ICLE White Paper

Regulatory Reconquista: Ex-Ante Regulation of Digital Platforms in Latin America

Abstract

The rise of digital markets has kicked off public-policy debates around the globe premised on the assumption that such markets’ special characteristics pose unique challenges for antitrust enforcement. This has led several Latin American policymakers and agencies to consider the enactment of ex-ante regulation or “digital competition regulations” (DCRs) similar to the European Union’s Digital Markets Act (DMA). Some Latin American agencies and policymakers (e.g., in Mexico and Brazil) are already well on their way toward exploring that path. This paper challenges the fundamental premise that digital markets require de novo approaches to competition law, and recommends that Latin American jurisdictions follow their own policy path based on the region’s market and political realities and challenges.

The introduction briefly explains how Latin American legislation—particularly competition laws—long have been inspired by European counterparts. It also describes the “power competition” among developed countries that creates incentives for European policymakers to seek to expand their regulatory sphere of influence—in the case of the EU pushing Latin America to adopt its path, this can fairly be described as a modern “Reconquista” of sorts.

Section 1 reviews public-policy reports on the digital economy in Latin America in order to identify any shortcomings or regulatory bottlenecks. It concludes that while competition in digital markets is important, insufficiently competitive digital markets are not among Latin America’s most urgent public-policy priorities. Indeed, Section 1B illustrates that the region’s digital markets are “reasonably competitive.” While some actors, such as Google and Microsoft, appear to enjoy large and durable market shares, which could indicate excess market power, other so-called “Big Tech” platforms have much smaller market shares and face significant competition. In fact, new actors are thriving in the e-commerce, FinTech, ride-hailing, and food-delivery markets. This suggests that barriers to entry are much lower than proponents of DCRs often make them out to be.

Moreover, as highlighted in Section 2A, digital markets generally do not exhibit the kind of “market failures” that warrant ex-ante regulation. They are not characterized by natural monopolies, significant negative externalities, public goods, or informational asymmetries. Section 2B explores arguments made by DCR proponents that antitrust law is too slow and cumbersome to address competition issues in digital markets. Section 2C analyzes a number of key cases, investigations, and advocacy reports produced by Latin American competition agencies, which demonstrate that much can be done to address purported competition problems by employing the procedures and remedies of traditional antitrust law (even if Latin American agencies have not actually done much).

Finally, Section 3 examines possible reforms of those policies that hinder Latin American firms and innovators from growing and creating more digital services and products. We conclude that Latin American entrepreneurs would benefit greatly from regulatory and licensing reform; greater incentives for private investment (especially in telecommunications infrastructure); elimination of legal barriers to entry; labor and tax reforms; the alleviation of unnecessary regulatory burdens; and better provision of public goods, such as infrastructure and education, in order to unleash the market’s talent and creativity.

Introduction

European law has long influenced legislation in Latin America. This was most obvious during the colonial era, when most countries were either Spanish, Portuguese, or French colonies, but the trend has continued long after the United States gained more economic and political influence in the region. Examples can be found in the civil codes of several Latin American countries that were approved in the late 1970s and early 1980. These codes were strongly influenced by Italy’s Codice Civile of 1942.[1]

In recent times, the growing influence of the European Union has manifested itself in various ways. One area where this has been most apparent is data privacy. The enactment of the EU General Data Protection Regulation (GDPR) in 2016 resulted in the proliferation of data-privacy laws across Latin America that were substantially similar to the GDPR,[2] even despite mounting evidence that the GDPR hindered venture-capital investment and increased market concentration in Europe.[3]

Competition law has not been immune to this influence. According to Alfonso Miranda, “the structure of EU competition law has been adopted by the legislations of the Latin-American countries and by the Andean Community of Nations – CAN.”[4] Likewise, Julián Peña explains that while the “economic reasoning” of U.S. antitrust law has had a major influence in Latin America, “most of the competition legal framework in Latin America during this period has been mainly influenced by the European model (e.g., Argentina, Brazil, and Peru), whether in substance (e.g., abuse of dominant position) or in the procedure.”[5] In Argentina, as German Coloma notes, Act 22,262 enacted in 1980, “implied a movement towards rules that were analogous to European standards, since Articles 1 and 2 of Act 22,262 were clearly inspired by Articles 85 and 86 of the Treaty of Rome.”[6]

Against this backdrop, there is a growing sense that European law is once again set to influence policy in Latin America, this time in digital-competition policy. Due to geopolitical considerations, the European Union is looking to increase its influence in the region (as well as the presence of its domestic firms) by imposing its regulatory model for the digital sphere.[7] This strategy can be seen as part of an unfolding “great power competition.”[8]

Unfortunately, there is reason to believe Europe’s digital regulations are not guided solely by concern for consumer welfare, and are instead crafted to promote the interests of European firms. There is, indeed, some indirect evidence of the protectionist motivations of the EU’s Digital Markets Act (DMA).[9] French President Emmanuel Macron declared in 2020: “If we want technological sovereignty, we’ll have to have to adapt our competition law, which has perhaps been too much focused solely on the consumer and not enough on defending European champions.”[10] As Meredith Broadbent has explained:

…the DMA threatens to impose heavy-handed antitrust measures and to exclusively levy punitive fines on large U.S. firms, while leaving other countries’ tech firms—namely European, Chinese, and perhaps Russian companies supplying essentially the same services—untouched. Europe’s success in assuming the role of global standards-setter in the area of privacy under the GDPR has energized Brussels, as it seeks further control over the business practices of successful U.S. companies.[11]

Despite this evidence, policymakers, regulators, and competition agencies around the world have in recent years rushed to introduce so-called “digital competition regulations” (DCRs),[12] inspired primarily by the DMA. Latin American policymakers and agencies are no exception.[13] The Andean Community (CAN), for instance, is considering specific regulations for digital markets. In late 2022, CAN General Secretary Jorge Hernando Pedraza declared:

We are sure that this initiative will strengthen the specialized knowledge of digital markets at the regional level and the application of community rules for the investigation and sanction of anticompetitive practices and abuse of dominance in the Andean region, without prejudice to the evaluation of the possible development of specific regulations for digital markets, as part of our agenda.[14] (emphasis added)

In Mexico, the Federal Economic Competition Commission (COFECE) published a digital-strategy report[15] that proposed creating a digital-markets competition unit similar to the one recently implemented in the United Kingdom.[16] COFECE’s strategy contemplates:

Whether or not it is necessary to identify, under specific categories, digital platforms with certain capacities to influence or distort markets; [and]

Whether or not it is necessary to consider specific regulation to delimit the conduct of digital platforms that fall into said categories or that may otherwise distort markets.[17] (emphasis added)

In Peru, the National Institute for the Defense of Competition and Protection of Intellectual Property (INDECOPI) has proposed—in a market report on the financial-technology (FinTech) sector—studying the possibility of enacting “open banking” or “open finance” regulations to “level the information playing field.”[18]

Brazil, however, appears to be “leading the race,” as it is the only Latin American country with an actual regulatory proposal. In October 2022, Federal Deputy João Maia introduced Bill No. 2768/2022 on digital markets regulation.[19] The bill’s statement of reasons included a discussion about the need to avoid imposing “absolute prohibitions” on digital platforms, but it also included a non-rebuttable presumption that any company with annual operational income of more than R$70 million should be considered a “gatekeeper” (“detentores de controle de acceso essencial”). The measure would mandate that these gatekeepers give “equal and non-discriminatory treatment” to “professional users” and “not to refuse to provide access to their digital platforms to professional users.”

The bill also specifically mentioned the DMA in its statement of reasons:

In the European Commission, the ‘Digital Markets Act,’ aimed at the so-called ‘gatekeepers’ in the digital world, is quite detailed and was approved in 2022.

We believe it is appropriate to introduce regulation in line with the European Commission, but in a much less detailed way. This is because we are dealing with issues of extreme relevance, which require regulatory responses much faster than what is possible in defense of competition but which are sufficiently new to indicate that it is not appropriate to place an ex-ante straitjacket on economic agents, with a series of absolute prohibitions.[20]

More recently, Brazil’s Ministry of Finance unveiled its report on the economics and competition dynamics of digital platforms.[21] The report did not recommend implementing DCRs but instead called for a “more flexible,” quasi-regulatory approach similar to the existing regulatory regimes in Germany, Japan, and the United Kingdom. This would entail, the ministry reports, applying “case-by-case specific obligations” to “systemically relevant digital platforms.”

In short, while it remains unclear the extent to which DCRs will be implemented in Latin America, there is no doubt that Europe and the DMA exerts at least some influence among Latin American policymakers. This raises a crucial question: is the EU’s approach sensible? And even if it is sensible for the EU, does that necessarily make it an appropriate regulatory approach in the context of Latin America? These questions are analyzed in the following sections.

I. If DCRs Are the Solution, What’s the Problem?

This section reviews public-policy reports on the digital economy in Latin America in order to identify relevant shortcomings and bottlenecks. While competition concerns remain important across the region, they are not among the most urgent public-policy priorities for Latin America. Moreover, Part B illustrates that the region’s digital markets are “reasonably competitive.” While some actors—such as Google and Microsoft—do appear to enjoy large and durable market shares, which could indicate excess market power, other so-called “Big Tech” platforms have much smaller market shares and face significant competition. Indeed, new actors are thriving in the e-commerce, FinTech, ride-hailing, and food-delivery markets. This suggests that barriers to entry are much lower than DCR proponents often make them out to be.

A. Digital Markets in Latin America

Before considering new regulations, Latin American countries should think carefully about their policy objectives and the best way to accomplish them. Among the questions that must be asked:

• Is there a need to “tame” large digital platforms?
• Do these platforms somehow constrain growth and innovation?
• Do they create inefficiencies or inequities?
• Are “contestability” and/or “fairness” insufficient in digital markets?

It is safe to say that there is little evidence that would merit answering any of these questions affirmatively. If anything, Latin American societies need greater access to and use of digital platforms so that citizens can more readily access information, education, markets, and opportunities.

One important problem is that the proposed DCRs discussed in the introductory section are grounded primarily on theoretical concerns about competition—not the diagnosis of actual competition problems (or any other sort of market problems) in the Latin American digital economy. In contrast, most public-policy reports that actually analyze the Latin American digital economy see it as a tool to enhance economic growth, knowledge, productivity, and social inclusion, and highlight its enormous growth in recent years.

A 2013 report by the United Nations’ Economic Commission for Latin America and the Caribbean (ECLAC), for example, found that:

After two decades of implementing policies that have emphasized the development of infrastructure, access to the Internet and the diffusion of ICTs, evidence shows a significant share of the digital economy in GDP. ECLAC estimates indicate that, on average for Argentina, Brazil, Chile and Mexico, it reaches at least 3.2%, a non-negligible figure if we consider that in the 27 countries of the European Union the corresponding percentage is 5%.[22]

But unlike in the United States or (to a lesser degree) Europe, information and communications technology (ICT) has not led to broad productivity increases in Latin America. Rather than insufficient competition, the primary reason for this appears to be “the existence of barriers to the use of ICTs as a source of increased productivity and growth.”[23] Latin American firms lack the management efficiencies, human capital, and broader infrastructure that their counterparts in the United States and Europe enjoy.[24] Failures to engage in effective state modernization or to proper education on the use of ICT may also play a role.[25]

A more recent OECD report, produced in concert with the EU and the United Nations, underscored that this “digital divide” has served as a barrier that impedes Latin Americans from taking advantage of ICT to foster growth and productivity,[26] and noted the region still has a “high and increasing” productivity gap with developed economies.[27] Citing the Digital Ecosystem Development Index’s measurements of the impact of digitalization on economic development, the report notes that:

Despite significant advances in the last 15 years, LAC’s digital ecosystem is at an intermediate level of development (index value 48.7 on a scale of 0 to 100), compared with Africa (34.2), Asia-Pacific (42.1), the Middle East and North Africa (55.4), the OECD area (66.8), Western Europe (67.6) and North America (75.4).[28]

While the index does mention “competitive intensity” as one of the area in which Latin America continues to fall short, this referred only to competition in telecommunications services (mobile services, fixed broadband, mobile broadband and cable TV).[29]

But as I have argued, a lack of competition in “digital markets” or digital platforms is not the primary problem holding back the productive use of digital technologies in Latin America. More basic problems like access to digital services and a general lack of knowledge about how to use ICT remain the main bottlenecks. While Latin American countries have experienced significant growth in internet access—the percentage of the population who use the internet regularly nearly doubled from 2010 to 2018, reaching 68%,[30] while more recent data suggest that 75% of the population now uses the internet[31]—there remains a large gap in the quality of access.

[D]espite improvements, connection speeds are below the world average, limiting types of services and apps available. Low connection speed prevents simultaneous apps, a critical issue during the coronavirus (Covid?19) pandemic.[32]

Moreover, in Latin American markets where relatively few people have the skills to use ICT, it is significantly harder for entrepreneurs to exploit opportunities on digital platforms, let alone to create their own platforms and complementary services. This, naturally, also applies to business users who are unable to take advantage of digital services. The fact is that:

Less than half of Latin Americans have used a computer or have sufficient skills to use computers for basic professional tasks. …

The most common daily activities among those with computer skills were using the Internet for information gathering (73%) and email (69%), followed by real?time communications, such as videoconference or chat. Only 8% used computers for programming. Computer and Internet use varies by country. In Mexico, 15% use ICT to conduct transactions at least once per week, compared with 30% in Chile.[33] (emphasis added)

According to the OECD’s 2019 “Shaping the Digital Transformation in Latin America” report:

In terms of broadband access and use, although relevant advances have been made, there is still a long way to go. As noted above, some 38% of the population of LAC was not yet connected to the Internet in 2017, implying that some 237 million people were considered to be “offline”. Brazil, Mexico and Colombia, alone, for their size and populations, jointly still need to connect around 133 million people. In addition, that estimate does not yet qualify for the type or quality of Internet access. From the 391 million connected people in LAC, for example, only one-quarter of them, or 103 million, had a fixed broadband subscription at the end of 2017 (Figure 2.1). However, progress is being made rapidly, and more than 40 million more people were connected to a fixed network at the end of 2017 than in 2014 (OECD/IDB, 2016). Moreover, some 86 million additional people were online in 2017 compared to 2014. [34]

The report also highlighted lack of skills as a barrier to ICT adoption:

Skills levels are poor in the region, due to the low quality of primary and secondary education and structural barriers. Young Latin Americans perform poorly in reading, mathematics and science compared to their counterparts in OECD countries. Between 23 and 70% of young Latin Americans enrolled in school do not acquire basic-level proficiency in reading, mathematics and science, according to PISA results. (…) less than 3.6% of LAC students perform among the highest levels of proficiency in either mathematics, reading or science. In contrast, 15% of students in OECD countries perform in the top in at least one of these subjects.

