by István Kopácsi
Competition authorities and policy makers from the G7 countries met in Tokyo on 8 November 2023 and published the conclusions in a joint communiqué.[1]
The aim was to discuss issues related to competition in digital markets, recognizing the importance of using existing competition law tools to address new issues and developing and implementing new, modern competition policy initiatives or regulatory frameworks.
Experience clearly shows that the challenge to be overcome is that network effects, economies of scale, digital ecosystems and the accumulation of big data can create barriers to entry, making markets vulnerable to tipping and the growth or emergence of dominance. With this in mind, the G7 has also begun to address the numerous competition issues that arise in the digital economy, but it should be stressed that as competitive harm in these markets can occur quickly, action and enforcement must also be rapid.
The G7 countries consider that to promote competition and discourage future anti-competitive behaviour, it is necessary to learn lessons from interventions and to continuously improve the instruments of intervention.
As the digital economy evolves, new technologies are emerging that enable rapid growth for businesses developing or using these technologies. Among others, artificial intelligence (AI) and blockchain can spur disruptive innovation, but in addition to the emergence and development of new markets, they can also damage competition or disrupt digital markets for example through anti-competitive mergers and exclusionary behaviour.
The role of competition authorities and policymakers in managing the impact of new technologies on competition is crucial: the first step is to understand emerging technologies. This allows (or would allow) competition concerns to be anticipated and addressed at an early stage. This of course also requires monitoring the evolution of technologies and how they are used to increase or decrease competition. To this end, the G7 say they will use the full range of regulatory tools, institutional resources and knowledge to help ensure that these technologies benefit people, businesses and the economy as a whole.
Addressing the issue of artificial intelligence (in particular generative artificial intelligence), they argue that it has the potential to benefit people and businesses by increasing productivity and growth. The downside of AI, however, is that it raises a number of issues related to transparency, disinformation, intellectual property rights, privacy and personal data protection, in addition to potential competition concerns.
Incumbent technology firms that dominate key AI assets (huge amounts of data, highly skilled workforce, significant computational resources) or adjacent markets may harm competitors by engaging in anti-competitive behaviour such as tying, exclusive dealing or self-preferential treatment, negatively affecting competition.
Market players can also contribute to such disadvantages through acquisitions or partnerships, and can further strengthen their existing market power or create new ones. Control over key components of AI and network effects can create barriers to entry and allow market concentration to lead to dominance, limiting the competitiveness of start-ups and new entrants. As a potential impact of AI on competition, we should also consider the potential for anti-competitive agreements to arise because AI-based pricing tools used by firms may facilitate collusion.
The G7 countries stress that the competition rules currently in place cover the development and use of AI, meaning that public authorities currently have powers to deal with the competitive harm caused by AI, but this does not mean that these rules cannot be complemented by new AI-specific rules.
Given that business activities in the digital economy and their impact often cross borders, the G7 countries believe that close cooperation between their competition authorities and policy makers is essential to address common issues and challenges that arise in the context of digital competition.
In the future, discussions will take place among G7 members to address the competition and enforceability issues raised by emerging technologies through existing and new legal instruments. To this end, G7 competition authorities and policymakers will continue to share updates on approaches to promoting competition in digital markets, including legal reforms, policy advances, institutional changes and enforcement progress.
[1] https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Others/G7_2023_Communique.pdf?__blob=publicationFile&v=2
