The disruptive effects of big technology companies on digital and offline markets was the subject of intense discussion at a recent UNCTAD meeting on competition law and policy.
Governments gathered from July 10-13 at the United Nations’ headquarters in Geneva for a three-day meeting with three main issues in their crosshairs:
The driving force behind the meeting was an urgency to address the remarkable increase in market concentration in many sectors of the global economy in the hands of a few multinational companies.
In the non-financial sector, today’s top 100 global firms worth 7,000 times more than the bottom 2,000 firms combined in terms of market capitalisation, up from just 31 more in 1995.
UNCTAD Secretary-General Mukhisa Kituyi said, ‘’this heavy increase in market concentration in the global economy is particularly notable in agriculture, pharmaceuticals and technology sectors. And it costs consumers dearly.’’
Digital markets, where Amazon, Apple, Facebook and Google have replaced oil and gas and telecom firms among the top 10 global companies based on market capitalisation in 2018, also demonstrate the trend.
‘’Digitalisation, in particular, has led to winner-take-all dynamics in digital markets. Economies of scale and network effects have led to single dominant firms in e-commerce, online search, online advertising and social networking.
‘’This has also given these firms significant control over consumer data, which confers them further market power, raising not only competition-related concerns, but also consumer protection concerns’’, Kituyi said.
While these concerns are compelling competition law and policy makers to find new ways of approaching, policing and addressing the challenges, some believe a long history of competition law has equipped legislators with what they need to tackle competition issues in the digital economy.
The University of Melbourne’s Prof. Caron Beaton-Wells said in her keynote address to the meeting, ‘’at a global level competition policy goals don’t need to change – they are sufficiently flexible to accommodate changes in the digital economy. But the toolkit needs to be tweaked and the enforcement needs to be bolder and quicker.’’
The activities of big technology companies are cause for concern for competition law and policy makers, not only because of competition and concentration issues within the technology space, but also their cannibalisation of the offline market too.
‘’The United States’ and China’s technology giants generate 90% of digital revenues. The same companies are penetrating sectors in the non-digital economy, disrupting traditional business models, in areas such as retail trade and financial services’’, Beaton-Wells said.
She added that the digital economy was taking over the offline market as the new engine for the economy: ‘’But there are economic distress signals: increasing market concentration, declining business dynamism, slowing productivity growth, increasing mark-ups and stagnating wages.’’
There is also little real competition within the industry, dominated by a handful of big companies which buy competing start-ups before they become a real threat, experts said.
The matter of regulation and enforcement is thus central, the meeting heard.
Philip Marsden, the deputy chair of the Bank of England’s enforcement decision making committee said while “big tech” are like babies, “they live in our house and need to live by our rules”.
‘’They’re wonderful and life changing, but at the same time exhausting and very demanding. We have to remember that they have a mommy and a daddy. Who’s that? That’s us, the regulators’’, he said.
‘’We know what the tech giants want. They want our data and they want to make money off it. Enforcers have to run faster to face digital era challenges. We officials cannot wait for the glacial evolution of the judicial precedent, we have to lead it. It is up to us to ensure Big Tech run competitively in the market race’’, Marsden said.
The importance of international cooperation in combating cross-border anticompetitive practices was emphasized both governments and experts at the meeting.
Frederic Jenny, OECD competition committee chair, speaking about the rise of the digital economy, said: ‘’We see the development of a new way to organise the economy which raises the same competition issues in all countries simultaneously. We need stronger cooperation to face those challenges.’’
An acknowledgement of the need for greater international cooperation and coordination saw the adoption of the Draft Guiding Policies and Procedures under Section F of the UN Set on Competition, of which UNCTAD is the custodian.
These will be submitted for consideration and approval to the eighth United Nations Conference to Review the UN Set of Principles and Rules on Competition in 2020.
‘’This is a milestone and paves the way for stronger cooperation between competitions authorities at a global level’’, said Teresa Moreira, UNCTAD’s head of competition and consumer policies branch.
Closing the session Beaton-Wells said: ‘’Competition is not a panacea designed to deal with all of the challenges presented by the technological tsunami. But, as an instrument concerned with the use of economic power, it has a vital role to play in ensuring that we all reap the benefits of the transformative changes taking place in our economies and society.’’
Considering the capacity and resource constraints for competition law enforcement in developing countries, her message for developing countries was to consider regulation as a tool to ensure that digital markets work for their people.