This paper identifies a set of possible regulations that could be used both to make the search market more competitive and simultaneously ameliorate the harms flowing from Google’s current monopoly position. The purpose of this paper is to identify conceptual problems and solutions based on sound economic principles and to begin a discussion from which robust and specific policy recommendations can be drafted.
Economic thinking and analysis lie at the heart of the objectives and the design of the EU Digital Markets Act. However, the design of the DMA reflects a very deliberate—and reasonable—intention to ensure clarity, speed, administrability, and enforceability. In doing so, this procompetitive regulation omits several elements of standard competition law where economics has typically played a key role. Nonetheless, we believe that economic insights and analysis—including behavioural economic thinking—will continue to play an important role in enabling the DMA to achieve its ambitious and laudable goals, albeit in a somewhat different way.
The Commission is charged with implementing the Digital Markets Act (DMA). Based on economic and legal reasoning, this paper asks how the Commission can fulfil this challenging task effectively. We make recommendations about how the Commission might prioritize cases, design optimal internal work structures, maximize the compliance mechanism’s effectiveness, avoid reinventing at least some wheels by leaning on antitrust tools and knowledge, and leveraging the Commission’s concurrent antitrust and regulatory powers to ensure the speedy and effective resolution of current and future investigations.
This is the fifth in a series of papers prepared by a collection of economists and policy experts in the United States, the UK, and the European Union who have studied, and are committed to the improvement of, competition in digital markets. Previous papers addressed consumer protection in online markets, regulating the market for general search services, the concepts of “fairness” and “contestability” as used in the Digital Markets Act, and the use of “equitable interoperability” as a “super tool” to restore and encourage competition in online markets.
This paper is concerned with competition in digital platform markets where network effects are strong. As is widely acknowledged, these markets have an inherent tendency towards concentration, leaving consumers with little competition in the market. We explain how interoperability regulation can help stimulate competition in the market in a way that benefits consumers.
We analyze the use of the concepts of fairness and contestability in the Digital Markets Act (DMA) and propose formal definitions rooted in the economic analysis of digital markets as well as the goals of the proposed law. We discuss the implication of these concepts for innovation in digital markets.
This paper identifies a set of possible regulations that could be used both to make the search market more competitive and simultaneously ameliorate the harms flowing from Google’s current monopoly position. The purpose of this paper is to identify conceptual problems and solutions based on sound economic principles and to begin a discussion from which robust and specific policy recommendations can be drafted.
Consumer protection law is vital for ensuring that market-based economies work in the economic interest of consumers as well as businesses, and thus to the benefit of civil society. This is the case for online markets just as it is for offline markets. However, despite broad consensus on these points, too little has been done to ensure that the various standards applicable in offline markets are sufficient or adequate to guarantee efficiency and fairness in online markets. This paper outlines eleven key features of online markets that might necessitate standards additional to or different from those that are applicable offline, and provides a menu of possible policies in relation to each. Many of these are general to all online markets, but some are specific to the largest digital platfoms. Many if not most of our policy proposals could be enacted through minor changes to existing law or regulation or through decisional law interpreting existing legislation. Some have already been implemented in some jurisdictions. What is needed in all jurisdictions, however, is a regulator or regulators with sufficient expertise around technical issues such as A/B testing and algorithmic decision-making to understand, anticipate, and remedy the myriad ways that online firms can disadvantage consumers.
This is the sixth in a series of papers prepared by a collection of economists and policy experts in the United States, the UK, and the European Union who have studied, and are committed to the improvement of, competition in digital markets. Previous papers addressed consumer protection in online markets, regulating the market for general search services, the concepts of “fairness” and “contestability” as used in the Digital Markets Act, the use of “equitable interoperability” as a “super tool” to restore and encourage competition in online markets, and coherence between US and European approaches to digital regulation.
The advent of mobile devices and digital media platforms in the past decade represents the biggest shock to cognition in human history. Robust medical evidence is emerging that digital media platforms are addictive and, when used in excess, harmful to users’ mental health. Other types of addictive products, like tobacco and prescription drugs, are heavily regulated to protect consumers. Currently, there is no regulatory structure protecting digital media users from these harms. Antitrust enforcement and regulation that lowers entry barriers could help consumers of social media by increasing competition. Economic theory tells us that more choice in digital media will increase the likelihood that some firms will vie to offer higher-quality and safer platforms. For this reason, evaluating harm to innovation (especially safety innovation) and product variety may be particularly important in social media merger and conduct cases. Another critical element to antitrust enforcement in this space is a correct accounting of social media’s addictive qualities. Standard antitrust analysis seeks to prohibit conduct that harms consumer welfare. Economists have taught the antitrust bar that the output of a product or service is a reliable proxy for consumer welfare. However, output and welfare do not have this relationship when a product is addictive. Indeed, in social media markets, increased output is often harmful. We argue that antitrust analysis must reject the output proxy and return to a focus on consumer welfare itself in cases involving addictive social media platforms. In particular, courts should reject defenses that rely only on gross output measures without evidence that any alleged increases in output actually benefit consumers.
We study where privately insured individuals receive planned MRI scans. Despite significant out-of-pocket costs for this undifferentiated service, privately insured patients often receive care in high-priced locations when lower priced options were available. The median patient in our data has 16 MRI providers within a 30-minute drive of her home. On average, patients bypass 6 lower-priced providers between their homes and their actual treatment locations. Referring physicians heavily influence where patients receive care. The share of the variance in the prices of patients’ MRI scans that referrer fixed effects (52 percent) explain is dramatically greater than the share explained by patient cost-sharing (< 1 percent), patient characteristics (< 1 percent), or patients’ home HRR fixed effects (2 percent). In order to access lower cost providers, patients must generally diverge from physicians’ established referral patterns.