Network regulation and competition policy in digital markets

Competition law cases and market investigations of digital platforms, particularly in the European Union, have identified that network effects (direct, indirect, and algorithmic) play a fundamental role in erecting barriers to entry into digital markets and in creating a concentrated market structure. This is why we think digital markets can be defined as the new network industries. The regulation of these new network industries in the European Union builds on the experience of regulating the telecommunications sector in the EU. As competition law faces structural limitations in markets where network effects are prevalent, the Digital Markets Act, adopted in 2022, is pushing for asymmetric ex-ante regulation, i.e., prescriptive obligations imposed only upon gatekeepers. One of the main objectives is to reduce barriers to entry to increase contestability, the same program that was implemented in the EU for the reform of the traditional network industries. More precisely, the Digital Markets Act aims to foster contestability in digital markets through well-known regulatory techniques that reduce barriers to entry resulting from network effects, such as interconnection obligations, interoperability, measures to reduce lock-in, along with vertical access obligations.