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The evolving concept of market power in the digital economy – Background note

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This paper explores how the concept of market power is being applied and adapted to digital markets, as well as the implications for competition policy. First, based on competition authority decisions and academic literature, it identifies the main contributors to market power in digital markets, including the role of network effects, economies of scale and scope, data, multi-homing and switching costs. The paper also considers whether these contributors are unique to digital markets, and some of the conceptual questions authorities have faced in assessing digital firms’ market power. Next, this paper reviews a range of concepts and terms recently applied to digital market dynamics that are related to market power. This includes particular types of “power” held by firms in digital markets (e.g. bottleneck power), and designations developed to capture the influence of specific firms in the context of new regulatory initiatives (e.g. gatekeepers). Finally, the paper considers several competition policy challenges related to market power in the digital era, including questions about the relationship between new regulatory concepts related to market power and established enforcement concepts such as dominance. It also highlights the risk of growing divergences in the application of new regulatory designations. This paper concludes that market power should remain a core guiding principle as the competition policy community faces these challenges.

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OECD Handbook on Competition Policy in the Digital Age

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The OECD Handbook on Competition Policy in the Digital Age provides a new resource for competition authorities, policymakers, researchers and anyone else interested in digital competition policy. It highlights the key messages from the extensive body of OECD work in this area to date, including anticompetitive conduct, merger control and remedies. The Handbook provides links to all of our digital competition work, making it easier to explore the wealth of background papers, country contributions, and other resources available on over 40 topics. It also contains our views on the road ahead for digital competition policy, including the need for co-ordination among jurisdictions as they transition from diagnosing concerns, to implementing solutions.

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Ex Ante Regulation and Competition in Digital Markets

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Digital platform markets have particular characteristics that may warrant specific regulation, as discussed by a number of high-profile reports by experts appointed by governments and regulators in recent years. To address these particularities, over the past year many jurisdictions have proposed some form of ex ante regulation to supplement existing ex-post competition law enforcement. However, there has been a lack of co-ordination across jurisdictions. This has resulted in significant divergences in the way that the regulations seek to solve the problems, which ultimately could affect their success. To support a discussion about the merits and objectives of ex ante regulation amidst the regulatory cacophony, this paper gathers some of the most salient regulatory proposals and amendments to existing laws, which were available to the public as of August 2021 to compare and contrast them. This vue d'ensemble aims to help the debate about the degree to which it is possible to dovetail the world-wide regulatory approaches to platforms

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Environmental Considerations in Competition Enforcement

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Climate change is one of the most pressing issues of this century. Due to the urgency of the issue and the pressure on governments to act, the debate on climate change is moving quickly from the political level to focused conversations on policy choices and implementation options. This background paper discusses the role of competition policy and enforcement in supporting and incentivising sustainable and pro-competitive business practices. It analyses the practical approaches that competition authorities may take when assessing cases with an environmental dimension. Looking at past experiences in cartels, co-operation agreements, abuses of dominance and merger control, the paper explores the question how competition authorities can integrate economic and noneconomic environmental effects into the competitive assessment from the legal and economic perspective. It also identifies the challenge

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Konkurrencerådet gør status på markedet for automatisk regningsbetaling

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I september 2020 udsendte Konkurrencerådet en større analyse af konkurrencen om automatisk regningsbetaling i Danmark; et marked i vækst og af stor betydning for danske virksomheder og forbrugere. I oktober 2021 gjorde Rådet derfor status over de indsatser og anbefalinger, der blev behandlet i analysen fra september 2020.