This constitutes an obstacle to further develop more specific skills and may hamper innovation. While the latest PISA results show a moderate improvement over time in students’ learning outcomes, results remain poor compared to many other regions in the world.

(…) 43 million young Latin Americans aged 15 to 29, or 31% of the youth population, have not completed secondary education and are not enrolled in school. Even those who graduate suffer from poor quality education and transition into adult life with skills far down the ranks in comparative international evaluations such as PISA.[35] (citations omitted, emphasis added).

The 2019 OECD report did mention that “ensuring sufficient competition in the digital economy is also a challenge” and that “competition authorities must be prepared with flexible tools and co-operate across borders to address transnational competition issues.”[36] It also included a section on “Competition in the Digital Economy,” which noted that “digital technologies and data lead to greater competition in many markets” but that they “also have demonstrated a potential to tilt others toward greater concentration, market power or even dominance.”[37]

It is important to point out, however, that the report mentioned only potential competition problems or challenges to competition agencies. The report did not reference any data regarding harms to competition, or highlight any market trends that suggest rising concentration or market power. More importantly, the report did not suggest any major policy changes, let alone endorse DCRs or any other kind of regulation. Instead, it recommended greater coordination among the various jurisdictions’ competition agencies, as well as with other (e.g., consumer-protection or data-privacy) agencies within their own jurisdictions:

As digital transformation continues to affect competition, it may lead to some new challenges for competition policy frameworks that were designed with traditional products in mind. One such challenge is that digitalisation may introduce new dimensions of competition in markets, as well as new ways to achieve anticompetitive outcomes, such as the use of algorithms to collude. In addition, a range of issues will require competition authorities to enhance their advocacy efforts and deepen their co-operation with consumer protection, data protection and other regulators. These include the use of consumer data under the relevant data protection safeguards as a competitive asset when providing products at no cost, or when developing personalised prices.

Co-operation may be needed across borders to ensure that common standards are applied and that information is available to regulators. Bilateral and regional enforcement may also be useful, for example joint decision making between jurisdictions, although it is important that clear rules exist to indicate how enforcement actions are to be addressed if there are bodies with overlapping responsibilities.[38]

In other worse, even if there are reasonable concerns about competition in the “digital economy,” no putative competition problem (i.e., strategic barriers to entry implemented by a dominant incumbent) should be considered the primary constraint on the use of digital services and products to foster growth and productivity in the region (or even to its beneficial use by individuals). Most diagnoses about the state and impact of the digital economy in Latin America identify far more fundamental problems. Digital-markets regulation, therefore, should not be a public-policy priority for Latin America.

Despite this conclusion, some DCR proponents nonetheless point to “lack of competition” as a valid reason to adopt ex-ante regulation. Part B will explore if the evidence on this point.[39]

B. Are Digital Markets Competitive in Latin America?

As Section 2 will explore in greater depth,[40] most DCRs have a broad scope and are designed to cover all “digital markets,” including myriad products and services—from search engines to online marketplaces to operating systems to streaming platforms.[41] If a single body of rules is meant to regulate all “digital markets” due to an alleged lack of competition, all or most markets covered by those rules must show symptoms of a “decline in competition.” If digital markets instead offer evidence that competition is sufficiently vigorous, that should be reason enough to reevaluate the scope of DCRs, if not to abandon them altogether.

There are few comprehensive assessments of the state of competition in Latin American digital markets,[42] but it is possible to find reports and statistics covering such markets as e-commerce, FinTech, and ride-hailing platforms that show consistent growth and entry. Market share and market concentration are, of course, imperfect proxies for competition,[43] but the available evidence does not appear to support the common contention that “Big Tech” companies are “monopolies” in Latin America.

Google is arguably the only company that enjoys a dominant position—in its case, in the search-engine market in Latin America. Not only does it have an extremely large market share in the region—93.27% in 2024[44]—but it has also maintained that position for more than a decade.[45] Microsoft also enjoys extremely high market shares in the operating-system market, especially if the desktop OS market is measured separately from mobile. In the desktop OS market, Microsoft, owner of Windows, is the clear leader, with 88.42% market share,[46] followed distantly by Apple’s OSX, with a 4.56% market share.[47] In the mobile OS market Google’s Android has an 83.43% market share, followed by Apple’s iOS with a 16.33% market share.[48]

This does not mean, however, that these firms can exercise market power without any consequence. In recent years, mobile devices can substitute for desktops for a growing number of use cases.[49] Microsoft, therefore, is not only constrained by its edge competitors in the desktop OS market, but also by what participants in the mobile OS market are doing to enhance the experience of tablet and smartphone users. Google, in turn, faces potential competition in the search-engine market from artificial intelligence (AI) chatbots like ChatGPT and from AI search applications developed by Microsoft, Meta, and other firms.[50] Even if we assume that Google has incontestable monopoly power, regulation would be difficult to implement.[51]

Other “usual suspects” of market dominance, such as Meta or Amazon, have smaller but still important market shares. Meta, the owner of Facebook and Instagram, has a large market share in the social-media space: 71.87%, if Facebook (48.92%) and Instagram (22.95%) are lumped together.[52] Facebook’s market share is, however, declining, and newer platforms like TikTok are gaining users.[53] Indeed, TikTok has had an extraordinary rate of growth, attracting an annual average of 340 million active new users worldwide from 2018 to 2022.[54] The example of TikTok demonstrates how a new competitor with an attractive product can challenge an established incumbent like Meta, despite lacking its network effects, scale, or data advantages.

Conversely, Amazon may be the “big tech” company facing the most competition in Latin America; it is sometimes even the underdog against the regional “unicorn” Mercado Libre or other local platforms. A recent report about online marketplaces across Latin America and the Caribbean found that “(a)s of August 2022, there were 893 B2C or C2C online marketplaces in the LAC region, accounting for 2,876 websites (URLs).”[55] As shown in Table 1, there are more than 20 marketplaces that have averaged a more than 1% share of online traffic from 2019–2021.

TABLE 1: Share of Marketplace Traffic in Latin America, 2019-2021 (%)

SOURCE: Estefanía Lotitto and Bernardo Díaz de Astarloa (2023)

It is important to note that the list only includes marketplaces focused specifically on Latin American and Caribbean countries. The full number of competitors might be even larger, as the list does not take into account online traffic to international marketplaces where Latin American consumers also shop.

Report authors Estefanía Lotitto & Bernardo Díaz de Astarloa acknowledge that there has been significant entry in the e-commerce market, but suggest that Latin American governments should nonetheless “monitor competition patterns in the e-commerce market to avoid dominant positions and mitigate economic risks associated with competition between traditional SMEs who lack the capabilities to operate effectively in digital channels and large, established marketplaces.”[56] The authors do not explain what kind of monitoring these government should be doing, but given that also do not endorse any changes to the legal system, it is fair to assume they do not have DCRs in mind.

According to the OECD, e-commerce in Latin America:

While it remains relatively small (…), it is growing rapidly: revenues reached USD 45.4 billion in 2017 compared to USD 29.8 billion in 2015. While not all e-commerce firms are platforms (e.g., many traditional retailers also sell their products on their own websites), many of the largest players in e-commerce in Latin America are platforms: the main e-commerce retailers in Latin America include MercadoLibre, Amazon, B2W Digital, Alibaba, eBay, CNova, Apple, Walmart, Google Shopping, Buscape.[57]

Given this backdrop of growing demand, it would be extremely difficult for an alleged monopolist to exercise market power, as that demand would not be satisfied by the restriction of output; it would instead likely attract new sellers.[58] In the case of e-commerce (as in most, if not all, digital markets), low barriers to entry facilitate such additional competition.[59]

In the case of Amazon, for instance, there is empirical evidence that it not only competes in Mexico but competes intensively with other distribution channels, and has a net-positive welfare effect on Mexican consumers. A 2022 paper found that “e-commerce and brick-and-mortar retailers in Mexico operate in a single, highly competitive retail market” and that “Amazon’s entry has generated a significant pro-competitive effect by reducing brick-and-mortar retail prices and increasing product selection for Mexican consumers.”[60]

The recent entry of other marketplaces into the region (e.g., Shein) suggests that the e-commerce market is highly competitive. Moreover, there is a substantial margin for expansion, which suggests that demand could grow even more: “For instance, in 2017, 35% of Chileans had purchased online, compared to 27% in Brazil, 13% in Mexico, and 8% in Colombia.”[61]

Recently, Aeropost—a U.S. shipping and logistics company already operating in other Latin American and Caribbean countries—entered to compete in the Peruvian e-commerce market with the inauguration of its own marketplace. The business journal Semana Económica explains that “(t)he company – specialized in importing products from the United States to Latin America – seeks to take advantage of the growth of electronic commerce in the region.”[62] The company‘s CEO highlighted the relatively low penetration of e-commerce in the country: “(w)hen we talk about e-commerce in Latin America, the numbers are still very small compared to total retail. So, it is about opening, about making the pie grow, and not about the percentage of the market you have.”[63]

Regarding the FinTech market, the evidence also suggests a market experiencing consistent growth and entry:

One study identified 703 Fintech start-ups in 16 Latin American countries in 2017 (IDB and Finovista, 2017), of which 33% were in Brazil, 26% in Mexico, 12%, in Colombia, 10% in Argentina and 9% in Chile. A year later, the study identified 1,166 companies in the region, representing a 66% increase from the previous year (IDB and Finovista, 2018). The main business segments in which these Fintech start-ups are active include payments and remittances (24%), lending (18%), enterprise financial management (15%), personal financial management (8%) and crowdfunding (8%) (IDB and Finovista, 2018, p. 15).[64]

INDECOPI’s report on the FinTech sector found that the number of FinTech companies operating in Peru has been growing at an annual rate of 15%, reaching 154 companies in 2022 from 50 in 2014.[65]

FinTech, importantly, is not only competitive, but it is also “boosting competition.” As Bas Bakker et al. explained: “(t)he proliferation of new financial technology and digital banks is associated with a reduction in lending spreads. (…) fintech companies do not just compete with banks and insurance companies; they also provide banks and insurance companies with new technologies and services.”[66] The growth of FinTech services has also improved financial inclusion:

About three-quarters of digital banks’ customers are previously unbanked and underbanked consumers and small and medium enterprises (SMEs). A higher level of fintech adoption is associated with lower income inequality. Alternative finance has boosted access to finance for micro, small, and medium enterprises—sectors that have been underserved by the traditional banking system.[67]

Ride-hailing and food delivery may be the digital markets experiencing the most intense regional competition. According to The Economist, “(i)n 2021 Latin American startups attracted around $16bn in investment, roughly as much as in the previous ten years combined.”[68] Many of those firms are digital platforms that:

Aim to make life more convenient—groceries or takeaway food delivered to your door, for example. The likes of Cornershop, a Chilean app that started in 2015 and was bought by Uber in 2020, and Rappi, a Colombian app, are now used across the region. Both have expanded to do more, including delivering small parcels and running errands.[69]

Apps like Uber, Cabify, and Didi disrupted the traditional private-transport market in Latin America. Using Brazilian municipal data from 2014-2016, Guilherme Mendes Resende and Ricardo Carvalho de Andrade Lima found: “Uber’s entry into the market resulted in an average reduction of 56.8 percent in the number of rides from [the other] cab-hailing apps in the cities where the platform operates.”[70]

While there are some companies with large market shares in these markets, the landscape is highly competitive. As Scott Beyer has noted:

While Uber and Didi do in fact dominate LatAm rideshare, it hasn’t been easy. And in food delivery, they’re actually losing to the region’s homegrown companies. In either case, government regulation (or lack thereof) dictates their trajectory. (…)

Uber and Didi are both expanding in these regions, and see in urbanized Latin America a particularly alluring battleground. (…).

I saw the battle play out in my first stop, Mexico City. Uber dominated Mexico for years, but now has less market share there than Didi. It was easy to see why: each time I needed a ride, I’d find Didi had slightly lower prices.

But once getting further down into LatAm, I found the market got more crowded—namely for food delivery. Three regional apps now beat both Uber and Didi in delivery market share. PedidosYa, based in Uruguay, is dominating Central and far South America. Rappi, a delivery and finance app, wins its home country of Colombia and several surrounding ones. iFood, based in Sao Paulo, is all over Brazil, by far the region’s biggest market. These apps draw global investors and generate lots of buzz.[71]

There is also evidence that Latin American digital economy is not only competitive, but that it has made “traditional” industries more competitive. For example, COFECE’s digital-strategy report recognized that:

So far, the arrival of some technological giants in the Mexican markets has generated competitive pressure for traditional companies. For example, the growing activity of companies such as Google and Facebook in the advertising market may have the effect that important companies established in this market face greater competition and work hard to satisfy the demands of their consumers. Something similar could happen in sectors such as retail sales, finance, mobility and entertainment, whose traditional markets present significant levels of concentration, and which with the arrival of companies such as Amazon, Uber, Cabify, Didi, various Fintech, Apple and Netflix could benefit from the competition process.[72]

Similarly, Esteban Greco and María Fernanda Viecens found that:

Digital players act as disruptive suppliers with respect to traditional players. In various markets it is observed that it is digital developments that exert competitive pressure on the market, and those that provide innovative products and technological alternatives, resulting in the competitive process including both traditional and digital players. So, in such cases, more than digital markets, digital players are observed breaking into traditional markets and exerting competitive pressure on established suppliers.[73]

In summary, there is evidence of market growth and entry in various digital markets across Latin America, suggesting that barriers to entry are low. If that is indeed the case, firms’ attempts to exercise market power would be disciplined by competition. Therefore, a general “lack of competition” in digital markets is a poor rationale to create DCRs in Latin America.

