By: Pinar Akman (Chilling Competition)
Nicolas Petit’s book Big Tech and the Digital Economy comes at a time of increasingly polarised and politicised debates on how one solves a “problem” like big tech. It presents a meticulously studied anatomy of six big tech companies – Google, Facebook, Amazon, Apple, Microsoft, and Netflix. It offers nuanced prescriptions of what one can do about this group of companies, which displays levels of growth, size, and market capitalisation that are unheard of in economic history. Petit’s proposals are primarily aimed at competition law and regulation, but the book has a wide scope that will be of appeal to a broader audience due to the book’s incorporation of management, technology, economics, and different areas of law such as tax and data protection.
Petit’s book easily distinguishes itself from the crowd by its clear-headed inquiry into whether there is a problem with big tech and, if so, what competition law can and should do about it. His analysis is objective, yet critical, unlike the – what Petit calls – “airport books” on the topic, where everyone can find a narrative about what’s right or wrong with big tech to suit her personal taste or “echo chamber”. Petit’s book, in contrast, displays the best qualities of public discourse on a subject of contemporary significance (such as open-mindedness), whilst avoiding the worst (such as the ad hominem). It is both very accessible for the non-specialist and full of thought-provoking ideas for the specialist. This particular piece will discuss one such important and interesting theory put forward in the book, namely that traditional antitrust principles modelled on “rivalry” should be abandoned or radically altered in digital markets.
According to Petit, the protection of rivalry is not always socially beneficial in industries with increasing returns to adoption, such as the digital markets under scrutiny. Petit’s theory is premised on the idea that “in industries with increasing returns, economic forces … produce incentives on structural monopoly firms to compete by indirect entry in untipped markets, and avoid privately and socially inefficient rivalry in tipped markets”. According to Petit, “[r]ivalry in tipped markets is privately inefficient because it is very costly for the direct entrant, and it is socially inefficient when there are increasing returns to scale due to rising marginal benefits”. Thus, “[a] sound antitrust regime should … preserve competitive pressure on monopoly firms in markets that have tipped and in which incentives to indirect entry have therefore disappeared”. One implication is that “antitrust should focus on cases of harm to competition in markets that have tipped, and be more forgiving toward the leveraging of market power in untipped markets”…