Inspired by the European Union’s Digital Markets Act (DMA), a growing number of jurisdictions around the globe either have adopted or are considering adopting frameworks of preemptive digital-competition rules (DCRs) that would more closely regulate the business models of such platforms as Google’s search engine and Amazon’s e-commerce business. The Turkish government may soon join them, as the draft amendment to Law No. 4054 on the Protection of Competition nears completion.
The prevailing narrative that underpins DCRs is that these “big tech” companies have accumulated so much economic and political power that existing competition laws can no longer effectively contain them. In the name of fulfilling the moral (and politically attractive) crusade to “stand up” to big tech, enforcers hope DCRs will allow them to avoid having to make the counterintuitive case before judges that high-quality, zero-price or low-priced goods that consumers love are, somehow, systematically marred by anticompetitive and exploitative conduct. Thus, big tech’s critics have lobbied to change the competition rules to effectively guarantee that they always get their preferred remedy.
The trick? Moving the goal posts by passing stringent ex-ante rules that require a lower evidentiary standard and that relinquish consumer welfare and efficiency as the relevant yardsticks for distinguishing procompetitive from anticompetitive conduct.
But there are costs to this enforcer-friendly approach that often get swept under the rug of political grandstanding. Abandoning the competition law’s existing paradigm will lead enforcers to conflate protecting competition with protecting competitors. Arguably, this was always the goal. Indeed, at their most fundamental level, DCRs address a moral failure, not an economic one.
The difference is a subtle but important one. Under the logic of DCRs, competition is no longer about efficiency or consumer welfare; it is about “fairness” and equity. This line of reasoning hearkens back to a way of thinking about antitrust law that has fallen by the wayside precisely because of its inability to distinguish efficient from inefficient market exit; and thus between procompetitive and anticompetitive conduct.
As such, DCRs will ultimately have to grapple with some of the same problems as the paradigms they now seek to resuscitate. Stringent, wide, and discriminatory rules risk hamstringing—even punishing—targeted digital platforms’ efforts at investment and innovation. The minefield of redistributive policies that DCRs leave in their wake will, in turn, invite costly rentseeking behavior by self-interested third parties.
More generally, purposefully leveling down incumbents sends the message that “equitable” outcomes are preferred to excellence, which could further stifle procompetitive conduct. These dynamics will curtail economic growth, effecting a macroeconomic transfer from the entire citizenry to a few politically favored domestic firms and to foreign jurisdictions with relatively less deleterious policies.
It is time for Turkey to decide whether it wants to be on the winning or losing end of that equation. Things do not currently look promising. The draft amendment of the Turkish Competition Act goes even further than the DMA, and is especially draconian in the fines and remedies it envisions (e.g., bans on mergers and acquisitions for up to five years). Its negative effects are likely to be compounded by other statutes, such as Turkey’s E-Commerce Law, which imposes discriminatory taxes on e-commerce platforms and even limits their ability to grow organically.
It is not, however, too late for Turkey to change course and stick to what will likely turn out to be a competitive advantage in the not-too-distant future: sound competition policy guided by evidence-based, case-by-case economic analysis, rather than political impetus and populism.