II. Are DCRs Needed Where There Is Sufficient Competition?

DCR proposals rest on the premise that digital markets “dominated by large digital platforms” (so-called “Big Tech” firms) are not and cannot be sufficiently competitive due to certain “characteristics” that make them prone to concentration and monopoly. Thus, even if certain digital markets appear to be competitive, the argument goes, it is inevitable that they will eventually become monopolies, and regulation is needed to prevent that. Giuseppe Colangelo summarizes the argument well:

The distinctive features of digital markets apparently require a rethinking of the antitrust regime. The presence of strong economies of scale, extreme indirect network effects, remarkable economies of scope due to the role of data as a critical input, and conglomerate effects, along with consumers’ behavioural biases and single-homing tendencies, represent significant barriers to entry that make digital markets highly concentrated, prone to tipping, and not easily contestable. Therefore, large incumbent players appear not to be under threat and hard to dislodge. Moreover, digital platforms act as gatekeepers (either by controlling the access of third-party firms to their users or controlling the consumption of products and services by their users) and regulators (due to their rule-setting role within their ecosystem), and frequently play a dual role, being simultaneously operators for the marketplace and sellers of their own products and services in competition with rival sellers.[74]

In addition to the aforementioned “characteristics,” problems in digital markets also allegedly arise from failures inherent to antitrust enforcement:

In light of this, mounting criticism against current competition policy allege that lax antitrust enforcement, flawed judicial rules that reflect unsound economic theories or unsupported empirical claims, and the limited effectiveness of the antitrust toolkit have contributed to a significant increase in concentration in digital markets. Furthermore, antitrust litigation and enforcement are deemed to be too protracted and expensive, causing ambiguity, draining resources, and privileging incumbents. Despite the Department of Justice’s Antitrust Division (DOJ) ongoing reviewing of whether and how certain online platforms have achieved market power and are engaging in anticompetitive practices and the Federal Trade Commission’s (FTC) launching of an ex post evaluation of BigTech acquisitions, there is strong skepticism and criticism surrounding the efficacy of antitrust investigations. Too little, too late.[75]

Proponents argue that DCRs could prevent or rapidly address these problems. Some of the proposed reforms are not actually labeled as “regulations,” but rather as “competition-law reforms.” Most, however, are sector-specific (“digital markets”) and include specific ex-ante rules and duties (with prescribed penalties in the case of breach). Also, their application would not be based on the consumer-welfare effects of the regulated conduct.[76] Therefore, for the purposes of this paper, these initiatives will also be considered ex-ante regulation.[77]

In general, the proposed regulations would introduce prohibitions and restrictions on certain practices, such as so-called “self-preferencing” or the use of third-party data, and special duties, such as “interoperability” and data sharing by digital platforms with “considerable economic power” (or “gatekeepers”).[78] Some also give competition agencies or new regulators the ability to impose specific remedies.[79]

A. Market Failure in Digital Markets

According to economic theory and long-tested economic principles, ex-ante regulation is justified only in the presence of “market failures.”[80] A market failure is “a situation where the private market fails to produce the optimal level of a particular good,”[81] or as former U.S. Supreme Court Justice Stephen Breyer put it, “an alleged inability of the marketplace to deal with particular structural problems.”[82] The four market failures most commonly accepted in the economic literature are information problems, externalities, natural monopolies, and public goods.[83]

Of course, other rationales have been put forward in the political debate surrounding DCRs (distributive concerns; “fairness,” as in the case of the DMA; central planning; human rights). Nonetheless, mainstream policy discussion and regulatory best practices have long required evidence that a market is not working properly in order to justify extraordinary interventions.[84] As Thom Lambert points out:

[B]ecause the point of market failure-correcting government interventions is to enhance social welfare, such interventions are not justified if they would themselves create losses greater than those occasioned by the market failures they are aimed at correcting. Wise policy, therefore, requires consideration of the ways in which government interventions may reduce welfare.[85]

Tellingly, the DMA—the “original blueprint”[86] for DCRs—does not mention the term “market failure” or argue that any of the above-mentioned market failures are present in digital markets.[87] Likewise, Brazilian Bill No. 2768 follows suit and fails to explain which market failure would justify the regulation of digital markets in Brazil.

Instead, DCR proposals tend to mention “characteristics” of digital markets that (in some cases) lead to highly concentrated markets and a lack of market contestability that could be labelled as “quasi-market failures.” Those “quasi-market failures” allegedly make entry and surpassing incumbent market leaders difficult, even if they do not actually impede competition. As Colangelo has described it: “strong economies of scale, extreme indirect network effects, remarkable economies of scope due the role of data as a critical input, and conglomerate effects, along with consumers’ behavioural biases and single-homing tendencies.”[88]

The DMA recitals mention, e.g., that:

…core platform services feature a number of characteristics that can be exploited by the undertakings providing them. An example of such characteristics of core platform services is extreme scale economies, which often result from nearly zero marginal costs to add business users or end users. Other such characteristics of core platform services are very strong network effects, an ability to connect many business users with many end users through the multisidedness of these services, a significant degree of dependence of both business users and end users, lock-in effects, a lack of multi-homing for the same purpose by end users, vertical integration, and data driven-advantages. All these characteristics, combined with unfair practices by undertakings providing the core platform services, can have the effect of substantially undermining the contestability of the core platform services, as well as impacting the fairness of the commercial relationship between undertakings providing such services and their business users and end users.[89]

These “characteristics” are not alleged to be market failures, as they do not impede competition or make it undesirable. That is why Justice Breyer’s emphasis on “structural” problems is important.[90] Not every condition that characterizes a market as failing to precisely fit the model of perfect competition is necessarily relevant for the purposes of public policy. The high cost of regulatory interventions demands that we intervene only to address those conditions that have a considerable impact, and only where they would remain in place over the long term in the absence of intervention.

To be sure, it is possible to find some level of informational asymmetry or (positive) externalities in digital markets, but not to such degree that they would fail to be addressed by market competition (actual or potential) or by such general rules as data protection or consumer protection. It is also possible to find digital markets where a firm has some degree of monopoly power. In most digital markets, however, there is little to no evidence of significant market power, nor of a tendency toward “natural monopoly” (that is, a case where it is not possible or desirable to replace the monopolist).[91]

Digital markets do not present a “new type” of market power. As Herbert Hovenkamp has explained:

There is little empirical support for the proposition that digital-platform markets are winner-take-all. Rather, the landscape for digital markets resembles the one for markets generally: some of them are more conducive to single-firm dominance than others. Some resemble markets with a dominant firm plus a competitive fringe. Others enjoy competition among more evenly sized rivals. (…)

For digital platforms, several factors point in different directions, making categorical treatment impossible. On the one hand, network effects can be a substantial entry barrier. Particularly in markets where significant product differentiation is impossible, a large base on one or both sides of a platform, which places newcomers at a significant disadvantage, can be a powerful entry deterrent. The same thing can be said of accumulation of large amounts of consumer data or large intellectual property portfolios. Offsetting these barriers are low consumer-switching costs and widespread multi-homing, which are common in platform markets; these factors, in contrast, encourage new entry. Product differentiation is also an avenue for new entry, as is high technological turnover.[92] (emphasis added).

In 2001, in the second edition of his “Antitrust Law” treatise, Richard Posner explained, in reference to what was then called the “new economy”, that:

Because of the extraordinary rate of innovation not only in computer software but also in communications technology, the extraordinary amount of capital available worldwide for investment in new enterprises, and the rapidity with which new networks that are primarily electronic can be put into service, the networks that have emerged in the new economy do not seem particularly secure against competition. We have seen all manner of firms rise and fall in this industry-falling sometimes from what had seemed a secure monopoly position. The gale of creative destruction that Schumpeter described, in which a sequence of temporary monopolies operates to maximize innovation that confers social benefits far in excess of the social costs of the short-lived monopoly prices that the process also gives rise to, may be the reality of the new economy. This is especially likely because quality competition tends to dominate price competition in the software industry. The quality-adjusted price of software has fallen steadily simply because quality improvements have vastly outrun price increases.[93]

In the same vein, Thom Lambert has analyzed several common indicators of market power and concluded that (at least, in general) we cannot assume that there is a general trend toward monopoly in digital markets. He finds that consumer prices on most platforms do not appear to be rising (in fact, most of their services are offered at zero monetary cost). There is also little evidence that advertising prices are rising.[94] Regarding the quality of digital products and services, Lambert finds that:

GAFA firms are hardly fat monopolists enjoying the quiet life that results from a lack of competition. They are better characterized as relentless innovators that continually improve their offerings for the benefit of consumers.[95]

Jonathan Barnett observes that “while digital markets tend to converge on ‘winner-take-most’ outcomes, that is often not the end of the story.”[96] He offers several examples of market incumbents that have lost their market-leadership position, or that have at the least been forced to confront the menace of innovative entrants:

In the social networking market, Facebook has faced stiff competition since 2019 from TikTok, which by some recent estimates (as of 2022) accounts for 20% of the global social-media networking market (as compared to 46% for Facebook and Instagram). In the office productivity software market, Microsoft’s long-standing leadership has been contested recently by Google’s Workspace applications suite, which by one estimate as of 2022 accounted for almost half of the global market. In the mobile device communications market, initial leaders such as Motorola, Nokia, Ericsson, and Blackberry enjoyed large market shares in the 1990s—in 1999, Nokia and Motorola accounted for 27% and 17% of the global market³¹—but were rapidly dislodged in the mid-2000s by Apple’s iPhone and Android-based devices produced by Samsung and other firms. In the online shopping market, Amazon has faced robust competition from Walmart and, in apparel, now faces robust competition from Shein and Temu. In the search market, Google has always faced competition in “vertical” search markets from leading providers in those segments, such as Expedia and Booking.com in travel, Zillow and Redfin in real estate, and Yahoo!, Bloomberg and Reuters in finance.[97]

In a book that examined digital platforms through the lens of natural-monopoly theory,[98] Francesco Ducci focused on three case studies of “big” digital platforms, and only in the case of general or horizontal search (Google) did he find features of a natural monopoly.[99] His findings are debatable, but even assuming that they are correct, Ducci also warns that “a real-world regulator for horizontal search is likely to face a number of insurmountable limitations and challenges, especially in technologically fast and fluid industries.”[100]

In the case of e-commerce platforms like Amazon, Ducci concluded that “(d)espite the fact that network externalities give rise to large e-commerce marketplaces and the physical infrastructure of online shopping for logistics and delivery is characterized by some scale economies, neither effect is strong enough to give rise to a natural monopoly.”[101]

Finally, in the case of ride-hailing platforms (like Uber), Ducci concludes that the evidence is ambiguous:

Ride-hailing platforms are not necessarily natural monopolies. Fixed costs of entry are not very high, and the positive effects of network externalities are likely to taper off after a certain critical mass is reached. Especially in larger cities, these factors may leave room for competition between networks, which can create a number of positive effects on prices, fees, and quality of the services. The technological features of ride-hailing platform can, however, increase the chances of natural monopolies compared to the traditional taxi dispatch systems, by pushing the frontier of efficient scale toward larger networks and geographic areas.[102]

It is worth discussing the “network effects” argument in digital markets. If a firm moves fast and gets the first customers, network-effects theory holds that the presence of those customers would, in turn, attract still more customers and sellers, who will attract even more. This growth would result, allegedly, in a single firm monopolizing the market. But as David Evans and Richard Schmalensee point out, that result is far from inevitable:

Systematic research on online platforms by several authors, including one of us, shows considerable churn in leadership for online platforms over periods shorter than a decade. Then there is the collection of dead or withered platforms that dot this sector, including Blackberry and Windows in smartphone operating systems, AOL in messaging, Orkut in social networking, and Yahoo in mass online media.^[103]

In the same vein, Christopher Yoo explains that:

Despite attempts by recent reports to equate network effects with market failure, an examination of both the theoretical and empirical literature make clear that the relationship between network effects and market failure is more complex. Indeed, history is littered with once-leading digital companies that can attest to the reality that network effects are not sufficient by themselves to protect the dominance of early-market leaders. Considerations such as variation in the value of connections and the existence of countervailing externalities make the relationship between network effects and market failure ambiguous. In addition, network-effects based theories depend on the satisfaction of structural preconditions that must be shown in individual cases. Even when those preconditions are met, alternative institutional solutions exist that can mitigate or even dissipate the impact of network effects.[104]

Even those open to ex-ante regulations for digital markets acknowledge that there are considerable challenges, especially if the intent is to regulate digital platforms like “essential facilities.” Jean Tirole, for instance, acknowledges that it is possible to regulate a “stable essential facility,” but that the fast-moving nature of digital markets makes it difficult for regulators to identify them, collect the appropriate data, and promulgate and enforce the appropriate rules.^[105]

This is probably why the European Commission’s Regulatory Scrutiny Board—an independent body within the Commission that advises commissioners and evaluates the impact of proposed regulations—has, according to one report, “expressed concern about the lack of evidence supporting the DMA’s underlying assumptions concerning the purported negative effects of certain platform practices.”[106]

It is also important to consider that most proposed DCRs are designed as a single body of rules that would cover all “digital markets,” as if such markets were homogeneous. But as the International Center for Law & Economics (ICLE) explained at a 2022 meeting of the OECD’s Competition Committee:

The digital economy spans from online retail to real estate listings to concert tickets to travel booking to social media. Consequently, there is not a universally defined digital market. While digital markets are dynamic and evolving, as many markets are, digital market innovations in some segments are not as groundbreaking as they once were. In a similar manner, prominent digital market characteristics are not unique to digital markets. Print newspapers are multi-sided markets. Broadcast radio is zero-price.^[107] (emphasis added)

Those differences are important enough to believe that the broad regulation of “digital markets” is misguided. As Herbert Hovenkamp has explained:

… broad regulation is ill-suited for digital platforms because they are so disparate…. They sell different products, albeit with some overlap, and only some of these products are digital. They deal with customers and diverse sets of third parties in different ways. What they have in common is that they are very large and that a sizeable portion of their operating technology is digital.^[108] (emphasis added)

Platforms like Google Search, Amazon’s marketplace, Uber, and Spotify are so different from one another that it is highly unlikely that any single body of regulation could be both necessary and reasonable for all of those markets. Some of these markets have market leaders with a significant market share and few competitors; some are more fragmented and have more competitors with evenly distributed market shares. Some of them have strong “network effects” (payment systems), and some have milder “network effects” (streaming of video and audio). Some rely on extremely specific user data in order to deliver a valuable service, while others can work with more general data.

