Competition over what competition means, the disruption rules

The landscape is rapidly changing. We can see it everyday just travel or walking around.

That’s not just true on the physical level due to climate change and rapid global urbanization. It’s also based on the new regulation level for the big players on the market. 

Any large company today, including those operating in the transportation and infrastructure space, faces the challenging task of assessing future strategic options in arenas where the very concept of competition is evolving. Just as example, in the last months, headlines are being dominated by global trade tensions, catalyzed by U.S. President Donald Trump’s conviction that America must be made great again by taking back industrial activities done elsewhere. Yet one need scratch only a little to realize that the issues go far beyond alleged or real subsidies but stretch well into emerging and complicated issues over regulation.


And especially Intellectual property and Big Data are two areas increasingly under the radar. With stronger headwinds for economic growth and growing political concerns about income inequality, employment is also likely to become a new part of regulatory dashboards.

On a policy front, the changes point to potential confusion ahead. On top of that is the political calendar. European parliamentary elections this summer will lead to a new Commission by the end of 2019.


Shadow boxing is already underway, reflecting emerging views about the importance of scale – gigantic, when it comes to standard-setting infrastructure networks, and less so when it comes to actual consumer welfare.

The minister of one important EU country has already warned that “determining the future of the world’s mobility with law that is 30 years old” will amount to a gift to emerging countries. But the Brussels view is that the EU’s cumulative rulebook may “save our civilization” from the big digital platforms - based mainly in the U.S. and structured in ways that make their tax contributions in Europe at best modest – and that it’s premature to protect incumbents from eventual challenges from rivals.

Longer-term investors in infrastructure will wish to know how this and similar disputes will be settled.

Specialists, lawyers and advisors broadly agree that momentous decisions loom.

“2019 looks set to be a year when the role of antitrust enforcement will be tested by politicians, businesses and consumers worldwide,’ says Thomas Janssens, Global Head of Freshfields Bruckhaus Deringer’s Antitrust, Competition and Trade Group. “Mounting pressure for radical intervention in some concentrated sectors is driving authorities to question whether they have the right tools for the job.”


Signs of regulatory mission creep – often reflecting genuine conundrums rather than power grabs – abound. Enforcement can be one arena; for example in December 2018 the EU for the first ever sought consultations with a free-trade partner, South Korea, over failure to respect a labor standard obligation.

Or consider this potential big bang: India’s new rules as of February 2019 require that companies operate e-commerce platforms or sell goods on them – but not both. That had an immediate impact on Amazon and Wal-Mart’s operations in the country.

Such a division – which the New York Times protested as protectionist but was a staple more than a century ago when pioneering trust-busting rules in the US banned railway companies from transporting good they owned on their trains – strikes at the heart of the platform companies that have been thriving in the past decade.

On the numbers, Amazon has a marginal share of any country’s retail sector. But it’s growing quickly and there is much talk the company will – or at any rate could – use the sales data it manages to pick and choose what products to make on its own and promote through algorithms.

It’s a brave new world, and new thinking will inevitably emerge. Already lawyers are writing scholarly explorations of what might happen if a robot committed libel in the media.

There is also a strongly differentiated regional situation. China, for example, has scale on its side. That, independent of allegations of real or potential espionage, is what makes it such a potential giant in 5G telecom networks, as well as batteries. The US, meanwhile, has spawned digital giants but these are cannibalizing middle-class jobs and leaving the economy highly reliant on the energy sector – leading to the election of a president who promised to make coal great again.Europe, meanwhile, has excelled at its favorite fetish – competitiveness – but national fragmentation and failure to complete a monetary union make it harder for the continent’s companies to climb to the top of global value chains.


Much of the new thinking reflects surprises that have arisen from the digital revolution, where categories can blur and it’s not always clear exactly what a product, a market or even a price is.


Using big data to provide companies with fast-adjusting and nuanced pricing strategies is quite common. On the one hand, this should provide a purer price signal, one stripped of bias and based just on billions of facts. Call that the Snow White world. On the other, the novelty of the technique could lead to collusion in ways that elude the typical methods that authorities use to measure and investigate. This is the world of the Evil Genius.

As noted in the first sentence, we live in a rapidly-changing landscape. And so apparently do algorithms themselves. In a fascinating just-published research, Italian economists have shown that Artificial Intelligence programs that “learn how to learn” - based on their own experience and without any instructions other than try to be profitable- end up colluding on price in a simple market game. Naturally they leave no trace of concerted action, as there was none.

The regulatory road ahead may or may not be bumpy, but it’s guaranteed to be fascinating.