In the second of two articles (read the first part here), Ioannis Lianos discusses how the incipient ideas and suggestions Mario Draghi presents in his report on the future of competition in the European Union could be developed into real-world policy.
The Draghi report does not engage in a detailed discussion of all the possible reforms that need to be undertaken in competition law. It is therefore not clear if it argues for adopting new thinking in the application of existing competition law principles while relying on existing institutions, or if Draghi advocates for a more ambitious overhaul, or a new competition law framework that would aim to promote productivity, growth and innovation, but also other goals that may be put forward by the EU social contract (e.g. digital/data sovereignty, resilience or sustainability).
The development of such a framework should involve a comprehensive policy participation process, representing diverse stakeholders from both economically central and peripheral regions of Europe. However, the report’s list of evidence sources reveals a striking absence of input from Eastern, Central, and Southeast European stakeholders. This omission might suggest that the EU “Industrial State” envisioned by Draghi bears similarities to the techno-nationalist agendas of the larger, Western EU member states, reminiscent of their historical “Industrial State” models, rather than presenting a genuinely EU-wide federal approach. While this criticism may be premature, the report does contain elements of “national champions” rhetoric, lamenting the EU’s scarcity of unicorns and large digital platforms, while cautioning against over-regulation that could impede the development of “European champions” in telecommunications equipment and software sectors (see pages 72 and 298). Nevertheless, Draghi explicitly states that the proposed industrial policy “should not lead to policies of defending ‘national champions’ that can stifle competition and innovation,” suggesting a more nuanced approach than what the proponents of the laissez-faire approach suggest.
Envisioning a competition law and policy framework compatible with the Draghi report presents a complex challenge without a straightforward solution. However, Draghi’s approach offers insights into potential directions for this new thinking. His sector-specific analysis of the EU’s strengths and weaknesses, coupled with a detailed examination of growth bottlenecks across various segments of global value chains involving EU-based firms, provides a partial blueprint for a shift in competition policy’s political economy. This approach suggests a more nuanced, context-specific perspective on competition that considers broader economic goals beyond traditional antitrust concerns, such as industrial strategy, global competitiveness, and value chain positioning alongside more conventional competition metrics. It could potentially focus on the preservation of competitive markets with strategic interventions aimed at fostering EU firms’ global leadership in key sectors. While not explicitly outlined, this reimagined competition policy would likely necessitate a more flexible, adaptive approach capable of addressing the unique challenges and opportunities presented by different industries and their respective positions in global value chains, all while maintaining core principles of competition on the merits with the aim of ensuring the well-being of the Union.
Global value chains and ecosystems antitrust
Of course, the methodological tool of global value chains is a well-known feature of literature on economic development, and has not been absent from modern competition analysis. However, we can do more to integrate this methodological toolkit and the way value chain positioning and geography/geopolitics may play a role in the analysis of power and of different types of competitive bottlenecks. Furthermore, Draghi’s careful analysis of innovation and growth shows the intrinsic interdependencies between various markets and the role of General Purpose Technologies (GPTs) in generating new technological trajectories and through these new entrepreneurial opportunities in new industries.
The resurgence of industry-level analysis in competition policy, particularly evident in recent merger decisions’ focus on dynamic capabilities and assets, suggests a shift towards a more comprehensive approach to evaluating innovation and competition (even though innovation diversity still remains a neglected issue). This trend implies that emerging meso-level concepts, such as digital ecosystems, which now coordinate a significant portion of global economic activity, should be similarly integrated into competition analysis frameworks. As industries increasingly operate within interconnected digital ecosystems, competition policy may need to evolve to consider these complex, multi-layered structures. This approach would entail examining not just traditional market dynamics, but also the intricate relationships, feedback loops, network effects, and power dynamics within and between ecosystems. It would require assessing how ecosystem dynamics impact innovation, market entry, and competition across multiple interrelated sectors simultaneously. Such an evolution in competition analysis could provide a more nuanced understanding of modern economic structures, potentially leading to more effective regulatory interventions.