These idiosyncrasies mean that some rules will be useless in some markets, but will be enforced nonetheless, and generate compliance costs that could be passed on to consumers. Think of, e.g., data-sharing mandates that require the compulsory transfer of information to other platforms or “business users,” even if it is not useful to them. In other cases, the rules will not be useless, because they will affect the market where they are applied (i.e., they will benefit some business users and some consumers), but could have unintended consequences (i.e., harm to consumers in general). As Lazar Radic has pointed out:

There are a range of risks and possible unintended consequences associated with the DMA, such as the privacy dangers of sideloading and interoperability mandates; worsening product quality as a result of blanket bans on self-preferencing; decreased innovation; obstruction of the rule of law; and double and even triple jeopardy because of the overlaps between the DMA and EU competition rules.[109]

It is also important to consider that, even if they were warranted, DCRs create barriers to entry, regulatory risks, and restrictions on the monetization of business assets—all of which could make the affected markets less attractive, and thereby deter market entry. There is already anecdotal evidence that the DMA is having such consequences. As Alba Ribera has explained:

One of the greatest examples of the dichotomy that arises between the different types of consequences that can be generated by the regulatory capture of digital ecosystems can be found in Meta’s recent decision not to launch its new service Threads in the European Economic Space. To the extent that its service could be interpreted as falling within the definition of a “core platform service” belonging to the category of “online social networks” (listed by the DMA), Meta decided to refrain from entering the European market, due to the disproportionate burden that the demanding obligations imposed by the DMA would entail. It should be noted that Threads is still an entrant service in the online social networking market, in contrast to the predominant position occupied by X (previously known as Twitter). In this way, we observe that the categorization as a core platform service unifies and eliminates all the nuances that free competition entails with respect to incoming services in the markets.^[110]

It also should be noted that DCRs would likely have a greater impact in developing economies where digital markets are not yet mature. More developed economies might, indeed, be able to afford any inefficiencies that stem from DCRs.^[111]

For instance, regulations could make online goods and services more expensive. Facebook is already experimenting with a new business model in which consumers would see no advertising (and thus, there would be no data collection—or less data collection for marketing purposes, at least) but would instead have to pay to subscribe.[112] If this model were to become generalized, it may be good for some users. Privacy-minded American and European consumers would probably be able to afford such subscriptions. But the same could hardly be said for Latin American consumers—who, on average, earn less than a third the income of their European counterparts.[113]

From the perspective of the companies that own and operate digital platforms and services, if DMA-like regulations make emerging markets less profitable, the companies could simply leave or choose not to enter such markets. As Geoffrey Manne and Dirk Auer have explained, “to regulate competition, you first need to attract competition.”^[114]

While empirical research on the impact of DCRs is scarce, a recent paper by Ke Rong, D. Daniel Sokol, Di Zhou, & Feng Zhu[115] analyzing the impact of China’s “Anti-Monopoly Guidelines for the Platform Economy”[116] finds that:

This regulation has made the investment climate less attractive for startups, evidenced by a 26.73% decrease in the monthly number of investments and an 18.72% drop in newly established companies in affected industries. Contrary to expectations, the Platform Guidelines have not fostered greater competition.[117]

The recently published “The Future of European Competitiveness” report[118] (commonly known as the “Draghi Report”) underscores the impact that regulation can have on competitiveness, growth, and innovation. While the report appears to endorse the DMA, it does acknowledge that regulations like the GDPR have had a negative impact, and cautions against the administrative burden that the DMA could impose:

…while the ambitions of the EU’s GDPR and AI Act are commendable, their complexity and risk of overlaps and inconsistencies can undermine developments in the field of AI by EU industry actors. (…) This calls for developing simplified rules and enforcing harmonised implementation of the GDPR in the Member States, while removing regulatory overlaps with the AI Act (…). This would ensure that EU companies are not penalised in the development and adoption of frontier AI. With the DMA and DSA, the EU has also adopted pioneering legislation to ensure that digital competition and fair online market practices are enforced. This aims to protect smaller innovators and players from the dominance of Very Large Online Platforms, and to safeguard citizens, creators and IP holders from lack of accountability by the responsible platforms. While it is early to fully gauge the impact of these landmarks regulations, their implementation must avoid producing administrative and compliance burdens and legal uncertainties as the GDPR’s and must be enforced within shorter timeframes and more stringent processes for compliance provisions.[119]

Precisely because there is a significant growth and productivity gap between Latin America and other developed countries—greater even than that between Europe and the United States—Latin America cannot afford to implement regulations that could hinder its competitiveness. The Draghi Report points out that:

EU economic growth has been persistently slower than in the US over the past two decades, while China has been rapidly catching up. The EU-US gap in the level of GDP at 2015 prices has gradually widened from slightly more than 15% in 2002 to 30% in 2023, while on a purchasing power parity (PPP) basis a gap of 12% has emerged.[120]

But Latin American countries’ GDP gap with the United States is even larger and, in some cases, growing (see Figure 1). The primary culprit behind this gap is productivity, which is only about half that of the United States.[121]

In sum, there are several reasons to believe that no solid rationale exists to regulate Latin American digital markets: not any of them specifically, and not in general. Moreover, there are good reasons to believe that such regulations would do more harm than good for competition and consumers.

FIGURE 1: Per-Capita GDP, US and Select Latin American Countries, 1960-2023 (Constant 2015 US$)

SOURCE: World Bank, OECD[122]

B. Costs and Benefits of Regulation Versus Antitrust

Those reports that do recommend adoption of DCRs often highlight the alleged shortcomings of traditional antitrust law—i.e., that it is “too slow” or “too hard to win” for plaintiffs—as the primary justification to pursue ex-ante regulation. As Giuseppe Colangelo has explained:

… the regulatory approaches recently advanced do not seem to reflect the distinctive features of digital markets, but rather the need to design enforcement short-cuts to cope with growing concerns that antitrust law is unable to address potential anticompetitive practices by large online platforms. Hence, in most of the mentioned reports, the revival of regulation seems supported more by an alleged antitrust enforcement failure rather than true a market failure. The goal is indeed to fill alleged enforcement gaps in the current antitrust rules by introducing tools aimed at lowering legal standards and evidentiary burdens in order to address anti-competitive practices that standard antitrust analysis would struggle to tackle.^[123]

This may be a reasonable cause for regulation (although an “institutional failure,” rather than a market failure). Few would disagree that antitrust cases should be faster. Competition agencies and courts, generally speaking, should have more resources and more expeditious procedures to adjudicate cases before market structures and dynamics change and render any potential remedy useless.[124] But the fact that cases are “hard to win” is not a valid reason. Indeed, this is arguably a feature, and not a bug, of antitrust law, especially in the context of “abuse of dominance” or “monopolization” cases.^[125]

In replacing standard antitrust-law concepts like “relevant markets,” “monopoly power,” “dominant position,” and “consumer harm” with concepts like “core platforms services” and “gatekeepers,” DCRs provide procedural shortcuts to condemn some business models and practices. While these shortcuts may reduce administrative costs, these putative benefits are easily overstated. Only a few weeks after the DMA entered into force, and only a week after compliance workshops held with the newly designated “gatekeepers”, the European Commission announced that it was initiating noncompliance proceedings against three companies because their compliance proposals fell “short of effective compliance” with the new DMA rules.[126] If gatekeepers decide to appeal the seemingly inevitable noncompliance decisions, these proceedings could take months or even years of litigation before they are resolved.

Perhaps more importantly, these procedural shortcuts have a cost: they amount to the per-se prohibition of business models and practices that usually provide benefits for consumers, such as lower prices and a safer user experience. These costs are compounded by the fact that, as mentioned,[127] the language of DCRs is often overly broad. As Lazar Radic, Geoffrey Manne, and Dirk Auer have explained:

… digital markets tend to be very different from those traditionally subject to price regulation and access regimes. And even in those industries, price regulation and access regimes raise many difficulties, such as identifying appropriate price/cost ratios and fleshing out the nonprice aspects of the goods/services or regulated firms.

Those difficulties are compounded in the fast-moving digital space, where innovation cycles are faster, and where yesterday’s prices and nonprice factors may no longer be relevant today.[128]

To pick one such obligation, the application of “common-carrier” laws to digital platforms would not have a positive impact for consumers, in that “by questioning the core of digital platform business models and affecting their governance design, these interventions entrust public authorities with mammoth tasks that could ultimately jeopardize the profitability of app-store ecosystems.”[129] Apple’s App Store is one such example. As Randal Picker explained:

Would Apple have an obligation to carry—here meaning pre-install—any app requesting that? I hope that merely to state the idea is to make clear why that would be an outcome that would be physically impossible and would create a terrible consumer experience. No blocking of apps found to contain malware, no limits on pornography, no limits on apps that help that help people violate the law or evade law enforcement. Part of what consumers want from app stores (or presumably any store, online or offline) is some assurance of quality and filtering for safety and other important social values. And all of the problems that consumers experience in searching through the app stores would come directly to their devices. So don’t pre-install apps, but pre-install links, say an incredibly long browser ballot for all apps on your device. Again, self-refuting I hope.[130] (emphasis added).

The ban on “self-preferencing” would also have adverse effects for consumers. As Thom Lambert noted in a piece critical of the proposed American Innovation and Choice Online Act (AICOA) in the United States,[131] the pre-installation of services like the iPhone’s Siri involves “self-preferencing” or discrimination among business users of Apple’s iOS platform. But consumers value having a device that is ready to be used. Consumers also like the fact that Google’s search results for a restaurant or a museum offer directions to the place, which implicates the self-preferencing of Google Maps.[132]^,[133]

DCRs’ rigidity comes, at least partially, from the fact that regulators act with limited information (because they design the rules to be applied to an activity before that activity takes place). In the case of antitrust laws, agencies and courts apply the law to activities whose effects can be assessed, if imperfectly. In that sense, antitrust laws are more precise than DCRs, which rest on presumptions that certain categories of conduct are generally harmful:

… in real economies with positive transactions and information costs, the performance of the two systems will differ. Because ex-post liability systems evaluate the activities of firms later in time after information on the effects of an activity has been revealed, the information advantage favors the use of ex-post liability systems when there is heterogeneity that is known to the regulated firms (but not the regulator) ex-ante.[134] (emphasis added)

Moreover, antitrust laws are more flexible than ex-ante regulation and more likely to be appropriate for a broader range of markets and business models.^[135] As Richard Posner illustrates, while per-se rules are generally simpler and cheaper to enforce, they tend to be either underinclusive or overinclusive. When the application of such rules is determined by facts like a platform’s size or numbers of users, which are disconnected from its goals, they are “especially apt to fail.”[136]

As Geoffrey Manne has pointed out, the “common-law approach” of antitrust can be a form of error cost avoidance, leading to less Type I errors than is the case with regulation.[137] Since the “specification of detailed, ex-ante rules will ensure costly, erroneous outcomes where conduct is not clearly harmful, our understanding of its effects is indeterminate, or technological change alters either the effects of certain conduct or our understanding of it.”[138] Moreover, a case-by-case approach “is readily amenable to Bayesian updating, and as more information is gleaned (both through experience and the development of economic science), the common law approach incorporates it into the analysis.”[139]

It is important to note here that most of the practices banned by the DMA and similar regulations (and proposals) around the world are vertical restraints (contracts or other type of restraints between economic agents at different levels of the production chain), that therefore warrant a “rule-of-reason” analysis. As Jonathan Barnett explains:

The predominance of the rule of reason concerning these practices rests on a solid evidentiary foundation. Scholarship by economists and legal academics has shown that vertical restraints typically fall into the category of difficult-to-diagnose, lower to moderate-risk practices identified by Judge Taft in 1898. The most comprehensive and widely-cited review of the literature finds that, while there  is variation in theoretical models of the competitive effects of tying practices, “the empirical evidence concerning the effects of vertical restraints on consumer well-being is surprisingly consistent … when manufacturers choose to impose such restraints, not only do they make themselves better off but they also typically allow consumers to benefit from higher quality products and better service provision.” Given the complexity involved in diagnosing the competitive effects of vertical restraints, coupled with a body of evidence indicating that these practices typically benefit consumers in real-world markets, the courts’ and agencies’ fact-intensive, case-specific approach is a prudent course of action.[140] (citations omitted, italics in the original)

Even the 2019 “Cremer Report,”[141] which concluded that there are aspects of digital markets where “regulation might be appropriate,” acknowledged the relative superiority of antitrust laws to deal with any possible competition problem in digital markets:

Competition law can and should, for the foreseeable future, continue to accompany and guide the evolution of the platform economy. Its case law method is particularly well suited for the current state of evolution of the platform economy: a still experimental stage, where the efficiencies of different forms of organisation are not yet well understood and our knowledge and understanding still needs to evolve step by step.[142]

In Europe and the United States, the myriad cases initiated indicate that the “antitrust toolkit” is sufficient to address possible competition concerns in digital markets. As Giuseppe Colangelo explains,[143] the obligations introduced by the DMA appear to be based on past and current antitrust investigations. For example, the DMA prohibition on combining personal data across platforms appears to have been inspired by the Bundeskartellamt case against Facebook;[144] the prohibition on most-favored nation (MFN) clauses resembles the e-book case against Amazon.[145] The aforementioned rule on self-preferencing appears to have been inspired by the Google Shopping case.[146] Radic, Manne, and Auer also note that:

… the DMA covers conduct identical to that which the Commission has pursued under EU competition law. For instance, Google Shopping was a self-preferencing case that would fall under Article 6(5) of the DMA.130 Cases AT.40462 and AT.40703, which related to Amazon’s use of nonpublic trader data when competing on the Amazon Marketplace and its supposed bias when awarding the “Buy Box,” would now be caught by Articles 6(2) and 6(5) of the DMA.131 Apple’s anti-steering provisions—for which the Commission issued a fine mere days before the DMA’s entry into force—would be prohibited by Article 5(4) of the DMA.[147]

The fact that these cases have not been summarily dismissed, and that some cases have been adjudicated in the European Commission’s favor, tells us that the substantive rules and evidentiary burden of EU antitrust laws can be applied to digital markets. Therefore, it would be wise for Latin America to, at the least, wait for the outcome of the pending antitrust cases in Europe and the United States before rushing to adopt DCRs covering similar conduct. That would grant time to observe and analyze the results of the DMA’s “natural experiment” before opting to regulate digital markets.[148]

Another relative advantage of antitrust is that the risk is low that it would encourage “rent seeking.” Indeed, in a paper assessing the relative benefits and costs (and possible complementarity) of antitrust and regulation in network industries, Dennis Carlton and Randall Picker conclude that antitrust laws are less susceptible to “regulatory capture” because regulation to affect special interests more directly.[149] Jean Tirole also underscores that regulation creates concerns about regulatory capture.[150]

From the perspective of the rule of law, it is also important to point out that DCRs tend to grant enforcers a great degree of discretion, which in turn fosters incentives for arbitrariness and abuse. This, of course, depends on how a specific piece of regulation is drafted and implemented. Policymakers should be cautious about following the DMA template. As Pablo Ibañez Colomo points out, “the Commission is not subject to the boundaries defined over the years in the case law. [The DMA] expands the leeway through very choice of goals and benchmarks, which are inherently broad and vague.”[151] The European regulation does not contemplate clear and specific requirements that trigger its application, but rather:

… identifies a number of factors that the Commission is entitled to consider in its analysis, such as the size of the undertaking, the features of the activity (for instance, whether there are network effects or data-driven advantages and whether there is customer lock-in). However, nowhere does Article 3(8) provide that all factors be present, or that they be weighed against one another. It is explicit about the fact that it may take into account ‘some or all’ of them.[152]

To summarize, despite the alleged “technical challenges” that digital markets present to the methodology and procedures of antitrust, it remains much better suited to address any possible competition issues than regulation. As Richard Posner concluded more than 20 years ago, “antitrust doctrine is sufficiently supple, and sufficiently informed by economic theory, to cope effectively with the distinctive-seeming antitrust problems that the new economy presents.”[153]

C. Is Latin American Competition Law up to the Task?

The reality of antitrust enforcement in Latin America suggests an even more cautious approach. While the legal toolkit available to Latin American competition agencies is more or less the same as it is in Europe and the United States (that is, without approving DCRs or specific provisions for digital markets within competition law), such agencies’ experience and budgets is significantly more modest.

