Digital platforms and competition policy in developing countries - Article l Concurrences N 2-2021
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Concurrences REVUE DES DROITS DE LA CONCURRENCE | COMPETITION LAW REVIEW Digital platforms and competition policy in developing countries Article l Concurrences N° 2-2021 www.concurrences.com Harry First harry.first@nyu.edu Charles L. Denison Professor of Law New York University School of Law
Article
Harry First*
Digital platforms
constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment and up to a € 300 000 fine (Art. L. 335-2 Code de la Propriété Intellectuelle). Personal use of this document is authorised within the limits of Art. L 122-5 Code de la Propriété Intellectuelle and DRM protection.
harry.first@nyu.edu
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L. 335-2 CPI). L’utilisation personnelle est strictement autorisée dans les limites de l’article L. 122 5 CPI et des mesures techniques de protection pouvant accompagner ce document. This document is protected by copyright laws and international copyright treaties. Non-authorised use of this document
Charles L. Denison Professor of Law
and competition
New York University School of Law
policy in
ABSTRACT
Big tech platforms have become a subject
of intense antitrust scrutiny in developed
economies, most recently in the United
developing
States. The thesis of this article is that
the power of platforms is not just a first world
problem, however, but is also an issue
of importance for competition policy
countries
in developing countries. These platforms
present different costs and benefits
for developing countries than for developed
countries; in particular, the major big tech
platforms have become important tools
for further digital platform innovation
in developing economies. The article begins
with a discussion of the connection between
competition law, innovation, and development.
The article then discusses how digital
platform technologies are employed
in Africa in four areas—online retail sales,
Introduction
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.
Les plateformes Big tech font l’objet
1. It was just a few years ago—I date it from 2017—that concern for the power
d’une surveillance antitrust intense dans of the “big tech” platforms moved from the pages of the law reviews to the
les économies développées, et plus pages of major U.S. newspapers. “We are, all of us, in inescapable thrall to one
récemment aux États-Unis. La thèse de
of the handful of American technology companies that now dominate much
cet article soutient que le pouvoir des
plateformes n’est pas seulement un problème of the global economy,” wrote New York Times’s technology columnist Farhad
du premier monde, mais qu’il est aussi Manjoo.1 In that same year, after Amazon acquired U.S. food retailer Whole
une question d’importance pour la politique Foods, the Wall Street Journal’s technology columnist, Christopher Mims, wrote
de concurrence dans les pays
en développement. Ces plateformes that “America’s biggest tech companies are spreading their tentacles (. . .) [P]ower
présentent des coûts et des avantages and wealth will be concentrated in the hands of a few companies in a way not seen
différents pour les pays en développement since the Gilded Age.”2
et pour les pays développés ; en particulier,
les plateformes sont devenues des outils
importants pour la poursuite de l’innovation 2. Manjoo dubbed these tech companies “the Frightful Five”: Amazon, Apple,
numérique dans les économies Facebook, Microsoft, and Alphabet. Sometimes these companies are listed in size
en développement. L’article commence
order (by market capitalization in the United States): Apple, Microsoft, Alphabet,
par une discussion sur le lien entre le droit
de la concurrence, l’innovation Amazon, and Facebook.3 Sometimes by convenient mnemonic: “GAFAM”
et le développement. Il examine ensuite (Google instead of its parent, Alphabet), or “GAFA” (minus Microsoft, which
comment les technologies des plateformes often seems to be overlooked in the public debate, despite its continued domi-
numériques sont employées en Afrique dans
quatre domaines : la vente au détail en ligne, nance on desktop computers around the world4), or, even more descriptive,
les chaînes de valeur, les produits “FANGs” (Facebook, Amazon, Netscape, and Google5).
de technologie financière (fintech) et
les plateformes de partage. L’article se termine
par une discussion sur les enseignements que
3. U.S. antitrust enforcement agencies and Congress have responded to this
ces évolutions ont pour la politique de public concern. In 2019 the U.S. Department of Justice and the Federal Trade
concurrence dans les pays en développement. Commission announced investigations into GAFA; state antitrust enforcers put
together multi-state teams to investigate whether to bring antitrust suits against
Article to be published in Eleanor Fox
Liber Amicorum, N. Charbit and al. (eds.),
Concurrences, 2021.
1 F. Manjoo, Tech’s Frightful Five: They’ve Got Us, N.Y. Times, May 10, 2017.
*I thank Michael Kalman for his outstanding
research assistance. A research grant from 2 C. Mims, Tech Companies Spread Their Tentacles, Wall St. J., June 17–18, 2017, at A1.
the Filomen D’Agostino and Max E. Greenberg
Research Fund at New York University School 3 See Bloomberg Finance, https://ext-marketing.com/wp-content/uploads/2020/01/AAPL-US-Equity-Apple-Inc-
of Law provided financial assistance for this Dail-2020-01-17-10-08-12_v2.jpg (as of January 2020).
article. This article is part of a book dedicated
to my colleague Eleanor Fox. It should be obvious 4 See Microsoft Corp., Annual Report Form 10-K (June 30, 2020), at 40–42 (detailing revenue and margin increas-
that her pathbreaking work on competition policy es over previous two years in Windows segment), https://c.s-microsoft.com/en-us/CMSFiles/MSFT_FY20Q4_10K.
in developing countries, particularly in Africa, as docx?version=71873a68-d431-e887-124f-4d24b9ade60c.
well as her work on how antitrust can be used
to control the power of the major digital platforms, 5 See N. Petit, Are ‘FANGs’ Monopolists? A Theory of Competition Under Uncertainty (Oct. 10, 2019) (working paper), https://
is this article’s inspiration. ssrn.com/abstract=3414386.
Concurrences N° 2-2021 I Article I Harry First I Digital platforms and competition policy in developing countries 1Facebook and/or Google.6 On July 29, 2020, the Antitrust 5. This debate over high-tech platforms has taken place
constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment and up to a € 300 000 fine (Art. L. 335-2 Code de la Propriété Intellectuelle). Personal use of this document is authorised within the limits of Art. L 122-5 Code de la Propriété Intellectuelle and DRM protection.
