Algorithms and Competition in a Digitalized World

Focusing in particular on the impact of algorithms, this essay demonstrates ways in which the peculiarities of the digital economy are reflected in the practice of the Bundeskartellamt (BKartA). In light of the increasing importance of algorithms, it elaborates on the BKartA’s practical experiences in this regard and points out conclusions drawn from past proceedings. These practical experiences are complemented by conceptual considerations on pricing algorithms and collusion as well as on potential interdependencies between algorithms and market power, which inform future enforcement. In view of the challenges posed by the implications of algorithms on competition, but also more broadly by the ongoing digital transformation, the essay finally points to the current discussions on adjusting the legal toolkit and highlights that digitalization, as a global phenomenon, calls for international collaboration and exchange.

By Andreas Mundt¹

I. TURNING DIGITAL

The global trend towards digitalization poses unique challenges for both competition policy and enforcement. Considering the digital economy in particular, many business models rely on positive network effects as customers often prefer services which many others use. The more a service is used – e.g. social networking websites – the more customers it attracts and the more attractive it becomes, potentially resulting in a winner-takes-all dynamic. A further important trait of many popular businesses in the d