According to a 2019 OECD report, “competition authorities in Latin America and the Caribbean have dealt with very few enforcement cases involving digital platforms to date.”[154] A more recent report from Juan David Gutiérrez and Manuel Abarca confirms that finding:

Only Argentina, Brazil, Chile, Mexico, and Uruguay have conducted and finalised antitrust investigations in cases that involve digital markets. In other words, between 2015 and 2022, only 22 per cent of LAC’s jurisdictions studied in this research (five out of 23) adopted definitive decisions in antitrust cases in digital markets.[155]

Andrés Fuchs and Nader Mufdi similarly note that Latin American agencies have scant experience with antitrust enforcement in digital markets:

… the list of cases included in a recent report published by the Free Competition Program of the Pontificia Universidad Católica de Chile illustrates in a good way the differences that exist in number and content among cases that have taken place in Europe and the United States, and the LAC region as a whole. Certainly, beyond a couple of procedures carried out by the Conselho Administrativo de Defesa Econômica (CADE) against Google, in Latin America it has not been possible to find a case that challenges the large platforms that capture the attention of the authorities of the United States and Europe.

In short, if observed as a whole, the Latin American reality is still far from the major cases that draw the attention of the institutions, media and academia of the countries that have traditionally taken the lead in competition law. Although it is possible to observe the existence of a relevant number of cases that would include some digital component, the truth is that, both in quantity and relevance, the cases that we observe in Latin America differ considerably from the legal battles that today take place in the developed world. Certainly, the differences that persist in the cases of Latin America compared to those that have taken place in Europe and the United States are consistent with the lag experienced by digital markets in this part of the world compared to the economies in which, at date, its proliferation has been more significant.[156]

Of course, the relative scarcity of antitrust enforcement in digital markets is not necessarily negative; fewer cases initiated does not necessarily mean there has been underenforcement. It could very well be that there is not enough merit to initiate more antitrust cases in digital markets (i.e., that harmful behavior is being deterred or precluded by competition on the market), or that Latin American authorities can simply stand back and reap the benefits of enforcement initiatives elsewhere.

As Fuchs and Mufdi note, the differences in enforcement could be explained by the “lag” in these markets. Latin America does not have (perhaps apart from Mercado Libre, the Colombian delivery app Rappi, and some important actors in the digital-payments sector) many notable digital platforms that could plausibly initiate antitrust conflicts with “Big Tech” companies. It also does not have many major “complementors” to such companies (such as Yelp or Spotify) that could compete with them in their “niche” markets.

Another hypothesis is that Latin American agencies are using their (relatively scarce) resources efficiently and prioritizing the prosecution of cases in markets where the payoff could be better. Agencies already constrained by limited resources should prioritize that conduct that most harms consumers (such as cartels) and markets that could be “growth multipliers” like transportation and logistics. As the World Bank has emphasized:^[157]

While there are many ways to promote competition, tackling cartels can yield immediate and tangible benefits, especially for poor households, with little risks of unintended consequences for the business environment. Worldwide, much of the recent policy dialogue on competition issues has focused on information technology, especially social networks and online commerce platforms, as well as the broader rise of global corporate market power. Policies designed to address the potential anticompetitive impacts of these developments are complex and risk undermining the business environment by weakening incentives for firms to innovate and grow. By contrast, cartels can be identified and eliminated, or prevented from forming, through relatively simple, well-established policies and enforcement mechanisms.

Despite the relatively small number of cases brought by competition agencies in Latin America, there are a few cases that allow us to conclude that, as in the EU, antitrust law can be used to address types of conduct covered by DCRs.

In Argentina, for instance, the National Commission for the Defense of Competition (CNDC, after its Spanish acronym) launched an investigation and issued interim measures ordering WhatsApp Inc. not to update its terms and conditions in ways that would allow sharing data collected through that platform with the other integrated platforms similarly owned by Meta—notably, Facebook and Instagram.[158] According to the decision, which applies “standard” Argentinian competition law, such conduct is an “unreasonable collection of data” that would be an “exploitative abuse of a dominant position” by Meta. The decision is not only similar to the Bundeskartellamt decision against Meta’s Facebook mentioned in Section 2B, but it also cites that decision. It is also similar to the data-sharing prohibition contained in Article 5.2(c) of the DMA.

The Brazilian Administrative Council for Economic Defense (CADE, after its Portuguese acronym) has been the most active agency in the region.[159] It initiated cases regarding the MFN clauses applied by online travel agencies (OTA) like Expedia do Brasil, Decolar.com and Booking.com.[160] This move resembled similar cases initiated in the European Union, and the prohibition of MFN clauses contained in Article 5.3 of the DMA. Brazil has also seen a “self-preferencing” case in which the e-commerce media group Informacao e Tecnologia Ltda. (owner of the price-comparison websites Buscapé and Bondfaro) alleged that Google was abusing its dominant position by favoring its own process-comparison service with a privileged position in search results.[161] Again, this was another case that resembled both a prior European competition-law case and a prohibition contained in the DMA and most DCRs.

While both cases were dismissed in the end, they were not dismissed on grounds that the facts in the case were outside the scope of competition law, or because it was exceedingly difficult to analyze those. They were dropped because the parties reached a settlement in the first case and because CADE determined that there were efficient alternatives to Google’s products and data in the second.[162] As mentioned, nothing in the substance or the procedural aspects of Latin American competition law should lead anyone to conclude that antitrust law cannot be used to address any potentially anticompetitive conduct by digital platforms.

Another important consideration when analyzing proposed DCRs in Latin America is the institutional constraints that Latin American competition agencies already face. In those jurisdictions that have approved DCRs, it has been necessary to create new offices or hire significantly more personnel to enforce these additional rules.[163] Agencies in Latin America already face significant budgetary and human-capital constraints to discharge their existing duties. As explained by a recent World Bank report:

LAC competition agencies are understaffed and underfunded compared to peers from other regions (figure 2.11). The average competition budget is lower in LAC than the OECD and significantly affected by a few larger jurisdictions in LAC with a particularly high competition budget.51 While budgets alone do not provide a flawless gauge of the region’s antitrust activity and agencies’ ideal size in staffing and budget is justifiably tied to the size of the local industry, these budget and staffing data offer insights into agencies’ capacity and positioning within governmental policy priorities.[164]

For example, INDECOPI, the Peruvian competition agency, has just 46 staff dedicated to enforcing antitrust laws (including merger control, market studies, and anticompetitive conduct). This amounts to only 1.4 staff per million inhabitants, significantly smaller than the OECD average of nine staff per million. The Latin American average is four staff per million inhabitants, which is more than Peru but still less than half the OECD average.[165]

Beyond the institutional constraints, Latin American competition agencies should probably focus on more humble priorities than “tame huge global digital platforms.” A recent World Bank report posits that competition may be the missing ingredient for growth in the region. It finds that competition is less vigorous in Latin American markets than in peer nations in other regions, with fewer ex-officio investigations, less use of leniency programs, and fewer dawn raids. This suggests that many cartels remain undetected.[166]

It would be wise to ensure that Latin American competition agencies have sufficient budgets and human capital to fulfill their existing mission before even considering assigning them new tasks.

III. Reforms to Address the Real Bottlenecks in Latin American Digital Markets

While digital markets in Latin America appear to be “reasonably competitive,” as noted in Section 1B, the region does not need to be complacent on this front. In line with the shortcomings and barriers identified in Section IA, much needs to be done to increase the positive impact that digital economies could have on the region’s welfare, productivity, and growth.

A 2019 OECD report about the digital transformation of Latin America lists a number of key policy areas that the countries in the region should consider:

…in order to create and maintain a healthy digital environment that promotes diversity and helps seize the benefits of the digital transformation, including productivity growth. These include: enhancing access to broadband networks to reduce digital divides, strengthening the diffusion of digital technologies, fostering healthy business dynamism and efficient resource reallocation to enable the growth of digitally intensive firms and SMEs, supporting the development of skills and finally, creating new opportunities for trade.[167] (emphasis in the original)

Among these potential reforms, the most urgent—especially considering the implementation time it would require—is to reform telecommunications regulation in order to promote more investment in infrastructure and universal access. While the number of people in Latin America with mobile-internet access has nearly doubled in recent years, significant gaps in coverage and usage remain. According to GSMA Intelligence:

Some 190 million people across the region (of the 230 million unconnected), in both urban and rural areas, live in locations with mobile internet network coverage but do not access the internet. Despite a continued decline in service prices, this usage gap remains due to a lack of affordability. Low income levels in some population segments are an important factor, but regressive, short-termist tax policies also artificially raise the price of internet connectivity for low-income populations.[168]

The World Bank Latin American Economic Outlook 2020 report also underscored that:

Access to broadband and connection quality remain uneven among and within LAC countries. There are several initiatives to improve connectivity, primarily in broadband, along with specific initiatives to facilitate infrastructure deployment by easing the rights of way.[169]

The report mentions that “regulatory frameworks must promote competition and investment arising from the increasing convergence of networks and services in the digital economy.”[170] But it also emphasizes that “a stable and predictable regulatory framework fosters long?term investment in communication infrastructure and digital innovation”[171] and that:

In a sector where return on investment is often measured in decades, guaranteeing regulatory stability, transparency and legal certainty helps firms prepare business plans and ultimately facilitates investment.[172]

The report also detailed several strategies to expand internet access and use for disadvantaged populations, both on the demand and supply side, which could be replicated in other countries:

On the demand side, Latin Americans have difficulty accessing the Internet, mostly owing to the cost of ICT devices and provider fees. Income inequality exacerbates affordability barriers, as low?income households tend to have a much lower income than the average (OECD/IDB, 2016). On the supply side, among other barriers, limited telecommunications infrastructure, tax burdens, inefficiencies in service provision, price distortions due to lack of competition and adequate regulation limit the reach of ICT services for a significant share of the population (West, 2015).

Supply?side initiatives that have increased Internet affordability include enhanced competition, effective broadband expansion strategies, efficient spectrum allocation and infrastructure?sharing models (A4AI, 2019). Peru’s Internet para Todos (Internet for all) aims to bring 4G mobile Internet access to 6 million people in more than 30 000 rural areas by the end of 2021. This partnership between Telefónica, Facebook, IDB (Inter?American Development Bank) Invest and CAF – Development Bank of Latin America – enables operators to use communication infrastructure to expand coverage in rural areas. Telefónica has 3 130 towers across Peru; Internet para Todos aims to install an additional 866 by 2021. This programme also constitutes a growth opportunity for Telefónica by offering the possibility to test new business models and technologies in new locations and potentially expand the customer base in new markets (MAEUEC, 2020). The long?term goal is to replicate the approach in other LAC countries, where some 100 million still have no Internet access (IDB, 2020).[173]

Another potential barrier to digital markets in Latin America (which often need the support of online-payment solutions) is financial inclusion:

Data from the World Bank shows that 55.1% of the Latin America and Caribbean population over 15 had an account with a financial institution or a mobile-money service provider in 2017. The distribution of account ownership however varies across countries ranging from 30% to over 70% in some countries (see Figure 3 below). In addition to a bank account, having a credit and/or a debit card are also important means to make purchases online. These means of payment remain relatively limited in Latin American and Caribbean countries, suggesting an important link between Fintech market development and access to e-commerce.[174]

Lotitto and Diaz also highlight this shortcoming:

A consistent feature of the marketplace landscape in the LAC region is the prevalence of websites that do not allow users to finalize transactions digitally. Most likely, this reflects gaps in the development and adoption of electronic payments solutions and integration of marketplaces with logistics solutions. These two dimensions are key to fully develop e-commerce ecosystems.[175]

Even more fundamental than improved physical infrastructure are the region’s deficiencies in basic “legal infrastructure” for entrepreneurship (property rights, contract enforcement, a proper rule of law). In his “The Mystery of Capital,” Hernando de Soto contemplated why only the United States has produced a Bill Gates, writing:

Apart from his personal genius, how much of his success is due to his cultural background and his “Protestant ethic”? And how much is due to the legal property system of the United States?

