Introduction
1. It was just a few years ago—I date it from 2017—that concern for the power of the “big tech” platforms moved from the pages of the law reviews to the pages of major U.S. newspapers. “We are, all of us, in inescapable thrall to one of the handful of American technology companies that now dominate much of the global economy,” wrote New York Times’s technology columnist Farhad Manjoo. [1] In that same year, after Amazon acquired U.S. food retailer Whole Foods, the Wall Street Journal’s technology columnist, Christopher Mims, wrote that “America’s biggest tech companies are spreading their tentacles (. . .) [P]ower and wealth will be concentrated in the hands of a few companies in a way not seen since the Gilded Age.” [2]
2. Manjoo dubbed these tech companies “the Frightful Five”: Amazon, Apple, Facebook, Microsoft, and Alphabet. Sometimes these companies are listed in size order (by market capitalization in the United States): Apple, Microsoft, Alphabet, Amazon, and Facebook. [3] Sometimes by convenient mnemonic: “GAFAM” (Google instead of its parent, Alphabet), or “GAFA” (minus Microsoft, which often seems to be overlooked in the public debate, despite its continued dominance on desktop computers around the world [4]), or, even more descriptive, “FANGs” (Facebook, Amazon, Netscape, and Google [5]).
3. U.S. antitrust enforcement agencies and Congress have responded to this public concern. In 2019 the U.S. Department of Justice and the Federal Trade Commission announced investigations into GAFA; state antitrust enforcers put together multi-state teams to investigate whether to bring antitrust suits against Facebook and/or Google. [6] On July 29, 2020, the Antitrust Subcommittee of the U.S. House Judiciary Committee called the CEOs of Google, Apple, Facebook, and Amazon to testify for more than five hours. Throughout this hearing, the four companies were broadly criticized by both Democrats and Republicans, although the Congress members’ concerns were varied and sometimes reflected their different political perspectives. [7] The Committee’s Majority Staff subsequently issued a report, taking nearly 350 pages to describe the GAFA’s anticompetitive conduct and devoting nearly thirty pages to possible legislative remedies. [8] On October 20, 2020, the U.S. Department of Justice and eleven state attorneys general filed a monopolization suit against Google, the first such suit since the monopolization case against Microsoft more than two decades before. [9] The U.S. suit against Google was then followed by two more suits against Google filed by two different groups of states. [10] Facebook was then sued by the FTC and by another large group of states. [11] The Wall Street Journal’s Christopher Mims reported, “Tech’s Antitrust Reckoning is Near.” [12]
4. Concern for the power of big tech platforms has not been limited to the United States, of course. If anything, the United States has been a lagging jurisdiction. The European Union, along with Germany and the United Kingdom, have been pressing ahead with enforcement actions and proposals for imposing significant restrictions on the competitive behavior of the GAFA. The European Commission has brought three separate cases against Google for abuse of dominance, imposing fines of more than $5 billion; [13] Germany has sued Facebook, linking competition law with privacy protections; [14] the UK’s Competition and Markets Authority has published a final report of its market study on online platforms and digital advertising. [15]
5. This debate over high-tech platforms has taken place with a decidedly first world perspective. In the United States and in the EU the focus never seems to move beyond GAFA’s impact on the citizens, consumers, and economies of the United States and Europe. Particularly in the United States, mention is almost never made of platforms elsewhere (except when they pose a perceived national security threat to the United States [16]).
6. The question that this article addresses is whether antitrust’s focus on big tech platforms is appropriately centered in the developed world. Does the concern for the competitive effects of tech platforms have any relevance to competition law enforcement in the developing world?
7. The thesis of this article is that the power of platforms is not just a first world problem, but is also an issue of importance in developing countries. Even so, these platforms present different costs and benefits for developing countries than for developed countries. For developing countries, the U.S. big tech platforms have become basic tools for digital platform commerce and development. They open the possibility of providing a market presence and access for small and medium businesses that might otherwise find it difficult to reach consumers in domestic and international markets. This is an important enough phenomenon that competition policy in developing countries should be particularly attuned to problems of platform access and fair competitive practices, without regard to whether antitrust in developed countries ends up reflecting these goals.
