Don’t Kill the Golden Goose; or Is This About Saving Red Riding Hood?

The Competition and Innovation Story: Part I

An oft-asked question that has cropped up more than once during my ongoing course on “Ex ante Regulation in Digital Markets, Why What & How?” could be rephrased as “Why kill the golden goose?” It is tempting to fall prey to arguments that justify laissez-faire even if large entities appear to indulge in anti-competitive behaviour, especially when the immediate target is an inconsequential, smaller or less powerful business rival. It is like businesses to justify their perspective well: Huge investments are only possible when one has deep pockets. Aren’t massive amounts of resources necessary for innovation? Regulators should not interfere with rules that distract large businesses and deter investments.

Regulators, on the other hand, could be more eloquent and better understood!

Let us de-jargonise and simplify. The first thing to realise is that all anti-competitive conduct affects the consumer. The world is round, and so is the economic impact of such conduct.

Once Upon a Time: Suppose the rival was a new privacy-enhancing app called “Transparency Fairy.” However, it may never see the light of day because it is acquired, banished, “killed,” or modified beyond recognition by a significant digital player.

Whose privacy continues to be under threat? 

The consumer.

Whose kingdom of data extraction and ads-based model has been protected? 

The significant digital player.

Who vanished without a trace? 

Beneficial innovation: Transparency Fairy.

Who is left behind?

The significant player continues to invest in better extraction practices to access and use troves of consumers’ personal data and supply more free behavioural ads.

What does the consumer get?

More tasty but poisoned apples.

Who is knocking on the door?

Competition Authority threatening enforcement.

How long will proving harm and punishing the large digital giant take?

Forever.

Happily Ever After? What will also be impacted?

Allocative and dynamic efficiency, productivity, competitiveness & the economy’s GDP.

What If Goldilocks did not fall asleep? Such conduct is prohibited ex-ante and prevented by Regulation. 

The Privacy-enhancing app survives and thrives, and big businesses are compelled to invest in and search for better, more consumer-friendly business models. A somewhat different-looking kingdom.

What do we all get?

Better personal data protection. Even more beneficial innovations.

Let Sleeping Watchdogs Lie? Who Need Not Stir?

Competition Authorities

Moral of the Story

Regulation is not always the Big Bad Wolf!