Subcommittee of the U.S. House Judiciary Committee with a decidedly first world perspective. In the United
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called the CEOs of Google, Apple, Facebook, and States and in the EU the focus never seems to move
Amazon to testify for more than five hours. Throughout beyond GAFA’s impact on the citizens, consumers, and
this hearing, the four companies were broadly criti- economies of the United States and Europe. Particularly
cized by both Democrats and Republicans, although in the United States, mention is almost never made of
the Congress members’ concerns were varied and some- platforms elsewhere (except when they pose a perceived
times reflected their different political perspectives.7 national security threat to the United States16).
The Committee’s Majority Staff subsequently issued a
report, taking nearly 350 pages to describe the GAFA’s 6. The question that this article addresses is whether
anticompetitive conduct and devoting nearly thirty pages antitrust’s focus on big tech platforms is appropriately
to possible legislative remedies.8 On October 20, 2020, centered in the developed world. Does the concern for the
the U.S. Department of Justice and eleven state attor- competitive effects of tech platforms have any relevance
neys general filed a monopolization suit against Google, to competition law enforcement in the developing world?
the first such suit since the monopolization case against
Microsoft more than two decades before.9 The U.S. suit 7. The thesis of this article is that the power of platforms
against Google was then followed by two more suits is not just a first world problem, but is also an issue of
against Google filed by two different groups of states.10 importance in developing countries. Even so, these plat-
Facebook was then sued by the FTC and by another large forms present different costs and benefits for developing
group of states.11 The Wall Street Journal’s Christopher countries than for developed countries. For developing
Mims reported, “Tech’s Antitrust Reckoning is Near.”12 countries, the U.S. big tech platforms have become basic
tools for digital platform commerce and development.
4. Concern for the power of big tech platforms has not They open the possibility of providing a market presence
been limited to the United States, of course. If anything, and access for small and medium businesses that might
the United States has been a lagging jurisdiction. The otherwise find it difficult to reach consumers in domestic
European Union, along with Germany and the United and international markets. This is an important enough
Kingdom, have been pressing ahead with enforcement phenomenon that competition policy in developing
actions and proposals for imposing significant restric- countries should be particularly attuned to problems of
tions on the competitive behavior of the GAFA. The platform access and fair competitive practices, without
European Commission has brought three separate cases regard to whether antitrust in developed countries ends
against Google for abuse of dominance, imposing fines up reflecting these goals.
of more than $5 billion;13 Germany has sued Facebook,
linking competition law with privacy protections;14 the 8. To develop the thesis that digital platform competi-
UK’s Competition and Markets Authority has published tion matters in developing countries this article examines
a final report of its market study on online platforms and two broad areas. First, the article places the development
digital advertising.15 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
6 See, e.g., C. Kang, D. Streitfeld & A. Karni, Tech Titans Face Tough Scrutiny From All
Sides, N.Y. Times, June 4, 2019, at A1; C. Kang, K. Benner & J. Nicas, Justice Dept.
platform technology? Second, the article describes some
Explores Google Antitrust Case, N.Y. Times, May 31, 2019. of the ways that digital platforms are now being used in
7 See, e.g., C. Kang & D. McCabe, Lawmakers Give Tech ‘Emperors’Jabs From 2 Sides, N.Y.
developing countries and how that use may affect deve-
Times, July 30, 2020, at A1. lopment. The article’s focus will mainly be on Africa, but
8 See Majority Staff Rep. and Recs., Subcomm. on Antitrust, Commercial, and Admin. Law,
Africa provides sufficient heterogeneity that it can show
Comm. on Jud., Investigation of Competition in Digital Markets (2020), https://judicia- why competition law is important for the growth of plat-
ry.house.gov/uploadedfiles/competition_in_digital_markets.pdf. forms in developing countries more generally.17
9 See United States v. Google LLC, Case No. 1-20-cv-03010 (D.D.C. Oct. 20, 2020). See also
B. X. Chen, It’s Google’s World. We Just Live in It., N.Y. Times, Oct. 20, 2020. 9. The article begins with a discussion of the connection
10 See Colorado v. Google LLC, Case No. 1:20-cv-03715 (D.D.C., Dec. 17, 2020) (35 states, between competition law, innovation, and development.
Puerto Rico, District of Columbia, and Guam); Texas v. Google LLC, Case No. 4:20-cv- The next part of the article discusses how digital platform
00957 (E.D. Texas, Dec. 16, 2020) (10 states).
technologies are employed in Africa in four areas—online
11 See FTC v. Facebook, Inc., Case No. 1:20-cv-03590 (D.D.C., Dec. 9, 2020); New York
v. Facebook, Inc., Case No. 1:20-cv-03589: (D.D.C., Dec. 9, 2020) (46 states, District of
retail sales, value chains, financial technology products
Columbia, and Guam). (fintech), and sharing platforms. The article concludes
12 C. Mims, Tech’s Antitrust Reckoning Is Near, Wall St. J., Oct. 20, 2020, at B1.
with a discussion of the lessons these developments have
for competition policy in developing countries.
13 See A. Portuese, Google AdSense for Search: Fines Always Come in Threes, Comp. Policy
Int’l (April 2019) (discussing cases).
14 See Bundeskartellamt, Case Summary: Facebook, Exploitative business terms pur-
suant to Section 19(1) GWB for inadequate data processing (6 February 2019), 16 See G. Wells, M. C. Bender, K. O’Keeffe & C. Lombardo, Microsoft Aims for a Deal on
https://www.bundeskartellamt.de/SharedDocs/Entscheidung/EN/Fallberichte/ TikTok, Wall St. J., Aug. 3, 2020, at A1 (reporting that TikTok sees itself as a potential
Missbrauchsaufsicht/2019/B6-22-16.pdf ?__blob=publicationFile&v=4. equal rival to Facebook).
