Value creation and distribution in digital markets is strongly impacted by players who create sophisticated ecosystems offering a constellation of products and services, often spanning multiple markets, connected through synergies and often having harmonised technical standards. Recently a number of antitrust authorities have started to experiment with “ecosystem theories of harm” to capture the importance of the entire ecosystem of pre-existing assets and capabilities for post–merger competition. Experts discussed topical issues of digital markets at the 3rd BRICS+ Digital Competition Forum, which took place on November 22 in Rio de Janeiro. The event was organized by the International BRICS Competition Law and Policy Centre in cooperation with the FGV University School of Law and the Administrative Council for Economic Defense of Brazil (CADE).
The forum included four sessions on the regulation of digital ecosystems, the digitalization of the global food chain, concentration in the artificial intelligence (AI) sector, and AI regulatory issues. In his welcome speech, Nicolo Zingales, Professor, FGV/RJ, noted that the idea behind the conference, held for the first time in 2022, was to bring together competition officials, academics and civil society representatives in the BRICS + format, with the participation of countries that are interested in BRICS or have already expressed a desire to join the organization. This year's conference brought together 56 participants.
Digitalization of food chains: a boon or a threat?
Two topics are of particular importance for Brazil: the impact of digitalization on competition in the food sector and the regulation and responsible use of artificial intelligence, said Alexandre Barreto, General Superintendent, CADE. Digitalization can enhance transparency and empower small producers by connecting them directly with buyers. But it also increases market concentration as large players use data and technology to bypass competitorsю These shifts can impact pricing power, access to markets, and the overall balance within value chains, Mr. Barreto stressed.
Alexey Ivanov, Director of the BRICS Competition Law and Policy Centre, agreed that digitalization strengthens the global power of large corporations, which, as a result, poses a threat of market monopolization. He urged BRICS antitrust regulators to pay close attention to a similar example of increasing market power through digitalization — the blockchain platform Covantis. The platform aims to digitize the entire agribusiness trade process, from contract management to final shipping. Founded by the largest agro-traders of the ABCD group (ADM, Bunge, Cargill and Louis Dreyfus), Covantis avoids antitrust scrutiny due to its structure. At the same time, the platform collects valuable commercial information about production from farmers and agricultural traders.
“Data plays a key role in the food market. When digital technology is used to concentrate access to this data and it is shared with large players who dominate the provision of inputs, concentration within the global value chain increases, leading to imbalances in the market,”
Ivanov said.
It is necessary to demand more transparency from global grain traders and other organizers of digital platforms, the BRICS Center director is convinced.
“If we create an appropriate BRICS structure to analyze this kind of phenomena, it will be a great achievement. I think that UNCTAD can support such an initiative. Together we can try to introduce a data disclosure requirement for such platforms,”
Alexey believes.
Corporate sovereignty over food systems, especially when combined with the financialization and digitalization of food trading, has a direct impact on food security and economic stability in developing countries, said Anastasia Nesvatailova, Director, Macroeconomic and Development Policies Branch, GDS,UNCTAD. She called for more proactive regulation of food markets and financially active food traders.
“Global food demand is projected to increase by more than 50 percent by 2050, with climate change and other risks leading to more price spikes, profiteering, and food insecurity, which could become significant political concerns,”
Ms. Nesvatailova cautioned.
Concentration in different parts of the global food chain often occurs under the pretext of increasing farmer participation in trade and addressing sustainability issues. This is the case with the aforementioned Covantis platform, said Simon Roberts, Professor, Centre for Competition, Regulation and Economic Development, University of Johannesburg. He agreed with Alexey Ivanov's arguments in favor of investigating Covantis, noting that the companies that created it are copying the tactics of digital platforms that also operate at different levels of their value chain.
Citing the experience of the South African cement cartel case, Hariprasad Govinda, Chief Economist at the South African Competition Commission's Bureau of Economic Research at the Competition Commission of South Africa (CCSA), said one of the key recommendations for companies was to stop collecting and disseminating disaggregated data. The Covantis platform operates on the same principle, but competition authorities are doing nothing, he pointed out, calling for immediate regulatory intervention.