How many software innovations could he have made without patents to protect them? How many deals and long-term projects could he have carried without enforceable contracts? How many risks could he have taken at the beginning without limited liability systems and insurance policies?[176]

If Latin America wants entrepreneurs and creators like Bill Gates, Steve Jobs, Sergey Brin, Larry Page, or Mark Zuckerberg, the region’s governments must start with the essential reforms needed to establish a proper rule of law. The countries of Latin America should reform their judiciary and administrative procedures to protect property rights and enforce contracts effectively. They should create a friendly business environment, with less burdens and red tape, and better public services. Currently, the region is far from that standard. Chile is the best-positioned Latin American country in the World Bank’s “Ease of Doing Business” survey, ranking in 59th place.[177]

According to the OECD’s 2023 economic survey for Peru:

… weakness of the rule of law reduces the attractiveness of Peru’s business environment. A strong rule of law is supposed to not only protect private parties from arbitrary action and infringement of property rights by the state, but also to ensure a level playing field for economic interactions between private parties. It provides for security of property rights and contract enforcement (…), necessary incentives for private sector investment and innovation. However, in Peru, high corruption and unpredictable and inefficient judicial system result in weak de facto property rights, as perceived by the business community (…). The poor efficiency of the legal framework in settling disputes (…) limits businesses’ willingness to bear the risk of, for example, contracting with unknown business partners, or hiring formal workers given high legal uncertainty about the interpretation of strict employment protection regulations.[178]

Education and intellectual property also play important roles. Another OECD report focused on public policies to foster digital transformation noted that it is crucial to “(s)trengthen the diffusion of digital technologies and related practices and business models across the economy (…) fostering investment in tangible (machinery and equipment) and in intangible capital, notably in complementary assets such as skills, organizational changes, process innovation, intellectual property, R&D, new systems and new business models,”[179] as well as to “(s)upport the development of skills that people will need to succeed in the digital world of work, notably sound cognitive skills, ICT skills, specialist skills and the ability to cope with change and keep learning.”[180]

The OECD’s “Shaping the Digital Transformation” report suggested that “(p)olicies to promote ICT investment and the diffusion of digital toots should pay particular attention to the challenges faced by SMEs to adopt and benefit from ICTs”[181] and that “(t)o help SMEs overcome barriers to effective use of advanced digital tools, governments need to enhance support and better target policies to SMEs.” [182] Examples of such approaches include schemes to facilitate the adoption of tools that may be new to SMEs, like cloud computing; promoting better use of intellectual property and other intangibles (for instance, reducing the cost to register a brand); creating exemptions from certain rules for SMEs in order to facilitate regulatory compliance; and implementing programs to raise awareness of and create opportunities for linkages between SMEs and larger firms.[183]

Regarding education, the same report proposed:

Skills-enhancing programmes for youth that combine classroom teaching, workplace learning and job search services help young Latin Americans transition to employment. Training interventions for youth in the region, such as Jóvenes con más y mejor trabajo in Argentina, ProJovem in Brazil, Plan Nacional de Lenguas Digitales in Chile, Jóvenes en Acción in Colombia, Puntos Mexico Conectado in Mexico and ProJoven in Peru, prove that comprehensive interventions have positive results on youth employability, earnings and especially job quality (ILO, 2016a). Public spending in training programmes in LAC ranges from 0.02% of GDP in Peru to more than 0.30% in Colombia and Costa Rica, compared to an OECD average of 0.14%. At secondary and tertiary levels, Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico and Peru are making significant advances in coverage, quality and adequacy of the programmes to meet the needs of the private sector.

Training programmes that respond to the needs of the marketplace, thanks to private sector participation in their design and implementation, facilitate youth’s transition into quality jobs and better earnings. Impact evaluations of the early experiences of these programmes in LAC show that coordinating course content with the private sector as well as providing participants with a stipend, are central for programmes to work well. Although foundational skills are important, individuals should be trained to participate in knowledge-based and skills-based economies. General education and TVET should expand their links with the region’s productive sector to underpin on-the-job-training systems, which should be a cornerstone of education and training across the life cycle.[184]

Upgrading human capital is paramount to maximizing technology’s benefits for productivity. But in addition to fostering specific skills, what is needed more generally is:

…improving Latin American youth’s skills involves strengthening the coverage and quality of the education system and promoting lifelong comprehensive skills-enhancing policies. Broader reforms of the education system are expected to increase access to, and quality and pertinences of, primary, secondary and tertiary education.[185]

IV. Conclusion

The case for ex-ante regulation of digital markets is weak, even in mature digital markets like the United States and Europe. It is weaker still in regions like Latin America, which do not present a general “lack of competition” problem or market failures in such markets. Some digital markets even show vibrant competition, as in the case of e-commerce, FinTech, ride-hailing, and food delivery.

Latin America has more pressing problems to address. Before even thinking of regulating digital markets, the region’s policymakers should be thinking about ways to attract companies operating in digital markets to invest in the region[186] and should facilitate the creation of new ones. For that, legal reform is indeed needed. But not to the antitrust laws, and certainly not to implement DCRs. The focus should instead be on policies like implementing proper “rule-of-law” mechanisms, removing regulatory barriers, improving access to infrastructure, increasing the use of telecommunications networks, and fostering better access to education (both in general and specifically regarding the proper skills to use digital products and services).

Rather than inviting a “Regulatory Reconquista” from Europe in the form of DMA-like regulation, Latin America should follow its own path. Before any new regulation is to be approved, Latin American policymakers should follow their own analysis and rationale. At the very least, Latin America should take a cautious “wait and see” approach to the DMA’s implementation in the EU, and the adjudication of major pending antitrust cases against digital platforms in both Europe and the United States.

[1] Jan Kleinheisterkamp, Latin America, Influence of European Private Law, in The Max Planck Encyclopedia of European Private Law (Jürgen Basedow et al., eds., 2012), at 1032.

[2] See Arturo J. Carrillo & Matías Jackson, Follow the Leader? A Comparative Law Study of the EU’s General Data Protection Regulation’s Impact in Latin America, 16 Vienna J. Int’l Const. L. 177 (2022).

[3] See, e.g., Jian Jia, Ginger Zhe Jin, & Liad Wagman, The Short-Run Effects of GDPR on Technology Venture Investment (Nat’l Bureau of Econ. Research Working Paper No. 25248, 2019), https://ssrn.com/abstract=3278912; Garrett Johnson, Economic Research on Privacy Regulation: Lessons From the GDPR and Beyond, in The Economics of Privacy (Avi Goldfarb & Catherine Tucker eds., 2024); see also, more generally, Michal Gal & Oshrit Aviv, The Competitive Effects of the GDPR, 16 J. Competition L. & Econ. 349 (2020).

[4] Alfonso Miranda Londoño, Competition Law in Latin America. Main Trends and Features 5, Cent. Estud. Derecho Competencia (Apr. 2012), available at https://centrocedec.files.wordpress.com/2010/06/cornell-lacompetition-20123.pdf.

[5] Julian Peña, Las Políticas De Competencia en América Latina Post-Consenso de Washington, Cent. Compentencia (Mar. 31, 2021), at 7-8, available at https://centrocompetencia.com/wp-content/uploads/2021/03/Julian-Pena.pdf.

[6] See Germán Coloma, The Argentine Competition Law and Its Enforcement, in Competition Law and Policy in Latin America (Eleanor Fox & Daniel Sokol, eds., 2009), at 94; Acts 11,210 and 12,906, from 1933 and 1946, respectively, were rarely enforced.

[7] Aida Sanchez Alonso, Brussels Looks to Regain Influence in Latin America, as Leaders’ Summit Begins, Euronews (Jul. 17, 2023), https://www.euronews.com/my-europe/2023/07/17/brussels-looks-to-regain-influence-in-latin-america-as-leaders-summit-begins (“After eight years without any high-level summits, Europe wants to regain influence in the region, realising that the war in Ukraine has changed the rules of the game when it comes to geopolitics. China has also been massively investing in the region, something Brussels is looking to counter.”)

[8] Thibault Schrepel, The Expected Impact of “Great Power Competition” on Antitrust Policy, Network L. Rev. (May 17, 2023), https://www.networklawreview.org/great-power-competition.

[9] Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on Contestable and Fair Markets in the Digital Sector and Amending Directives (EU) 2019/1937 and (EU) 2020/1828, 2022 O.J. (L 265) 1 (hereinafter “DMA” or “Digital Markets Act”).

[10] Barbara Moens & Paola Tamma, Macron and Merkel Defy Brussels with Push for Industrial Champions, POLÍTICO EU (May 18, 2020), https://www.politico.eu/article/macron-and-merkel-defy-brussels-with-push-for-industrial-champions.

[11] Meredith Broadbent, Implications of the Digital Markets Act for Transatlantic Cooperation, Cent’r for Strategic & Int’l Studies (Sep. 15, 2021), at 19, https://www.csis.org/analysis/implications-digital-markets-act-transatlantic-cooperation.

[12] The term “digital competition regulation” or “DCR” will be used to differentiate the ex-ante regulation of digital markets for purposes connected (even if only purportedly) to competition from other regulations intended to serve other policy goals, such as the General Data Protection Regulation (Regulation (EU) 2016/679) or the EU AI Act. DCRs include both extant rules and those currently under consideration. Context on legislative status will be provided where available and appropriate.

[13] Lazar Radic, Geoffrey A. Manne, & Dirk Auer, Regulate for What? A Closer Look at the Rationales and Goals of Digital Competition Regulations, Int’l Ctr. L. Econ. (Aug. 1, 2024), forthcoming 22 Berkeley Bus. L.J., https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4929628.

[14] See Press Release, Países de la Comunidad Andina Dialogaron Sobre Libre Competencia Comunictaria y Mercados Digitales, Comunidad Andina (Nov. 28, 2022), https://www.comunidadandina.org/notas-de-prensa/paises-de-la-comunidad-andina-dialogaron-sobre-libre-competencia-comunitaria-y-mercados-digitales (free translation of the following text in Spanish: “Estamos seguros de que esta iniciativa fortalecerá a nivel regional el conocimiento especializado de los mercados digitales y la aplicación en la normativa comunitaria para la investigación y sanción por prácticas anticompetitivas y de abuso de posición de dominio en la región andina, sin perjuicio, de evaluar la posible elaboración de una normativa exclusiva para mercados digitales, como parte de nuestra agenda.”)

[15] Estrategia Digital, Com. Fed. Competencia Econ. (COFECE), (Mar. 30, 2020), available at https://www.cofece.mx/wp-content/uploads/2020/03/EstrategiaDigital_V10.pdf.

[16] Initially proposed as part of the final report of the UK’s Digital Competition Expert Panel (also known as the “Furman report”), a Digital Markets Unit is authorized to be created within the Competition and Markets Authority by virtue of the Digital Markets, Competition and Consumers Bill. See Jason Furman et al., Unlocking Digital Competition: Report of the Digital Competition Expert Panel (Mar. 2019), available at https://assets.publishing.service.gov.uk/media/5c88150ee5274a230219c35f/unlocking_digital_competition_furman_review_web.pdf.

[17] COFECE, supra note 15, at 12.

[18] Estudio de Mercado del Sector Fintech en el Peru, Inst. Nac. Def. Competencia Prot. Prop. Intelect. (INDECOPI), (Sep. 30, 2023), at 138-139, available at https://cdn.www.gob.pe/uploads/document/file/6215160/5476585-estudio-de-mercado-del-sector-fintech-en-peru.pdf?v=1713476412.

[19] PL 2768/2022, Dispõe Sobre a Organização, o Funcionamento e a Operação das Plataformas Digitais Que Oferecem Serviços ao Público Brasileiro e dá Outras Providências, Câmara dos Deputados (Nov. 10, 2022), available at https://www.camara.leg.br/proposicoesWeb/fichadetramitacao?idProposicao=2337417.

[20] Id. at 9 (free translation of the following text in Portuguese: “Já na Comissão Europeia, o ‘Digital Markets Act,’ direcionado aos chamados ‘controladores de acesso’ (gatekeepers) no mundo digital, é bastante detalhado e foi aprovado em 2022. Acreditamos que cabe introduzir uma regulação na linha da Comissão Européia, mas de forma bem menos detalhada. Isso porque estamos lidando com questões de extrema relevância, que exigem respostas regulatórias bem mais rápidas do que o que é possível na defesa da concorrência, mas suficientemente novas para indicar não ser cabível colocar uma camisa de força ex-ante nos agentes econômicos, com uma série de proibições absolutas.”)

[21] Plataformas Digitais: Aspectos Economicos e Concorrenciais e Recomendacoes para Aprimoramentos Regulatórios No Brasil, Minist. Fazenda (Oct. 10, 2024), available at https://www.gov.br/fazenda/pt-br/central-de-conteudo/publicacoes/relatorios/relatorio-plataformas-consolidado.pdf.

[22] Economía Digital Para el Cambio Estructural y la Igualdad, Econ. Comm. Lat. Am. Caribb. (ECLAC), (2013), at 97, available at https://repositorio.cepal.org/server/api/core/bitstreams/ce419364-f83a-4ef3-a9dd-91c9c295b273/content (free translation of the following text in Spanish: “Después de dos décadas de implementación de políticas que han enfatizado el desarrollo de la infraestructura, el acceso a Internet y la difusión de las TIC, la evidencia muestra una importante participación de la economía digital en el PIB. Estimaciones de la CEPAL indican que, en promedio para Argentina, Brasil, Chile y México, alcanza al menos a 3,2%, cifra no despreciable si se considera que en los 27 países de la Unión Europea el porcentaje correspondiente es 5%.”)

[23] Id. at 39.

[24] Id.

[25] Id.

[26] Latin American Economic Outlook 2020: Digital Transformation for Building Back Better, Organ. Econ. Co-oper. Dev. (Sep. 24, 2020, https://doi.org/10.1787/e6e864fb-en.

[27] Id. at 83.

[28] Id. at 94.

[29] Metodología del Índice de Desarrollo del Ecosistema Digital (IDED), Banco Desarro. Am. Lat. Caribe (Jan. 2017), available at https://scioteca.caf.com/bitstream/handle/123456789/1052/METODOLOGIA%20DE%20IDED.pdf.

[30] OECD, supra note 26, at 96.

[31] Individuals Using the Internet (% of population) – Latin America & Caribbean, World Bank, https://data.worldbank.org/indicator/IT.NET.USER.ZS?locations=ZJ (last visited Sep. 29, 2024).

[32] OECD, supra note 26, at 96.

[33] Id. at 127-128.

[34] Shaping the Digital Transformation in Latin America: Strengthening Productivity, Improving Lives, Organ. Econ. Co-oper. Dev. (2019), at 17, https://www.oecd-ilibrary.org/docserver/8bb3c9f1-en.pdfexpires=1727657393&id=id&accname=guest&checksum=15F0525182C411C03A98395D05010716.

[35] Id. at 57.

[36] Id. at 13.

[37] Id. at 75.

[38] Id. at 75-76.

[39] In Section 2A, we explain why regulation of digital markets is not warranted under the standard “market failure rationale.”

[40] See, infra, Section 2.

[41] The DMA Art. 2(2) defines “core platform services” as including: online intermediation services, online search engines, online social-networking services, video-sharing platform services; number-independent interpersonal communications services; operating systems; web browsers; virtual assistants; cloud-computing services; and online advertising services, including any advertising networks, advertising exchanges, and any other advertising-intermediation services provided by an undertaking that provides any of the abovementioned core platform services.

[42] Other than the legal research and the advocacy reports by competition agencies cited in Section 2C.

[43] Richard A. Posner & William M. Landes, Market Power in Antitrust Cases, 94 Harv. L. Rev. 937, 947-951 (1980).

[44] Search Engine Market Share South America– August 2024, Statcounter, https://gs.statcounter.com/search-engine-market-share/all/south-america (last visited Sep. 29, 2024).

[45] In 2014, it had nearly the same market share, 93.25%; see Search Engine Market Share South America– Jan – Dec 2014, Statcounter, https://gs.statcounter.com/search-engine-market-share/all/south-america/2014 (last visited Sep. 29, 2024).

[46] Desktop Operating System Market Share South America, Statcounter, https://gs.statcounter.com/os-market-share/desktop/south-america (last visited Sep. 30, 2024).