15 See CMA, Online platforms and digital advertising, Market study final report (July 1, 17 For a fuller exploration of competition policy in Africa, as well as the need for using com-
2020), https://assets.publishing.service.gov.uk/media/5efc57ed3a6f4023d242ed56/ petition law to advance the goal of inclusive development, see E. M. Fox & M. Bakhoum,
Final_report_1_July_2020.pdf. See also Australia ACCC Report, https://treasury.gov. Making Markets Work for Africa: Markets, Development, and Competition Law in Sub-
au/publication/p2019-41708. Saharan Africa (Oxford University Press, 2019).
2 Concurrences N° 2-2021 I Article I Harry First I Digital platforms and competition policy in developing countriesI. Competition law, 12. In looking at innovation from the viewpoint of
constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment and up to a € 300 000 fine (Art. L. 335-2 Code de la Propriété Intellectuelle). Personal use of this document is authorised within the limits of Art. L 122-5 Code de la Propriété Intellectuelle and DRM protection.
competition policy in developing economies, however,
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it is helpful to have a broader view of innovation.
innovation, and Christensen, Ojomo, Gay, and Auerswald (“COGA,”
for ease of exposition), drawing on the work of Joseph
development Schumpeter, define innovation as “a change in the process
by which an organization transforms labor, capital, mate-
rials, or information into products and services of greater
value.”23 This broader approach moves beyond the idea/
1. What counts as innovation? invention focus to take more of an innovation process
10. When trying to assess the connection between inno- approach. “Innovation,” they write, “is not neces-
vation and competition law, commentators often have a sarily high tech, overly advanced, or even entirely new.”
particular idea of what counts as innovation. Innovation Innovation, they conclude, “is different from invention.”
is often thought of as a technological advance. As a
former head of the U.S. Department of Justice Antitrust 13. COGA’s non-high-tech approach leads to a somewhat
Division put it, “let’s not forget what drives the hopes different categorization of innovations than an exclusive
and dreams of so many innovators: the hope of making a tech-centric approach provides. They posit three types of
technology that will improve the way people live.”18 This innovations: market creating, market sustaining, and effi-
technology-centric view of innovation is further skewed ciency producing.24 Market-creating innovations create
by distinctions between different kinds of innovations. new markets that serve people for whom there either were
Thus, economists often distinguish between fundamental no products or for whom existing products were “not
innovations and process innovations (or disruptive inno- accessible” because of cost or “a lack of the expertise
vations and incremental innovations), assessing how required to use them.” Market-sustaining innovations
incentives may vary depending on which type of innova- improve solutions already on the market. Their economic
tion is involved.19 impact on jobs, profits, or economic climate is less than
market-creating innovations because they generally use
11. These prior assumptions about what counts as inno- “established channels to sell to an existing customer
vation tend to affect economic studies and theories about base.” Efficiency innovations are generally process inno-
innovation, as well as competition law enforcement vations that allow firms to be more productively efficient.
dealing with innovation. Empirical studies often focus COGA views these innovations as more likely to be the
on R&D expenditures or rates of patenting;20 theoretical result of competitive pressures on firms that are trying to
discussions model the incentives for and efficiencies from stay viable.
new product introductions.21 Competition law enforcers
focus on licensing of intellectual property rights or on the 14. COGA’s definition of innovation, and their three-part
potential suppression of disruptive technologies through categorization, allows us to see innovation in a way that
exclusionary practices or “killer” acquisitions.22 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.
18 M. Delrahim, Assistant Att’y Gen., Antitrust Div., Take It to the Limit: Respecting Ibrahim’s company, within six years of its founding,
Innovation Incentives in the Application of Antitrust Law (2017), at 1, https://www. covered 13 African countries and gained 5.2 million
justice.gov/opa/speech/file/1010746/download. customers. This growth led to the spread of mobile
19 See, e.g., W. M. Cohen, Fifty Years of Empirical Studies of Innovative Activity and phone networks more generally, now covering more than
Performance, in 1 Handbook of the Economics of Innovation 129 (B. H. Hall &
950 million subscriptions and providing a platform for
N. Rosenberg, eds., North-Holland, 2010) (surveying literature explaining how a mo-
nopolized market may lead to greater process innovations because a monopolist can apply payments transfers and loans in many African coun-
cost-cutting measures across their existing, broad scope of production); G. Federico, tries.25 Nollywood produces 1,500 movies annually,
G. Langus & T. Valletti, Horizontal Mergers and Product Innovation, 59 Int’l J. Indus.
Org. 1 (2018) (presenting an economic model for product innovations where competitive
second only to India’s Bollywood, with revenues that
markets lead to higher innovation). exceed $1 billion annually and employment of more than
20 See, e.g., Federico et al., supra note 19; R. J. Gilbert, Competition, Mergers, and R&D
Diversity, 54 Rev. Indus. Org. 465 (2019).
21 For a thorough discussion of models of innovation incentives, see R. J. Gilbert, Innovation
Matters: Competition Policy for the High-Technology Economy (2020), ch. 4, available at
https://doi.org/10.7551/mitpress/12686.001.0001. 23 C. M. Christensen, E. Ojomo, G. Daines Gay & P. E. Auerswald, The Third Answer: How
22 See U.S. Dep’t of Just. & Fed. Trade Comm’n, Antitrust Guidelines for the Licensing of Market-Creating Innovation Drives Economic Growth and Development, 12 Innovations:
Intellectual Property (2017), at 2 (“The intellectual property laws provide incentives for Technology, Governance, Globalization 10 (2019), at 12. See also Mansfield et al., Research
innovation (. . .) The antitrust laws promote innovation and consumer welfare by prohibit- and Innovation in the Modern Corporation (Palgrave Macmillan, 1971) (innovation
ing certain actions that may harm competition with respect to either existing or new ways of process).
serving consumers”); United States v. Microsoft, 84 F. Supp. 2d 9, 112 (D.D.C. 1999) (dis- 24 Christensen et al., supra note 23, at 12. These categories are not completely dissimilar to
cussing effect of Microsoft’s effort to stifle innovation) (Finding of Fact ¶ 412), vacated the distinctions that economists have often made among different types of innovation, see
and remanded on other grounds, 253 F.3d 34 (D.C. Cir. 2001); Dep’t of Justice, Antitrust supra note 19.
