Wednesday, November 22, 2017

Taming the Shrew: There's No Need for a New Market Power Definition for the Digital Economy

Hedvig Schmidt, University of Southampton - School of Law describes Taming the Shrew: There's No Need for a New Market Power Definition for the Digital Economy.

ABSTRACT: The digital economy is all around us in our every-day lives and we rely on digital products more and more. Approximately 2 billion people are connected to the internet worldwide – a figure that is said to increase to 3 billion in the near future. 

The European Commission recognises that the digital economy ‘… is the single most important driver of innovation, competitiveness and growth, and it holds huge potential for European entrepreneurs and small and medium-sized enterprises (SMEs)’. 

The importance placed on the digital economy has recently been emphasised by the attention granted to the Google Shopping case, in which the European Commission found Google to have abused its dominant position as a search engine by giving an illegal advantage to its own comparison shopping service. In doing so it denied other companies to compete on merits and innovate as well as denying European consumers a genuine choice of services. 

Interestingly, European businesses are lagging behind those from other regions in the world in their exploitation of the digital economy. The European Commission is therefore intent on providing support in various forms to its own companies and improve their competitiveness globally. One of the many ways to encourage growth is by ensuring that there is a strong competition policy in place that can boost competition and innovation. The challenge is whether the competition rules (i.e. Article 101 and 102TFEU and the Merger Regulation) are still fit for purpose when dealing with the digital economy? That is, are we able to continue to make use of the traditional competition law tools with respect to the digital economy? Especially, when the digital economy appears to present new and different market characteristics that test our traditional understanding of competition within a market. The digital economy has been branded as having a ‘competition-to-dominance trait’, meaning that the market characteristics lend themselves to ‘automatically’ creating market power for the company that fulfils certain conditions. Therefore at the heart of this paper is the question, should market power in relation to unilateral conduct be defined differently in the digital economy, under the notion that the digital economy is an untameable shrew within the current competition rules.

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