Competition law and regulations for digital markets: What are the best policy options for developing countries? (UNCTAD)

Arguments

The EU’s Digital Markets Act identifies and sets regulations for ‘gatekeepers’ in the digital services industry.

Supporting facts:

• Gatekeepers are companies with significant influence within the internal markets.

• To be designated as a gatekeeper, a company must meet certain quantitative threshold such as turnover of services, market capitalization, the number of business users, and end users.

• These gatekeepers are under certain restrictions and obligations including prohibitions of self-preferencing and obligations to give access to data data.

• Gatekeepers must also report any major transaction to the Commission.

Topics: Digital Markets Act, EU, Tech Companies

More flexibility and more dialogue is required in implementing the Digital Markets Act.

Supporting facts:

• There is a new sort of dialogue that aims to ensure the long-term compliance of companies with the regulations.

• The Commission has the power to take actions including fines and imposing specific compliance requirements to enforce the regulation.

• There is an ongoing relationship to be built with stakeholders for effective enforcement.

Topics: Digital Markets Act, EU, Tech Companies

The DMA enforcement is exclusively the responsibility of the commission

Topics: DMA, EU, Commission

The DMA borrows a number of concepts for competition

Topics: DMA, Competition

A member state cannot apply if the Commission is applying the DMA

Topics: DMA, EU, Commission

The DMA is clear that it applies at the same time as competition law

Topics: DMA, Competition Law

The DMA is only applicable to a specific list of companies and obligations

Topics: DMA, Competition Law

The Commission may still pursue problems not addressed by the DMA in cooperation with national competition authorities

Topics: DMA, EU, Commission, National competition authorities

Report

The Digital Markets Act (DMA) introduced by the European Union aims to regulate companies known as “gatekeepers” in the digital services sector. Gatekeepers are companies that hold considerable influence within the internal markets. To be designated as a gatekeeper, a company must meet specific quantitative thresholds, including turnover of services, market capitalisation, and the number of business and end users.

The DMA establishes various restrictions and obligations for gatekeepers, such as prohibiting self-preferencing and requiring them to provide access to data. Gatekeepers also have to report major transactions to the European Commission. The DMA primarily seeks to promote fair competition and prevent market power abuse by gatekeeper companies.

The implementation of the DMA involves close regulation and cooperation with gatekeeper companies. In September, the Commission designated six companies as gatekeepers, namely Alphabet, Meta, Apple, Amazon, Microsoft, and BitDance. These companies were given 45 days to adapt their compliance plans before further regulations were enforced.

Non-compliance can result in fines of up to 10% of worldwide turnover. Effective enforcement is encouraged through a regulatory dialogue, with companies required to present compliance programs and make necessary adjustments. Flexibility and ongoing dialogue are seen as essential in implementing the DMA.

Building long-term compliance with regulations requires establishing relationships with stakeholders. The European Commission has the exclusive responsibility for enforcing the DMA, but can collaborate with national competition authorities to address issues not covered by the Act. In summary, the DMA is designed to regulate gatekeepers in the digital services industry, ensuring fair competition and preventing market power abuse.

Gatekeeper companies are subject to restrictions and obligations, with the European Commission playing a crucial enforcement role. The implementation process emphasises flexibility, ongoing dialogue, and collaboration.

Arguments

Competition laws are not sufficient to address anti-competitive conduct in the digital economy

Supporting facts:

• Antitrust comes too little, too late

• Timeliness of intervention is important as market positions may become more entrenched

Topics: Competition laws, Digital Economy, Anti-competitive conduct

Ex-ante regulation is a necessary complement to address competition and consumer harms posed by digital platforms.

Supporting facts:

• The European Union, Brasilia, Australia are propagating ex-ante regulation

• South Africa has conducted in-depth studies of sectors to underline elements of competition that may not be working well for consumers

Topics: Ex-ante regulation, Competition, Consumer harms, Digital platforms

If developing countries adopt ex-ante regulation, it might be prone to some sort of weak enforcement culture.

Supporting facts:

• Capacity building for competition enforcement needs to be strengthened

• Added work to build the capacity for enforcing the rule of law

Topics: Ex-ante regulation, Developing countries, Enforcement culture

Work towards regulatory coherence instead of absolute consistency.

