutes market power in markets with network effects where, without reaching a large scale, there can be no profitable business activity. Likewise, another difficult question is where and how to draw the limits of “competitive” business conduct in the case of platforms that compete with their own customers in some dimensions of their business activities (Akman 2019). These and many more pertinent questions in current competition law and policy debate over digital markets are rarely questions that can be resolved with straightforward answers that can then be translated into positive or negative legal obligations. Thus, the current approach of creating rules and regulations based on the answers that policy makers decide are currently the correct answers to such questions risks oversimplifying and underestimating the challenges involved to the extent that they lack sufficiently robust theoretical foundations and empirical evidence. At best, such policy solutions can occasionally give the right answer and will haphazardly be effective. At worst, they will miss the mark completely and, in the process, the problems may become larger.
None of the above is to say that there are no new challenges posed by digitalization or digital platforms to competition law and that the best approach would be to do nothing. There are, indeed, many such challenges that digitalization poses and, in fact, these are generally challenges for many areas of law simultaneously.
There are at least two types of new challenges in the competition law and policy context. The first type arises out of the extensive use of (big) data and algorithms2 in business activities where self-learning algorithms take on a life of their own — as the name suggests they would — and questions arise regarding their effect on market conditions such as price, quantity or quality. Some obvious new challenges in this context relate to liability rules and how traditional competition law would and should apply in such cases where there is no human involvement in a practice that leads to an anticompetitive market outcome. This is a challenge posed by digitalization that shows its face in different areas of law in different factual contexts (for example, self-driving cars and civil/criminal liability rules), where the applicable law far outdates the facts of the case at hand. The second type of challenge arises out of the complexity that big data, algorithms and, more generally, automated systems cause for enforcers’ enforcement activities (Competition and Markets Authority 2021b). This challenge arises because algorithms and automated systems are mostly black boxes that, through a small change in the algorithm, can cause disproportionately large effects on markets and market outcomes. There are issues regarding discoverability and effective remedies, as well as the investigative capabilities and resources that many enforcers may be lacking. These types of challenges are not “flavour-of-the-month” challenges and will also most certainly not make the headlines. Yet there may, indeed, be such technical, complex and fundamental questions that need to be debated and attended to before any lasting improvements can be achieved regarding the application of competition law and the approach of competition policy in digital markets. The current competition law and policy approach to digital markets can substantially be improved by increasing its focus on the more fundamental and “new” challenges that digitalization poses for platform governance.