8. To develop the thesis that digital platform competition matters in developing countries this article examines two broad areas. First, the article places the development and use of digital platforms in the context of competition policy and innovation generally. Can competition policy in developing countries help drive innovation in those countries, specifically, innovations involving the use of platform technology? Second, the article describes some of the ways that digital platforms are now being used in developing countries and how that use may affect development. The article’s focus will mainly be on Africa, but Africa provides sufficient heterogeneity that it can show why competition law is important for the growth of platforms in developing countries more generally. [17]
9. The article begins with a discussion of the connection between competition law, innovation, and development. The next part of the article discusses how digital platform technologies are employed in Africa in four areas—online retail sales, value chains, financial technology products (fintech), and sharing platforms. The article concludes with a discussion of the lessons these developments have for competition policy in developing countries.
I. Competition law, innovation, and development
1. What counts as innovation?
10. When trying to assess the connection between innovation and competition law, commentators often have a particular idea of what counts as innovation. Innovation is often thought of as a technological advance. As a former head of the U.S. Department of Justice Antitrust Division put it, “let’s not forget what drives the hopes and dreams of so many innovators: the hope of making a technology that will improve the way people live.” [18] This technology-centric view of innovation is further skewed by distinctions between different kinds of innovations. Thus, economists often distinguish between fundamental innovations and process innovations (or disruptive innovations and incremental innovations), assessing how incentives may vary depending on which type of innovation is involved. [19]
11. These prior assumptions about what counts as innovation tend to affect economic studies and theories about innovation, as well as competition law enforcement dealing with innovation. Empirical studies often focus on R&D expenditures or rates of patenting; [20] theoretical discussions model the incentives for and efficiencies from new product introductions. [21] Competition law enforcers focus on licensing of intellectual property rights or on the potential suppression of disruptive technologies through exclusionary practices or “killer” acquisitions. [22]
12. In looking at innovation from the viewpoint of competition policy in developing economies, however, it is helpful to have a broader view of innovation. Christensen, Ojomo, Gay, and Auerswald (“COGA,” for ease of exposition), drawing on the work of Joseph Schumpeter, define innovation as “a change in the process by which an organization transforms labor, capital, materials, or information into products and services of greater value.” [23] This broader approach moves beyond the idea/invention focus to take more of an innovation process approach. “Innovation,” they write, “is not necessarily high tech, overly advanced, or even entirely new.” Innovation, they conclude, “is different from invention.”
13. COGA’s non-high-tech approach leads to a somewhat different categorization of innovations than an exclusive tech-centric approach provides. They posit three types of innovations: market creating, market sustaining, and efficiency producing. [24] Market-creating innovations create new markets that serve people for whom there either were no products or for whom existing products were “not accessible” because of cost or “a lack of the expertise required to use them.” Market-sustaining innovations improve solutions already on the market. Their economic impact on jobs, profits, or economic climate is less than market-creating innovations because they generally use “established channels to sell to an existing customer base.” Efficiency innovations are generally process innovations that allow firms to be more productively efficient. COGA views these innovations as more likely to be the result of competitive pressures on firms that are trying to stay viable.
14. COGA’s definition of innovation, and their three-part categorization, allows us to see innovation in a way that is more useful for competition policy and enforcement in developing countries. Their examples illustrate the point. For market-creating innovation, they cite Sudanese entrepreneur Mo Ibrahim’s creation of a market for mobile phones in Africa in the late 1990s and the growth of “Nollywood,” Nigeria’s motion picture industry. Ibrahim’s company, within six years of its founding, covered 13 African countries and gained 5.2 million customers. This growth led to the spread of mobile phone networks more generally, now covering more than 950 million subscriptions and providing a platform for payments transfers and loans in many African countries. [25] Nollywood produces 1,500 movies annually, second only to India’s Bollywood, with revenues that exceed $1 billion annually and employment of more than one million people. [26] Ibrahim did not invent cellphones; Nollywood did not invent motion pictures. What both did was to recognize local needs and create markets for bringing these products to local users in ways that they found useful (mobile phones) or attractive (movies that reflected the lives of average Africans).
15. COGA contrast their argument for markets with what they say are the two dominant theories for what drives development—ideas and institutions. COGA’s argument is that ideas, in themselves, still need to be accepted and diffused; markets do this. Institutions—financial, legal, political—are needed if ideas are to be protected from appropriation but these institutions grow up in response to the markets they protect and advance.
16. Whether markets drive innovation and development more so than ideas or institutions is a debate that does not have to be resolved here. The critical point is to see the connection between market-advancing innovation and development, without regard to other factors that may also affect development. This puts competition law front and center for insuring innovation. If there is anything that competition law should be able to achieve it is making markets work.