Supporting facts:

• Different rules in different jurisdictions can create complexity and confusion

• Regulatory coherence could support greater compliance with new obligations imposed in other jurisdictions

Topics: Regulatory coherence, Consistency

Engage within region corporations for a shared understanding

Topics: Regulation, Cooperation, Regional Understanding

Implement strategic regulatory experimentation

Topics: Regulation, Experimentation

Initiate competition enforcement investigations

Supporting facts:

• Advanced countries achieve this through regulation

• Self-preferencing as an example

Topics: Regulation, Investigation, Competition

Coordinated enforcement across jurisdictions is valuable

Supporting facts:

• Before the Digital Markets Acts (DMA) kicked in, this was the EU approach

Topics: Regulation, Jurisdiction, Enforcement

Align internationally on standards such as data portability or interoperability

Topics: Interoperability, Data Portability, Standards

Competition policy and advocacy plays an important role, especially in developing countries

Supporting facts:

• Competition authorities should articulate the benefits of competition for consumers and markets

Topics: Competition Policy, Advocacy, Developing Countries

Report

Competition laws alone are insufficient in addressing anti-competitive conduct within the digital economy. The timeliness of intervention plays a crucial role, as market positions can become more entrenched over time. Ex-ante regulation is considered necessary as a complementary measure to address competition and consumer harms posed by digital platforms.

The European Union, Brasília, and Australia are actively advocating for ex-ante regulation, while South Africa has conducted in-depth studies on sectors to identify competition elements that may not be working well for consumers. This positive sentiment towards ex-ante regulation highlights the recognition of the need to proactively address the challenges posed by digital platforms.

Developing countries may have a heightened reliance on digital platforms, given the opportunities they offer to small and medium-sized enterprises (SMEs). These platforms serve as a lifeline, enabling businesses to reach consumers and play both a market-creating and market-sustaining role.

However, concerns are raised about weak enforcement cultures in developing countries if they were to adopt ex-ante regulation. Strengthening competition enforcement capacity and building a sound foundation for enforcing the rule of law becomes imperative to ensure effective implementation. In terms of regulation, it is argued that prioritizing regulatory coherence, instead of absolute consistency, can help mitigate complexity and confusion resulting from different rules across jurisdictions.

This approach would promote greater compliance with new obligations imposed in different regulatory landscapes. Regional cooperation and shared understanding are considered valuable for effective regulation. Encouraging engagement and collaboration among corporations within specific regions can foster a shared understanding of the challenges and potential solutions.

Strategic regulatory experimentation is seen as a positive step. Implementing experiments can help identify effective regulatory approaches, leading to better regulation and outcomes within the digital economy. Initiating competition enforcement investigations is another recommended course of action. Advanced countries have achieved success in this area by utilizing regulations, such as self-preferencing, to ensure a level playing field and fair competition.

Coordinated enforcement across jurisdictions is deemed crucial for effective regulation. The EU’s Digital Markets Act serves as an example of how coordinated enforcement can bring about valuable outcomes. Aligning internationally on standards, such as data portability and interoperability, is significant, as it promotes consistency and facilitates seamless operations and interactions between different platforms and systems.

Competition policy and advocacy play an important role, especially in developing countries, where competition authorities should articulate the benefits of competition for consumers and markets. Emphasizing the advantages of dynamic competition and innovation can help drive economic growth and reduce inequalities within these countries.

Overall, the analysis highlights the need for a multi-faceted approach to tackle anti-competitive conduct in the digital economy. While competition laws serve as a foundation, they must be complemented by timely intervention, ex-ante regulation, regulatory coherence, regional cooperation, strategic experimentation, competition enforcement investigations, coordinated enforcement, international standard alignment, and strong competition policy and advocacy.

By leveraging these measures, stakeholders can address the challenges and harness the opportunities presented by the digital economy.

