As we anticipated in the previous edition, with the rapid advancement of artificial intelligence (AI), new services and products are continually emerging, leading to more sophisticated forms of monopolies. Several fundamental concepts of competition law need to be updated or, alternatively, reinterpreted. Digital players today may not hold traditional market power to fix prices or directly restrict supply, but through network effects, data control, and algorithmic collusion, they can establish market shares so dominantly that competition becomes almost impossible. This situation complicates the task of demonstrating the damage caused by such practices.
For instance, network effects refer to the phenomenon where a product or service gains additional value as more people use it. As an example, social media platforms like Facebook and Instagram become more valuable to users as their networks grow, creating high entry barriers for new competitors. Data control allows these companies to amass vast amounts of information on user behavior, preferences, and trends, which can be leveraged to maintain market dominance and stifle competition. Algorithmic collusion, where companies use sophisticated algorithms to set prices or manage supply in ways that would be illegal if done explicitly, poses a new challenge for regulators.
Also, the proliferation of AI will also introduce new debates and challenges in competition litigation. Smaller firms now have access to advanced and powerful tools, enabling them to craft more sophisticated arguments and gain a better understanding of evolving market scenarios. This democratization of AI-driven legal services will lead to a more dynamic and competitive legal landscape, where the interpretation and enforcement of competition laws will need to evolve rapidly to keep pace with technological advancements.
AI tools can analyze vast amounts of data to identify anti-competitive behavior, predict outcomes of litigation, and even suggest optimal legal strategies. This increased capability can level the playing field between smaller firms and larger, more established entities, fostering greater innovation and competition in the legal industry itself.
At the same time, regulatory bodies will need to adapt their frameworks to address the unique challenges posed by the digital economy. This includes developing clearer guidelines on what constitutes anti-competitive behavior in digital markets, ensuring that definitions of market power are updated to reflect the realities of the modern economy, and investing in the technological capabilities needed to effectively monitor and investigate these markets.
Regulators may need to develop new metrics for assessing market power that go beyond traditional measures like market share and pricing power. These could include factors such as control over data, the role of network effects, and the potential for algorithmic collusion. Additionally, collaboration with international regulatory bodies will be crucial, as many of these digital giants operate on a global scale, and inconsistent regulations across borders can create enforcement challenges.
Digital markets pose a new challenge because, unlike physical economic markets, there is really no scarcity in them, or at least not in a pure sense. In a physical market, the component of scarcity defines the hoarding of a good (its availability or even its price), while in a digital market, since it does not manifest or operate in the same way, only the user or the demand itself can be hoarded.
For example, digital goods such as software, music, or movies can be replicated infinitely without significant additional cost.
However, as mentioned, there can be scarcity in terms of user attention, time, and computational resources, which is relevant for economic competition in digital markets.
This is already visible. Digital companies seek to monopolize user attention through strategies such as creating closed ecosystems (for example, Google, Facebook, Apple). This becomes relevant in how new monopolies will arise and, above all, practices different from traditional monopolistic ones.
These could include the preference for their own products on platforms (such as Amazon prioritizing its own products), the control and manipulation of algorithms to favor certain content or services, and the extensive use of personal data to maintain market dominance.
Therefore, the strict application of the concepts of the current law could ultimately generate an inhibitory effect that prevents people from accessing and taking advantage of valuable or useful offers. When the supply is much broader but, above all, more complex, the criteria for judging an anti-competitive effect must necessarily change.
Sanctioning participants in digital markets will undoubtedly produce different and possibly negative economic effects, as it could actually mean punishing creativity, development, and innovation of digital goods or products, which represents a delicate issue that must be kept in mind when addressing problems related to the digital market.
In these conditions, competition litigation will become even more complex and there is likely to be a stronger deference to the judgement and decisions of administrative regulatory bodies, such as COFECE and IFT, who, in theory, are closer to the developments in today’s markets.
However, in the absence of an updated regulation, this may not be the most ideal regime, as it makes it impossible for judges in this kind of lawsuits to go beyond the interpretations that these authorities make in this regard, usually extending the scope of their powers.
In any case, it will be interesting to see the implications of the recent decision of the US Supreme Court to overturn the precedent set in Chevron v. Natural Resources Defense Council, Inc (1984), and, above all, to see the implications of this in our country, if it is at least received, since administrative deference was implicitly established, to a large extent, in our judicial system based on the ideas of that case.