1. A comparative look at antitrust regulation of the digital economy in Europe and China
- Author:
- Aifang Ma
- Publication Date:
- 12-2023
- Content Type:
- Working Paper
- Institution:
- Robert Schuman Foundation (RSF)
- Abstract:
- Influenced by the Matthew effect[1], the digital economy tends to be a hyper-concentrated market. Large platforms with well-developed business models have far less difficulties in attracting customers and accumulating data than smaller ones. Market concentration is accentuated by certain explicitly monopolistic practices of large firms. It is not uncommon for them to deliberately design their products in such a way that they are incompatible with the devices or services offered by their competitors. The iPhone charger, for example, is not compatible with smartphones made by Samsung or Xiaomi, as this could affect the longevity of the battery. In China, consumers can only pay for their purchases on Taobao, a C2C platform of Alibaba, by using Alipay, not WeChat Pay, even though these two online payment tools work in the same way. To eliminate their competitors, established companies have embarked on aggressive mergers and acquisitions (M&A), incorporating many innovative start-ups in the process. It is estimated that Google merged 257 entities between 2006 and 2022. At the same time, Facebook acquired 94 companies between 2005 and 2021. The trajectory followed by other digital firms is similar. The boundaries of the behemoths are constantly expanding to cover a wide range of activities: social networks, entertainment, e-commerce, artificial intelligence, content sharing, etc... Cartels, abuse of the dominant position on the market, and M&A by digital giants destabilise the market. They kill the enthusiasm of small businesses for technological innovation, reduce the number of choices available to consumers, and most importantly, turn the economic power of big businesses into political power. One simply can read The Age of Surveillance Capitalism[2] to understand the close links forged between the digital empires of Silicon Valley and the American government. The latter relies on high-tech companies to develop surveillance technologies. The companies recruit former politicians to improve their chances of obtaining favourable deals. One important mission of the American association Numerama is to oversee the relations between political and economic actors. According to the association, between 2005 and 2016, Google recruited sixty-five employees from European administrations, including senior civil servants, to make its voice heard in Brussels. At the same time, fifteen employees of Google joined European administrations at various levels[3]. The unequal capacity of companies to reach key decision-makers further strengthens the position of the large to the detriment of the small. The European Union is currently the most active in the antitrust regulation of the digital economy. On the one hand, with the Digital Markets Act (DMA), the EU is the first political entity to have established specific legislations on antitrust issues in the digital economy. Furthermore, compared with their counterparts in other countries, European regulators are the most intransigent in the fight against anti-competitive practices. Record-high fines imposed on major platforms come from Europe, a subject that will be discussed later in this article. Following in its footsteps, China, which has long been laxist in this area, has been taking active measures since the end of 2020 to regulate the activities of its national champions. In July 2021, Tencent was punished six times for its illegal M&A, which led to market concentration. In October 2021, Meituan Dianping, one of the largest e-commerce platforms, was penalized for abusing its dominant position in the meal delivery market. The company was accused of forcing retailers to sign exclusive agreements with it. The Chinese regulator imposed a fine of 3.442 billion yuan (€441.8 million) to Meituan Dianping. New provisions have been proclaimed and the amendment to the anti-monopoly law was approved by the Chinese legislature on 24 June 2022. Nevertheless, challenges persist in the Middle Kingdom. The delimitation of the relevant market, an essential procedure for judging whether a firm occupies a dominant position, is difficult to apply to the digital economy. The reason is simple: most digital platforms offer products to the consumers located in different parts of China, rather than in a precise geographical area. This study examines how the European Union and China regulate anti-competitive practices in their respective digital economies. The European Union and China are chosen as the subject of study because they are currently the most active and the most advanced in institutionalizing the antitrust regulatory framework for the digital economy. They have different political systems: while the twenty-seven Member States of the EU are democracies, China is an authoritarian state. This raises many questions. For example, do China and the EU face the same challenges in legislating the antitrust-related issues? Do they fight unfair competition in the same way? This is where the originality of this article lies: by analysing the antitrust regulations of countries where the state-market power relations differs, this article can clarify on the future development of the antitrust regulation in the world’s major digital economies. Among other things, it asks whether countries with different political regimes are likely to fight unfair competition in the same way. If so, the similarity of regulatory objectives could provide a solid basis for building an international regulatory framework of the digital economy.
- Topic:
- Regulation, Digital Economy, and Antitrust Law
- Political Geography:
- China and Europe