In Search of a Competition Policy for the Digital Sector

By: Diana L. Moss (Progressive Policy Institute)

Competition policymakers face significant challenges in regulating the digital sector, especially when it comes to large digital ecosystems. These ecosystems present a unique set of issues due to economic characteristics that encourage high market concentration, rapid growth through mergers and acquisitions (M&A), and high levels of innovation. These factors explain much of the difficulty competition policy has historically encountered within the digital space.

For years, competition policy has largely avoided challenging digital mergers, despite two major waves of M&A activity that began in the mid-1990s. These waves encompassed the expansion of first-generation digital ecosystems, now well-established, as well as the ongoing development of cloud technologies and artificial intelligence—both of which continue to drive digital transformation, innovation, and economic growth.

Antitrust enforcement, which aims to foster innovation by promoting competition, has struggled to address market power in the fast-evolving digital sector. Though there has been some renewed engagement with digital ecosystems, recent U.S. efforts to challenge mergers have been largely unsuccessful. Additionally, current monopolization cases against major players will take years to resolve, and the potential remedies remain uncertain.

This reactive approach to U.S. antitrust enforcement may prove ineffective in an industry that evolves at breakneck speed. Similarly, the preemptive, compliance-driven regulation of digital platforms in Europe offers no perfect solution. Surprisingly, few competition policy experts have questioned whether a more cohesive strategy for promoting competition in the digital sector is both feasible and necessary. The PPI report, In Search of a Competition Policy for the Digital Sector, concludes that it is.

PPI’s analysis explores the critical factors that underscore the need for a clearer digital competition policy. These include the distinct economics and business models of the digital sector, rapid expansion through acquisitions, and the sector’s high levels of innovation and dynamism. The report assesses the policy implications of antitrust’s delayed intervention in this space and proposes three key initiatives aimed at shaping a more coherent approach to digital competition policy…

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