Arguments

South Africa has been pursuing digital market issues through market inquiry powers, finding them well suited to the types of issues emerging in digital markets

Supporting facts:

• South Africa completed a market inquiry into the online intermediation platform market

• launched an inquiry into media and digital platforms

Topics: Market Inquiry, Competition Law, Digital Markets

The DMA approach is inflexible compared to the market inquiry

Supporting facts:

• The DMA focuses on specific issues

• Market inquiry is not likely to impose permanent remedies and solutions can be revisited

Topics: DMA, Market Inquiry

Regional and international cooperation is critical in managing cross-border anti-competitive practices and establishing a fair competitive environment

Supporting facts:

• The African competition forum has been involved in creating a protocol to establish a continental competition authority

• The competition protocol specifically provides for dealing with gatekeepers and digital markets

• Through forums like the ACF and BRICS, there are discussions around understanding the digital market landscape and appropriate policy choices

Topics: Africa Continental Free Trade Area, BRICS, Competition Protocol

Uniformity or diversity in applied remedies for platforms must be context-specific

Supporting facts:

• Remedies offered by global tech companies need to be appropriate to contexts, for example in South Africa’s interaction with Google

Topics: Competition Authorities, Tech Companies

Report

South Africa has been actively addressing digital market issues by utilizing market inquiry powers, which have proven to be well-suited to deal with the emerging challenges in the digital sphere. This approach of market inquiry is preferred over strict regulation of technology firms, as it focuses on improving competition rather than preventing it.

Market inquiry offers substantial flexibility in taking remedial action and has the ability to consider the entire industry rather than solely examining the conduct of individual companies. On the other hand, the approach of the Digital Markets Act (DMA) is viewed as less flexible compared to market inquiry.

The DMA focuses on addressing specific issues but lacks the ability to impose permanent remedies. Additionally, it is acknowledged that the solutions provided by market inquiries are not set in stone and can be revisited if necessary. While regulation plays an important role, it is essential to consider jurisdictional and resource constraints.

Introducing or amending legislation can be a time-consuming process, and establishing a new regulatory entity requires significant resources. Thus, a balanced approach that takes into account these factors is necessary. Regional and international cooperation are highlighted as crucial in managing anti-competitive practices that span across borders and establishing a fair competitive environment.

The African competition forum, along with forums like BRICS (Brazil, Russia, India, China, South Africa), facilitate discussions on understanding the digital market landscape and making appropriate policy choices. The protocol established by the African competition forum specifically addresses dealing with gatekeepers and digital markets, reinforcing the need for cooperation.

Notably, it is emphasized that Africa should not only be a consumer but also an active participant in digital markets. South Africa, for instance, has engaged with other jurisdictions in concluding an online platform market inquiry. When engaging with global tech companies, discussions around remedies have considered aspects specific to the South African context.

It is vital to ensure that remedies offered by these companies are appropriate and context-specific, emphasizing the importance of taking into account the unique circumstances of each region. In conclusion, South Africa’s pursuit of digital market issues through market inquiry powers demonstrates a preference for a competition-centric approach rather than strict regulation of tech firms.

While market inquiry offers flexibility and a broader industry perspective, the DMA is seen as less flexible. The importance of considering jurisdictional and resource constraints when implementing regulations is emphasized. Regional and international cooperation are seen as critical in managing cross-border anti-competitive practices.

Ensuring Africa’s active participation and considering context-specific remedies are also highlighted as important factors to establish a fair competitive environment.

Arguments

Asia Pacific is not a single market, so, there is extreme diversity across the region. Each country is in a very widely different stage in terms of digital transformation.

Supporting facts:

• In Australia, Singapore, Korea, over 99% of the population have Internet access.

• In other parts of Asia Pacific the rate is much lower.

Topics: Asia Pacific, Digital Transformation, Market Diversity

What is common across the Asia Pacific region is enormous growth potential, especially with the digital economy.

Supporting facts:

• According to a report published by Bain and Company last year, Southeast Asia’s digital economy will reach about 1 trillion U.S. dollars.

• Platforms are generally seen as an enabler rather than a gatekeeper to spur more growth and innovation.

Topics: Asia Pacific, Digital Economy, Growth Potential

Japan is working on a more targeted ex-ante legislation to address competition issues in the mobile ecosystem and app distribution.

Supporting facts:

• In June 2024, HDMC will carry out a comprehensive competition assessment.

• The report concludes with a recommendation of a very targeted ex-ante legislation.

