Many digital markets exhibit certain characteristics, such as low variable costs, high fixed costs and strong network effects, that result in high market shares for a small number of firms. In some cases, these lead to “competition for the market” dynamics, in which a single firm captures the vast majority of sales.
Firms in these concentrated markets may possess market power, the ability to unilaterally and profitably raise prices or reduce quality beyond the level that would prevail under competition. There is an ongoing debate about whether competition policy is adequately making use of this tool in digital markets today. However, authorities face numerous challenges when bringing abuse of dominance cases in digital markets:
- First, determining whether a firm is dominant is a substantial challenge.
- Second, authorities must decide whether to use new theories of harm, such as self preferencing, rather than existing theories such as tying and bundling, or refusal to deal.
- Third, abuse of dominance cases can be lengthy and resource-intensive.
In December 2020, the OECD Global Forum on Competition discussed the main types of abuse of dominance concerns that can emerge in digital markets, what makes these markets unique, and how have competition authorities around the world tackled these challenges.
