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Digital trade

The turtle and the gazelle: Can competition policies effectively regulate the digital economy?


Published 07 December 2021

As the digital sphere continues to grow at an explosive rate, global digital firms have grown in parallel and reached astronomical market capitalizations. With improper framing of competition regulation, those seeking to challenge the perceived monopoly of big digital platforms often forget about the consumer welfare principle and pursue policies incongruent with their goals.

In parallel with the technology sector’s rapid growth is ever increasing market concentration and capitalization. Even amidst the sharp downturn caused by the Covid-19 pandemic, tech giants reached all-time-high market capitalizations. The five largest companies on the US stock market – all tech companies – have maintained a combined value of more than 20% of the total market. In China, the digital economy accounted for nearly 40% of the country's GDP in 2020, while online shopping services grew by 70 million users in Southeast Asia in the same year.

The sector’s growth and apparent dominance of a handful of firms has prompted greater scrutiny of the tech giants and a renewed focus on the appropriate use of competition policy and regulation to manage outcomes. Many policymakers have argued that, if harnessed more effectively, existing competition policy frameworks should ensure healthy competition in the digital economy. However, without adequate regulatory tools and appropriate conceptualization of existing competition policy options, authorities have struggled to cope with nontraditional business models and evaluate alleged anti-competitive behaviours.

In this paper by Deborah Elms and Nick Agnew of the Asian Trade Centre, the authors argue that the risks of imposing ungauged responses to the growing power of digital firms are high, with potentially significant challenges ahead. As is often the case, the burden will fall most heavily on the smallest firms, including domestically located companies that are often assumed to be the biggest beneficiaries of new applications of competition policy.

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Dr Deborah Elms is the Founder and Executive Director of the Asian Trade Centre. Dr. Elms is also Vice Chair of the Asia Business Trade Association (ABTA) and sits on the International Technical Advisory Committee of the Global Trade Professionals Alliance and is Chair of the Working Group on Trade Policy and Law.

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Author

Nick Agnew

Nick Agnew is a Research Analyst at Asian Trade Centre.

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