July 19, 2019

G7 Regulators Agree on General Concepts as to Competition in the Digital Economy

Steven Lofchie Commentary by Steven Lofchie

The G7 competition authorities presented a paper reflecting a common understanding on "how competition plays out in the digital economy." The authorities (Italy, France, Germany, Canada, UK, U.S., EU and Japan) agreed to the following broad principles:

  1. "Competitive markets are crucial to well-functioning economies"; the digital markets must remain competitive.
  2. "Competition law is flexible"; it can "adapt to the challenges posed by the digital economy without wholesale changes to its guiding principles and goals." The G7 stated that "accumulation of large amounts of data by platforms can create barriers to entry or market power . . . an [issue that is] not beyond the reach of competition law."
  3. Competition authorities must have the necessary tools to enforce competition policy in digital markets.
  4. "Governments should assess whether policies or regulations unnecessarily restrict competition in digital markets." Policymakers and regulators recognized that regulations may hinder competition in digital markets when they (i) increase the cost of entry and/or (ii) enact burdensome requirements.
  5. International cooperation is important "[g]iven the borderless nature of the digital economy."

Commentary

While the G7 "common understanding" on the digital economy may be short of specifics, the direction is clear: national antitrust regulators (maybe some, maybe all) are going to be examining big tech and looking to bring cases. Notably, the publication of the common understanding follows shortly after the U.S. Congress heard testimony on a bill titled Keep Big Tech Out of Finance Act. The Act would prevent the largest technology firms from entering the financial services business, presumably because the value of consumer data and technology expertise is so much greater than that of financial expertise. See House Financial Services Committee Considers Testimony on Implications of Libra. As with the Act, the G7 common understanding raises a basic question: "if a law is adopted to keep big tech out of finance, does the prohibition stop with finance?" That is, does the same logic suggesting that big tech should be kept separate from finance suggest that big tech should be kept separate from other types of commerce?

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