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Antimonopoly Regulation in a Digital Economy

May 26, 2017, 17:03 UTC+3
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The leading nations are keen to create favourable conditions for global development of digital companies reducing the room for local competition. This suggests the necessity for international competition management tools and restriction of the digital monopoly. Currently, antimonopoly regulations only apply to individual countries and regional organisations, such as the EU.

Digital companies are leading the way in global economic development, while the digital sector keeps increasing its share in the world's GDP.

  • According to the Boston Consulting Group (BCG), the share of digital economy in the developed countries' GDP has been steadily growing since 2010 to reach the current figure of 5.5%. In the developing countries this share is somewhat lower, standing at 4.9%. The global leaders are the UK (12.4% of the GDP), South Korea (8%) and China (6.9%).
  • In 2017, four out of ten companies with the highest capitalisation operate in the digital market. Those include Apple (USD 618 billion), Alphabet (USD 532 billion), Microsoft (USD 483 billion), and Facebook (USD 332 billion).

According to the BCG's report Russia online? Catch up impossible to fall behind, Russia is only ranked 39th in terms of digitisation. The digital economy's share of the national GDP is 2.8% or USD 75 billion, with USD 63 billion attributable to the consumer market.

BCG analysts concur that the digital divide between Russia and the leading countries is 5–8 years. With the Russian digital economy keeping the current pace, this gap could expand to 15–20 years.

Yet, the Russian digital economy has considerable growth potential: the country ranks 6th globally and 1st in Europe by the number of internet users. The focus on digitisation can become key to boosting Russia's competitive position.

  • In his 2016 address to the Federal Assembly, President Vladimir Putin instructed the Government to approve a programme for Digital Economy and provide for a legal basis for its further development and integration in the member states of the Eurasian Economic Union.

Arkady Dvorkovich, Russian Deputy Prime Minister, emphasises that digitisation in Russia is gaining momentum while the respective regulatory framework is lagging behind, which poses a real risk of losing control over competition in the innovations market.

The explosion of digital technologies and omnipresence of global leaders makes antimonopoly regulation a must for protection of local companies' interests. What makes the drafting of such regulations so challenging is that there is no international framework in place. Nor is there a consistent approach to the legislative process adopted by different countries.

For Russia, antimonopoly regulation of digital economy is a fairly new practice that reportedly stemmed from the amicable settlement between Russia's Federal Antimonopoly Service and Google in April 2017 to improve competition in the mobile app and mobile search segments.

Experts believe that the Russian antimonopoly regulation in the digital market should seek to:

  • improve the antimonopoly laws and practices;
  • develop a methodology to tax foreign companies and oversee their operations;
  • govern intellectual property matters related to software, equipment, etc.; and
  • fight new types of violations, including prevention of price fixing on e-marketplaces.

These initiatives would help Russia successfully integrate into the international regulatory framework targeting digital economy, once the latter is put in place.

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