By Erini Yemenitzis, PhD Candidate, School of Law, University of Strathclyde.

14 July 2024.

CITE: Erini Yeminitzis, Universal Approach to Competition Law in the Digital Economy, The Global South Network Blogs, 14 July 2024.

In recent years, the traditional economy has undergone a significant transformation, with the impacts of digitalisation permeating every aspect of society. At the forefront of this shift to a more digital economy are technology firms or digital platforms, such as Google/Alphabet, Amazon, Microsoft, Apple, and Meta. Their influence is pervasive, altering how individuals interact and restructuring market operations. While these changes have opened up new opportunities, they have also presented challenges, for example, to competition law authorities globally, who have redirected their focus, increasingly incorporating stricter competition regulation.

While the European Union (EU) is considered the leading jurisdiction globally with an increased focus on competition law in digital markets, countries like South Africa have also been active in this area (such as the Google/Fitbit case). Even though there are similarities between the EU approach and the South African approach, differences can also be observed. This contribution underscores the inadequacy of applying the EU competition law approach and imposing it as a global one-size-fits-all standard for the digital economy. It emphasises that jurisdictions vary in policy objectives, indicating that a tailored approach is necessary.

Jurisdictional Competition Law Goals Matter

There has been wide debate surrounding what the goals of competition are and, more importantly, what they should be given the changes to the markets over the past decade (See Stylianou and Iacovides). Amongst this debate, there is a growing discussion relating to the goals of competition law, specifically when looking at developing countries. It is a topic with global relevance, given the nature and implications of the digital economy, which consists of markets operating without borders. In stating this, it is therefore important for countries to have well-defined competition goals since they provide legal certainty for enforcers, especially in the digital era. However, South Africa and the EU have distinct objectives from traditional competition law, and this contribution demonstrates how this may impact their approach to regulating the digital economy.

Compared to the EU, the South African Competition Commission (SACC) has generally attempted to include broader socio-economic and public interest considerations, as indicated in the Preamble of the Competition Act 1998. Meanwhile, in the EU, none of the EU treaties specify any outright goals or aims of the EU competition law. Nevertheless, the early 2000s marked the modernisation of the EU competition law regime, in which the EU Commission actively pursued a ‘more economic approach’ (See Lianos et al). This called for the acceptance of relevant economic goals such as efficiency and the protection of consumer interests or consumer welfare (See Albæk) while also recognising the EU’s commitment to ensure competition law policy within the EU achieved market integration.

When reviewing developing countries, such as South Africa, Njako poses that the focus should be on ensuring that the markets operate for the good of the people in these countries. As acknowledged by Gumede and Manenzhe, it will be important for the SACC to track how the public interest considerations in the 1998 Act (e.g. the impact on small and medium enterprises and the impact on ownership by historically disadvantaged individuals) are interpreted by the SACC as they relate to digital markets. The final Online Intermediation Platforms Market Inquiry (OIPMI), published in 2023, has indicated the prospective approach the SACC will be taking regarding these considerations.

Implications for the Digital Economy and Jurisdictional Goals

In looking at the impact of the development of the digital economy over the years, António Guterres previously stated that:

Digital advances have generated enormous wealth in record time, but that wealth has been concentrated around a small number of individuals, companies and countries. Under current policies and regulations, this trajectory is likely to continue, further contributing to rising inequality.

Guterres thereby highlights the critical issue of the rapid wealth creation through digital advancements disproportionately benefiting a small segment of the global population. Given the digital economy’s wide reach, it is pivotal that this new economy is built to benefit all. The issue, however, goes beyond just wealth to include the explicit and implicit practices of these companies. To deal with these anti-competitive practices in the digital economy, competition agencies worldwide have become increasingly proactive in identifying and developing an approach to regulate digital markets. 

The SACC, for instance, has indicated that it intends to increase its regulatory oversight of both technology and digital markets through reports such as the Competition in the Digital Economy in 2020 and through cases such as Google/Fitbit. The case, which concerned Google acquiring Fitbit (an American company that made and sold wearable devices), was scrutinised in both the EU and South Africa. There were concerns related to the aggregation of user health data held by Fitbit and the already extensive amount of data held by Google. The merger was allowed to continue in both the EU and South Africa based on several conditions, including one being the insurance that the dataset will be kept separate. The approach adopted by the EU Commission and the SACC, whilst being scrutinised for not being sceptical enough and being one of the limited mergers that have come under scrutiny in South Africa, also illustrates a level of coherence in regulating digital platforms.  Accordingly, although scrutinised, there has been a wider attempt to deal with anti-competitive practices of companies operating within the digital economy whilst also ensuring the conduct being carried by such companies is fit for domestic markets and interests.

