Abuse of Dominance in Digital Markets: OECD Background Paper

Abstract

Digital markets pose fundamental challenges for abuse of dominance enforcement. This paper will explore these challenges, and set out some strategies that authorities can consider in their casework. On the one hand, digital markets may be more likely to manifest the kind of harm that abuse of dominance laws were designed to prevent. If competition authorities are unable to apply these prohibitions to digital business models, it may lead to questions about the broader relevance of abuse of dominance as a competition enforcement tool. As a result, some have called for more extensive enforcement in this area. On the other hand, the analysis of this harm can be potentially complex, and give rise to the risk of error (resulting in either over- or under-enforcement). Aggressive enforcement that is not founded in economic theories of harm, or which does not address the risk of over-enforcement, may end up harming the consumers it was meant to protect, and undermine support for competition enforcement more generally. To balance these risks, it seems that both (1) an openness to abuse of dominance theories of harm, and (2) great care in selecting which cases to bring, are needed. Different jurisdictions make different assessments of where the balance of under- and over-enforcement risks lies. These assessments cannot be separated from the underlying legislative, historical, and philosophical context of competition law in each jurisdiction. They may also be updated in response to ex-post assessments of past interventions, evidence about trends in market power. However, there are areas of convergence in terms of the need for effects-based analysis in most cases, and the need to avoid action that creates disincentives for innovation. At the same time, there are cases in which alternative competition policy tools could be either more justified, more timely, or more resource-efficient. Going forward, competition authorities seeking to address abuses of dominance in digital markets would benefit from deeper international co-operation, given the international scope of many digital firms. In addition, there remain significant opportunities for the development of new methodologies that help authorities assess the unique circumstances in digital markets, and identify clearer conditions in which harm will emerge.