Tipping Markets : An analysis of the Commission's proposal for a Digital Markets Act

Abstract: The particular characteristics and practices of digital platforms have given rise to the phenomenon of “tipping”, where one platform provider takes the whole market. There has been a growing concern among competition law regulators and enforcers that the traditional ex-post antitrust instruments cannot remedy the distortion of competition it causes in digital markets. In December 2020, the Commission published a proposal for a Digital Markets Act which aims to combat weak contestability and unfair practices in platform markets. The proposal includes a list of ex-ante rules, a merger information requirement and a market investigation tool that gives the Commission greater flexibility in designating the rules. The research questions of this thesis concern the challenges of addressing tipping digital markets with existing competition rules and how the Digital Markets Act will address them. In answering the first question, it reviews the underlying factors leading to high market concentration and entry barriers, the implications of tipping markets for consumer welfare and innovation, as well as high-profile cases such as Microsoft, Google Shopping and Facebook/Whatsapp. The thesis finds that although monopoly-akin market structures may not always be detrimental to the objectives of competition law, the entrenched incumbent positions of companies such as Google, Apple, Facebook, Amazon and Microsoft are often a cause for anti-competitive concerns. Furthermore, the ex-post character of article 102 TFEU makes it ineffective to target tipping markets, and the merger rules are not adjusted to the dynamic and uncertain digital economy. The examination of the Digital Market Act has been limited to the sub-set of provisions applicable to firms that do not yet enjoy an entrenched and durable market position. The findings of this review are that the proposal can improve competition as it prevents the platforms from locking their users into their digital ecosystems. The thesis also recognises that the requirements of data-sharing, compulsory IP licences and prohibition of Most Favoured Nation clauses pose a risk of freeriding, which could negatively impact platform innovation. However, it concludes that the anticipated increase of overall innovation and competition in the digital economy should outweigh these risks.