Div., Press Release, Visa and Plaid Abandon Merger After Antitrust Division’s Suit to
Block (“In a victory for American consumers and small businesses, Visa has abandoned its 25 Ibid. at 14–15. For background information on Ibrahim, see L. Handley, Mo Ibrahim,
efforts to acquire an innovative and nascent competitor”) (Jan. 12, 2021), https://www. The accidental businessman, CNBC, May 15, 2019, https://www.cnbc.com/mo-ibra-
justice.gov/opa/pr/visa-and-plaid-abandon-merger-after-antitrust-division-s-suit-block. him-african-entrepreneur-and-founder-of-the-ibrahim-index.
Concurrences N° 2-2021 I Article I Harry First I Digital platforms and competition policy in developing countries 3one million people.26 Ibrahim did not invent cellphones; 19. Economists have continued to debate and refine
constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment and up to a € 300 000 fine (Art. L. 335-2 Code de la Propriété Intellectuelle). Personal use of this document is authorised within the limits of Art. L 122-5 Code de la Propriété Intellectuelle and DRM protection.
Nollywood did not invent motion pictures. What both Schumpeter’s and Arrow’s ideas. Although each
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did was to recognize local needs and create markets for approach has a plausible core, neither approach sets out
bringing these products to local users in ways that they a complete picture of the incentives for innovation or
found useful (mobile phones) or attractive (movies that the optimal market conditions to produce innovation.30
reflected the lives of average Africans). More recent economic writing thus offers a blend of the
two approaches that accounts for the two cross-cutting
15. COGA contrast their argument for markets with what incentives: competitive rivalry and monopoly profits. 31
they say are the two dominant theories for what drives
development—ideas and institutions. COGA’s argument 20. These newer approaches suggest three principles that
is that ideas, in themselves, still need to be accepted and can help developing countries to assess the relationship
diffused; markets do this. Institutions—financial, legal, between the conduct subject to competition law and the
political—are needed if ideas are to be protected from desire for innovation: contestability, appropriability, and
appropriation but these institutions grow up in response synergies.
to the markets they protect and advance.
21. Contestability focuses (Arrow-like) on “the extent
16. Whether markets drive innovation and develop- to which a firm can gain profitable sales from its rivals
ment more so than ideas or institutions is a debate that by offering greater value to customers.”32 This factor
does not have to be resolved here. The critical point is puts more stress on rivalry among firms than on market
to see the connection between market-advancing inno- concentration per se, that is, on factors (including effi-
vation and development, without regard to other factors ciencies) that lead to a robust competitive process for
that may also affect development. This puts competition winning the patronage of customers.33
law front and center for insuring innovation. If there is
anything that competition law should be able to achieve 22. The second principle is appropriability, which focuses
it is making markets work. (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)
2. Competition and innovation that enable innovators to capture spillover effects or by
conduct that increases scale and allows the benefits of
17. If markets are necessary for producing innova- process innovations to be spread over more output.35
tion (whether broadly or narrowly defined), what is the Appropriability benefits, though, need careful assess-
optimal market structure that will achieve that result? ment. In particular, the need for appropriability does not
Is monopoly best? Or is the “constant stress” of rivalry necessarily justify anticompetitive tactics that exclude
in competitive markets the way to insure “industrial rivals and increase the innovator’s profits. Such tactics
progress,” as Judge Hand wrote in Alcoa?27 might add little to appropriability where appropriability
is already high (say for a dominant firm), but stopping
18. Whether monopoly is necessary for innovation exclusionary conduct might enhance the innovation
is a long-running debate in industrial organization incentives of smaller rivals and force the dominant firm
economics and in antitrust. The debate is often cast as to substitute more costly (but more socially valuable)
a debate between two schools, those who follow Joseph innovation for cheaper exclusion (which might only
Schumpeter and those who follow Kenneth Arrow. Put slightly increase the gains to the monopolist from its past
simply, the Schumpeter school focuses on the “size of the innovations).36
prize.” As Schumpeter wrote, high profits are “the baits
that lure capital on to untried trails.”28 The Arrow school 23. The third principle is synergies, that is, combining
takes a contrary view. Monopolists will not be good inno- complementary assets to enhance innovation capabili-
vators because if they bring out a new product, it will ties. Synergies focus on the ability to innovate, in contrast
only take sales away from the old. This cannibalization of to contestability and appropriability, which focus on
sales (the “replacement effect”) will act as a disincentive
to innovate.29 Small firms (upstarts) will be better inno-
vators because they have little to lose and much to gain.
30 The empirical evidence with regard to the relation between concentration and innovation
is also mixed. See Gilbert, supra note 21, at 116–17 tbl. 6.1.
31 See ibid. at 108 (recent studies show“a more nuanced relationship between innovation and
firm and industry characteristics”).
32 C. Shapiro, Competition and Innovation: Did Arrow Hit the Bull’s Eye?, in The Rate
26 See Christensen et al., supra note 23, at 18–19. and Direction of Inventive Activity Revisited 361 (J. Lerner & S. Stern, eds., University of
27 United States v. Aluminum Co. of America, 148 F.2d 416, 427 (1945). Chicago Press, 2012), at 364.
28 J. Schumpeter, Capitalism, Socialism, and Democracy (Routledge Classics, ed. 2010), at 78. 33 See ibid. at 382–83.
29 K. Arrow, Economic Welfare and the Allocation of Resources to Invention, in The Rate 34 See ibid. at 364.
and Direction of Inventive Activity: Economic and Social Factors 609 (Princeton University 35 See ibid. at 388–89; Cohen, supra note 19, at 138.
Press, 1962), at 620 (“The preinvention monopoly power acts as a strong disincentive
to further innovation”). The phrase “replacement effect” is attributed to Jean Tirole, The 36 See J. B. Baker, The Antitrust Paradigm: Restoring a Competitive Economy (Harvard
Theory of Industrial Organization (The MIT Press, 1988), at 392. University Press, 2019), at 173–74.