2. Competition and innovation
17. If markets are necessary for producing innovation (whether broadly or narrowly defined), what is the optimal market structure that will achieve that result? Is monopoly best? Or is the “constant stress” of rivalry in competitive markets the way to insure “industrial progress,” as Judge Hand wrote in Alcoa? [27]
18. Whether monopoly is necessary for innovation is a long-running debate in industrial organization economics and in antitrust. The debate is often cast as a debate between two schools, those who follow Joseph Schumpeter and those who follow Kenneth Arrow. Put simply, the Schumpeter school focuses on the “size of the prize.” As Schumpeter wrote, high profits are “the baits that lure capital on to untried trails.” [28] The Arrow school takes a contrary view. Monopolists will not be good innovators because if they bring out a new product, it will only take sales away from the old. This cannibalization of sales (the “replacement effect”) will act as a disincentive to innovate. [29] Small firms (upstarts) will be better innovators because they have little to lose and much to gain.
19. Economists have continued to debate and refine Schumpeter’s and Arrow’s ideas. Although each approach has a plausible core, neither approach sets out a complete picture of the incentives for innovation or the optimal market conditions to produce innovation. [30] More recent economic writing thus offers a blend of the two approaches that accounts for the two cross-cutting incentives: competitive rivalry and monopoly profits. [31]
20. These newer approaches suggest three principles that can help developing countries to assess the relationship between the conduct subject to competition law and the desire for innovation: contestability, appropriability, and synergies.
21. Contestability focuses (Arrow-like) on “the extent to which a firm can gain profitable sales from its rivals by offering greater value to customers.” [32] This factor puts more stress on rivalry among firms than on market concentration per se, that is, on factors (including efficiencies) that lead to a robust competitive process for winning the patronage of customers. [33]
22. The second principle is appropriability, which focuses (Schumpeter-like) on the ability of the firm to benefit from the social value of its innovation. [34] Appropriability can be enhanced by collaborative conduct (or mergers) that enable innovators to capture spillover effects or by conduct that increases scale and allows the benefits of process innovations to be spread over more output. [35] Appropriability benefits, though, need careful assessment. In particular, the need for appropriability does not necessarily justify anticompetitive tactics that exclude rivals and increase the innovator’s profits. Such tactics might add little to appropriability where appropriability is already high (say for a dominant firm), but stopping exclusionary conduct might enhance the innovation incentives of smaller rivals and force the dominant firm to substitute more costly (but more socially valuable) innovation for cheaper exclusion (which might only slightly increase the gains to the monopolist from its past innovations). [36]
23. The third principle is synergies, that is, combining complementary assets to enhance innovation capabilities. Synergies focus on the ability to innovate, in contrast to contestability and appropriability, which focus on the incentives to innovate. [37] That said, as with appropriability, care must be used in assessing whether synergies could be achieved in a way that is less restrictive to contestability, thus achieving gains from innovation at a lower cost. [38]
3. Does competition law matter for innovation in developing countries?
24. There are many factors that might lead one to be skeptical about whether competition law provides much value added when it comes to increasing innovation in developing countries. Infrastructure support for innovation generally, and for digital products and services specifically, may be more of a hurdle for innovation than weak competition law enforcement. Competition law enforcement agencies have had difficulty incorporating innovation into antitrust policy even in major developed economies; how much more so for resource-starved agencies in developing countries? Perhaps it would be better to let the major enforcement agencies take the lead, particularly when the major digital platforms are involved, on the assumption that changes in structure or business practices will likely spill over to developing countries in any event.
25. Despite these caveats, it would be unwise for agencies in developing countries to ignore innovation issues in competition law enforcement. Developing countries have particular policy concerns that may seem less important to developed countries. One major concern, of course, is economic development, for which innovation may be a critical driver, particularly if we view innovation in a less technology-centric way. Another major concern is inclusive economic growth, making certain that the gains from markets are distributed more widely rather than less, particularly when it comes to groups that have faced discrimination or have not adequately participated in the economy. A third concern is sovereignty, to make sure that a developing economy is not dominated by outside economic interests. Competition enforcement that increases innovation, particularly through an emphasis on competitive rivalry in dynamic markets, offers the possibility of advancing all three goals.
