Can market studies be a more effective tool for tackling emerging competition issues?

Over the years, market studies have proven to be a flexible tool for helping competition authorities to examine broader competition issues that fall outside merger reviews or antitrust investigations. OECD’s Patricia Bascunana-Ambros reviews the potential for applying this tool to address emerging competition issues.

Patricia Bascunana-Ambros is a competition expert with the UK Financial Conduct Authority currently on secondment to the OECD..

The debate on how to use and adjust competition policy frameworks and tools continues to evolve as competition authorities gain experience in a constantly changing world.  Experience has shown that challenges to effective competition do not come solely from anti-competitive behaviour and merger strategies.  Market studies provide a flexible tool for competition authorities to examine such challenges outside the context of merger reviews or antitrust investigations. So can market studies be a more effective tool than enforcement tools  to tackle emerging competition issues?

Emerging competition issues are scenarios where certain new or changing market features create a risk to competition.  Competition authorities are currently facing structural emerging competition issues from the increasing digitalisation of markets and the use of other new technologies. The structural features of these markets can lead to increase concentration, even if short of individual market power.  Novel demand-side issues have also arisen, for example with the increased use of big data, that competition authorities cannot address through competition enforcement alone.  Competition authorities are also facing regulatory emerging competition issues as the need to keep regulations up to date becomes even more important as markets undergo significant change. Over the longer-term, the post-COVID competitive landscape may present new competition issues.

These changes present new and evolving challenges. Competition authorities are unlikely to have yet sufficient enforcement experience or knowledge of the market in question to understand the potential competition issues and identify how best to address them.  This means that the use of market studies may precede other enforcement actions and thus act as a beneficial ex-ante tool.

Market studies can be forward-looking, cover a broader set of issues, focus on the dynamic process of rivalry and promote increased competition than can be done in enforcement.  This enables the authority to consider market wide problems and the interlinkages between the different factors (supply and demand side issues) creating competition concerns, irrespective of individual firms..

Market studies may also be an easier way to provide market certainty and clarity on anticompetitive practices as opposed to lengthy enforcement cases with case-specific arguments that can be difficult to prove. A market study also provides an opportunity for an authority to shape the market early on by clarifying that certain behaviour may infringe competition law, even where the study finds no specific instances.

Market studies are not without limitations. Recommended changes to legislation tend to be static and can take time to implement.  At a time of rapid technological change, the way that legislation can be changed is key to reducing the risk of existing legislation holding back innovation.

Recommendations issued by the majority of jurisdictions are not legally binding.  This can limit the effectiveness of the tool.  In the few jurisdictions that can issue legally binding recommendations, this power rightly comes with very tight governance and procedural checks and balances to ensure the competition authority is accountable and remains within its remit.  This inevitably increases further the cost of market studies in terms of time and resources.

On balance, market studies can play a key preventive role in identifying and diagnosing emerging competition issues by exploring the different drivers and clarifying the options available to tackle them from a competition policy, competition enforcement, regulatory, or other policy perspective before consumer harm becomes significant.  The use of this tool contributes to the debate at the 2020 OECD Global Forum on Competition on how best to use and adjust existing competition tools to better deliver benefits to society in a changing world.  

Participants at the OECD Global Forum for Competition will explore using market studies to tackle emerging competition issues on 10 December 2020.

2020 OECD Global Forum on Competition Blog Series

Blog 1: How can competition law tackle misconduct in digital markets?

Blog 2: Can market studies be a more effective tool for tackling emerging competition issues?

Blog 3: Are digital markets bringing new challenges in abuse of dominance cases?

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