4 Concurrences N° 2-2021 I Article I Harry First I Digital platforms and competition policy in developing countriesthe incentives to innovate.37 That said, as with appro-
II. Digital platform
constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment and up to a € 300 000 fine (Art. L. 335-2 Code de la Propriété Intellectuelle). Personal use of this document is authorised within the limits of Art. L 122-5 Code de la Propriété Intellectuelle and DRM protection.
priability, care must be used in assessing whether syner-
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gies could be achieved in a way that is less restrictive to
contestability, thus achieving gains from innovation at a
lower cost.38
use in developing
countries
3. Does competition law matter
for innovation in developing 1. An overview
countries? 26. Digital platforms are in widespread use in devel-
oping countries. The major U.S. digital platforms tend
24. There are many factors that might lead one to be skep-
to be ubiquitous—in South Africa, for example, nearly
tical about whether competition law provides much value
half of all Internet users use Facebook, YouTube, and
added when it comes to increasing innovation in devel-
WhatsApp39—but there are also more local platforms in
oping countries. Infrastructure support for innovation
developing countries that are of significant size.40
generally, and for digital products and services specifi-
cally, may be more of a hurdle for innovation than weak
27. Digital platforms can be categorized in different ways.
competition law enforcement. Competition law enforce-
Most common is to categorize them by the type of service
ment agencies have had difficulty incorporating innova-
they offer; the proposed EU Digital Markets Act, for
tion into antitrust policy even in major developed econ-
example, has eight categories of “core platform service,”
omies; how much more so for resource-starved agencies
such as search engines, social networks, and operating
in developing countries? Perhaps it would be better to let
systems.41 This type of categorization is similar to product
the major enforcement agencies take the lead, particu-
markets as analyzed under competition law. A more func-
larly when the major digital platforms are involved, on
tional approach divides digital platforms into transaction
the assumption that changes in structure or business
platforms and innovation platforms.42 Transaction plat-
practices will likely spill over to developing countries in
forms are generally multi-sided and “support exchanges
any event.
between a number of different parties,” Amazon and
Uber being good examples. Innovation platforms (some-
25. Despite these caveats, it would be unwise for agencies
times called technology or engineering platforms) provide
in developing countries to ignore innovation issues in
components that firms in a sector can use in common for
competition law enforcement. Developing countries have
their interactions. Computer operating systems and tech-
particular policy concerns that may seem less important
nology standards are good examples of these platforms.43
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 39 See T. Buthelezi & J. Hodge, Competition Policy in the Digital Economy: A Developing
economic interests. Competition enforcement that Country Perspective, 15 Competition L. Int’l 201 (2019), at 202; see also Comp. Comm’n
of S. Afr., Competition in the Digital Economy (Sept. 2020) [hereinafter “Competition
increases innovation, particularly through an emphasis in the Digital Economy”], at 20–21 tbl. 3 (listing active digital platforms in South
on competitive rivalry in dynamic markets, offers the Africa, most of which are U.S.- and China-based), http://www.compcom.co.za/wp-con-
possibility of advancing all three goals. tent/uploads/2020/09/Competition-in-the-digital-economy_7-September-2020.pdf; N.
Friederici, M. Wahome & M. Graham, Digital Entrepreneurship in Africa: How a Continent
is Escaping Silicon Valley’s Long Shadow (The MIT Press, 2020) [hereinafter “Digital
Entrepreneurship”], at 41 (YouTube, WhatsApp, and Facebook have continent-wide reach
in Africa).
40 Examples of developing country platforms are Flipkart in India, Mercado Libre in Latin
America, Jumia and Konga in Nigeria, and Takealot in South Africa. A number of these
companies, however, have been acquired in whole or in part by major platform compa-
nies from developed countries. See U.N. Conference on Trade and Development, Digital
Economy Report 2019, U.N. Doc. UNCTAD/DER/2019 [hereinafter “UNCTAD
Digital Economy Report”], at 109–12, https://unctad.org/en/PublicationsLibrary/
der2019_en.pdf.
41 See Proposal for a Regulation of the European Parliament and of the Council on
Contestable and Fair Markets in the Digital Sector (Digital Markets Act), COM(2020)
842 final (Dec. 15, 2020), at 2, 34–35 (Art. 2(2), https://eur-lex.europa.eu/legal-content/
en/TXT/?uri=COM%3A2020%3A842%3AFIN).
42 UNCTAD Digital Economy Report, supra note 40, at 25–27; see also Friederici et al.,
Digital Entrepreneurship, supra note 39, at 16–18 (distinguishing between digital pro-
duction, information processing, user interconnection, and market intermediation as dif-
37 For discussion of the distinctions, see Shapiro, supra note 32, at 364–65. ferent forms of digital value creation by platforms).
38 Cf. ibid. at 397–98 (discussing Genzyme/Novazyme merger). 43 UNCTAD Digital Economy Report, supra note 40, at 25–26.
Concurrences N° 2-2021 I Article I Harry First I Digital platforms and competition policy in developing countries 528. Entrepreneurs in developing countries have generally such as Amazon or eBay.49 It has also begun integrating
constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment and up to a € 300 000 fine (Art. L. 335-2 Code de la Propriété Intellectuelle). Personal use of this document is authorised within the limits of Art. L 122-5 Code de la Propriété Intellectuelle and DRM protection.