II. Digital platform use in developing countries
1. An overview
26. Digital platforms are in widespread use in developing countries. The major U.S. digital platforms tend to be ubiquitous—in South Africa, for example, nearly half of all Internet users use Facebook, YouTube, and WhatsApp [39]—but there are also more local platforms in developing countries that are of significant size. [40]
27. Digital platforms can be categorized in different ways. Most common is to categorize them by the type of service they offer; the proposed EU Digital Markets Act, for example, has eight categories of “core platform service,” such as search engines, social networks, and operating systems. [41] This type of categorization is similar to product markets as analyzed under competition law. A more functional approach divides digital platforms into transaction platforms and innovation platforms. [42] Transaction platforms are generally multi-sided and “support exchanges between a number of different parties,” Amazon and Uber being good examples. Innovation platforms (sometimes called technology or engineering platforms) provide components that firms in a sector can use in common for their interactions. Computer operating systems and technology standards are good examples of these platforms. [43]
28. Entrepreneurs in developing countries have generally not created innovation platforms. [44] Rather, they have used platform technologies created elsewhere to offer products that are distributed digitally, mostly on a relatively localized basis, that is, within the home country of the entrepreneur. Platform technologies are thus tools for these enterprises, allowing them to create new products and distribute them more efficiently. Even if entrepreneurs in developing countries do not create the tools, however, their use of platform technologies can still be market-creating or sustaining and thereby qualify as innovation that can drive economic growth.
29. As the following examples will show, whether platforms are successful depends on many factors beyond competition law enforcement. Indeed, at the moment, competition law violations may not as yet have emerged. The question, though, is whether competition policy can play a role in keeping digital platform tools accessible and digital product markets competitive.
2. Mapping platform use in Africa: Four areas
2.1 Online retail sales
30. Online retail sale of physical products and services is developing in Africa, but slowly. In South Africa, for example, e-commerce is estimated to have only approximately 1–2% of total retail sales, in comparison to 18% in the UK, with customers generally being higher income earners mostly concentrated in metropolitan areas. [45] Nevertheless, throughout Africa a wide range of products are sold through online retail platforms, including food, consumer electronics, fashion, and apparel. [46]
31. Retailers use platforms in three ways. First, traditional brick-and-mortar stores use Internet sales as a complement to their sales in physical stores; this has given major retailers a strong presence in online retail selling. [47] Second, some sellers have an online presence only, selling their products at retail on various digital platforms. The “most ubiquitous” digital enterprises in Africa are e-commerce sites that present their products on Facebook. [48] Third, Africa-based platforms offer marketplace services for other retailers. Takealot in South Africa, for example, has become the largest online retail marketplace in South Africa, with more traffic than international competitors such as Amazon or eBay. [49] It has also begun integrating into offering its own exclusive brands in competition with other retailers on the platform, raising potential concerns for self-preferencing. [50]
32. Online retail sellers in Africa, particularly small and medium business enterprises, face a set of challenges that make it difficult to compete successfully. Online advertising is critical for these enterprises, but the two main advertising channels are Facebook and Google, and their use is expensive and complex for smaller businesses. [51] Most e-commerce payment transactions are made by credit card, but fees can be high, payments can be slow, and concern for fraud has been high. [52] Delivery may require investments in expensive assets (trucks, motorcycles, warehouses), particularly where the postal service is unreliable. [53] On the other hand, the expense of drop-shipping international packages, the unreliability of the postal service, the relatively small size and geographical isolation of many African countries can make it difficult for international platforms like Amazon to compete successfully with local e-commerce sites. [54]
2.2 Value chains
33. Companies in Africa use digital platforms to participate in “value chains,” that is, as intermediate transactors in the production and sale of goods and services. The ultimate consumer in the chain may be located outside the country or inside. For many African countries, participation in global value chains has been seen as an important way to stimulate economic growth, particularly if small and medium-size businesses are the beneficiaries of such participation. [55]
34. The extent to which digital platforms have increased such participation by African firms is unclear. A study of value chains in Kenya and Rwanda examined how tourism firms integrated with international tourism sites to provide booking availability and service information but found that their participation was often limited by a lack of technical skills and by the platforms’ managerial requirements. [56] A study of small-scale fresh fruit and vegetable farmers in Tanzania and Kenya focused on the use of certain basic platform technologies (mobile phones, Internet, and Facebook) to access payment systems, get pricing and production information, and reach export markets. Such usage was actually rather small (only 11% of farmers surveyed). Although the use of cellphones was helpful to small farmers in many local markets, reaching export markets required the use of the Internet more than the use of basic cellphones, a step that excluded farmers who lacked sophistication (technical and linguistic). [57]
35. The difficulties of establishing digital value chains is not just limited by access to technology. Existing market structures and entrenched competitors may stand in the way as well.
