unctad.org | Restoring competition in "winner-took-all" digital platform markets
Restoring competition in "winner-took-all" digital platform markets
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UNCTAD Research Paper No. 40

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Digital platforms provide a variety of services such as marketplaces, social networking, search engines and payment systems. Their business model relies on data and data monetization for growth. These are multi-sided, oligopolistic or monopolistic markets characterized by network effects, high economies of scale and scope, and increasing returns to scale, which together raise barriers for new entry.

In digital markets, platforms compete for the market and not in the market. These features together with control over user data confer significant market power to incumbent platforms in their respective markets. This has raised concerns about competition and led the competition lawyers and economists reflect on ways to restore the lost competition in digital markets.

This paper suggests adapting competition law tools and analysis to the realities of this new business model; reforming merger control regimes; focusing not only on free but also fair competition in digital markets; adopting regulatory measures such data openness and portability, interoperability between online platforms.

The paper also questions the relevance of consumer welfare standard based on price effects and efficiency to the new business model of online platforms. It suggests adopting a broader framework including choice, quality, privacy, innovation, future competition and effective competition structure and competitive process in competition law enforcement.

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