not created innovation platforms.44 Rather, they have used into offering its own exclusive brands in competition with
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L. 335-2 CPI). L’utilisation personnelle est strictement autorisée dans les limites de l’article L. 122 5 CPI et des mesures techniques de protection pouvant accompagner ce document. This document is protected by copyright laws and international copyright treaties. Non-authorised use of this document
platform technologies created elsewhere to offer products other retailers on the platform, raising potential concerns
that are distributed digitally, mostly on a relatively local- for self-preferencing.50
ized basis, that is, within the home country of the entre-
preneur. Platform technologies are thus tools for these 32. Online retail sellers in Africa, particularly small and
enterprises, allowing them to create new products and medium business enterprises, face a set of challenges that
distribute them more efficiently. Even if entrepreneurs make it difficult to compete successfully. Online adver-
in developing countries do not create the tools, however, tising is critical for these enterprises, but the two main
their use of platform technologies can still be market-cre- advertising channels are Facebook and Google, and
ating or sustaining and thereby qualify as innovation that their use is expensive and complex for smaller busi-
can drive economic growth. nesses.51 Most e-commerce payment transactions are
made by credit card, but fees can be high, payments can
29. As the following examples will show, whether plat- be slow, and concern for fraud has been high.52 Delivery
forms are successful depends on many factors beyond may require investments in expensive assets (trucks,
competition law enforcement. Indeed, at the moment, motorcycles, warehouses), particularly where the postal
competition law violations may not as yet have emerged. service is unreliable.53 On the other hand, the expense of
The question, though, is whether competition policy can drop-shipping international packages, the unreliability of
play a role in keeping digital platform tools accessible the postal service, the relatively small size and geograph-
and digital product markets competitive. ical isolation of many African countries can make it diffi-
cult for international platforms like Amazon to compete
successfully with local e-commerce sites.54
2. Mapping platform use in
Africa: Four areas 2.2 Value chains
33. Companies in Africa use digital platforms to partic-
2.1 Online retail sales ipate in “value chains,” that is, as intermediate transac-
30. Online retail sale of physical products and services tors in the production and sale of goods and services.
is developing in Africa, but slowly. In South Africa, for The ultimate consumer in the chain may be located
example, e-commerce is estimated to have only approxi- outside the country or inside. For many African coun-
mately 1–2% of total retail sales, in comparison to 18% tries, participation in global value chains has been seen as
in the UK, with customers generally being higher income an important way to stimulate economic growth, partic-
earners mostly concentrated in metropolitan areas.45 ularly if small and medium-size businesses are the benefi-
Nevertheless, throughout Africa a wide range of products ciaries of such participation.55
are sold through online retail platforms, including food,
consumer electronics, fashion, and apparel.46 34. The extent to which digital platforms have increased
such participation by African firms is unclear. A study
31. Retailers use platforms in three ways. First, tradi- of value chains in Kenya and Rwanda examined how
tional brick-and-mortar stores use Internet sales as a tourism firms integrated with international tourism sites
complement to their sales in physical stores; this has given to provide booking availability and service information
major retailers a strong presence in online retail selling.47 but found that their participation was often limited by a
Second, some sellers have an online presence only, selling lack of technical skills and by the platforms’ managerial
their products at retail on various digital platforms. The
“most ubiquitous” digital enterprises in Africa are e-com-
merce sites that present their products on Facebook.48
Third, Africa-based platforms offer marketplace services 49 Goga et al., supra note 45, at 13–14.
for other retailers. Takealot in South Africa, for example, 50 See S. Goga & A. Paelo, Issues in the Regulation and Policy Surrounding E-Commerce
has become the largest online retail marketplace in South in South Africa, CCRED Working Paper No. 6/2019 (April 2019), at 5; Menu Page
for Shopping Takealot’s Exclusive Product Line, Takealot (last visited Mar. 12, 2021,
Africa, with more traffic than international competitors 3:05 PM), https://www.takealot.com/promotion/exclusivetotakealot.
51 See Goga & Paelo, supra note 47, at 16–17; Friederici et al., Digital Entrepreneurship,
supra note 39, at 48 (surveyed African digital entrepreneurs report they primarily used
Facebook for digital advertising).
44 See ibid. at 109–22; Friederici et al., Digital Entrepreneurship, supra note 39, at 63–67
(finding that market intermediation was the most common form of value creation among 52 See Goga et al., supra note 45, at 17–18 (75% of payments by credit card); ibid. at 20–21
African platforms). (use of mobile payment systems comparable to PayPal). See also Friederici et al., Digital
Entrepreneurship, supra note 39, at 61 (for surveyed digital entrepreneurs cash is the pre-
45 See S. Goga, A. Paelo & J. Nyamwena, Online Retailing in South Africa: An Overview, dominant method of payment).
CCRED Working Paper No. 2/2019 (March 2019), at 3–5, https://papers.ssrn.com/sol3/
papers.cfm?abstract_id=3386008. 53 See Goga et al., supra note 45, at 21 (theft prevalent in South Africa postal service);
Friederici et al., Digital Entrepreneurship, supra note 39, at 109–13 (costliness of “last
46 Ibid. at 5–6 (South Africa); A. Budree, Policy Considerations for E-Commerce in South mile”delivery systems).
Africa and Other African Countries, GEGAfrica Policy Briefing (June 2017), at 3 (Tanzania
and Kenya). 54 See Goga et al., supra note 45, at 29–32.
47 See S. Goga & A. Paelo, Strategies for Adapting to Online Entry: The Case of Retailers in 55 See H. First & E. M. Fox, Philadelphia National Bank, Globalization, and the Public
South Africa, CCRED Working Paper No. 3/2019 (March 2019), at 2–3, 19. Interest, 80 Antitrust L. J. 307 (2015), at 344–46 (importance of inclusion in global
supply chain as part of remedy in Walmart/Massmart merger); Comp. Comm’n of S. Afr.,
48 Friederici et al., Digital Entrepreneurship, supra note 39, ch. 2 at 61. Competition in the Digital Economy, supra note 39, at 51.
