Designing Remedies for Digital Markets: The Interplay Between Antitrust and Regulation

Abstract

Over the past decade, societies significantly improved their understanding of the competitive dynamics at play in digital markets. However, a challenge remains in designing remedies that actually improve overall welfare. This paper first maps out the frontier of remedy design in the digital world. Section I summarizes antitrust remedies imposed on digital companies to both group cases according to the different underlying concerns they tackle and to identify potential interplays with regulatory interventions that share the same rationale. Section II complements this analysis by reviewing eighteen key independent reports on competition in digital markets to identify proposals to advance antitrust or regulatory interventions. The overall conclusion is that while the interplay between antitrust and regulation is bound to grow, authorities lack a coherent framework that would allow them coherently and rationally apply these policies in practice. Section III, the core of the paper, fills this gap by introducing a new framework to integrate antitrust and regulatory interventions in the digital world—one that is focused on two different levels of remedy design. First, it develops a compounded error-cost framework authorities can apply when choosing between remedies for a given conduct: when authorities accept higher risks of over-enforcement in deciding to intervene they should compensate by taking lower risks of over-enforcement in remedy design, and vice-versa. Second, it proposes four criteria authorities can rely on to allocate between different regulators three connected but different key activities in remedy design: (i) the identification of harmful behavior; (ii) the design of the intervention; and (iii) monitoring and adaptation of the remedy. Section IV concludes by applying this framework to seven types of conduct that Sections I and II identified as potentially problematic: (i) discrimination, unfair treatment and self-preferencing; (ii) exclusivity relations with suppliers, distributors or clients; (iii) tying or bundling through contractual agreements; (iv) MFNs and other price parity clauses; (v) refusals to deal, limited interoperability and lack of data portability; (vi) rules and terms of service imposed by digital platforms; and (vii) nudges, sludges and other concerns in user interfaces.