Addressing Competition Issues in the World’s Fastest Growing Digital Economy

AAYLF delegate from Australia Tilini Rajapaksa addresses the importance of anti-competitive frameworks to combat market concentration and monopolistic practices in the digital economy​.

In March 2018, Uber announced it had agreed to sell its Southeast Asian business to Singapore-based regional rival Grab for a stake, merging the two ride-hailing businesses. What followed was Grab’s domination of the ride-sharing market in every single ASEAN nation. While the Competition and Consumer Commission of Singapore (CCCS) ultimately levied a fine of US $9.5 million in total on the companies for anti-competitive conduct and the Philippines Competition Commission (PCC) followed later with a smaller fine, neither chose to unwind the merger – a legal outcome which would have been extremely challenging, if not impossible, to enforce due to how rapidly the companies carried out the merger and the intangible nature of assets transferred.

Southeast Asia is home to the world’s fastest growing population of internet users. ASEAN’s digital economy is predicted to triple its annual size to US $300 billion by 2025 [1]. When it comes to mobile internet usage, Southeast Asians are the most prolific in the world, making it one of the world’s fastest-growing regions for e-commerce and ride-hailing [2].

Issues to do with the digital economy are no longer peripheral. The digital economy does not refer to a separate economic ecosystem, it refers to a colossal and integral shift in the way the economy operates as a whole. As the OECD noted in 2014 “the digital economy is increasingly becoming the economy itself ” [3]. 

The Grab-Uber merger highlights the inadequacies in Southeast Asia’s anti-competitive frameworks in the era of the digital economy, which has transformed business patterns and heightened the complexity of competition issues[4].

There is increasing recognition of the tendency for market concentration and monopolistic practices in the digital economy as a result of positive network effects [5], which means the value of a good or service is increased by the number of people using it. For example, as more drivers and customers joined Grab and Uber, the two brands strengthened their footholds in the market as the key platforms for ride-sharing and consequently grew their market value among consumers. These dynamics are increasingly more common as the digital economy allows for businesses to develop a competitive advantage and market power at a very high speed.

Robust competition is at the heart of an effective market, protecting consumer choice and demands and facilitating innovation. Southeast Asia has been one of the last regions in the world to adopt competition regimes and if it fails to protect an even playing field for businesses with the shift towards a digital economy, the region will see its hard-earned regional integration and reputation as an attractive region to do business being undermined by anti-competitive practices [6]. Though Southeast Asian nations are adapting, commerce is evolving even faster.

Over in Australia, the Australian Competition and Consumer Commission (ACCC) held a landmark inquiry into the impact of digital platforms on competition between 2018 and 2019 [7], although limited in scope to studying competition in media and advertising services markets.

Australia and ASEAN have increasingly taken up opportunities to collaborate on competition issues. Through the AANZFTA Competition Law Implementation Program (CLIP), the ACCC and the New Zealand Commerce Commission (NZCC) have provided targeted capacity building and technical assistance to ASEAN states to facilitate the development of sustainable competition policy and implementation frameworks since 2014 [8].

However, the need prevails for Australia and ASEAN to put greater emphasis on the new nuances the digital economy brings to competition issues. A more multifaceted policy approach is required to address competition issues in the era of the digital economy and may require changes to contract law, consumer protection law and data protection law, as noted by the German Competition authorities in a report submitted to the European Union this year [9].

While the ASEAN Secretariat’s ASEAN Regional Guidelines on Competition Policy published in 2010 requires renewal to address the immense differences in the commercial landscape today, the ASEAN Competition Enforcers’ Network (ACEN), created in 2018 to further cooperation and handle cross-border cases, is a strong and visible move towards greater regional coordination in the context of rising non-traditional tech companies which operate across borders.

Through CLIP, ASEAN and Australia have a foundation to focus on the sharing of expertise with greater focus on the digital economy. New integrated competition guidelines to address these evolving issues could be developed to facilitate greater consistency in competition regulation and implementation across Southeast Asia. Both Australia and ASEAN, having had varied experiences when it comes to the digital economy, are in a positive place to benefit from greater dialogue to address these evolving challenges.

References

  1. Google, Temasek and Bain & Company, “e-Conomy Southeast SEA 2019”, October 2019 <https://www.blog.google/documents/47/SEA_Internet_Economy_Report_2019.pdf>.
  2. Ibid.
  3. OECD “Chapter 4: The Digital Economy, New Business Models and Key Features” in Addressing the Tax Challenges of the Digital Economy, published September 16, 2014, p. 73.
  4. Angayar K. Ramaiah, Ningrum N. Sirait and Nucharee N. Smith, “Competition in Digital Economy: The State of Merger Control on Consumer Transportation in ASEAN”, April 2019, International Journal of Modern Trends in Business Research Volume 2, Issue 7.
  5. See German Commission ‘Competition Law 4.0’, “A New Competition Framework for the Digital Economy” 9 September 2019 < https://www.bmwi.de/Redaktion/EN/Downloads/a/a-new-competition-framework.pdf?__blob=publicationFile&v=2> and United Nations Conference on Trade and Development, Digital Economy Report 2019 –  Value Creation and Capture: Implications for Developing Countries, 2019, page 7-8 retrieved from <https://unctad.org/en/PublicationsLibrary/der2019_overview_en.pdf>.
  6. Nikkei.
  7. See Australian Competition and Consumer Commission, Digital Platforms Inquiry Final Report June 2019 <https://www.accc.gov.au/system/files/Digital%20platforms%20inquiry%20-%20final%20report.pdf>.
  8. See Competition Law Implementation Program < https://www.accc.gov.au/about-us/international-relations/competition-law-implementation-program-clip>
  9. German Commission ‘Competition Law 4.0’, English Summary of “A New Competition Framework for the Digital Economy” 9 September 2019 < https://www.bmwi.de/Redaktion/EN/Downloads/a/a-new-competition-framework.pdf?__blob=publicationFile&v=2>

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