Between 2013 and 2023, about 8% of all mergers notified to Brazil's antitrust authority CADE were related to the agricultural sector, with half of them involving food. For the retail sector, including supermarkets, the figure was 10%. This suggests that the agricultural and food sectors are increasingly seen as consolidated. This trend is likely to intensify as digitalization reshapes the industry, said Lilian Marques, Chief Economist, СADE.
Digital ecosystems — a challenge for antitrust efforts
During the forum, participants also discussed new theories of harm and different enforcement approaches to address the dominance of digital ecosystems. Alexandre Ferreira, Director, Program of the Secretary on Economic Reforms, Ministry of Finance, delivered a report on Brazil's digital ecosystems. The report examined the design of ecosystems, the level of interconnection of their services, and their governance models, focusing on ecosystems monetized through digital advertising. It also analyzed 20 key digital services in Brazil and highlighted systemically important digital platforms.
Difficulties in antitrust regulation of digital ecosystems stem from the lack of effective tools for applying new theories of ecosystem related harm, said Bruno Carballa Smichowski, Research Officer, Joint Research Centre. "The term 'ecosystem' is mentioned, but in the economic analysis supporting the [regulator's] decision, you will only see a description of anticompetitive practices that we have known for a long time,” he said, calling for a shift to practical application of new ecosystem theories of harm in real competition policy.
The discussion was exacerbated by Cristina Caffarra, Honorary Professor, University College of London, who accused the antitrust community of indecision.
“Antitrust is about posture. The law is there. The issue is what do competition agencies do with it? How do they fill it with content? So how could we wait 10 years to develop some academic fantasy about what ecosystems actually are and how we measure them? I would say we need to act right now. We are a decade too late to get serious about this issue.”
Competitive agencies are not sitting idly by and are already using new tools to regulate digital markets, said Anastasia Dokukina, Head of the Division of the Department for International Economic Cooperation of the FAS Russia. Last year, Russia adopted the Fifth Antimonopoly Package, designed to adapt legislation to the conditions of the digital economy. Work is underway on the Sixth Antimonopoly Package, which will include antimonopoly regulation measures for non-transactional platforms (social networks, search services, video hosting). FAS of Russia is actively applying soft law tools in digital markets: it issues clarifications and guidelines, conducts market studies, and has developed the Principles of Fair Behavior in Digital Markets, which have been signed by Russia's largest IT companies.
Seyed Nourani, Chairman of the National Competition Council of the Islamic Republic of Iran, highlighted the challenges of the digital economy in Iran under sanctions. Among them are digital piracy, the opacity of algorithms of the online ride-hailing service Uber and the lack of legal representation of companies such as Apple, which leads to a lack of guarantees and after-sales service for Iranian customers.
In today's environment, the market power of companies is increasingly determined by the amount of data they possess. Leading Fortune companies differ only in the way they process data: some process data for business, while for others, data processing is their core business, pointed out André Vellozo, CEO, DrumWave.
“What we're seeing now is Big Government, Big Tech and Big Finance competing for 100% of your data,”
he summarized.
Is the future under control? Challenges and prospects for AI regulation
The implications of AI partnerships and commercial agreements, as well as ensuring fair competition in the development and use of AI technologies, were the focus of the last two sessions of the Forum.
The number of merger-like partnerships and investment agreements is growing in the AI sector and related areas, while companies often avoid the attention of antitrust authorities by circumventing formal criteria for reviewing transactions. As Elena Rovenskaya, Program Director of International Institute for Applied System Analysis (IIASA), noted, an additional challenge is that each case is unique and companies find different ways to evade scrutiny, making any new antitrust scrutiny criteria ineffective.
The answer to this may be the application of system analysis and system dynamics modeling (or system mapping), which IIASA is developing together with the BRICS Competition Law and Policy Centre. This method allows a complex system or phenomenon to be represented in a so-called system model with all cause-and-effect relationships between its fragments identified. Elena demonstrated how the system mapping method works as applied to the Microsoft - Open AI partnership.
