Centre news
17.06.2021

Workshop report and preliminary outcomes: Concrete contributions to detecting market dominance in digital sectors

On 1-2 June, 2021, the Hertie School and its Centre for Digital Governance hosted a virtual workshop aimed at concretely improving present competition and antitrust regulation through empirical metrics, with a particular focus on the problems of digital markets. 

The meeting was chaired by Joanna Bryson, Hertie School Professor of Ethics and Technology, and Helena Malikova, member of the Chief Economist Team of DG COMP at the European Commission and fellow at the Hertie School. The meeting followed from a project course the two had taught this semester, Detecting market dominance and emerging digital sectors (P1053). The workshop was more generally a part of an ambitious and innovative programme on reshaping regulation for the digital age, based on ongoing academic research as well as graduate coursework at the Hertie School. Hertie School students’ work from their project course was among the outcomes discussed at the meeting, and several of the students attended the meeting and are still actively engaged in the project. 

 

Problems addressed

The digital economy is challenging established analytic frameworks and exacerbating existing challenges in competition and antitrust proceedings. The workshop brought international expert participants together to help establish mechanisms for documenting market dominance, with a goal of identifying and promoting extant or readily-available empirical data and research on the functioning of digital markets. The initial idea was to highlight or arrange to produce materials that could be used as empirical evidence when arguing competition cases in decisions by the European Commission and/or at the European Court of Justice. Such research is particularly timely now in light of the EU’s recently-released draft legislation: The Digital Services Act, the Digital Markets Act, and the AI Regulation. Although the meeting’s particular focus was European competition law enforcement, many participants engaged with theoretical frameworks for German and American national regulations, among other broader concerns discussed. 

Questions considered included:

  • How do we establish consumer harm in markets where claims are made that the product is free to consumers?
  • What are the best ways to test the veracity of increasingly common narratives used to discourage regulation such as (i) big companies are more efficient and (ii) targeted ads benefit consumers?
  • What might be ways to complement or replace metrics that had concrete no meaning in a traditional business environment (such as “marginal costs” that have been central to competition economics) by additional metrics aligned with the real objectives of a business including KPI that is operating in the digital age?
  • Given that market capitalisation allows large companies to acquire markets and competitors, how do we ensure that this attribute / vector of market power is not ignored by regulators?
  • How do we integrate in the consumer welfare assessment framework the impact of very large platforms on suppliers, wages, and the attention economy?
  • How should competition rules be deployed to ensure small and medium sized businesses survive, and thrive, in a business environment currently dominated by companies with extremely high market capitalisations?
  • To what extent can competition regulation be part of efforts at maintaining and securing democratic control of economies and national security?

 

Meeting structure

The meeting began with a general and ethical framing by Prof. Bryson and an introduction to the problem by Helena Malikova, including a description of the project students’ outcomes, detailed below. The meeting then turned to invited keynote speakers, then on each day a “round table” discussion wrapping up with some active questions, answers, and debate. Participants were welcome to “socialise” for an additional hour each day, and a few did, despite the lack of catering.

The keynote speakers on the first day were Stéphanie Yon-Courtin, MEP rapporteur on competition, and Agustin Reyna, Bureau Européen des Unions de Consommateurs (BEUC). On the second day the keynote speakers were journalist Cory Doctorow, Diana Moss, president of the American Antitrust Institute, and Prof. Thomas Philippon, of NYU Stern School. The round table was chaired by Prof. John Zysman, Berkeley the first day, and author and lawyer Michelle Maegher the second day.

 

Preliminary outcomes and links

Two Hertie working papers were introduced at the workshop as part of a wider project, the directory for the outcomes of this project is linked here. One paper challenged the idea of “efficiencies” used to justify mergers and acquisitions (M&A) by even dominant companies. Data indicated that in the area of digital economy companies engaging in M&A do not have concrete plans to save costs or if they do they announce such plans only in very few cases compared to non-digital M&A. A second paper on dominance metrics considered market capitalisation as a surrogate measure of market dominance, to replaced price analyses given that many digital services are “free”. Further research by Hertie School students looked also at data as an asset to be considered in mergers and the utility of targetted advertisement. 

Stephanie Yon-Courtin presented the challenges of the European Digital Markets Acts, for which she is the rapporteur in the European Parliament (ECON committee). She described many legal and even logical challenges of the present version of the DMA, such as the lack of clarity on its enforcement, and its overlap with the existing competition enforcers such as the DG COMP. Agustin Reyna presented the perspective of consumers, including privacy concerns which are not addressed by the existing antitrust frameworks.

On the second day Cory Doctorow promoted an adversarial interoperability approach, referred to as "com com"; he recommended this EFF resource on the topic. Diana Moss presented a report released 1 June (the first day of the meeting), Market Power and Digital Business Ecosystems, issued by her institute. This discusses the (in)effectiveness of remedies, arguing for behavioural remedies and for assessing the business rationale of platforms.

Thomas Philippon's presented his new paper, which finds that the imbalance between large firms and the rest of the economy is not greater than over other historical periods. A key finding is also that large firms do not innovate as much as internally but compensate by buying innovative firms.

John Zysman, chairing the round table on the first day,  also presented with attendees Martin Kenney and John Cioffi their collaborative work on Platform Power and Regulatory Politics

Michelle Maegher chaired the second day round table, and described a relevant project she cofounded Balanced Economy, a newsletter with topics and approaches in common with the workshop. A featured intervention on that day also came from Alissa Starzak of Cloudflare, who was the primary voice of SMEs present. She expressed skepticism that interoperability was a solution rather than a barrier or trap into a monopoly infrastructure. 

We appreciate the time and enthusiasm of all the participants, but particularly the presenters, who all contributed their time on a voluntary basis, as did Ms. Malikova. We are looking forward to further collaborations with and progress from all the participants. 

A partial (and dynamic) list of participants, their short bios and their relevant work is available here