Draghi’s analysis appears to sidestep the meso- and micro-levels of economic organization, a choice that seems at odds with his aim to provide strategies for “upgrading” the European economy. This approach reflects a potentially outdated perspective, reminiscent of an era dominated by M-form corporations. However, the contemporary economic landscape has largely moved beyond this organizational model, particularly in the Western world. Today’s conglomerate relationships are predominantly structured within business ecosystems, often centralized around an ecosystem orchestrator, rather than within traditional multi-divisional firms. This shift in organizational structure represents a fundamental change in how businesses operate, innovate, and compete. By not delving into these newer, more complex forms of economic organization, Draghi’s analysis may miss crucial insights into the dynamics driving modern economic growth and innovation. A more comprehensive approach would need to consider how these ecosystem structures impact competition, innovation, and economic upgrading at various levels. Such an analysis could provide more targeted and effective strategies for enhancing European competitiveness in a global economy increasingly characterized by interconnected, ecosystem-based business models.
Antitrust as a Catalyst for Technological Opportunities
Some of the Draghi report’s commentators often cite the U.S. light-touch regulatory approach as key to its digital economy innovation and productivity edge over the EU. This perspective assumes a causal link between minimal regulation and technological advancement, challenging, for instance, the EU’s stricter competition law paradigm. This overlooks other valuable international comparisons, particularly the instructive case of South Korea.
South Korea’s successful industrialization and development of a thriving digital economy, including the emergence of global digital platforms, presents a compelling alternative model. Notably, South Korea adopted data protection laws inspired by German and EU legal doctrine as early as 2011 with the Personal Information Protection Act (PIPA), enshrining informational self-determination and privacy as constitutional rights. This approach challenges Draghi’s conceptualization of a trade-off between stringent regulation and digital economic success. South Korea’s achievements in developing a world-class digital economy and a powerful global IT sector, despite having one of the world’s most stringent privacy regimes and a relatively small venture capital sector, merit closer examination. Potential factors contributing to this success include the internal financing of digital innovation within the large conglomerate-style structures of South Korean chaebols, driven by international competition, and an active industrial policy focused on “upgrading” and promoting competition in key inputs. These strategies have positioned South Korea more favorably than the EU in global IT and computing value chains. The South Korean example thus provides a compelling counterpoint to the notion that state interventionism, including through aggressive competition law enforcement and privacy regulation, inherently hinders growth and innovation. This example offers valuable insights for policymakers seeking to balance robust regulation with digital economic development.
The emphasis put by Draghi on a more dynamic, evolutionary, and growth-oriented approach is a very welcome development, to the extent that this is seen as “the only way to […] grow and become more productive, preserving our values of equity and social inclusion.” Preserving social inclusion is a key concern for Draghi and an important feature of the recent focus of growth theory on institutions, scientific development, and culture as the most important ingredients for the accumulation of knowledge and capabilities and thus the economic success of a nation. This social dimension (also in the context of competition law) should not be set aside and forms an important reason to value the protection of competition, in addition to the usual arguments put forward by competition authorities in terms of the costs of non-competition.
In an economy characterized by increasing returns, network effects, and feedback loops, as well as growing dependence on dominant designs in the evolution of technological trajectories, competition law must evolve to foster productivity, growth, and responsible innovation. This evolution necessitates ensuring all firms have access to technological opportunities, which in the digital economy translates to access to data, advanced learning, and computational infrastructures. As Draghi notes, catching up with the technologically leading nations requires significant public and private investments. However, private sector investment can only be incentivized if there’s a credible possibility of challenging Big Tech’s dominance across the value chain and developing new technological opportunities. This underscores the need for an active competition law policy to guarantee access to such new technological opportunities.
The European Commission’s ongoing reflection on the new transfer of technology regulation and guidelines could serve as a testing ground for innovative approaches that might extend to other areas of competition law, such as merger control. A more sectoral systems approach to innovation could be adopted in areas where the productivity gap between the EU and other jurisdictions (U.S., China, South Korea) is most pronounced. However, it’s crucial to embrace a broader socio-technical systems perspective that acknowledges users’ role in shaping innovation and its governance. This approach should also emphasize the active role of public institutions in establishing socio-technical infrastructures and system builders to complement competition law enforcement and regulation, as exemplified by recent initiatives put forward in Europe like the EuroStack. Such a holistic strategy could more effectively balance the preservation of competition and inclusive growth with the promotion of an innovative economy.
Ioannis Lianos is Professor of Global Competition Law and Public Policy and co-Director, Centre for Law, Economics and Society, UCL Faculty of Laws. He is also a Member of the UK Competition Appeal Tribunal. Any views expressed in this blogpost are strictly personal. Many thanks to Stavros Makris (UCL) for helpful feedback.
Author Disclosure: the author reports no conflicts of interest. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
