In the third episode of our podcast series Competition Law in Digital Markets in Latin America “Competition and Innovation Policy I”, our guest, Geoffrey A. Manne discusses the role of public policies in competition and innovation of Digital Markets.
Moving on, we examine concepts such as ‘business model innovation’ or ´process innovation´ to study the way companies are doing business, how they are structured and most importantly how these can improve everyone´s welfare.
Dr. Manne explains how competition is being addressed in legal systems and how it is compared between developed and developing countries and the risks of adopting laws such as EU´s Digital Markets Act (DMA) in Latin American economies.
At the end of this episode, he makes some final remarks on the trade-off between ex-ante regulation and ex-post enforcement to consider the future challenges for competition authorities, as the key aspects that policymakers, regulators, and competition agencies in Latin America must think about to follow its own path regarding competition in Digital Markets.
“What´s different with competition per se is that innovation is the process by which new ideas emerge to improve things rather than simply revealing want people want and how much their willing to pay.”
“Innovation is about finding products, new ways of doing business, new things that don’t currently exist in the market and thereby improving everyone’s welfare overall and productivity is a really important part of that.”
“Business model innovation or process innovation are innovations in the way we do business, companies are structured, products are offered and most importantly in the way a company itself obtains new information, processes that information, and turns it into technological or other source of advances.”
“Innovation is really important in Digital Markets and is both technological and business model innovation.”
“A lot of the enforcement actions we´ve seen in these Digital Markets have run on the wrong side and certainly haven´t done a really good job ensuring that there is a real competition problem and that addressing it if there is one isn’t causing more harm on the innovation side effects.”
“Imagine how big the risk is when you’re dealing with ex-ante regulations which sweep very different kinds of companies into their orbit and force them all into a single pre-conceived idea of how they should behave.”
“In Latin American countries, there´s very low evidence that these platforms that are the subject of these ex-ante regulations are actually causing competitive harm.”
“In a lot of cases you find these companies injecting lots of money into the start-up environment and have an interest in local developers that develop products that work with their platform.”
“These platforms are not really threatened by most of the companies that are coming up around their ecosystems (…) it´s in their interest to bring them in this broader ecosystem, connecting them more with other parts of the world and with their own potential customers and providers.”
“These regulations (DMA) are at least delaying the technological advance in places where they are adopted. We don’t know that they are actually improving competitive conditions.”
“If you think that you want one of these ex-ante regulations really ask yourself: What you expect to achieve from it?”
What is competition? What is innovation? We usually talk about laws which propose to promote and foster both. Industrial policies regarding these concepts require consensus on these concepts.
Joan Robinson was one of the first economist which made us reflect if the models are applicable to reality. The model of perfect competition does not exist, and the dynamics usually refer to different market structures depending on the nature of the market or the products offered. Also, timing need to be considered if markets are growing or shrinking, is there innovation in the markets, are players being entrenched or new players are coming into play. Necessarily a plurality of market agents does not mean that innovation and consumer welfare is not being materialized. Are digital markets facing issues which require government intervention, or does State need to work on legal and policy frameworks to promote business coming into play so consumers benefit of innovation.
Innovation means new ways of doing business. Productivity of the economy comes into play, as there are product innovations and process innovations. Product innovations regards the final outcome of how the need is addressed. Process innovations regard how we make the product come into existence. Many of the impacts of digital economy are reaching different process innovations in many markets and business using tools by companies serving from digital markets.
The distributed added value in these markets is yet to be assessed and a consideration that should be addressed before questioning exiting market structure in digital markets.
President and Founder of the International Center for Law and Economics ICLE
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