[47] Id.

[48] Mobile Operating System Market Share South America- Aug 2023-Aug 2024, Statcounter, https://gs.statcounter.com/os-market-share/mobile/south-america (last visited Sep. 30, 2024).

[49] Imed Bouchrika, Mobile vs Desktop Usage Statistics for 2024, Research.com (Jun. 13, 2024), https://research.com/software/mobile-vs-desktop-usage.

[50] Jonathan Barnett, Illusions of Dominance: Revisiting the Market Power Assumption in Platform Ecosystems, 86 Antitrust L. J. 1, 13 (2024).

[51] See note 100 and accompanying text.

[52] Social Media Stats South America- Aug 2023-Aug 2024, Statcounter, https://gs.statcounter.com/social-media-stats/all/south-america (last visited Sep. 29, 2024). Computation of market-shares statistics does not include TikTok, but does include YouTube.

[53] Matteo Ceurvels, Facebook and Twitter Poised to Shed Users in Latin America, Emarketer (Apr. 10, 2023), https://www.emarketer.com/content/facebook-twitter-due-shed-users-latin-america.

[54] See Katharina Buchholz, The Rapid Rise of TikTok, Statista (Oct. 7, 2022), www.statista.com/chart/28412/social-media-users-by-network-amo.

[55] Estefanía Lotitto & Bernardo Díaz de Astarloa, The Landscape of B2C E-Commerce Marketplaces in Latin America and the Caribbean, Econ. Comm. Lat. Am. Caribb. (ECLAC), (2023), at 13, https://www.cepal.org/es/node/58098.

[56] Id. at 32.

[57] Latin American and Caribbean Competition Forum – Session III: Practical Approaches to Assessing Digital Platform Markets for Competition Law Enforcement, Organ. Econ. Co-oper. Dev. (Sep. 2019), at 12, available at https://one.oecd.org/document/DAF/COMP/LACF(2019)4/en/pdf.

[58] See Landes & Posner, supra note 43, at 950. Jonathan Barnett makes a similar point regarding cloud computing: “Regulators assert that cloud providers have natural incentives to exploit locked-in users. In a market in which users can multihome across cloud providers and retain data on-premises, this assertion does not withstand scrutiny. A provider that extracts immediate gains by degrading the quality of service for existing clients—an observable signal of provider opportunism—would be short-sighted since it would likely sacrifice a far larger stream of future gains as a result of decreased usage by existing clients and lost usage from potential clients. Given that the cloud market is still in its relatively early stages, the number of potential clients that have not yet migrated to cloud based data services almost certainly exceeds by a large measure the number of existing clients.” See Barnett, supra note 50, at 47.

[59] See Hovenkamp, infra note 92 and accompanying text; see also Daniel D. Sokol & Jingyuan (Mary) Ma, Understanding Online Markets and Antitrust Analysis, 15 Nw. J. Tech. & Intell. Prop. 43 (2017).

[60] Raymundo Campos, Alejandro Castañeda, Aurora Ramírez, & Carlos Ruiz, Amazon’s Effect on Prices: The Case of Mexico (El Colegio de Me?xico, Centro de Estudios Econ. Working Paper No. II-2022, 2022), available at https://cee.colmex.mx/dts/2022/DT-2022-2.pdf.

[61] OECD, supra note 57 at 13.

[62] Aeropost Ingresó a Competir en el Mercado de E-Commerce en el Perú, Semana Económica (Nov. 23, 2023), https://semanaeconomica.com/sectores-empresas/comercio/aeropost-ingreso-a-competir-en-el-mercado-de-e-commerce-en-el-peru.

[63] Id.

[64] OECD, supra note 57, at 114-15.

[65] See INDECOPI, supra note 18, at 24-25.

[66] Bas B. Bakker et al., The Rise and Impact of Fintech in Latin America, Fintech Notes (2023), https://www.elibrary.imf.org/view/journals/063/2023/003/article-A001-en.xml.

[67] Id.

[68] The Future Is Bright for Latin American Startups, The Economist (Nov. 13, 2023), https://www.economist.com/the-world-ahead/2023/11/13/the-future-is-bright-for-latin-american-startups.

[69] Id.

[70] Guilherme Mendes Resende & Ricardo Carvalho de Andrade Lima, Evaluating the Competition Effects of Uber’s Entry into the Brazilian Incumbent Cab-Hailing App Segment, 14 J. Competition L. & Econ. 608–637 (2018), https://academic.oup.com/jcle/article-abstract/14/4/608/5528532; Juan David Gutiérrez & Manuel Abarca, Mind the Gap: Assessing Ride-Hailing Apps in Latin America and the Caribbean, Kluwer Competition L. Blog (Mar. 17, 2023), https://competitionlawblog.kluwercompetitionlaw.com/2023/03/17/mind-the-gap-assessing-ride-hailing-apps-in-latin-america-and-the-caribbean.

[71] Scott Beyer, Latin America’s Food Delivery Wars, Catalyst (May 8, 2023), https://catalyst.independent.org/2023/05/08/latam-delivery.

[72] COFECE, supra note 15, at 6 (free translation of the following text in Spanish: “Hasta el momento, la llegada de algunos gigantes tecnológicos a los mercados mexicanos ha generado presión competitiva para las empresas tradicionales. Por ejemplo, la creciente actividad de empresas como Google y Facebook en el mercado de la publicidad puede tener como efecto que importantes empresas establecidas en este mercado enfrenten mayor competencia y trabajen arduamente por satisfacer las demandas de sus consumidores. Algo similar podría suceder en sectores como el de ventas al por menor, finanzas, movilidad y entretenimiento, cuyos mercados tradicionales presentan importantes niveles de concentración, y que con la llegada de empresas como Amazon, Uber, Cabify, Didi, diversas Fintech, Apple y Netflix podrían beneficiarse del proceso de competencia.”)

[73] Esteban Greco & María Fernanda Viecens, Economía Digital en América Latina: Reflexiones Sobre las Concentraciones Económicas en la Región, 21 Revista de Derecho Administrativo 146, 158-159 (2022), (free translation of the following text in Spanish: “Los jugadores digitales actúan como oferentes disruptivos respecto de los jugadores tradicionales. En diversos mercados se observa que son los desarrollos digitales los que ejercen presión competitiva sobre el mercado, y los que proveen productos novedosos y alternativas tecnológicas, resultando que el proceso competitivo incluye tanto a jugadores tradicionales como digitales. Entonces, en tales casos, más que mercados digitales se observan jugadores digitales irrumpiendo en mercados tradicionales y ejerciendo presión competitiva sobre oferentes establecidos.”)

[74] Giuseppe Colangelo, Evaluating the Case for Regulation of Digital Platforms, in The Gai Report on the Digital Economy (2020), at 905.

[75] Id. at 905-906.

[76] See Analytical Note on the G7 Inventory of New Rules for Digital Markets Organ. Econ. Co-Oper. Dev. (2023), available at https://www.oecd.org/competition/analytical-note-on-the-G7-inventory-of-new-rules-for-digital-markets-2023.pdf.

[77] See Bruce H. Kobayashi & Joshua D. Wright, Antitrust and Ex-Ante Sector Regulation, in The GAI Report on the Digital Economy (2020), at 869, Table 1; see also Pablo Ibañez Colomo, The New EU Competition Law (2023), at 125. (“The path eventually chosen by the Commission and the EU legislature is the enactment of sector-specific legislation, comparable in several respects to the one that applies to telecommunications and energy (electricity and gas) activities. At least formally speaking, the DMA is not a competition law regime. In fact, the Preamble itself is explicit about the role of the regulatory apparatus as a complement to Articles 101 and 102 TFEU.”)

[78] Colangelo, supra note 74, at 927-928; see also Radic, Manne, & Auer, supra note 12.

[79] Colangelo, supra note 74, at 914.

[80] See Robert Cooter & Tomas Ulen, Law and Economics (3d. ed., 2000), at 40-43; W. Kip Viscusi, Joseph E. Harrington Jr. & John M. Vernon, Economics of Regulation and Antitrust (4d. ed., 2005), 376-379.

[81] Henry Butler, Christopher R. Drahozal & Joanna Shepherd, Economic Analysis for Lawyers (3d. ed. 2014), at 125-126.

[82] Stephen Breyer, Regulation and its Reform (1982), at 15.

[83] Butler et al., supra note 81, at 26; Cooter & Ulen, supra note 80, at 40-43; Viscusi et al., supra note 80.

[84] See Breyer, supra note 82; see also Regulatory Impact Assessment: OECD Best Practice Principles for Regulatory Policy, Organ. Econ. Co-oper. Dev. (Feb. 25, 2020), https://doi.org/10.1787/7a9638cb-en.

[85] Thomas Lambert, Tech Platforms and Market Power: What’s the Optimal Policy Response? (Mercatus Ctr. Working Paper, 2021), at 14, tech-platforms-and-market-power-whats-optimal-policy-response.

[86] Radic, Manne, & Auer, supra note 12, at 21.

[87] See DMA, recitals 2-5.

[88] See Colangelo, supra note 74.

[89] See DMA, recital 2.

[90] See Breyer, supra note 82.

[91] Cooter & Ulen, supra note 80, at 40. (“The public policies for correcting the shortcomings of monopoly are to replace monopoly with competition where possible, or to regulate the price charged by the monopolist. The first policy is the rationale for the antitrust laws. But sometimes is not possible or even desirable to replace a monopoly. Natural monopolies, such as public utilities, are an example; those monopolies are allowed to continue in existence but government regulates their prices.”)

[92] Herbert Hovenkamp, Antitrust and Platform Monopoly, 130 Yale L. J. 1952, 1978 (2021).

[93] Richard Posner, Antitrust Law (2nd. ed., 2001), 248-250.

[94] Lambert, supra note 85, at 24-25.

[95] Id.

[96] Jonathan Barnett, Does the European Union’s Digital Markets Act Provide an Appropriate Model for Maintaining Competition in California’s Innovation Economy? (report commissioned by the Chamber of Progress, Dec. 2023), at 17, available at http://www.clrc.ca.gov/pub/2024/MM24-05.pdf.

[97] Id.

[98] Francesco Ducci, Natural Monopolies in Digital Platform Markets (2020).

[99] Id. at 73.

[100] Id. at 74.

[101] Id. at 95.

[102] Id. at 124.

[103] David S. Evans & Richard Schmalensee, Debunking the “Network Effects” Bogeyman, 40 Regulation 36, 39 (2017-2018), available at https://www.cato.org/sites/cato.org/files/serials/files/regulation/2017/12/regulation-v40n4-1.pdf.

[104] Christopher Yoo, Network Effects in Action, in The GAI Report on the Digital Economy (2020), at 191, available at https://gaidigitalreport.com/wp-content/uploads/2020/11/Yoo-Network-Effects-in-Action.pdf.

[105] Jean Tirole, Competition and the Industrial Challenge for the Digital Age, 15 Annual Rev. Econ. 573, 581 (2023), https://www.annualreviews.org/content/journals/10.1146/annurev-economics-090622-024222.

[106] Foo Yun Chee, Watchdog Highlights Shortcomings in EU Rules to Curb Tech Companies, Reuters (Dec. 21, 2020), https://www.reuters.com/article/business/watchdog-highlights-shortcomings-in-eu-rules-to-curb-tech-companies-idUSKBN28V1KR.

^[107] See The Evolving Concept of Market Power in the Digital Economy – Summaries of Contributions, Organ. Econ. Co-oper. Dev. (Jun. 22, 2022), available at https://one.oecd.org/document/DAF/COMP/WD(2022)63/en/pdf.

[108] Herbert Hovenkamp, Antitrust and Platform Monopoly, 130 Yale L. J. 1952, 1956 (2021).

[109] Lazar Radic, Digital-Market Regulation: One Size Does Not Fit All, Truth Mark. (Apr.17, 2023), https://truthonthemarket.com/2023/04/17/digital-market-regulation-one-size-does-not-fit-all.

[110] Alba Ribera, La Regulación de los Ecosistemas Digitales Frente a las Relaciones Complejas de los Operadores Económicos, Centro Competencia, (May 10, 2023), https://centrocompetencia.com/regulacion-ecosistemas-digitales-relaciones-complejas-operadores-economicos (free translation of the original text in Spanish: “Uno de los mayores ejemplos de la dicotomía que se erige entre los distintos tipos de consecuencias que se pueden generar por la captura regulatoria de los ecosistemas digitales lo podemos encontrar en la reciente decisión de Meta, de no lanzar su nuevo servicio Threads en el Espacio Económico Europeo. En la medida en que su servicio podría interpretarse de forma que cayera dentro de la definición de un ‘servicio básico de plataforma’ perteneciente a la categoría de redes sociales en línea’ (listada por la LMD), Meta decidió abstenerse de entrar en el mercado europeo, por la carga desproporcionada que le supondría las exigentes obligaciones impuestas por la LMD. Cabe notar que Threads es aún un servicio entrante en el mercado de redes sociales en línea, en contraste con la posición predominante ocupada por la actual X (anteriormente conocida como Twitter). De esta forma, observamos que la categorización como servicio básico de plataforma unifica y elimina todos los matices que el propio juego de la libre competencia opera respecto de servicios entrantes en los mercados.”); The service was made available in the European Union later in the year. See Imram Rahman-Jones & Tome Gerken, Threads: Meta’s Rival to Elon Musk’s X Launches in EU, Br. Broadcast. Corp. (Dec. 14, 2023), https://www.bbc.com/news/technology-67695643.

[111] Radic, supra note 109 (“While perhaps the EU—the world’s third largest economy—can afford to impose costly and burdensome regulation on digital companies because it has considerable leverage to ensure (with some, though as we have seen, by no means absolute, certainty) that they will not desert the European market, smaller economies that are unlikely to be seen by GAMA as essential markets are playing a different game.”)

[112] See Press Release, Facebook and Instagram to Offer Subscription for No Ads in Europe, Meta (Oct. 30, 2023), https://about.fb.com/news/2023/10/facebook-and-instagram-to-offer-subscription-for-no-ads-in-europe.

[113] See GDP Per Capita, Current Prices, Int’l. Monet. Fund, https://www.imf.org/external/datamapper/NGDPDPC@WEO/OEMDC/ADVEC/WEOWORLD/WE (last visited Sep. 29, 2024).

[114] See Geoffrey Manne & Dirk Auer, Brussels Effect or Brussels Defect: Digital Regulation in Emerging Markets, Truth Mark. (Dec. 20, 2022), https://truthonthemarket.com/2022/12/20/brussels-effect-or-brussels-defect-digital-regulation-in-emerging-markets. The argument presented is about South Africa, but may be even more relevant to Latin America.

