New digital markets improve competition

The growth of e-commerce is something most people are probably aware of. However, online sales of food are expanding slowly in rural areas, where efficient transport is lacking. So-called geo-blocking can make it hard for consumers to make purchases over national borders − but this is not due to the new technology.

Price transparency has increased, which is a mixed blessing.   – Our most important task in the new economy is ensuring that the new technology is not used to enable price coordination, even though such coordination may be easier to achieve, says Karin Lunning, acting Director General of the Swedish Competition Authority.

New electronic platforms, together with new payment solutions, create the possibility of a sharing economy where more people can share resources. This can apply to living accommodations and transportation, for instance. So far, this is a very small part of the total economy, but it may expand. The willingness to share is lower than the willingness to use the possessions of others, which may moderate such development.

One important aspect of the new sharing economy is the network effect, which means that customer benefits increase with the number of users a certain platform has. This might completely alter the tried and tested idea that a greater number of companies is always good for competition.

– We see that the platform companies can grow very quickly thanks to network effects and new technology. There is thus a risk that the largest companies will grow even stronger on the market. As the digital markets develop so quickly it is important that we, in the future, keep them under continual supervision, in order to be able to intervene in time, says Karin Lunning.

The report ”Competition and growth on digital markets” is written by the Swedish Competition Authority by order of the government.

Read the report 2017:2 (in Swedish with an English Summary)