Topics: Ex-Ante Legislation, Competition, Mobile Ecosystem, App Distribution

There isn’t one global standard on which policy path should be followed in regards to digital markets and emerging technologies

Supporting facts:

• The Asia Pacific region is very diverse which makes it hard to have one global standard

• More discussions needed about future of Asia Pacific region

• Local context dictates the solutions needed

Topics: Digital Markets, Emerging Technologies, Policy Path, Global Standard

The right sequencing for resolving problems is important

Supporting facts:

• Identify the problem first, akin to a robust medical checkup and diagnosis before starting surgery

• Discussion on whether or not the existing laws are good enough to solve current problems

• If existing laws are not sufficient, consider what would be the most effective instruments

Topics: Problem Solving, Sequencing, Evidence-based Rulemaking

Report

The Asia Pacific region demonstrates significant diversity in terms of digital transformation, with each country at a different stage of maturity. Australia, Singapore, and Korea stand out with over 99% of their population having internet access, while other parts of the region lag behind.

Despite these differences, the region as a whole has immense growth potential, particularly in the digital economy. Korea’s self-regulation model for digital markets is viewed favorably, with the government announcing a legislative bill to support this approach. Japan, on the other hand, has implemented a co-regulation model to enhance transparency and fairness in digital platforms.

They have established the Headquarters for Digital Market Competition (HDMC) to oversee this process. Japan also plans to develop targeted ex-ante legislation to address competition issues in the mobile ecosystem and app distribution, with a comprehensive competition assessment by 2024. However, across the Asia Pacific region, there is no single global standard for policy paths in digital markets and emerging technologies, as local context plays a significant role in determining the appropriate solutions.

In terms of problem-solving, accurate identification of issues is crucial before determining effective measures. This process is similar to a medical checkup and diagnosis before surgery. Evaluations are underway to assess the adequacy of existing laws and explore alternative solutions if needed.

In conclusion, the Asia Pacific region boasts diversity in digital transformation, with varying stages of maturity. There is considerable growth potential, particularly in the digital economy. Both Korea and Japan have adopted distinct approaches to regulate digital markets, with Japan also working towards targeted legislation.

The absence of a global standard highlights the need for tailored solutions, and a systematic approach in problem-solving is vital.

Arguments

UNCTAD has been closely monitoring competition in digital markets and efforts to promote inclusive economic growth and sustainable development

Supporting facts:

• UNCTAD is the focal point for competition law and policy within the United Nations system.

• UNCTAD organizes discussions between member states’ competition authorities and other relevant stakeholders in their annual Intergovernmental Group of Experts meetings on competition law and policy.

• The United Nations’ set of principles and rules on competition was adopted by the UN General Assembly on 5 December 1980.

Topics: Competition Law, Digital Markets, Inclusive Economic Growth, Sustainable Development

A participatory process involving bringing businesses to the table in regulatory talks is crucial.

Supporting facts:

• UNCTAD recommends an holistic approach that includes competition authorities, consumer protection agencies, data protection regulators, and other relevant regulators.

• Businesses have detailed knowledge about their own sectors, which can be useful in crafting effective regulations.

Topics: Regulation, Business participation, UNCTAD recommendations

Good business practices adopted by digital businesses in one jurisdiction should ideally be expanded globally.

Supporting facts:

• Consumers in all parts of the world deserve the same protections, not just those in the region where a specific regulatory action was taken.

Topics: Global standards, Digital businesses, Good business practice

Report

The United Nations Conference on Trade and Development (UNCTAD) plays a crucial role in monitoring competition in digital markets and working towards inclusive economic growth and sustainable development. As the focal point for competition law and policy within the United Nations system, UNCTAD is responsible for ensuring fair competition practices.

UNCTAD organises discussions between member states’ competition authorities and other relevant stakeholders in their annual Intergovernmental Group of Experts meetings on competition law and policy. This platform allows for knowledge sharing, best practice exchange, and cooperation among countries in shaping effective competition policies.

In addition to its monitoring role, UNCTAD also recommends a participatory process that involves bringing businesses to the table in regulatory talks. They emphasise the importance of including various stakeholders, such as competition authorities, consumer protection agencies, data protection regulators, and other relevant regulators.

