Effective Competition Frameworks: Enabling Competition and Innovation with a Global Mindset (Program Synthesis)

Panel Summary

This Panel brought together speakers from diverse backgrounds, jurisdictions and professions leading to a rich cross disciplinary discussion and was moderated by Professor David Evans (Global Economics Group / Jevons Institute). He set the stage for the discussion by noting that there is robust innovation by local and Chinese players in the APAC region and encouraged the Panel to address the issues arising from the digital economy, and to assess how different jurisdictions are attempting to address similar problems, and if there are opportunities for the jurisdictions to learn from each other.

Some relevant policy recommendations emerged from this panel. Illustratively, Geeta Gouri (formerly, CCI) emphasized the need for understanding and respecting the market logic and being wary of the per se approach in dominance cases, Yong Lim (Seoul National University AI Policy Initiative) brought to the forefront the need for careful institutional design and the need for reliance of economic evidence. He also spoke about the need to build skill and expertise in crafting proper remedies in competition matters. Similarly, the need for using consumer welfare standard as the guiding principle for regulating digital platforms and a word of caution against over regulation, as well as regulatory fragmentation, also emerged.

Jeff Paine (Asia Internet Coalition) cast a spotlight on the issue of rising techno nationalism in the south east Asia region (an issue that was alluded to the India Chapter of the conference as well). He also brought practical insights into the south east Asian market to the table.

Malavika Jayaram (Digital Asia Hub) emphasized the need to have an open, cross disciplinary approach to competition issues. She posited that equality should be the primary value to guide policy design of the digital markets and that there was need to build trust amongst different stakeholders.

Markham Erickson (Google) noted how every innovation brings its own set of regulatory challenges. He highlighted how the European approach to digital platforms is often selectively targeted and too restrictive and how certain APAC jurisdictions (that have homegrown tech platforms unlike the EU) are faring better in this regard. He also emphasized how digital platforms are marked by robust competition and innovation (meteoric rise of Zoom during the pandemic being case in point), that must be preserved and aided by regulation.

Professor David Evans made an interesting observation on the issue of rising techno nationalism in South East Asia. He highlighted that China while being protectionist, has produced tech giants (such as Alibaba, Alipay, Tencent, Baidu, etc.) that are innovative and globally competitive and that countries leaning towards digital protectionism may want to borrow this leaf from China’s playbook. On the issue of regulation of tech platforms, he noted that given the global scale of operation of the digital platforms, there could be regulatory overlaps and conflicts inter se different jurisdictions – that presents a significant compliance challenge for the tech platforms. Further, he remarked that digital economy is, over time, likely to become synonymous with ‘economy’ and that any regulation should address issues arising from the digital economy and not restrict itself to regulating the tech platforms that reign the day today (and could be dethroned tomorrow).

Key Talking Points | Dr. Geeta Gouri

1. Respect Market Logic:

Regulators, often suffer from god complex and need to understand market logic and acknowledge that digital markets are shaped by technology. Platform markets are different from traditional markets.

2. Consumer Welfare Standard:

Regulators need to focus on consumer, identify the consumer and welfare of the consumer.

3. Indian Mobile Ecosystem:

The Indian Mobile Ecosystem is characterized by robust innovation by local players (for apps, and OS) covering almost every sphere of life. The pandemic has further accelerated innovation and reach.

4. Recommendations:

In assessing abuse of dominance cases, the tendency to consider all impugned conduct to be abusive (per se approach) needs to be reassessed. One must consider the whole process in entirety, including the effects on innovation and the local market conditions.

“… markets have their own logic. Regulators love to  play god in attempting  to reshape markets  and  is something we have to understand while designing competition enabling framework for a  digital economy…” – Geeta Gouri

Key Talking Points | Yong Lim

1. Lessons from Asian Competition Experience:

Institutional design (i.e. design of the competition agency) matters for competition policy; sometimes more than the substantive law. Asian jurisdictions should be willing to be flexible and fine tune their institutional design.

It is important to assess effects based on economic evidence and refrain from relying on market shares or structures alone.

There is a need to understand remedies and develop skills for crafting good remedies, designing effective consent decrees, better solutions that are well timed, market oriented and address the underlying competition challenges.

2. Digital Regulation in Korea:

Korea has over three decades of competition experience.

A new centralized data agency has been mooted. The Communications Agency, the Ministry of Science & ICT, the KFTC are promulgating rules to regulate digital platforms and appear to be having a regulatory turf war.

KFTC is likely to play a key role in regulating digital platforms.

3. Regulatory Experimentation:

Dissatisfaction with the pace and outcomes of antitrust enforcement has led to more interest in ex-ante rules. Competition law can only fix so much (cannot resolve privacy, political and social issues) creating dissatisfaction with the outcomes. Currently, we are in stage of political experimentation across jurisdictions, in relation to digital markets and rules, regulatory objectives, agencies are the key ingredients for the experimentation process. In doing so, one must be modest, open minded and eschew unwarranted extraterritorial application of the rules.