36. A good example is the effort to create an online tea auction market in Mombasa, Kenya. The Mombasa Tea Auction provides the link between East African tea processors and international buyers. [58] Kenya is the world’s leading exporter of tea, and tea is Kenya’s number one foreign exchange earner. [59] Tea is transported from highland areas in Africa to storage warehouses in Mombasa, where it is subsequently auctioned. Two groups have been the main intermediaries between growers and buyers in this process—tea brokers and storage warehouses—and only tea brokers could negotiate with buyers in the auction. Sellers made payments to the auction and then collected the tea from the warehouses for export. About 95% of tea exported from Kenya was sold through the Mombasa Tea Auction.
37. Asian competitors had been using online auctions, but the Mombasa Tea Auction was done in person. Recognizing the auction’s inefficiencies, in 2012 an effort was made by the East African Tea Trade Association (EATTA) to introduce an online auction system. EATTA has 200 members from 10 African countries (mostly in East Africa) and includes all groups in the industry (producers, buyers, brokers, warehouses, and packers). Intermediaries were most opposed to an online auction, particularly the brokers who were believed to have controlled the in-person auction and feared disintermediation. [60] Interestingly, the brokers also feared that buyers would find it easier to collude when they did not have to place bids in an open auction, perhaps a not misplaced worry given a later antitrust suit against EATTA for fixing brokers’ and warehouse owners’ fees in the tea auction. [61]
38. After a trial run of an online auction, the EATTA members voted against its continuation. Apparently the brokers were able to convince smaller producers, whose only link to these markets was through the brokers, that an online auction would harm the brokers and thereby harm them. [62] It was not until 2019 that an online tea auction became operational. [63]
2.3 Fintech
39. Financial technology products (“fintech”) operate as multisided platforms connecting buyers and sellers of financial services using the Internet, mobile devices, software technology, and/or cloud services. [64] Fintech products can cover aspects of banking, digital currencies, insurance, lending, money transfers, and payments. Fintech products can be deeply disruptive of existing banking and financial services but they can also offer platform infrastructure for many businesses. As such, fintech products are widely used throughout Africa.
40. Probably the most widely lauded fintech product in Africa is M-Pesa, the payments service that runs on mobile phones. [65] M-Pesa was launched in 2007 by Vodafone, the U.K.-based telecom company, in partnership with two African mobile phone system operators, Safaricom in Kenya and Vodacom in Tanzania. [66] M-Pesa “allows users to deposit money into an account stored on their cell phones, to send balances using SMS technology to other users (including sellers of goods and services), and to redeem deposits for regular money.” [67] There is no charge for depositing the cash with the mobile phone company; charges are deducted when “e-float” or “e-money” is sent to recipients or when cash is withdrawn. [68]
41. M-Pesa spread quickly following its introduction, with 10,000 new registrations by the end of its first year; two years later there were 7.7 million M-Pesa registered accounts. [69] In its first ten years, the service expanded to ten countries, including one in Eastern Europe. By that time 21% of all adults in Sub-Saharan Africa had a mobile money account; 73% of the population of Kenya and more than 50% of the population of Uganda and Zimbabwe used mobile money.
