The evolving concept of market power in the digital economy

Assessing market power is central to the CMA’s cases, including cases involving digital markets. Over the past few years, it has adapted its approach to deal effectively with digital markets and revised its guidance to reflect that approach. In dealing with digital cases, the CMA has not found that a new notion of market power was needed specifically for the digital space or for it to be able to capture its concerns in digital markets. However, it has revised its guidance to reflect how it conducts its assessment, including placing less emphasis on a formalistic market definition exercise and more emphasis on dynamic constraints, considering innovation as the current process of rivalry through investment decisions and incorporated the threat of entry when determining current competitive constraints. It has also considered characteristics like multi-sidedness, network effects and any resulting tipping dynamics in performing its assessments. The CMA’s current tools sometimes struggle to deal effectively with digital markets; therefore, the CMA’s Digital Markets Taskforce has recommended the introduction of a new ex ante regulatory regime to proactively shape the behaviour of particularly powerful digital firms and to prevent consumer harm from arising, including a new test to identify what firms should be subject to this new regime which includes, as an integral part, an assessment of market power.