New glasses? Only a few clicks away: with virtual screen mirrors and a selection of trial glasses by mail, online opticians provide services similar to the comprehensive services of specialty stores. Comparison portals filter out the largest selection of models, the most reasonable conditions, the quickest delivery times and the various ratings. The advantage for the consumer: from a number of offers, he or she selects the most suitable offer. This works equally well for new glasses, insurance, vacation trips, repair work and innumerable other products and services.
No question, digitalisation has had an enormous effect worldwide on competition – to the benefit of consumers. They have a nearly unlimited selection of products and services from all over the world – tailored to individual taste and reasonable in price. Finally, digitalisation allows for innovative technologies, products, services and business models. Using the Internet, young startups and established companies alike can open up new markets, both domestically and internationally, without being physically present in those markets. This in turn has a positive effect on productivity, efficiency and economic success.
|SMS and messaging services – still not a level playing field.|
|More and more people are using messaging apps instead of SMS text messages to communicate. Almost 700 million messages are sent per day in Germany using WhatsApp, whereas in 2015 only about 40 million SMS messages were sent. The problem is that the market leader WhatsApp expressly does not want to play by European rules, according to its terms and conditions. Accordingly, anyone using WhatsApp accepts the conditions of use, which means the user allows their data to be transmitted to the USA, and accepts Californian law as governing law. On the other hand, the SMS providers – the telephone companies – are subject to the respective national laws. However, a level playing field means that the same rules should apply for customer protection, data protection and security, regardless of which is used – SMS or a messaging app.|
Data and users – it’s in the numbers
At the same time, digitalisation has given rise to offers and business models that follow their own market logic. Platforms are places like local market places in towns used to be. These global online market places provide a place for people and companies to meet, both from the neighboring areas, but also from opposite ends of the earth, to exchange goods, services and information. Anyone can offer and order services and products on these types of platform, cheaply and without effort. This is the basis for the sharing economy, as evidenced by Uber and Airbnb. Yet even social networks, online retailers and search engines – such as Facebook, Amazon and Google – are also digital platforms.
The basic maxim of the digital platform economy is: the bigger the platform, the more information it can provide, and the more attractive it is for customers and vendors. So-called network effects play a decisive role: that is, the benefits increase with each additional user. In other words, just as a telephone only makes sense when many people can use it to communicate with one another, a social network becomes more interesting when a growing number of people use it for networking. The consequence is that large platforms almost automatically become even larger. This can be beneficial for users. The more his or her contacts use the same instant messaging service, the simpler communication becomes. On the other hand, this kind of market concentration leads to users – both consumers and businesses – becoming more and more dependent upon large players. Smaller competitors of these large, dominant platforms usually remain small or disappear altogether, according to the principle “The winner takes it all”.
Government policies must create a fair environment
The Federal Government has already responded to the new economic situation in digital markets and has modernized the Act against Restraints of Competition. This amendment aims to provide greater protection from abuses by dominant market players and effective merger control.
However, unilateral national initiatives are not sufficient in the age of the digital platform economy. Our goal is to achieve a consensus among the G20 countries regarding applicable regulatory frameworks that will allow all companies a fair opportunity to participate in the market. Companies needs a level playing field on which the same rules apply for all participants, just like in sports, enabling fair play.
On the other hand, too much in-depth regulation could bear the risk of slowing down the fast pace of technological progress. Decisive for the global digital economy is a framework that provides legal certainty and yet is flexible and innovation-friendly.