UNCTAD recognises that businesses have detailed knowledge about their respective sectors, which can be invaluable when crafting effective regulations. Furthermore, UNCTAD supports the expansion of good business practices globally, particularly in the digital sector. They highlight that consumers worldwide should receive the same level of protection, regardless of the region in which regulatory actions are taken.

By advocating for global adoption of good business practices, UNCTAD aims to create a level playing field and promote a fair and transparent business environment. UNCTAD also places great importance on international and regional cooperation. They actively engage in dialogues and partnerships, such as the BRICS dialogue and preparations for the G20.

These platforms provide opportunities for collaboration and coordination among countries, fostering cooperation and harmonising standards. In conclusion, UNCTAD’s focus on monitoring competition in digital markets, promoting inclusive economic growth, and sustainable development highlights its commitment to creating fair and competitive global trade practices.

By involving various stakeholders, advocating for good business practices globally, and fostering international cooperation, UNCTAD aims to create a more equitable and prosperous economic landscape for all.

Arguments

Brazil is discussing extensive regulation for digital markets

Supporting facts:

• New proposal to regulate expansive digital platforms in Brazil was proposed before the national parliament in November 2022

• The proposal is substantially influenced by the European Union Digital Markets Act

Topics: digital platforms, regulations, Brazil

Concerns on the proposal includes it lacking public consultation and impact assessment

Supporting facts:

• The proposal lacked any kind of public consultation

• It was not anticipated by any sort of impacts assessment report

Topics: public consultation, impact assessment, proposals

The proposal preamble assigns enforcement power to the National Telecommunications Agency rather than the Competition Authority

Supporting facts:

• The proposal provides legal power to the National Telecommunications Agency to enforce the ex-ante obligations, not to the Competition Authority

Topics: National Telecommunications Agency, Competition Authority, enforcement power

Criticism on the threshold set for designating companies for regulation

Supporting facts:

• The proposal sets a threshold of 70 million of turnover, which might be too low for local markets

Topics: companies, threshold, regulation

The proposal lacks specific obligations and instead relies on broad principles, leading to potential regulatory discretion

Supporting facts:

• The proposal bans self-preference, prohibits the use of cross data or data collected without user’s consent, and provides very broad provision on interoperability and data portability remedies

Topics: regulatory discretion, broad principles, obligations

The BRICS experience report on digital markets will provide valuable insights

Supporting facts:

• NACADI is in charge of getting together the BRICS experience in order to launch a report about digital markets that came out this month.

• Different perspectives from BRICS countries and common lessons learned will be included.

• Diverse areas of enforcement discussed based on different conducts pursued by different countries.

Topics: BRICS, Digital Markets, International Cooperation

Brazil gains valuable insights from exchange with Latin American and other international authorities

Supporting facts:

• NACADI consults with Latin America and citrus authorities, especially in ongoing investigations involving digital markets.

• Constant exchanges on the subject maintained.

• Successful example is the creation of a group within Graca which holds bi-weekly meetings to share experiences.

Topics: Latin America, International Cooperation, Digital Markets

Brazil anticipates productive discussions at the upcoming G20

Supporting facts:

• Brazil is looking forward to the G20 meeting in Rio de Janeiro.

• Brazilian government has announced plans to make some side events and meetings about customer protection in several cities.

Topics: G20, Digital Markets, Brazil

Report

Brazil is currently discussing extensive regulation for digital markets, drawing inspiration from the European Union Digital Markets Act. However, there are concerns about the lack of public consultation and impact assessment in the proposed regulations, raising questions about transparency and accountability.

Another issue with the proposal is that enforcement power is assigned to the National Telecommunications Agency instead of the Competition Authority, which has been viewed negatively. Critics also highlight the low threshold for designating companies for regulation, suggesting it is too low for local markets.

The proposal includes provisions on self-preference and data use, but the reliance on broad principles rather than specific obligations raises concerns about regulatory discretion. Despite these issues, Brazil benefits from international cooperation with BRICS and Latin American authorities, with a report on digital markets being prepared.

Moreover, Brazil’s collaboration with Latin American and other international authorities facilitates knowledge sharing. Looking ahead, Brazil is eagerly anticipating the upcoming G20 meeting, where discussions on customer protection will take place. Enhanced cooperation among relevant authorities is seen as necessary to address the challenges posed by digitalization.