Similarly, the EU’s approach to the digital economy is based on the accumulated lessons learned from its own investigations (See Fletcher). As a result of these lessons, the EU has brought in the Digital Markets Act (DMA) to create a fair and competitive digital environment, in which they have imposed ex-ante regulations on certain digital platforms. It establishes certain dos and don’ts for digital platforms and thus aims to intervene before harmful conduct occurs.

It is important to highlight that the OIMPI report does interact with the EU on some level. For instance, the inquiry found that Google holds a 90% market share in search activity across devices and prioritises paid results and its own goods and services concerning ranking on its pages. This significantly impacts companies with smaller marketing budgets and fails to allow domestic businesses to gain visibility among the results. The inquiry, amongst its remedies, includes providing greater visibility and funding for training of domestic and small companies and further calls for Google to stop favouring its own products and comply with the DMA to address self-preferencing. As a result, although the SACC is open to engaging with the EU’s DMA regarding digital platforms, the OIMPI has stated that it currently has no plans to develop its own ex-ante regulations. Should it decide to do so, it is possible that these regulations would differ from the DMA in certain ways — a South African ex-ante measure would not necessarily mirror the DMA. While there may be similarities, the measure would be customised to suit the domestic market of South Africa and align with the jurisdictional objectives and principles pursued by the SACC at the time of enacting such a regulation.

Additionally, regardless of the above interaction between the SACC and the EU’s DMA, the OIMPI was initiated due to the SACC having concerns about certain features of online intermediation platforms within its domestic markets. In particular, the inquiry aimed to assess if the features of certain platforms “[…] impede, distort or restrict competition; and in order to achieve the purposes of the Act including the participation of small and medium enterprises (“SMEs”) and historically disadvantaged persons (“HDPs”) in these markets”. This again further illustrates the SACC’s approach when it comes to the goals of competition law, it is ensuring that it works with the realities of its domestic markets. The prioritising of jurisdictional goals illustrates why a universal approach to competition law in the digital economy is not only unlikely but it is also inappropriate (See and Murgatroyd et al). The demands of developing countries are very distinct from those of developed countries, not to mention the historical, political, and social experiences are singular (See Njako). So, whilst issues and challenges surrounding the existence of digital platforms may be shared, the ultimate objectives differ. Having these contrasting jurisdictional objectives will consequently suggest that the way in which a developing country deals with harms experienced within the digital economy will be tailored to achieve what they perceive is a correction of this conduct.

As discussed previously, since [t]he circumstances and priorities of developing countries differ in fundamental ways from those of developed jurisdictions. For developing countries like South Africa, establishing a suitable competition law regime that fits the needs of their markets is a top priority. As such, to ensure effective solutions are created for the local and domestic challenges created by digital platforms, competition law objectives will respond according to these jurisdictional concerns, thereby illustrating why jurisdictional goals matter.

The SACC and any similar authorities must consider the local legal, economic, and social realities of their jurisdictions. This will ensure that the policy arrived at is evidence based, globally informed, yet jurisdictionally located. For the time being, the focus should be on assessing how these digital platforms impact markets within South Africa and given the goals they would like to pursue, increased enforcement through cases and investigations may be more beneficial to the SACC. In the future, they may want to learn from the DMA and its limitations, and at that point, it may be beneficial to incorporate learned lessons. Yet, even so, this will likely never entail a full adoption of the EU approach since countries will have their own motives and priorities, thereby making a universal approach to competition law in the digital economy unlikely.

Erini is currently a PhD candidate at the University of Strathclyde in the UK, where she is currently pursuing her doctorate in the field of Law. Erini’s academic achievements are marked by her completion of both a Bachelor of Laws (LLB) and a Master of Laws (LLM) degree program at the University of Strathclyde in Glasgow. Erini’s areas of interest span the legal field, ranging from competition law to data protection and technology. Her research currently delves into the intricate world of digital platforms within the digital economy. Erini’s primary focus is on the market power held by these digital giants and the regulatory landscapes that govern them across various countries. Her work aims to evaluate the effectiveness of these regulations in addressing concerns surrounding the market structure and behaviours of digital platforms operating within the dynamic digital economy. Erini’s research aims to make an additional contribution to the ever-evolving landscape of digital commerce and regulation.