4. On Regulatory Issues:

Regulatory capture: Digital economy, as suggested by David Evans, will soon be synonymous with economy. Similarly, digital platforms will encompass the whole universe of industries, thus reducing the risk of regulatory capture because it’s not specialized and there are different interests and different parties all together in the same sphere

Cumulative regulation: Multiple agencies, multiple objectives, overlapping authority, presumably over similar firms can lead to increased burden, costs and confusion.

“… [its] important to have the personnel and resources invested for crafting really good remedies and monitoring compliance… everyone should experiment and try to achieve regulatory innovation… perhaps redesigning consent decrees and decree processes so that regulators can be both more aggressive and timely, and also nimble and more market oriented for the digital economy and the challenges it poses…” – Yong Lim

Key Talking Points | Takako Onoki

1. Digital Economy Regulation Updates from Japan:

In June 2018  the Japan Fair Trade Commission, Ministry of Economy, Trade and Industry, and Ministry of Internal Affairs and Communication were jointly tasked to come up with rules for regulating digital platforms.

In December 2018 these agencies issued the basic principles including emphasis on market researches to understand the reality of market situation, dynamic reviewing and updating the merger review guidelines and policies in accordance with developments in digital economy.

In September 2019, the Digital Headquarters to discuss policy, competition, privacy, innovation concerns arising from digital markets, was established.

In October 2019, the JFTC issued a market research report about online mall and app stores and identified some potential competition concerns.

In April 2020, the JFTC issued an interim report about digital advertisement.

In June 2020, the digital headquarters issued an interim report about digital advertisement.

On June 3, 2020 a new law relating to improvement of transparency and fairness of digital platforms (modelled after EU’s P2B regulation) was promulgated.

2. Mixed approach in Japan:

Japanese Government has a mixed approach where it tailors policy to local conditions while borrowing from foreign jurisdictions, as and when required.

“… Japanese government is trying to do whatever is appropriate for the Japanese market and Japanese people. And at the same time, there are many things that we should, and we can learn from other jurisdictions, including the EU and UK…”  – Takako Onoki

Key Talking Points | Jeff Paine

1. The Effects of Pandemic:

We can witness an acceleration of:

(i) Technology adoption; and

(ii) Clamor for imposition of digital taxes, to fund the economic recovery process and for digital regulation.

2. Increased competition concerns post-covid:

Asia Internet Coalition is witnessing higher consultations, and its membership includes local as well as global technology players.

3. Techno-nationalism in Southeast Asia:

Techno nationalism rising in Southeast Asia, in competition policy as well as data localization, data privacy, cybersecurity, local presence requirements, etc. that is antithetical to cross border data flows.

4. Chinese influence in SE Asian tech space:

Chinese companies, with very deep pockets, have strong presence in south east Asian markets.

“… I do think that the whole nationalist push is something that we are against because we promote cross border data flows as being a very important part of AIC…” – Jeff Paine

Key Talking Points | Markham Erickson

1. New technologies & Novel Challenges:

Not all challenges are competition challenges and need to be addressed appropriately using appropriate policy tools. Every time there are new technologies, there is a question of whether the laws need to be updated, paradigms need to be updated.

Sometimes, in the process of generating consumer benefit such as tailoring a search result for a query, the competitors whose services do not benefit from the process of giving efficient service to the customer, end up targeting the tech platforms.

2. Challenges with the European Approach:

(i) EU proposals to address competition challenges by digital platforms are highly targeted to certain players. (ii) Ex ante rules, explored by the EU, can create inefficiencies for the consumers.

3. APAC Approach:

APAC jurisdictions have more balanced and collaborative approach towards resolving competition issues. APAC region has some major Chinese players that compete with global players while EU does not have any home-grown tech companies that results in anti (US) tech bias in the EU.

4. Fair Treatment of Consumers as Guiding Principle:

Globally, there is no consensus on scope, scale and subject matter governed by regulators. However, there is consensus around certain principles such as transparency and accountability. The yardstick should be if a company is treating consumers fairly relative to its own principles.

Innovation without permission has to be preserved and promoted.

5. Rise of Techno-Nationalism:

The example of zoom rising to 200 million user-base from 10 million, in a year, is a sign of thriving competition.

“…the North Star here for governments ought to be consumer welfare and consumer benefit and a protection of the competitive process for sure which would mean that consumers will benefit from that… techno-nationalism, that may be good in some cases for a particular government or for particular industries in that government. It’s not always good for consumers…” – Markham Erickson

Key Talking Points | Malavika Jayaram

1. Need for Cross Disciplinary Approach:

There is a need to have cross disciplinary expertise and approach to issues arising in digital markets as it impacts people across cross sections on the society. Need more independent academics and scholars doing empirical research around emergent issues. Need for regulatory sandbox, collaboration between public and private sector, less paternalism. Regulatory solutions will have to be iterative process that will keep upgrading over time. Need to build trust between stakeholders.

2. Binary Approach:

There is prevalence of binary approach in digital economy parlance viz, one can either have innovation or security, access to technology or data privacy. This mutually exclusive trade off approach is erroneous. One needs to design in social values of inclusion, privacy, etc. into the digital architecture.

Equality and principle of inclusion should be the guiding principle for regulating digital markets.

“We spend a lot of time talking about antitrust and not enough talking about building trust… for people to trust platforms and for platforms to trust the users that they’re dealing with...” – Malavika Jayaram