6 Concurrences N° 2-2021 I Article I Harry First I Digital platforms and competition policy in developing countriesrequirements.56 A study of small-scale fresh fruit and place bids in an open auction, perhaps a not misplaced
constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment and up to a € 300 000 fine (Art. L. 335-2 Code de la Propriété Intellectuelle). Personal use of this document is authorised within the limits of Art. L 122-5 Code de la Propriété Intellectuelle and DRM protection.
vegetable farmers in Tanzania and Kenya focused on worry given a later antitrust suit against EATTA for
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L. 335-2 CPI). L’utilisation personnelle est strictement autorisée dans les limites de l’article L. 122 5 CPI et des mesures techniques de protection pouvant accompagner ce document. This document is protected by copyright laws and international copyright treaties. Non-authorised use of this document
the use of certain basic platform technologies (mobile fixing brokers’ and warehouse owners’ fees in the tea
phones, Internet, and Facebook) to access payment auction.61
systems, get pricing and production information, and
reach export markets. Such usage was actually rather 38. After a trial run of an online auction, the EATTA
small (only 11% of farmers surveyed). Although the use members voted against its continuation. Apparently the
of cellphones was helpful to small farmers in many local brokers were able to convince smaller producers, whose
markets, reaching export markets required the use of the only link to these markets was through the brokers, that
Internet more than the use of basic cellphones, a step that an online auction would harm the brokers and thereby
excluded farmers who lacked sophistication (technical harm them.62 It was not until 2019 that an online tea
and linguistic).57 auction became operational.63
2.3 Fintech
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 39. Financial technology products (“fintech”) operate
way as well. as multisided platforms connecting buyers and sellers
of financial services using the Internet, mobile devices,
36. A good example is the effort to create an online tea software technology, and/or cloud services.64 Fintech
auction market in Mombasa, Kenya. The Mombasa products can cover aspects of banking, digital curren-
Tea Auction provides the link between East African cies, insurance, lending, money transfers, and payments.
tea processors and international buyers.58 Kenya is Fintech products can be deeply disruptive of existing
the world’s leading exporter of tea, and tea is Kenya’s banking and financial services but they can also offer
number one foreign exchange earner.59 Tea is trans- platform infrastructure for many businesses. As such,
ported from highland areas in Africa to storage ware- fintech products are widely used throughout Africa.
houses in Mombasa, where it is subsequently auctioned.
Two groups have been the main intermediaries between 40. Probably the most widely lauded fintech product
growers and buyers in this process—tea brokers and in Africa is M-Pesa, the payments service that runs
storage warehouses—and only tea brokers could nego- on mobile phones.65 M-Pesa was launched in 2007 by
tiate with buyers in the auction. Sellers made payments Vodafone, the U.K.-based telecom company, in partner-
to the auction and then collected the tea from the ware- ship with two African mobile phone system operators,
houses for export. About 95% of tea exported from Safaricom in Kenya and Vodacom in Tanzania.66 M-Pesa
Kenya was sold through the Mombasa Tea Auction. “allows users to deposit money into an account stored
on their cell phones, to send balances using SMS tech-
37. Asian competitors had been using online auctions, nology to other users (including sellers of goods and
but the Mombasa Tea Auction was done in person. services), and to redeem deposits for regular money.”67
Recognizing the auction’s inefficiencies, in 2012 an effort There is no charge for depositing the cash with the
was made by the East African Tea Trade Association mobile phone company; charges are deducted when
(EATTA) to introduce an online auction system. EATTA “e-float” or “e-money” is sent to recipients or when cash
has 200 members from 10 African countries (mostly in is withdrawn.68
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 disintermedi-
ation.60 Interestingly, the brokers also feared that buyers 61 See East African Tea Trade Ass’n, supra note 59 (upholding finding of violation of
Competition Act, but exempting brokerage fees from the Act for two years).
would find it easier to collude when they did not have to
62 See Foster et al., supra note 58, at 67.
63 See A. Ngotho, Mombasa tea auction goes digital, switch in final stages, The Star, Jan.
20, 2021, https://www.the-star.co.ke/counties/coast/2021-01-21-mombasa-tea-auction-
56 See C. Foster et al., Digital Control in Value Chains: Challenges of Connectivity for East goes-digital-switch-in-final-stages. The difficulties of establishing digital trading facil-
African Firms, 94 Econ. Geography 68 (2018), at 78–79. ities for agricultural goods are not limited to developing countries. See J.-A. Verlaine,
57 See M. Krone & P. Dannenberg, Development or Divide? Information and Communication Poultry Trading Enters Digital Age, Wall St. J., March 9, 2021, at B2 (detailing the effort
Technologies in Commercial Small-Scale Farming, in East Africa, in Digital Economies at to create U.S. marketplace for trading chicken parts; Tyson moves “millions of pounds
Global Margins 79 (M. Graham, ed., The MIT Press, 2019), at 88–97. daily of meat and poultry products from farmers to vendors,” with consequent high bro-
kerage fees).
58 The detail about the tea auction is from C. Foster, M. Graham & T. Mwolo Waema,
Making Sense of Digital Disintermediation and Development: The Case of the Mombasa 64 See Comp. Comm’n of S. Afr., Competition in the Digital Economy, supra note 39, at 23.
Tea Auction, in Digital Economies at Global Margins 55 (M. Graham, ed., The MIT Press, 65 Pesa is Kiswahili for “money,” hence mobile money. See W. Jack & T. Suri, Mobile Money:
2019), at 63–66. The Economics of M-PESA, NBER Working Paper 16721 (January 2011), at 6 note 10,
59 East African Tea Trade Ass’n v. Competition Auth. of Kenya, Case No. CT/001 of 2017 https://www.nber.org/papers/w16721.
¶ 84 (April 24, 2020) (Competition Tribunal), http://kenyalaw.org/caselaw/cases/ 66 D. Yermack, Fintech in Sub-Saharan Africa: What Has Worked Well, and What Hasn’t,
view/194950. Kenya is not the world’s largest producer of tea, but it frequently ranks NBER Working Paper 25007 (September 2018), at 6, http://www.nber.org/papers/
as the top exporter in part because domestic consumption is low. See K. Chang, Food & w25007.
Agric. Org. of the United Nations, World Tea Production and Trade: Current and Future
Development (2015), at 4–5 tbls. 1 & 2, http://www.fao.org/3/i4480e/i4480e.pdf. 67 Jack & Suri, supra note 65, at 6.
