ICTworks

Robust, fair competition matters. Market competition incentivizes firms to treat consumers fairly and provide products and services that respond to real customer needs. A marketplace in which firms can compete on a level playing field also fuels innovation.

These dividends of competition apply as much to the digital economy as the analog economy.  If the right market dynamics are in place, people can gain access to useful services online, engage with each other, pursue economic opportunities and ultimately have greater agency over their economic livelihoods.

Beyond these individual- and firm-level dividends, an environment in which market actors have incentives to treat competitors and customers fairly can promote greater respect for the rule of law. This can instill greater confidence in democratic institutions that ensure both public and private sector actors respect the rights of users online.

Promoting Fair Competition in the Digital Economy

The development community can play a role in facilitating competition in the digital economy. The new USAID brief, “Promoting Fair Competition in the Digital Economy,” offers a few concrete examples of how programs can stimulate market development, improve safeguards, and foster the rise of digital economies that advance development priorities. In this brief, readers will:

• Understand how competition enables—and sustains—digital economies that can then create economic opportunity for small- and medium-size enterprises (SMEs); offer useful, equitable services to end-users; and strengthen respect for the rule of law.
• Review concrete examples and learn how USAID programs can stimulate fair competition either as a primary focus of an activity or a component of a larger activity.

The examples in the brief could, as appropriate, be integrated into a range of activities, including those oriented towards e-commerce, trade and investment, women’s economic empowerment, SME development, and “sectoral” efforts, such as digitizing agricultural value chains. The brief’s illustrative interventions fall into one of three categories of potential influence:

• Foster an enabling environment for fair competition;
• Catalyze fair competition within the marketplace;
• Strengthen the capacity of civil society and other watchdog groups.

Roles for development practitioners

Efforts to improve the enabling environment might include interventions to address legal foundations or regulatory safeguards, or to facilitate peer learning or regulatory coordination mechanisms among relevant authorities. In other cases, there might be opportunities to help authorities with a competition mandate to use technology more effectively to understand the marketplace.

Activities to improve competition in the marketplace might include interventions to mobilize capital for small firms and investors seeking a foothold in some part of the digital economy, or to support business incubation efforts that equip digital entrepreneurs with resources they need to refine their business model.

Lastly, initiatives to strengthen civil society capacity could focus on conducting independent research on the market practices within a country’s digital economy, to facilitate dialogue among competition authorities, industry actors, and consumer groups affected by potentially anticompetitive practices in the digital economy.

Market system approaches can help

Every market is different, and the digital economy in particular is distinguished by its rapid pace of evolution, diverse business models, and cross-border dimensions. As a result, this brief does not present an authoritative or exhaustive set of options for engagement.

Instead, it offers a starting point for identifying whether these issues need attention, and if so, a set of questions to pursue, which can help guide programming decisions that ultimately reflect a sound understanding of how these issues are playing out in the community.

A lightly edited Executive Summary of Promoting Fair Competition in the Digital Economy