ACCC’s evidence regarding the market power of digital platforms
The Australian Competition and Consumer Commission (ACCC) has been examining competition and consumer issues with digital platforms since late 2017. It published a long awaited report in November last year in which it said that there were a range of consumer and competitions issues with digital platforms, including increased market concentration and instances of anti-competitive conduct. It recommended new ex ante regulations be introduced to address these issues.
The question of whether digital platforms have market power is crucial to understanding if ex ante regulations are required to fix a competition issue. I recently examined this in a piece for the Australian Journal of Competition and Consumer Law (AJCCL), Vol 30 Pt 4 in which I set out:
- when should regulation be introduced to curb market power; and
- how can the market power of digital platforms be assessed.
When should regulation be introduced to curb market power?
Significant and enduring market power can lead to poor outcomes for consumers. Ex ante regulation can be warranted when it is shown that:
- there is significant and enduring market power, which is more than is required for suppliers to recover their fixed costs and provide an incentive to them to cut costs and innovate;
- the market power will be used to the detriment of consumers;
- regulation is feasible; and
- the benefits from regulation are greater than the costs, given the other regulations already present, including existing competition law.
How can the market power of digital platforms be assessed?
Market power must be assessed on a case-by-case basis, but some general principles are that market power can be assessed by examining:
- the strength of the competitive constraints acting upon the firm (or firms) of interest, which provides evidence as to whether a firm possesses market power;
- the conduct of the firm (or firms) in question, which may or may not be consistent with the use of market power; and
- the outcomes in a market, which may or may not be consistent with the use of market power.
I describe in the AJCCL how each of these can be applied to digital platforms and assess the ACCC’s evidence in relation to the market power of digital platforms.
I conclude that the evidence set out by the ACCC in relation to digital platforms focuses on market shares and barriers to entry, rather than competitive constraints more broadly, or the conduct of those firms and the outcomes in terms of the services provided and profits earned. The evidence is therefore not yet sufficient to conclude that regulation of digital platforms is needed to control their market power because it has not been shown that the conditions for ex ante regulation to be warranted hold in this case.
The Hon Dr Andrew Leigh MP gave an important