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OECD Secretary-General

G7 Conference on Competition and the Digital Economy

 

Closing remarks by Angel Gurría

Secretary-General, OECD

Paris, 3 June 2019

(As prepared for delivery)

 

 

 

Minister, Ladies and gentlemen,


This has been a fascinating and productive day and let me thank the exceptional set of panellists and speakers.

 

The breadth of the digital transformation and the scope of its impact on businesses and citizens is becoming increasingly clear:

  • More data may be produced every day than for the entire period between the beginning of our civilization and the early 2000s.

  • In OECD countries, there are more mobile broadband subscriptions than there are people. More than half of consumers reported making purchases online in 2017, compared to less than a quarter in 2005.

  • The next generation wireless networks such as 5G offer higher speeds, lower transfer times for data, and more flexibility, opening up a future with tens of billions of devices and sensors connected to the Internet.

 

We know what benefits we want this transformation to bring: technological solutions to some of the biggest challenges of our times: environment, health, economic and social development.


For companies, digitalisation could mean greater access to markets for a larger number of companies, including SMEs – benefitting both consumers and producers.

But we must develop the policies and the tools to make sure these benefits materialize for everyone. 


As we saw today, ensuring healthy competition between firms in this digitalized world is one of the critical tasks we are faced with.

 

And this is not a given!

  • We see worrying trends of falling business dynamism and growing market power: in digitally-intensive sectors, we see mark-ups at up to 55% higher than those in less digitally-intensive sectors.
  • Aggregate productivity growth has been sluggish in most OECD countries over the past decades. We also see an increasing gap between firms that are ICT-intensive and laggard firms. On average, across the EU, 33% of large firms perform big data analysis, while only 19% of medium-sized and 11% of small-sized firms do so.


What are the risks and challenges?


First, data.


It is creating entirely new market dynamics.
We’re talking about very big business here. The value of personal data in Europe alone has been forecast to reach almost EUR 1 trillion annually by 2020. Data can be crucial in developing digital services that provide value to consumers.


But we need to better understand the role of data as a new factor of production and how it can drive productivity.
We need to look at fundamentals. Who has control over data? When can it be shared, with whom and under what conditions? Are data and network effects leading to “winner-takes-most” dynamics in digital platform markets? Do vast amounts of different types of data act as a barrier to entry? Do overly onerous regulations favour the large incumbents? And what is the responsibility of large data aggregators – whether on-line platforms, data brokers or the government itself – in achieving public policy objectives like improved health or a cleaner environment?


Data can be monetised in ways that consumers cannot easily understand, and lead to consumer protection and privacy concerns.


More research is needed to better untangle these challenges. But there are already several ways to address some of these concerns, including by placing consumers at the centre.


To begin with, governments must ensure that data protection rules are sufficient to protect consumers by putting limits on data gathering and sharing
. These rules can also address some concerns about dominant firms exploiting their position to impose abusive terms on consumers.


We should consider whether new measures are needed that can better protect personal data and promote competition at the same time.
This work could be guided by empirical evidence on the impact of data on market dynamics, which the OECD is developing.


At the same time, we need to ensure that competition authorities continue to take data into account in their work
- whether in reviewing mergers of firm datasets that could generate durable market power, or in preventing abusive conduct by dominant firms to use data to exclude their competitors from the market

 

Second, innovation.

Vibrant market competition is an important driver of innovation for firms. However, protecting and promoting innovation competition can be challenging for competition enforcers. Separating mergers that will benefit innovation from those that will limit it means looking into an uncertain future.


Competition authorities must make assessments about how competition will evolve dynamically in these markets.
And the time horizons can be long – the impacts of a merger that harms innovation may not be felt by consumers for many years.


Moreover, Governments should be considering whether current IPR frameworks strike the right balance between incentivising innovation and promoting competition
. IPR may be slowing the pace of technological diffusion, possibly contributing to the productivity gap we are seeing between the frontier firms and the rest, helping to lock in their position. Governments incentivise innovation by granting intellectual property rights for a temporary exclusive use: a temporary monopoly.


There is much work to be done by policy-makers to tackle these challenges and the G7 is well placed to be the path-breaker.

  • First, we need to better understand how digitalisation is affecting market dynamics. Cutting-edge research is ongoing at the OECD, and promises to be a valuable resource for policymakers. G7 Finance ministers could encourage this fact-finding by the OECD.

  • Second, we need to avoid policy silos. The challenges we have discussed today cannot be easily addressed through a single piece of legislation, a single regulatory authority, or a broad-brush approach. More and more digital policy issues overlap between competition, consumer protection, data protection, innovation, productivity, growth, tax, and even labour policy.

  • Third, governments could set out core principles for protecting and promoting digital competition, which address the challenges we discussed today. These principles could include ensuring that regulation is not holding back competition in digital markets. They could also highlight the importance of adapting competition authority resources and analytical tools to emerging digital challenges.

  • Finally, competition authorities need to enhance their co-operation through tools such as joint investigations, enhanced information sharing, and coordinated enforcement actions. 


The G7 can exercise crucial leadership and lift others on board, be it on further pushing the research frontier, advancing common core principles or promoting international cooperation.


And the OECD stands ready to help.


We will deliver our updated Competition Assessment Toolkit by the end of this year and are updating our Product Market Regulation indicators
to help identify regulatory impediments to market entry and competition in the economy, including linked to the digital transformation.


Moreover, as we embark on the second phase of our Going Digital Project, we will continue to work to facilitate the co-operation that is so vital to tackling digital issues, in areas ranging from productivity, privacy, tax policy to regulatory design.


The Competition Committee meetings this week are an excellent example. Twice a year, delegates meet to share their experiences – including novel issues emerging in digital markets.


Let me close by thanking M. le Ministre Le Maire, Madame De Silva, et la Banque de France for hosting this conference with the OECD. And thank you all for attending.


We’ve seen today that digitalisation has great promise, and can promote competition in ways that benefit us all. But also that this process is not automatic. We need a strong commitment to protect competition, embedded in our policymaking process, and competition authorities ready, vigilant and equipped to stand up for competition.


We can make this happen in the G7. But we must make it happen beyond the G7. The OECD is there to help make it happen. Count on the OECD. Thank you.

 

 

 

See also:

Press Release: Conference on Competition and the Digital Economy

 

 

 

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