Competition in the New ASEAN Economy.

• Author: Tailor, Nimisha

1. Introduction

   Shifts in global trade, technological developments and the COVID-19 pandemic all provide an opportunity for Southeast Asia to grow its digital economy and accelerate economic recovery. Market dynamics are changing rapidly, with the rise of online platforms and mobile applications that offer consumers a wide range of products and services at greater convenience, across borders and supply chains. Existing markets in Southeast Asia are becoming more competitive and new markets are emerging as businesses make better use of digital technologies and draw insights from the large volumes of available data.

   However, as the digital economy develops, sophisticated forms of anti-competitive behaviour are surfacing. There are concerns that online platforms are becoming dominant and engaging in harmful conduct, such as collecting and using customer data--without consent--to exclude current and future competitors. As a result, competition agencies around the world are studying online markets and investigating business practices that make it difficult for rivals to compete with dominant online platforms. Southeast Asia is just as vulnerable to these concerns due to the increasing prominence of online platforms in the region.

   Anti-competitive behaviour, if left unchecked, can impede the pace of economic progress in Southeast Asia. Specifically, firms that enter into anti-competitive agreements, mergers, or abuse their market power, can harm consumers through: higher prices, poor service quality and fewer choices. ASEAN competition authorities should continue to understand the business models of online platforms and be equipped to mitigate any potential competition risks.

   This paper highlights why online platforms and the data they gather can pose a threat to competition in Southeast Asia and its overall economic growth. It is structured as follows. The next section defines the concept of a "new" economy and describes the features of online platforms and the wealth of data they generate. It also describes in detail the international and regional responses to the challenges associated with digital activities, and the rise of a new ASEAN economy. The subsequent section outlines the growing cases of competition enforcement in ASEAN, focusing on four online sectors: e-commerce, online travel booking, food delivery and travel. The fourth section offers policy recommendations while the final section concludes.

2. The "New" Economy

   2.1 Definition

   In the context of the fourth industrial revolution (Industry 4.0), the "new" economy generally refers to the "Internet economy" or "digital economy". The OECD described the Internet economy as "economic, social and cultural activities supported by the Internet and related information and communications technologies" (OECD 2008). More recently, it defined the digital economy as "all economic activity reliant on, or significantly enhanced by the use of digital inputs, including digital technologies, digital infrastructure, digital services and data. It refers to all producers and consumers, including government, that are utilizing these digital inputs in their economic activities" (OECD 2020a). The World Bank (2019) has also recognized the significance of the digital economy, but acknowledges the lack of a standard definition. This paper therefore adopts the latest OECD definition of the digital economy, also known as the new economy.

   2.2 Online Platforms

   A key feature of the new economy are online platforms, which the OECD described as a "range of services available on the Internet, including marketplaces, search engines, social media, creative content outlets, app stores, communications services, payment systems" (OECD 2019). There are different types of online platforms, such as business-to-business (B2B), business-to-consumer (B2C) and B2B2C.' The popularity of these online marketplaces has grown rapidly because they provide businesses, especially small medium-sized enterprises (SMEs), support for online sales in the form of a ready customer base and integrated payments and logistics infrastructure.

   In order to better understand the business models of online platforms and their impact on competition, many studies have been conducted or commissioned by competition authorities and/or governments of different countries, including the United Kingdom (CMA 2020; Furman et al. 2019), Japan (JFTC 2018) and Australia (ACCC 2019). Similarly, in the United States, a Digital Platforms Committee recently analysed both competition law and data protection (Scott Morton et al. 2019). Several developing countries have also come together to share their experiences in competition enforcement in digital-related markets to explore mutually beneficial solutions (CADE 2019).

   A number of studies have been devoted to online platforms in specific industries, such as digital advertising (CMA 2020; ACCC 2019), digital payments (ACM 2019a), online food delivery and audio books (SCA 2019). The Canadian Competition Bureau, for instance, has been monitoring very specific online markets, like online search, social media, and display advertising (Canadian Competition Bureau 2019a). In Southeast Asia, Indonesia's Commission for the Supervision of Business Competition (Komisi Pengawas Persaingan Usaha, or KPPU) commissioned a report to understand digital economy issues in the country and their long-term impact on competition (KPPU 2017) while the Competition and Consumer Commission of Singapore (CCCS) has published two reports on e-commerce platforms (Tailor et al. 2015; CCCS 2020a).

   Most of the above-mentioned studies explore competition issues related to online platforms and highlight the need for careful consideration of the following characteristics:

   * Multi-sided platforms: Online platforms connect different groups of customers on their websites. Their core business is to provide a common meeting place and to facilitate interactions between distinct customer groups (ACCC 2019; JFTC 2018).

   * Different structures and price levels: The prices charged to different customer groups take into account the need to get all distinct groups on board the platform. Some online marketplaces provide services to one group of customers at a lower price or even free of charge, while another group could be charged a higher price (Furman et al. 2019). In other words, it can be pro-competitive for a platform to subsidize one side of the market when its presence is very valuable to the other side (CCCS 2020a; OECD 2018a).

   * Economies of scale: With no geographic barriers, online platforms can achieve economies of scale on a global rather than national or regional scale, attracting an exceptionally large customer base (Furman et al. 2019).

   * Indirect network effects: The value that one customer group realizes from using the platform depends on the volume of customers from the other distinct customer groups (CCCS 2020a). Overall, the higher the number of users connected to the platform, the greater the value delivered at low cost (ACCC 2019; JFTC 2018).

   * Economies of scope: Online platforms have been able to expand into new upstream and downstream products and services by leveraging off existing customer bases (Furman et al. 2019; JFTC 2018). Amazon, for example, first started as an online bookstore, then expanded to sell music and consumer products, and now manufactures and retails its own brands (Statt 2018).

   * Control of large volumes of data: Online platforms have access to all the data on their platform and invest heavily in technology to store and process large volumes of consumer and business information (JFTC 2017; Furman et al. 2019).

   * Business strategies to keep users on the platform: Consumers and businesses may "multi-home", that is, switch quickly and easily between multiple platforms. To gain greater market share, online platforms usually encourage purchasers to "single home" and stay on their platform through loyalty schemes, either in the form of reward points or volume discounts (CCCS 2020a).

   * Extensive use of algorithms: Online platforms use algorithms to provide tailored customer advertising and/or pricing. In online marketplaces, the platform can also use an algorithm to set prices for independent retailers (CMA 2018).

   2.3 Data

   Online platforms collect, use and analyse significant volumes of data. Technological developments allow large amounts of diverse data points to be produced at high speed from multiple sources. Some competition authorities, including those of Japan, France, Germany and Singapore, have researched the competition effects of data (Japan 2017; CCCS, IPO and PDPC 2017; PDPC and CCCS 2019; Autorite de la Concurrence and Bundeskartellamt 2016).

   These studies find that data can be used by firms to enhance competition in three different ways. First, user data can provide valuable insights to improve the delivery of a firm's services. For example, a taxi-booking app uses data analytics to simulate how drivers and passengers would interact with new potential services (Sim 2018). Second, online platforms can develop algorithms to guide consumers to make better purchasing decisions. Many online food delivery platforms, for instance, use algorithms to provide customers with a customized list of restaurants based on past orders (Wong 2018). Third, digital market players can combine data in new ways across organizations and industries to generate new business opportunities or develop the next generation of products and services. For instance, self-driving cars are being developed by analysing data, generated from sensors recording the actions of drivers in cars (JFTC 2017).

   As a key resource in the digital economy, data can, however, become a barrier to entry, granting significant competitive advantages to...