42. For all of M-Pesa’s important success, its growth has actually been fairly limited, as has been the growth of fintech firms generally, which “have been slow to penetrate other sectors and other countries.” [70] M-Pesa has been limited by the fact that it operates a low-tech service, using basic cellphones and text technology but not relying on more advanced smartphones. [71] Thus it has proved less attractive in countries like South Africa that already had more advanced smartphone use and a “much more advanced banking network” that was able to meet the needs that M-Pesa met. [72] M-Pesa’s technological limits also made it less attractive for integrating its mobile payments API into other software applications. [73]
43. Whether the slow diffusion of fintech in Africa is a result of technological impediments or competitor resistance is unclear. One author concludes that the “largest impediment to more rapid FinTech growth appears to be the electrical and communications infrastructure in many developing countries, which have only limited, unreliable access to broadband Internet connections and smartphone handsets.” [74] There is little doubt that these infrastructure issues affect the ability of digital platforms to thrive in Africa, but it may also be the case that the powerful financial companies can create legal roadblocks to fintech entry as well as try to preempt that entry by offering products similar to what potentially disruptive fintech entrants are offering. Indeed, this may be the case in South Africa. As the South Africa Competition Commission points out, one approach is for incumbents to accommodate the competitive threat by partnering with the upstart fintech firm: “the Fintech firm commits to remain small, providing the incumbent with its offerings whilst being able to ride on the scale, distribution channels and licenses of the traditional bank.” [75] Another possibility is for the incumbent to acquire the fintech firm outright. A third is for the incumbent firm to compete with the fintech’s offerings, potentially leading to anticompetitive actions such as denying the fintech firm needed access to infrastructure assets. [76]
2.4 Sharing platforms
44. Sharing platforms are used by a wide variety of businesses in Africa. The South Africa Competition Commission defines these platforms as offering “short-term peer-to-peer transactions to share the use of idle assets and services or to facilitate collaboration.” [77] Sharing platforms include not only firms that allow owners of vehicles and accommodations to “share” them with users, but also that allow the sharing of workspaces, money (loans), clothing, and freelance services. [78]
45. Sharing platforms are an area in which the major international companies face competition with local enterprises. In the ride-hailing segment, for example, Uber’s entry into African markets triggered the spread of mobile mapping technology for collecting location data from mobile vehicles. This allowed local companies to develop their own products suited to the needs of customers in different cities and countries, “giving themselves an edge over foreign services.” [79] In South Africa, for example, Taxi Live and Mr D Foods (both South African firms) compete with Uber for taxi ride-hailing and food delivery; Afri Ride, a South African company, competes by allowing commuters or drivers to offer unoccupied seats on their trips. [80] In Kenya, Little Cab competed with Uber by accepting M-Pesa payments. [81]
46. Even with the existence of local companies, international firms appear to be the major competitors in most of these sharing platform markets. In a survey of users in Nairobi, Little Cab, four years after its entry, was running a distant third to the international platforms, Uber and Bolt. [82] A 2020 survey in South Africa showed that three of the fifteen most popular applications in South Africa were international ride-sharing platforms; none of the platforms in the survey was South African or African. [83]
47. The competitive problems that firms in sharing platform markets face do not appear to be the result of the exercise of anticompetitive conduct by dominant firms. Of course, as in developed countries, these platform companies do face opposition from the traditional operators in the fields that the platforms challenge. In the ride-sharing market, for example, the metered taxi industry has responded to Uber’s entry in ways that are similar to the responses in developed countries. Taxi drivers have tried to physically block Uber drivers; [84] they have also tried to invoke government action to stop Uber from engaging in certain business practices. [85] But they have also tried to meet the challenge with the more competitive response of developing their own apps to connect passengers to metered taxis. [86]
3. Conclusion
48. The mapping just presented of digital platforms use in Africa is by no means complete. Digital platforms are being developed in many other areas. In agriculture, for example, Kenya-based mobile apps have been launched to help farmers better manage crops such as cassava, maize, and potatoes. [87] In health care, there is a long list of available apps: Hello Doctor provides free essential medical information in ten African countries; FD-Detector (developed by five teenage girls from Nigeria) detects fake drugs by using bar codes; mTrac allows health care workers in Uganda to submit weekly health data via SMS; Omomi provides women in Nigeria with maternal and child health information and connects them to doctors. [88]
49. Even though the overview is necessarily incomplete, the picture that does emerge shows that digital platforms do hold out the promise not just of extending traditional industries into new means of distribution. Digital technologies also hold out the promise of dealing with certain problems that are more acute in developing countries (although not absent in developed countries). Access to capital can be increased through fintech applications; business transactions can be facilitated if payment systems are more secure; small enterprises can reach markets more efficiently if digital platforms are available and open; health care information and data can be shared more easily where mobile applications are available. Many of these improvements are more incremental than fundamental, but they all lead to better market-driven outcomes.
III. Lessons for competition policy for digital platforms
50. It is not surprising that even a brief survey of the adoption of digital platforms in Africa shows that their use is both important and spreading. To a large degree, these platform technologies are tools for a variety of improvements in the production and distribution of old and new products. The ability to use these tools to create new offerings is an important aspect of innovation.
