“The digital economy has led to one of the highest levels of monopolization”

“The digital economy has led to one of the highest levels of monopolization”
Photo: https://www.kommersant.ru/doc/4997586?fbclid=IwAR3r6AuHyIdcvOwrLDdvwQfb6dQckcLgyNCNTlMgYyTfpDXLlLMd1sGJPJw 24.09.2021 426

Alexey Ivanov, Director of the BRICS Competition Law an Policy Centre and the HSE Institute for Law and Development, gave an interview to the leading Russian business newspaper – Kommersant – and spoke about digital platforms, the role of Booking.com, and the intricacies of regulation.

Moscow, 24th of September /Kommersant/ 

What positive and negative effects do you see from the work of digital platforms and, in particular, Booking.com?

— Digital platforms have led to a significant increase in the volume of transactions, increased consumer involvement in organizing travel, made the process easier and faster, and helped democratize the market by making the average cost of travel per person more affordable. But the medal also has a flip side.  

Booking.com promoted price parity and it is a classic example of abuse of dominance. It is as if the director of the central market demanded from the sellers who rent shops from him, and outside this market to trade only on his terms. Or Gazprom would prohibit its customers from buying fuel oil from, for example, Rosneft. In this case, the main task is to eliminate the obvious imbalance in the balance of power that has developed at the moment in favor of Booking.com, while maintaining the positive effects of the platform's work. 

What risks may arise in the event that Booking.com's share of the Russian market declines as a result of a dispute?

 Firstly, the ban on price parity in other markets did not lead to a decrease in Booking.com's share. But hotels will get more room for maneuver, more opportunities to offer competitive prices, and better respond to fluctuations in supply and demand. It is not a fact that the ban on price parity on Booking.com will lead to a decrease in the cost of hotel services for consumers, although this is also possible, but part of the intermediary's income will be redistributed in favor of hotels. In addition, competition with other online platforms will drive Booking.com to improve algorithms, hotel and consumer experiences.

Booking.com is not the only digital platform that has already gained significant market share or is striving to do so. In your opinion, is it necessary to proactively impose restrictions on such services?

 Yes, that would be perfect. The problem is that the antitrust authorities are now, in most cases, guided by the methods of regulating the industrial economy for the digital sphere. In the case of Booking.com, it worked because this is a classic example of abuse of dominance, but in other cases - such as balancing ecosystems - these industrial approaches are not very effective. In ecosystems, the dominant position is not always obvious, but there is a fact of control.

It is often important to look beyond a specific antitrust case and look wider. For example, now, after the recent reform of the antitrust law, regulators in the UK are trying to work in the digital sphere - they have received the right to issue orders to remove barriers to the development of competition without initiating cases against specific companies. In order for such mechanisms to work in our country, it will take a restructuring of many aspects in the activities of the FAS and substantially more resources.

 Operators of the online platform market, when it comes to regulating their activities, warn that this threatens to stop the rapid growth of the nascent market. How do you feel about such statements?

— There are different types of regulation. Antitrust deals with abuse, in its original form it is geared towards identifying imbalances in the work of the market system. In this sense, it differs from administrative regulation. Booking.com practices are a pretty classic abuse of power. You need a very good reason to put up with abuse. However, criticism of more active antitrust policy is often driven by a simple desire to generate monopoly revenues. The digital economy has led to one of the highest levels of monopolization and concentration of market power in the history of capitalism. 

Source: Kommersant

digital markets 

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