Competition in the digital ecosystem – Europe and beyond

Event report

Increasingly, online platforms and social media are establishing monopolistic positions at the expense of users and smaller companies. This workshop aimed at exploring the technical and legal arrays of making the internet a free, affordable, and fair space where people and SMEs equally benefit from competition.

Ensuring that competition equally benefits all concerned groups

In theory, this can be achieved by a better understanding of how to tackle the so-called ‘margin problem’. Competition is good only when it is about who contributes the most to solving this problem. Overcoming the ‘margin problem’ means setting the best-suited goal of activity from the very outset and preventing avoidable risk accruals. ‘The better we perform at the wrong goal, the more risks we build, and this, in turn, lessens our options to overcome the risks and increases the damage that caused from the very beginning,’ said Ms Alève Mine (Author of ‘Storytelling Automation Principles’, Founder of the Zurich AR/VR Meetup, Originator of the OneGoal Initiative for Governance). In practice, this means that as competition speeds up, more caution should be exerted to choose what we are competing about, which will help not only to avoid the creation of monopolies, but also to prevent the permanent loss of potential for all groups.

Dynamics of competition in the digital environment

The actual dynamics of competition in the digital environment vary by product and service. While there is some competition in the market for open-source software providers, for example, the situation is different for the Office products, email services, Domain Name System (DNS), and instant messaging, to name but a few, said Mr Vittorio Bertola (Head of Policy & Innovation, Open-Xchange). These latter sectors, where dominant companies lack incentives to open for competition, should be the focus of the current regulatory initiatives.

Lack of interoperability is a common issue in the digital market for most services and products. At the EU level, the Digital Services Act package addresses the issue of interoperability, but the intended coverage of these draft rules is rather limited and needs to extend to more services and platforms, said Bertola.

European competition rules for the digital market

The need to have European rules addressing specifically the digital market was conditioned by three factors, said Mr Christoph Riedmann (Advisor for Digital Policy at EUROCHAMBRES, the European Chambers of Commerce and Industry). In the digital, new developments happen at an unprecedented pace, and monopolies can be created even within several days. The online market has an inherent tendency of monopolisation. Thirdly, on the internet, it is even more difficult to break up a monopoly once it is established.

The new European rules on competition in the digital landscape, namely the Digital Services Act package, aim to be simple and efficient, said Riedmann. Simple, clear rules will help even smaller companies to understand and follow the rules without profound legal expertise. Efficient rules are needed to tackle monopolies ex ante before it is late to break up the monopolies that are usually formed very fast in the digital environment.

The case of Australia’s News Media Bargaining Code

Competition rules do not work in abstract. They apply in markets that have precise boundaries, specific geographical scope, precise subjects of regulation, covered products and services. The internet itself has made the traditional competition rules difficult to apply, said said Mr Daniel Popovski (Australian Chamber of Commerce and Industry, Senior Advisor, Economics and Industry Policy).

In 2020, the Australian Competition and Consumer Commission launched the digital platform services inquiry specifically addressing competition in markets for the supply of digital platform services. The scope of the inquiry covered issues of the concentration of power, the behaviour of suppliers, mergers and acquisitions, barriers to entry or expansion, and changes in the range of services offered by suppliers of digital platform services. This inquiry led to the adoption of the News Media Bargaining Code of Australia, which, however, raised political tensions, leaving some tech giants dissatisfied with the regulation. Nonetheless, there are a lot of different areas in Australia where the role of competition is currently being investigated across the digital landscape.

The need for a multilayered approach

A multilayered and multistakeholder approach is generally required to tackle competition issues in the digital. There is a clear need for multilateral and domestic regulations on the matter, which should establish the general principles governing competition in the digital environment. This is a long process and such rules and principles can evolve over time.

There is also a role for ethics rules and standards to guide the development of new technologies. At the same time, quick action should be taken at lower layers of governance, considering what is happening on the ground, in the actual market, to ensure that the regulations do not get watered down or made ineffective at the technical level. Thus, a multistakeholder engagement can control the developments at the technical level, for example in terms of ensuring that standardisation organisations do not operate in a way that promotes centralisation and monopolies, said Bertola.