51. Developed countries now seem obsessed with the power of the major platforms over many aspects of our economy and life. Developing countries seem less obsessed but, in a significant way, more dependent. Mobile technology is a key tool for delivering new digital products, but this technology often comes with a hidden “tax” imposed by developed world patent holders that control the standards on which these devices (now smartphones) are based and set the fees for licensing those standards. [89] Developed world competition law enforcers seem powerless to control this pricing power; we would not expect developing world enforcers to do better. This tax, however, may be more critical in economies where the incomes are lower and smartphone use more limited.
52. What about the power of the GAFA? Although the use of Google and Facebook products is clearly ubiquitous, Apple and Amazon seem less powerful. In particular, Amazon’s business model puts it at a disadvantage in many developing economies, where shipping costs, tariffs, and delivery systems give local online sellers an edge.
53. Facebook and Google, but especially Facebook, loom larger. Search is important for delivering advertising, but Facebook, combined with WhatsApp, is vital not only for digital advertising but for digital presence. Sellers have come to rely on Facebook for connecting to consumers and establishing a network of users with whom to communicate and from whom to get information and data. Entrepreneurs in the developing world have complained about Facebook and Google’s high advertising rates, but with Facebook the problem goes deeper. Should Facebook or WhatsApp change their terms of use in some way, there would be little that developing countries could do. If Australia is having trouble controlling Facebook, what would we expect from countries with fewer users and smaller economies? [90]
54. This means that the first lesson for competition policy toward digital platforms is actually aimed at developing countries. If antitrust authorities in the U.S. are successful in their litigation against Facebook and Google, at least some thought should be given to how the remedies sought will affect developing countries. [91] Although consideration of extraterritorial effects is not part of the case against these companies, remedy is broader. Positive spillovers should be part of the governments’ calculus.
55. The second lesson is that competition law enforcement may not be the most critical driver of platform innovation in developing countries. Many commentators have pointed out that basic physical infrastructure is primary—better Internet access, more broadband service, less expensive smartphones—as is better managerial training and even better ability to use English. Competition law enforcement is a good tool to keep things from getting worse, but not necessarily the best tool to make things better. [92]
56. The third lesson is that the hope that digital platforms will allow local small and medium-sized businesses more access to global value chains remains just that, a hope. Local marketplace platforms do not yet have a global reach and key international platforms have proven difficult to access, but not because of any anticompetitive conduct. Developing country competition law enforcers should still be alert to anticompetitive practices, like self-preferencing, but not for the purpose of driving exports. Impact on local markets and local business should be reason enough to act.
57. The fourth lesson is that there appears to be little evidence so far of exclusionary conduct aimed at digital platforms of the type with which competition law is tasked to deal. This does not mean that such conduct is unlikely. In some jurisdictions with active merger enforcement, attention should be paid to the possibility of acquisitions done to quash nascent competitors (as in the fintech sector in South Africa). Economic theory counsels that rivalry from upstart competitors is a key driver of innovation.
58. Even if there is no indication of competition law violations, though, competition agencies still have an important role to play in articulating competition policy. A good example is the entry of international platforms in a way that disrupts local incumbent firms. Even if these international firms end up leading their markets (as has been the case with ride-sharing apps), competition law enforcers should be speaking up for how competitive rivalry benefits consumers in terms of new products and, hopefully, lower prices and increased opportunity for workers. This is another way in which making markets work fosters innovation and produces a dynamic society.
IV. Conclusion
59. There is a good case to be made that the surest way to incentivize innovations in the economy is through competitive rivalry, along with competition law enforcement to maintain it. Whether transformative or incremental, whether through new technology or simply through recognition of a new way to produce a product or service, innovation is important for social advancement and economic growth.
60. Digital platforms are an important aspect of innovative activity today both in developed and developing countries. This article’s survey of their use in four different areas shows the promise these platforms hold for local entrepreneurs and for consumers, but also shows the dependency of developing countries on the major platforms from developed countries, particularly from the United States.
61. In developing countries competition law enforcement involving digital platforms may be less pressing at the moment. Enforcement against the major platforms is now the job of agencies in developed countries who will be responsible for crafting remedies in the cases being litigated, remedies that could have spillover effects in the developing world. The hope is that that these agencies will pay attention to this aspect of their enforcement.
62. For now competition policy in developing countries may be more important than competition law enforcement. The goal should be competition policy that stresses the importance of rivalry and innovation, and articulates the benefits that competition can bring to consumers and the opportunities competitive markets can provide for entrepreneurs and workers. Infrastructure is important, but infrastructure is not just physical. Infrastructure also involves markets. Competition policy makes those markets work better.
