The Bannerman Competition Lecture 2021: consumer welfare and intervention in digital markets

Digital markets and technology move notoriously fast and it is fair to say that it has been challenging for competition regulators to stay ahead of the curve. In last week’s Bannerman Competition Lecture for 2021, Andrea Coscelli, Chief Executive of the CMA, issued a welcome call for regulators to align more closely with the needs of consumers and take a bolder and more collaborative approach to the regulation of digital markets.

Amplifying the consumer voice

In his lecture, Mr Coscelli set out the challenges to competition authorities’ objectives which have been posed in recent years. Should regulators go beyond the traditional scope of consumer welfare, and incorporate objectives such as the protection of workers, the promotion of small businesses, and/or the advancement of industrial strategy? Whilst undeniably important, these objectives risk coming into conflict if adopted simultaneously. It is therefore likely right, Mr Coscelli concludes, to continue to be led by one primary objective: consumer welfare.

He advocated that consumer welfare ought to be interpreted broadly. ‘Consumer harm’ should not be calculated by reference only to monetary loss, but include the qualitative effects of anticompetitive conduct, such as loss of innovation, worse products or services, and privacy implications. 

In fact, Mr Coscelli encourages competition regulators to move even closer towards consumers’ needs. Much of the evidence reviewed by regulators in the context of mergers and antitrust cases is produced by the businesses concerned and their advisors – the consumer voice is largely silent. This is especially the case in the context of appeals against regulators’ decisions. 

In this context Mr Coscelli calls for the amplification of the consumer voice. This, he says, would entrench the legitimacy of the competition regime – which purports to represent consumers – and help regulators to improve their analysis.

A call for bolder action in digital markets

A degree of uncertainty is inevitable in the context of competition regulation – but, Mr Coscelli says, it should be minimised where possible and should not preclude action.    

In the context of digital markets, the risk of consumer harm from under-enforcement is high. Digital markets can ‘tip’ towards monopolies very quickly, and subsequent ‘self-correction’ through market forces is unlikely. Antitrust enforcement needs to be quick enough to avoid irreparable harm, but often isn’t.

According to Mr Coscelli, digitalisation has brought major benefits to consumers, including greater choice, but also risks – the competitive process can be harmed if consumers are faced with choices that are too complex, or manipulated into making choices against their interests. Consumers are exposed to drip pricing, scarcity messaging, fake reviews and un-labelled social media endorsements, to mention but a few.

In the wake of this dichotomy, regulators have arguably moved too slowly, and permitted the largest digital platforms to attain unassailable positions of dominance. A new web of impediments to competition has emerged in the context of digital markets, including algorithmic collusion, self-preferencing, and acquisitions of nascent rivals. 

To address this, Mr Coscelli champions change. A new, pro-competitive regime is required to regulate the most powerful players in digital markets. Interventions – such as mandating interoperability between major digital firms – are justified and necessary to avoid consumer harm, he says. In the UK, the Digital Markets Unit is soon to be set up to oversee the new regime. There have also been calls for changes to the merger review process in the context of acquisitions by Big Tech, to allow the CMA to apply a lower standard of proof than it would normally apply before intervening.

The challenges faced in the UK are not unique. Mr Coscelli urges all competition regulators to share information collaboratively and work together to meet their common objectives in the wake of digitalisation, whilst recognising that in some cases there is already a great deal of alignment between regulators. 

Notably, both the CMA and the Australian Competition and Consumer Commission have called for their competition policy toolkits to be revamped in the wake of the digital revolution, favouring a procompetitive approach. Both regulators have also focussed their case work on tackling fake news, misleading online reviews, and the provision of inaccurate information through digital platforms.

Our perspective

Given the concerns which arise in relation to consumer welfare from the exponential growth of the digital economy, and specifically the colossal Big Tech platforms which operate as gatekeepers to these markets, Mr Coscelli’s focus on both an amplified role for the consumer voice in antitrust and merger investigations and bolder action from regulators across the board is to be welcomed. As is usual however, the key will be what happens in practice. Will reforms be such as to truly allow the consumer voice to be taken into account in investigations? Will the Digital Markets Unit have sufficient ballast to drive through change? And, ultimately, will the competition concerns in the digital markets be corrected? Time will tell.  

Other Perspectives