[115] Ke Rong, D. Daniel Sokol, Di Zhou, & Feng Zhu, Antitrust Platform Regulation and Entrepreneurship: Evidence from China (Harvard Business Sch. Tech & Operations Mgt. Unit Working Paper No. 24-039, USC Class Research Paper No. 24-16, 2024), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4697283.

[116] Anti-Monopoly Guidelines, State Counc. People’s Repub. China, https://www.gov.cn/xinwen/2021-02/07/content_5585758.htm (last visited Dec. 20, 2024). The Chinese anti-monopoly guidelines for the platform economy do not include all the obligations and prohibitions included in digital market regulations like the DMA, but they do regulate “unfair price practices” and whether some “relevant platforms are necessary facilities.”

[117] Rong, Sokol, Zhou, & Zhu, supra note 115, at 13.

[118] Mario Draghi, The Future of European Competitiveness, Eur. Comm. (Sep. 2024), https://commission.europa.eu/topics/strengthening-european-competitiveness/eu-competitiveness-looking-ahead_en.

[119] Id., at 79.

[120] Id., at 8.

[121] Eduardo Fernández-Arias & Nicolás Fernández-Arias, The Latin American Growth Shortfall: Productivity and Inequality, (UNDP LAC Working Paper Series, Mar. 2021), at 4, 8, https://www.undp.org/latin-america/publications/latin-american-growth-shortfall-productivity-and-inequality.

[122] National Accounts Data Files, World Bank, https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?end=2023&locations=US-BR-MX-AR-PA-PE-CL-CO&name_desc=false&start=1961&view=chart (last visited Mar. 9, 2025).

[123] Colangelo, supra note 74, at 930.

[124] While acknowledging the relative “slowness” of antitrust procedures and these may be more relevant for Latin America, see Lambert, supra note 85, at 17. (“It is important, however, not to overstate these limitations. As precedents develop, antitrust becomes both more determinate (as business planners, enforcers, and courts may look to past judgments to predict how courts will assess the reasonableness of a challenged practice) and faster (as the growing pattern of precedents deters conduct likely to generate an adverse judgment). In the early days of new business models and market structures, legal expectations are unclear, and adjudication is required to establish them. As precedents develop around novel markets and practices, antitrust’s directives become clearer and generate more immediate effects.”)

[125] Regulators often run the risk of condemning business practices and models that they don’t fully understand; even the businesses that implement them don’t always fully know or understand the impact of such practices. See Frank Easterbrook, The Limits of Antitrust, 63 Tex. L. Rev. 1 (1984).

[126] Press Release, Commission Opens Non-Compliance Investigations Against Alphabet, Apple and Meta Under the Digital Markets Act, Eur. Comm. (Mar. 25, 2024), https://digital-markets-act.ec.europa.eu/commission-opens-non-compliance-investigations-against-alphabet-apple-and-meta-under-digital-markets-2024-03-25_en.

[127] See notes 107 and 108 and accompanying text.

[128] Radic, Manne, & Auer, supra note 12, at. 69.

[129] See Giuseppe Colangelo & Oscar Borgogno, App Stores as Public Utilities? Truth Mark. (Jan. 19, 2022), https://truthonthemarket.com/2022/01/19/app-stores-as-public-utilities.

[130] Randal Picker, Prepared of Randal Picker, Investigation into the State of Competition in the Digital Market Place, U.S. House Judic. Subcomm. Antitrust Commer. Adm. Law (May 11, 2020), at 31, available at https://picker.uchicago.edu/PickerHouseStatement.100.pdf.

[131] S.2992 – American Innovation and Choice Online Act, 117th Congress (2021-2022), https://www.congress.gov/bill/117th-congress/senate-bill/2992/text.

[132] See Jeremy Torres, Pourquoi Google Maps ne Fonctionne Plus Directement Dans la Recherche Google, Liberation (last updated Mar. 5, 2024), https://www.liberation.fr/economie/pourquoi-google-maps-ne-fonctionne-plus-directement-dans-la-recherche-google-et-comment-y-remedier-20240304_2WCOEUZ5IJADFMSTFPQXY2KBTA.

[133] Thomas A. Lambert, AICOA Is Neither Urgently Needed Nor Good: A Response to Professors Scott Morton, Salop, and Dinielli, Truth Mark. (Jul. 25, 2022), https://truthonthemarket.com/2022/07/25/aicoa-is-neither-urgently-needed-nor-good-a-response-to-professors-scott-morton-salop-and-dinielli.

[134] Kobayashi & Wright, supra note 77, at 869-870. Kobayashi and Wright acknowledge that “this advantage may not be important when such heterogeneity is minimal or when it cannot be predicted ex-ante by the regulated firms. Moreover, the absence of effective ex-post remedies may favor the ex-ante approach even with heterogeneity.” As we explain in Section 2B, digital markets are heterogeneous.

[135] Lambert, supra note 124, at 14 (“Because they are more rigid and prescriptive than antitrust’s flexible standards, and thus less likely to be appropriate for a broad range of diverse firms, ex ante rules addressing market power concerns tend to be limited in scope. They are usually tailored for a particular industry or group of firms. Antitrust’s standards are focused on ends rather than specific means, and are therefore less likely to ‘misfire’ when applied broadly.”).

[136] Posner, supra note 93, at 39 (“Rules are generally simpler and cheaper to enforce than standards and provide clearer guidance both to the people subject to them and to the courts that administer them. But they are often either underinclusive or overinclusive, and sometimes they are both at the same time. They are especially apt to fail as a sensible method of lawmaking when the relation of the rule’s purpose to the fact of facts that it makes determinative or legality is unclear. In such cases, the decision whether to characterize the case as falling within the domain of the rule may depend on the same factors that would determine legality under a standard.”).

[137] Even in civil-law countries (as most, if not all, countries in Latin America are), antitrust laws are generally designed as ex-post rules with general prohibitions. While some specific practices may be listed as anticompetitive, courts and competition agencies have circumscribed, through the caselaw, the precise boundaries of anticompetitive behavior.

[138] Geoffrey A. Manne, Error Costs in Digital Markets, in The Gai Report On The Digital Economy (2020), at 38-39.

[139] Id.

[140] Barnett, supra note 96, at 15.

[141] Jacques Crémer, Yves-Alexandre De Montjoye, & Heike Schweitzer, Competition Policy for The Digital Era, Eur. Comm. (2019), at 126.

[142] Id. at 70.

[143] Giuseppe Colangelo, The Digital Markets Act and EU Antitrust Enforcement: Double & Triple Jeopardy, Int’l Ctr. L. Econ. (Mar. 23, 2022), at 7, available at the-digital-markets-act-and-eu-antitrust-enforcement-double-triple-jeopardy.

[144] Case B6-22/16 Facebook, Bundeskartellamt (Feb. 6, 2019), available at https://www.bundeskartellamt.de/SharedDocs/Entscheidung/EN/Entscheidungen/Missbrauchsaufsicht/2019/B6-22-16.pdf.

[145] Case AT.40153, E-book MFNs and Related Matters (Amazon), Eur. Comm. (May 4, 2017), available at https://ec.europa.eu/competition/antitrust/cases/dec_docs/40153/40153_4392_3.pdf.

[146] Case AT.39740 Google Search (Shopping), Eur. Comm. (Jun. 27, 2017), available at https://ec.europa.eu/competition/antitrust/cases/dec_docs/39740/39740_14996_3.pdf.

[147] Radic, Manne, & Auer, supra note 12, at 33.

[148] Lambert, supra note 85,  at 53-54.

[149] Dennis W. Carlton & Randall C. Picker, Antitrust and Regulation (Nat’l Bureau Econ. Research Working Paper No. 12902, 2007), at 50-51, available at, https://www.nber.org/system/files/working_papers/w12902/w12902.pdf. (“Regulation created numerous inefficiencies and benefited special groups. In response to criticisms of regulation, antitrust either completely or partially replaced regulation and antitrust was used as a complement and sometimes as a constraint on regulators in many industries. The deregulated network industries that we examined all show a similar pattern: after deregulation, there is massive consolidation, a lessening of the reliance on interconnection from other firms, a decline in either wages or employment or both, and a fall in prices with a reduction or end to any cross subsidy. Consumers benefit, special interests are harmed… The relative advantages and disadvantages of each mechanism became clearer over time. Regulation produced cross-subsidies and favors to special interests, but was able to specify prices and specific rules of how firms should deal with each other. Antitrust, especially when it became economically coherent within the past 30 years or so, showed itself to be reasonably good at promoting competition, avoiding the favoring of special interests, but not good at formulating specific rules for particular industries.”)

[150] Tirole, supra note 105, at 580.

[151] Ibañez Colomo, supra note 78, at 131.

[152] Id.

[153] Posner, supra note 93, at 256. (Posner does acknowledge that “the institutional structure of antitrust enforcement” could be troublesome when applying antitrust laws to the “new economy.” But he suggests addressing those difficulties within the realm of antitrust law, with some reforms to streamline procedures and allow the use of more technical expertise.)

[154] OECD, supra note 57, at 6.

[155] Juan David Gutiérrez & Manuel Abarca, Challenges to Competition and Innovation in Digital Markets. Insights from Latin American cases, in Digital Platforms, Competition Law, and Regulation: Comparative Perspectives (Kalpana Tyagi, et al. eds., 2024), at 164-165. (These figures do not include merger-control cases or advocacy reports, where the authors found that “… in the same period, LAC’s competition authorities assessed a significant number of digital markets cases in their merger control processes and advocacy activities. Merger control cases that involve digital markets were assessed in 43 per cent of the jurisdictions with mandatory merger control (six out of 14). The jurisdictions that dealt with digital merger cases were Argentina, Brazil, Colombia, Chile, Ecuador, and Mexico. Competition advocacy reports, market studies and competition assessments of regulatory projects related to digital markets were published in 48 per cent of LAC’s jurisdictions studied in this chapter (11 out of 23). These are Brazil, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Mexico, Panama, Paraguay, Peru, and Uruguay. Furthermore, the explicit prioritisation of a ‘digital antitrust agenda’ by the competition agencies of Colombia, El Salvador, Mexico, and Peru may render additional cases soon.”)

[156] Andrés Fuchs & Nader Mufdi, Derecho de la Competencia y Regulación de Mercados Digitales: Desafíos y Propuestas para Latinoamérica, Diàlogos Cent. Competencia (Jul. 2021), at 12, available at https://centrocompetencia.com/wp-content/uploads/2021/07/Fuchs-y-Mufdi-Derecho-de-la-Competencia-y-Regulacion-de-mercado-digitales-Desafios-y-Propuestas-para-Latinoamerica.pdf.

[157] Fixing Markets, Not Prices: Policy Options to Tackle Economic Cartels in Latin America and the Caribbean, World Bank (2021), at 8, available at https://documents1.worldbank.org/curated/en/148021625810668365/pdf/Fixing-Markets-Not-Prices-Policy-Options-to-Tackle-Economic-Cartels-in-Latin-America-and-the-Caribbean.pdf.

[158] Dictamen Firma Conjunta Número, Com. Nac. Def. Competencia (2021), at 56, available at https://www.argentina.gob.ar/sites/default/files/2017/02/cond_1767.pdf.

[159] See Luiz Azevedo de Almeida Hoffmann & Rafael Rossini Parisi, Abuse of Dominance in Digital Markets – Contribution from Brazil (Session II, OECD Global Forum on Competition, Dec. 2020), available at https://cdn.cade.gov.br/Relatoriorios%20de%20gestao/2020/Cap.%201/Abuse%20of%20dominance%20in%20digital%20markets.pdf.

[160] See Administrative Inquiry No. 08700.005679/2016-13 (Braz.).

[161] See Administrative Proceeding No. 08012.0101483/2011-94 (Braz.).

[162] Almeida & Parisi, supra note 159, at 5.

[163] See Dirk Auer & Lazar Radic, The Legacy of Neo-Brandeisianism: History or Footnote?, Network L. Rev. (Jul. 9, 2024), https://www.networklawreview.org/auer-radic-brandeisianism. (“For example, in 2021 the UK created a “Digital Markets Unit” (DMU) within the Competition and Markets Authority, which is now charged with enforcing the DMCC. The DMU’s headcount is set to rise from 70 in 2022 to 200 by the end of 2024. For its part, the EU currently has 80 staff assigned to enforce the DMA.”)

[164] Latin America and the Caribbean Economic Review, April 2024 – Competition: The Missing Ingredient for Growth?, World Bank (Apr. 2024), at 48, available at https://openknowledge.worldbank.org/bitstreams/184bce21-8fec-4b14-acad-9ee256e7db93/download.

[165] OECD Economic Surveys: Peru 2023, Organ. Econ. Co-Oper. Dev. (2023), at 62, https://doi.org/10.1787/081e0906-en.

[166] World Bank, supra note 156, at 49.

[167] OECD, supra note 34, at 4.

[168] Pau Castellas, Lucrecia Corvalan, & Facundo Rattel, Connectivity Gaps in Latin America. A Roadmap for Argentina, Brazil, Colombia, Costa Rica and Ecuador, GSMA Intell. (Mar. 2023), available at https://www.gsma.com/latinamerica/wp-content/uploads/2023/03/FINAL-Brechas-de-conectividad-en-America-Latina_-LONG-report-ENGLISH-DIGITAL-30-03-2023.pdf.

[169] OECD, supra note 26, at 98.

[170] Id. at 174.

[171] Id. at 175.

[172] Id.

[173] Id. at 126.

[174] OECD, supra note 57, at 13-14.

[175] Lotitto & Diaz, supra note 55, at 32

[176] Hernando De Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (2000), 223-224.

[177] Ease of Doing Business Rankings, World Bank (2020), available at https://archive.doingbusiness.org/content/dam/doingBusiness/pdf/db2020/Doing-Business-2020_rankings.pdf.

[178] OECD, supra note 157, at 1.

[179] Shaping the Digital Transformation in Latin America: Strengthening Productivity, Improving Lives, Organ. Econ. Co-Oper. Dev. (2019), at 8, available at https://read.oecd-ilibrary.org/science-and-technology/shaping-the-digital-transformation-in-latin-america_8bb3c9f1-en.

[180] Id.

[181] Id. at 29

[182] Id.

[183] Id. at 30.

[184] Id. at 59.

[185] Id. at 59.

[186] Most digital platforms, of course, are already available in Latin America, but do not necessarily serve Latin American markets at full capacity. Think, for example, of a marketplace that allows consumers to buy goods from vendors in the United States, but does has no logistics operations or relations with local vendors in the user’s country.