60 See Foster et al., supra note 58, at 66. 68 Ibid.
Concurrences N° 2-2021 I Article I Harry First I Digital platforms and competition policy in developing countries 741. M-Pesa spread quickly following its introduction, 2.4 Sharing platforms
constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment and up to a € 300 000 fine (Art. L. 335-2 Code de la Propriété Intellectuelle). Personal use of this document is authorised within the limits of Art. L 122-5 Code de la Propriété Intellectuelle and DRM protection.
with 10,000 new registrations by the end of its first year;
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L. 335-2 CPI). L’utilisation personnelle est strictement autorisée dans les limites de l’article L. 122 5 CPI et des mesures techniques de protection pouvant accompagner ce document. This document is protected by copyright laws and international copyright treaties. Non-authorised use of this document
two years later there were 7.7 million M-Pesa registered 44. Sharing platforms are used by a wide variety of
accounts.69 In its first ten years, the service expanded to businesses in Africa. The South Africa Competition
ten countries, including one in Eastern Europe. By that Commission defines these platforms as offering “short-
time 21% of all adults in Sub-Saharan Africa had a term peer-to-peer transactions to share the use of idle
mobile money account; 73% of the population of Kenya assets and services or to facilitate collaboration.”77
and more than 50% of the population of Uganda and Sharing platforms include not only firms that allow
Zimbabwe used mobile money. owners of vehicles and accommodations to “share” them
with users, but also that allow the sharing of workspaces,
42. For all of M-Pesa’s important success, its growth money (loans), clothing, and freelance services.78
has actually been fairly limited, as has been the growth
of fintech firms generally, which “have been slow to 45. Sharing platforms are an area in which the major
penetrate other sectors and other countries.”70 M-Pesa international companies face competition with local
has been limited by the fact that it operates a low-tech enterprises. In the ride-hailing segment, for example,
service, using basic cellphones and text technology but Uber’s entry into African markets triggered the spread
not relying on more advanced smartphones.71 Thus it of mobile mapping technology for collecting location
has proved less attractive in countries like South Africa data from mobile vehicles. This allowed local compa-
that already had more advanced smartphone use and a nies to develop their own products suited to the needs of
“much more advanced banking network” that was able customers in different cities and countries, “giving them-
to meet the needs that M-Pesa met.72 M-Pesa’s techno- selves an edge over foreign services.”79 In South Africa, for
logical limits also made it less attractive for integrating its example, Taxi Live and Mr D Foods (both South African
mobile payments API into other software applications.73 firms) compete with Uber for taxi ride-hailing and food
delivery; Afri Ride, a South African company, competes
43. Whether the slow diffusion of fintech in Africa is a by allowing commuters or drivers to offer unoccupied
result of technological impediments or competitor resis- seats on their trips.80 In Kenya, Little Cab competed with
tance is unclear. One author concludes that the “largest Uber by accepting M-Pesa payments.81
impediment to more rapid FinTech growth appears to be
the electrical and communications infrastructure in many 46. Even with the existence of local companies, interna-
developing countries, which have only limited, unreliable tional firms appear to be the major competitors in most
access to broadband Internet connections and smart- of these sharing platform markets. In a survey of users in
phone handsets.”74 There is little doubt that these infra- Nairobi, Little Cab, four years after its entry, was running
structure issues affect the ability of digital platforms a distant third to the international platforms, Uber and
to thrive in Africa, but it may also be the case that the Bolt.82 A 2020 survey in South Africa showed that three
powerful financial companies can create legal roadblocks of the fifteen most popular applications in South Africa
to fintech entry as well as try to preempt that entry by were international ride-sharing platforms; none of the
offering products similar to what potentially disruptive platforms in the survey was South African or African.83
fintech entrants are offering. Indeed, this may be the
case in South Africa. As the South Africa Competition 47. The competitive problems that firms in sharing
Commission points out, one approach is for incumbents platform markets face do not appear to be the result of
to accommodate the competitive threat by partnering the exercise of anticompetitive conduct by dominant
with the upstart fintech firm: “the Fintech firm commits firms. Of course, as in developed countries, these platform
to remain small, providing the incumbent with its offer- companies do face opposition from the traditional opera-
ings whilst being able to ride on the scale, distribution tors in the fields that the platforms challenge. In the ride-
channels and licenses of the traditional bank.”75 Another sharing market, for example, the metered taxi industry
possibility is for the incumbent to acquire the fintech firm has responded to Uber’s entry in ways that are similar to
outright. A third is for the incumbent firm to compete the responses in developed countries. Taxi drivers have
with the fintech’s offerings, potentially leading to anti-
competitive actions such as denying the fintech firm
needed access to infrastructure assets.76 77 Ibid. at 21.
78 See ibid.
79 E. Mourdoukoutas, Africa’s app-based taxis battle Uber over market share, Africa Renewal
69 Ibid. (August-November 2017), at 2, https://www.un.org/africarenewal/magazine/august-no-
vember-2017/africa%E2%80%99s-app-based-taxis-battle-uber-over-market-share (ac-
70 Yermack, supra note 66, at 18 (“success of M-Pesa in Kenya appears to be an outlier”). cessed March 12, 2021).
71 Ibid. at 1. 80 See http://taxiliveafrica.com/about; https://www.mrdfood.com/mr-delivery-is-now-mr-d-
72 Ibid. at 2. food#our-story; https://www.afri-ride.com/about.html (accessed March 12, 2021).
73 See Friederici et al., Digital Entrepreneurship, supra note 39, ch. 2 at 30 (describing 81 See E. Mourdoukoutas, supra note 79, at 2 (Little Cab service launched by Safaricom).
mobile payment APIs as “clunky and unreliable”). 82 B. Weru & J. Mugo, Ride Hailing Survey: Usage of App-Based Mobility Services in
74 Yermack at 2. Nairobi, Kenya (2020), at 37–38 (Uber 69%, Bolt 21%, Little Cab 10%), https://www.
changing-transport.org/wp-content/uploads/2020_Ride_Hailing_Survey.pdf.
75 Comp. Comm’n of S. Afr., Competition in the Digital Economy, supra at note 39, at 25.
83 See Statista, Most popular mobile apps used in South Africa as of February 2020 (ride-
76 See ibid. (noting how South Africa’s “big four” firms have “embraced fintech as part of share apps Uber, Bolt, and InDriver), https://www.statista.com/statistics/1103151/
their strategic direction for the future”). most-popular-mobile-apps-south-africa (accessed March 12, 2021).
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