“This kind of decomposition of a very complex problem into specific processes and causal relationships can also be useful in the competition analysis, as it has proven to be useful in other fields,”
Elena said.
Partnerships of GAMMAN group of companies (Google, Amazon, Microsoft, Meta, Apple, NVIDIA) attract special attention. Experts warn of the risk of monopolization of key resources in the AI ecosystem by these large players who control data, language models, cloud infrastructure and computing power.
Payal Malik, Visiting Professor, ICRIER Prosus Centre for Internet and the Digital Economy, former Advisor and Head of Economic Division, Competition Commission of India, spoke about the cooperation of Indian startups with large companies that provide them with resources.
“The main debate is whether an ecosystem where AI startups thrive through partnerships with large companies is better than one where startups suffer from a lack of resources. The startups we interviewed argue that they don't lose agency in partnerships.”
Enforcers may eventually come around to the idea of strictly regulating such partnerships and agreements because it is simpler and does not require market definition, said John Newman, Professor, University of Miami Law School.
“I would just urge a word of caution about that. I think the eyes of the world are going to be on the first regulator who takes action in this space. And if the first action is some technical, hard to understand, I think that risks losing some legitimacy,”
he said.
Luca Belli, Professor, FGV Law School in Rio de Janeiro, linked the topic of AI regulation to the issue of developing countries' AI sovereignty. He urged BRICS countries to develop their own AI models.
“When we talk about AI sovereignty, we mean the ability to understand, develop and effectively regulate digital technologies or AI systems. If you don't understand the technology, it is not transparent, and if it is not transparent, it cannot be accountable, period.”
The professor cited Brazil's PIX payment system and India's UPI, which undermined the VISA and Mastercard duopoly in those countries, as successful examples of national digital solutions.
UPI is an example of a successful solution to combat the dominance of big players in the payments industry. However, each sector is unique and in other areas, such as e-commerce, it is more difficult to achieve similar results, emphasized Vikas Kathuria, Professor, BML Munjal School of Law. India's Open Network for Digital Commerce (ONDC) was supposed to challenge the duopoly of Amazon and Flipkart, but this market works differently. While there has been some progress, replicating UPI's success will not be easy.
“Should we be dependent on generative AI solutions provided by Big Tech? The answer is no. India is a very diverse country and cannot afford bias or discrimination when implementing generative AI in various solutions. We need to develop our own models, trained on local vernacular data, to deliver meaningful results,”
Mr. Kathuria is convinced.
Irina Filatova, a member of the Russian State Duma's Committee on Competition Protection, highlighted the threat posed by deepfakes, which allow fraudsters to steal personal data and gain access to sensitive information. She called for the development of joint regulations to address these practices.
Data collection through AI can lead to the creation of dark patterns — the manipulation of consumer choices through the design of platforms. From a competitive perspective, this can be seen as exploitation of consumers to gain competitive advantage, said Marcela Mattiuzzo, Professor, INSPER Law school.
“FTC in the U.S. is trying to implement solutions that, in my opinion, are a mixture of antitrust and consumer law. For example, if a platform offers one-click subscription, there should also be a one-click unsubscribe option. AI-related issues bring together several areas of law that are usually dealt with separately.”
The issue of ethical aspects of AI use was raised by Alexey Ivanov.
“Ethical principles will not work if the industry develops only in one direction. Therefore, it is important for antitrust authorities to create conditions for the emergence of startups and products in the field of AI. If BRICS sets new standards and raises the bar, it will be a good example for antitrust authorities around the world,”
he said.
Concluding the session, CADE Commissioner Gustavo Augusto Freitas de Lima said there is a need for AI legislation that is more transparent, flexible and easy to implement.
“AI is the present, not the future. We should not see it as a tool only for Big Tech companies. AI will be used by all of society. It's too late to see ChatGPT as one product — it's hundreds and thousands of different applications over which no one will have centralized control.”
The BRICS+ Digital Competition Forum aims to address challenges, share insights and promote cooperation between BRICS jurisdictions. The opportunity provides a platform for competition authorities, academics and civil society to exchange ideas and explore harmonized approaches to navigating the complexities of the modern digital economy.
