Competition Law on Digital Platforms; The need to Revise Traditional Rules

Abstract

1. IntroductionThe expansion of the Internet and its ever-increasing rate along with the rise of smart mobile phones have made Internet-based businesses one of the inseparable sectors of today's economy. The part that this type of business plays in today’s world economy is so much that now the top companies in the world, in terms of capital and market value, are companies in the field of digital economy. This is a reality that Iran will also face in the not-too-distant future; then, companies in the field of digital economy will take a significant share of the market. So, today, it is especially necessary to pay attention to the issue of competition in digital platforms and to set the appropriate rules to govern them. Literature ReviewUntil the writing of this article, most of the issues raised in Iran's competition law are devoted to the examination of rules governing competition in traditional markets. Only one article titled "Competition Council and Internet Businesses" by Zarei et al. (2019) has been written in relation to platform markets, and this work is also based on the traditional rules of competition law and regardless of the specific challenges of this field. Analysis of the vote number 306 of the Competition Council. Therefore, it can be claimed that the explanation of the characteristics and challenges of platform markets and its effect on the regulation of competition in this field, which is examined in this article, qualifies as innovation. MethodologyIn order to correctly set the new rules applicable in the field of digital platforms’ competition, it is necessary to go through a three-stage system: first, we must get a correct understanding of the prominent features of the digital platform markets that affect the issue of competition. In the second stage, the competitive challenges arising from these characteristics, with which the traditional rules are not able to fully deal, should be examined and evaluated; and finally, new rules of competition in the field of platform markets based on the aforementioned characteristics and challenges should be put in place.As the title of the article suggests, the purpose of this article is to explain and analyze the first and second stages of the aforementioned process to show the deficiency of traditional rules in response to the competitive challenges of the field of digital platforms and the necessity of revising them. For this purpose, after explaining the meaning of "platform" and its conceptual evolution over time (the first part), the prominent features of digital platforms that affect the issue of competition are counted, identified, and evaluated (the second part) and finally, the challenges due to the aforementioned characteristics and the inadequacy of the traditional rules in response to them will be explained (part three) to prove the necessity of revising the traditional rules of competition law in the field of platform markets. ConclusionBased on the findings of this article, the main economic features of digital platforms are such as "the network effect", "reduction of transaction costs", "replacement of ownership with access", "fragmentation of supply and demand", "economy of scale and economy of significant scope", "simultaneous improvement of economies of scale and personalization" and "fundamental importance of data". Although they are not entirely new and traces of them can be seen in traditional markets, their simultaneous presence in digital platforms makes the market tend towards them. In addition, this problem may be aggravated by the actions of digital platforms to strengthen and expand their position in the market. It is noteworthy that none of the aforementioned features that have led to the occurrence of the mentioned challenges have been recognized in the traditional rules of competition as an obstacle to entering the market or as an anti-competitive practice. Therefore, the first competitive challenge of platform markets, which requires the regulation of appropriate rules, is the growing monopoly of these markets. Naturally, the most suitable solution to get out of this situation is to recognize the aforementioned features as specific types of entry barriers for digital markets.It should also be kept in mind that the preliminary stages to apply anti-competitive rules and guaranteeing them in digital platform markets face serious challenges. In these markets, it is not possible to identify the product as easily as it is in traditional markets, and the application of the conventional SSNIP test cannot be applied to many platforms that offer zero-price services or two- or multi-modal platforms. This makes it a serious challenge to recognize the exact share of the platform in the market and, accordingly, to recognize the market power. It seems that the transition from "quantitative criteria" to "qualitative criteria" is the way out of such challenges.Also, following the traditional rules in recognizing the anti-competitive behavior of platforms, causes many platforms to be accused of aggressive pricing at the very beginning due to having zero marginal cost. In addition, the existence of the aforementioned features has facilitated the conditions for committing anti-competitive acts, such as establishing exclusive conditions in the transaction, selling a package of products, collusion, etc. It seems that the requirement to overcoming such challenges is to promote ex-ante regulations along with the implementation of the current (mostly a-posteriori) regulation model.Finally, it seems that the simultaneous presence of these features in digital platforms has largely led to the reemergence of traditional issues of competition law as current issues, and this will consequently require a review of competition laws in this area, as countries such as the United States, China, and the European Union have followed the same path.

Keywords

• market
• digital platforms
• competition law
• competition council
• internet business