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The Concept of Potential Competition

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This paper discusses the concept of potential competition as an important pro-competitive factor. While potential competition is inevitably subject to significant uncertainty, where it does exist, the paper suggests treating potential competition with a parity of esteem with respect to actual competition. The paper considers the benefits of extending the timeframe used to evaluate potential competition and reviews the tools that are available to assess it. It suggests such tools may be helpfully placed within a specific framework to enable assessment under the different and greater uncertainty that exists over potential competitive constraints. These tools include many that are already widely used, such as the additional weight placed on credible contemporaneous internal documents, progress against regulatory checkpoints, understanding of business models and of competition to innovate. Similarly, on the counterfactual it suggests following existing best practices such as pro-actively exploring alternative counterfactuals. Other suggestions involve the use of what in some jurisdictions might be newer tools – valuation analysis, forward-looking consumer surveys, spillover analysis of non-overlapping products in adjacent markets, and the development of specialist progress-to-market expertise. The paper also highlights existing trends by competition agencies to advocate for a change in existing decision-making frameworks to effectively protect against the loss of potential competition. In this respect, the paper suggests that there might be a case for using different thresholds for potential competition from those that are used when the concern is over the possible loss of an actual constraint.

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Competition Enforcement and Regulatory Alternatives

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Economic regulation and competition policy are largely interdependent instruments of economic policy. However, they differ in aims and methods. It may be said that both competition policy and economic regulation seek to achieve the benefits from workable competition, but go about it differently – with competition law seeking to strengthen the workings of markets by prohibiting certain forms of anticompetitive behaviour, while economic regulation entails the imposition of public constraints on business behaviour to address ‘market failures’. However, the goals of competition policy and economic regulation are not necessarily aligned. Sometimes, economic regulations protect and promote competition; at other times, regulations limit competition for the sake of achieving other valuable public goals. Regulation can have the effect of stifling competition, and thereby deprive customers of its benefits, for example by raising barriers to entry. But regulation can also play an important role in supporting competition, for example by providing the legal and economic frameworks within which competition takes place. Ultimately, competition law and economic regulation are distinct but overlapping, largely complementary but occasionally in conflict. The purpose of this Background Note is to explore this relationship from the angle of competition enforcement. In particular, this note will explore the role that regulation can play in competition enforcement – by constraining or influencing it –, and how regulation can both substitute and complement competition enforcement in practice.

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The Promotion of Competitive Neutrality by Competition Authorities

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Building on the 2021 OECD Recommendation on Competitive Neutrality, this paper describes the main types of distortive measures jurisdictions may adopt and the tools available to competition authorities in order to address them. Section 2 of the paper focuses on how competitive neutrality may be distorted in six fields: the competition law framework, which may include exclusions that benefit certain companies and may be enforced in a discriminatory manner; the regulatory framework, which may grant some market players preferential market access or special terms for operating in the market; public procurement legislation and processes, which may favour SOEs, domestic bidders or incumbents (and, in some cases, SMEs); public support, which may grant unfair financial advantages to selected companies; exclusive and special rights – usually granted for the provision of public services – which may create undue advantages in the way beneficiaries are selected, the rights and privileges that are attached to the public services, and the compensation paid; and state activism, in particular, the creation or favouring of national champions. Section 3 of the paper focuses on the tools that competition authorities have to address competitive neutrality violations in these fields. In essence, authorities have three sets of tools. The first set of tools are those aimed to stop legislative and administrative acts that distort competitive neutrality. The extent of competition authorities’ powers varies across jurisdictions. Competition authorities may act as direct enforcers (directly removing the anti-competitive act) or they may challenge the act before a court (which can then remove it). The second set of tools allows competition authorities to review legislation and provide advice to government on potential competition implications of legislation and reform initiatives. This is typically done in one of three ways: mandatory regulatory impact assessments, in which the assessment is conducted as part of the policy making process; ad hoc assessments of laws and regulations, in which an analysis is carried out on a case-by-case basis, in relation to both proposed and existing laws and regulations; and market studies or sector inquiries, which are large scale resource-intensive exercises in which competition authorities only engage if there is some prima-facie case for concern. The third set of tools are those dealing with the control of public support measures. Most competition law regimes around the world do not contain specific provisions to address public support measures and so most competition authorities have a limited role in enforcement. Still, some authorities may rely on more general powers allowing them to intervene against anti-competitive state interventions. In addition, some competition authorities have specific advocacy roles in relation to subsidies, set out in legislation. Finally, competition authorities may support governments by drafting guidelines for public bodies, issuing opinions, and taking on a monitoring function.

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