Competition on the market for digital platforms in Sweden

Themes of the report 

In its report, the SCA has analysed five markets along with the SCA´s previous decisional practice (concerning digital markets) in order to assess whether and in what way  impediments to effective competition exist on digital platforms. 

Furthermore, in its report the SCA considers whether it is possible to exercise effective enforcement within the existing competition rules, or if there is a need for regulatory reforms or supplementary regulation to effectively enforce competition law in relation to digital platforms.

Findings of the report  

The report examines markets such as: mobile app stores, digital marketplaces, subscription services for digital books, digital order placement platforms for takeout food and intermediation of digital advertising space. 

Some of the competition law concerns that have been raised in recent years are, inter alia, whether the size of the platforms can prevent alternative platforms from entering and growing in the market, which could result in fewer consumer options, weakened competition and a slower rate of innovation. 

The negative effects arising from the market structure can also act in a way that restricts competition between business users (sellers) on the platform.  The result can be a limitation of consumers´ ability to choose between products and withholding access to important customer data, which leads to reduced choice of products on the platform, increased costs for consumers and decreased incentives for business users to innovate. 

Potential Competition concerns 

In the report, the SCA concludes that the main competition law concerns that arise from digital platforms are related to:

• The potential for platforms to tip the market by locking in their users;
• The power of important platforms in negotiations with business users;
• The dual role of platforms as both distributor and competitors to companies on the platform;
• The access to customer data on platforms.

In relation to the tipping of the market to their advantage, the SCA focuses on the ability of platforms to lock in their users due to the network effect, thus making it more difficult for customers to switch to competing platform. This power may therefore potentially restrict effective competition and ultimately lead to consumer harm. 

In relation to the bargaining power of the platforms, the SCA focuses on the possibility provided by platforms to allow business users to reach customers that they would otherwise struggle to reach. In cases where platforms have strong bargaining power despite a relatively low market share, there is a risk that digital platforms can utilise anti-competitive practices that cannot be addressed by competition enforcement within the scope of existing competition rules. 

It is, for example, possible for platforms to take advantage of this by designing their terms and conditions in a way that is not in the interest of the business users.

Further, digital platforms may adopt a dual role as both a distributor and a competitor to the businesses on the platform. This is especially relevant for vertically integrated platforms, which may give rise to concerns about the platform’s neutrality and give the digital platform an incentive to promote its own products ahead of those of its competitors.

In spite of several market participants considering data as very important for the possibility of competing with digital platforms, the SCA found that it was not possible to draw general conclusions as to the anti-competitive effects of denying access to user data due to the large variety in importance of data from market to market. A concrete analysis of a number of factors is therefore necessary to determine this. 

Limitations in current regulation

The SCA found that the existing competition law framework has a few built-in limitations. These are: 

1. Market structures are generally not covered by the existing prohibition. New regulation will therefore need to be implemented to regulate these.
2. Competition rules can only be applied after an anti-competitive conduct has been initiated or announced. It is therefore not possible to prevent anticipated anti-competitive conduct at the moment. 
3. The behavioural or structural remedies provide limited possibilities to shape remedies that have a forward-looking perspective.

The Swedish report including an English summary can be accessed here. 

For more information please contact Morten Nissen or Alexander Brøchner.