While adopted on 5 June, this communique was embargoed until yesterday. It can now be found here.
As it says on the tin, this document reflects the common position that the competition authorities in the G7 countries (namely, the Autoritá Garante della Concorrenza e del Mercato (Italy), the Autorité de la Concurrence (France), the Bundeskartellamt (Germany), the Competition Bureau (Canada), the Competition and Markets Authority (United Kingdom), the Department of Justice (United States of America), the Directorate General for Competition (European Commission), the Federal Trade Commission (United States of America) and the Japan Fair Trade Commission (Japan)) have reached on the digital economy.
It may come as no surprise that the level of agreement is relatively thin, and that the document does not go into the most controversial topics addressed in the reports reviewed last week and further below.
The common understanding begins with the mandatory section on the benefits of the digital economy.
Investment and innovation in the digital economy can serve as an engine of economic growth and generate positive externalities globally by fuelling additional innovation and business models that did not previously exist.
Data and its associated network effects can play a key role in the development of algorithms and artificial intelligence. The accumulation of data can also benefit consumers by improving the quality of existing goods and services and by creating new ones, including some that users can access for free.
Strategies involving zero-priced have brought significant benefits to consumers by offering more products and services to consumers who may have otherwise had to pay for them. These strategies can also enable new entrants to break into markets and increase competition.
The benefits to consumers by the digital economy can best be realised if digital markets remain competitive. Sound competition law enforcement will continue to play an important role in safeguarding trust in digital markets and ensuring that the digital economy continues to deliver economic dynamism, competitive markets, consumer benefits, and incentives to innovate.
A second section focuses on how existing antitrust rules are flexible enough to address the challenges brought about by the digital economy.
The digital economy presents challenges for competition enforcers. For example, the fast-moving nature of the digital economy, multi-sided markets and zero-priced offers can make market definition, market power assessment, and competitive effects analysis more difficult, requiring closer analysis of non-price aspects of competition such as quality, innovation, and consumer choice. Some digital markets can also be characterised by significant network effects and economies of scale/scope, which have generated concerns over the potential impact of these factors on concentration and barriers to entry. Concentration in digital markets may require enforcers to be more vigilant to detect anticompetitive behaviour by dominant firms. Similar concerns have been raised about whether accumulation of large amounts of data by platforms can create barriers to entry or market power, especially when data is difficult to replicate.
At the same time, these issues are not beyond the reach of competition law. Many of the features of digital markets, including the existence of platforms, network effects, economies of scale/scope, industry concentration and zero-priced offers are not new. Recent casework shows that competition law generally provides competition authorities with the tools and flexibility to tackle anticompetitive conduct in the digital economy. Moreover, a case-by case, evidence-based approach benefits the assessment of some of the more challenging elements of competition analysis in digital markets.
This is not to say that jurisdictions should not consider how their competition law should adapt to better deal with digital markets. Challenges include how to define and address markets comprising various multi-sided platform models; how to use effective information-gathering powers given new forms of and methods for retaining data; and how to pursue sound enforcement intervention against anticompetitive conduct in a meaningful timeframe. For effective enforcement and policy engagement, it is important that competition authorities have the tools and means to deepen their knowledge of new business models and their impact on competition, e.g., through market studies or sector inquiries.
Considering the need for continuous improvement, G7 competition authorities are further refining their expertise in the field, enhancing their in-house skills, tailoring their own institutional designs to address and keeping up-to-date with digital economy trends. Such efforts should be strengthened.
A third section looks at the importance of advocacy and of competition impact assessment of policies.
While governments should avoid using competition law enforcement to address non-competition objectives, domestic inter-agency cooperation can be important given the impact of digital economy-related regulations on competition. For example, cooperation with relevant consumer protection and data privacy authorities should be fostered where it is important to ensure a consistent approach with sound competition policy and practice. Sharing a competition authority’s knowledge and expertise throughout government also helps promote a competitive digital marketplace.
Regulations, when targeted and proportionate, can be complementary to competition rules in addressing digital challenges and may be appropriate to solve issues that go beyond the reach of competition rules alone. On the other hand, regulations can also harm competition by increasing the cost of entry and entrenching incumbents. Competition impact assessments that monitor the impact of proposed regulations, and periodically review existing regulations to ensure that they remain targeted and effective, are a useful tool to promote and maintain competitive markets. Governments should welcome the experience of their competition authority experts and carefully consider the impact that regulations in the digital economy may have on competition.
A fourth and final section addresses the need for international cooperation.
The global nature of the digital economy means that international cooperation between competition enforcers and policymakers is crucial. There is a growing need for convergent competition enforcement and for effective answers to cross-border practices and multijurisdictional cases. The development of a common understanding and closer cross-border cooperation in the detection and investigation of anticompetitive behaviours and mergers, could help increase the efficiency of competition authorities.
Ongoing work by individual agencies and working groups is to be welcomed to inform G7 competition authorities, as well as G7 discussions, on these topics in a flexible and voluntary manner, without prejudice to ongoing work in existing international fora. Competition enforcers therefore support continued cooperation and experience sharing through existing fora and networks.