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E-commerce, competition policy, and development


Title: E-commerce and competition policy in development Author: oecd Last modified by: oecd Created Date: 10/2/2001 9:35:38 AM Document presentation format – PowerPoint PPT presentation

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Title: E-commerce, competition policy, and development

E-commerce, competition policy, and development
  • Andrea Goldstein
  • OECD Development Centre
  • Workshop on Electronic Commerce Business Impacts
    Project (EBIP), Rome, 29-30 October 2001

Internet, the Great Equalizer?
  • makes the whole economic system, nationally and
    internationally, more competitive
  • prices of well-specified goods and services
    available on-line
  • buyers can shop for the best deal over a wide
    geographic area
  • sellers can reach a larger group of buyers
  • textbook model of perfect competition
  • large numbers of buyers and sellers
  • market with perfect information
  • lower profit margins
  • more efficient production
  • greater consumer satisfaction

Commissioner Montis Opinion
  • The Internet is a wonderful enabling technology,
    which will in principle increase competition in
    many markets. Nevertheless, that does not mean
    that it is immune from competition problems. Can
    competition law that was designed to deal with
    bricks and mortars deal with clicks and portals?

General competition concerns
  • "gate-keeper" effects and vertical integration
    (between portals and sites/products, or ISPs and
    multimedia companies) --gt ensure that control
    over telecom networks does not lead to
    distortions of competition
  • removal of geographical barriers to competition
    --gt avoid speculative, discriminatory and abusive
    registration or management of Internet domain

Does e-commerce create new markets for the
purposes of competition policy?
  • The answer will differ from market to market
  • will partly depend on
  • whether and how firms in traditional channels
    become involved in B2C and B2B "e-marketplaces"
  • on-line deliverability of a product
  • In OECD countries it is more likely to be a new
    sales channel
  • in non-OECD countries, where traditional sales
    channels are less well-developed, e-commerce
    creates new markets (eg, car parts in India)

May product markets be made narrower as a result
of increased scope for price discrimination?
  • e-commerce makes it easier to
  • quote different prices to different buyers
  • use information about consumer buying habits to
    identify those willing to pay higher prices
  • take advantage of the fact that higher income
    consumers, i.e. those with a greater ability to
    pay higher prices, place a higher value on time
  • ?
  • evidence points to persistence of price
    dispersions across Internet markets

Will geographical mkts be widened?
  • Forces mitigating against there being a truly
    global market in many products
  • Language barriers
  • taxation quandaries
  • regulatory barriers (differences in national laws
    concerning things like discounts, comparative
    advertising, resale price maintenance and
    exclusive territories)
  • physical delivery problems
  • absence of secure payment systems
  • difficulties identifying actors and enforcing
    contractual rights

Assessing market power
  • Lower entry barriers
  • lower search and selection costs on the buyer
  • lower transaction costs
  • reduced need for physical assets
  • rapid mkt growth
  • Higher entry barriers
  • sunk costs of establishing customer loyalty
    (so-called neural real estate)
  • network effects --gt markets are tippy,
    especially when liquidity and proprietary SCMSs
    are important

Reducing first-mover advantages
  • Sunk costs
  • customers ability to port their own database
  • effective consumer protection legislation
  • Tippy markets
  • ability of mkt participants to monitor different
    marketplaces and to switch between them (see AOL
    5.0 interoperability example)

Business-to-Business trading systems
  • Will sensitive information be exchanged between
  • Can these systems be used to exclude individual
    companies from the most efficient virtual market
  • Can the concentration of buyer power be a cause
    for concern?

E-commerce and consumer policy
  • consumers minimum rights
  • previous information
  • obtain necessary documentation
  • resolve a contract

Guidelines for Consumer Protection in the Context
of E-commerce
  • approved on 9 December 1999 after 18 months of
    discussion by the OECD CCP
  • help ensure that consumers are no less protected
    when shopping online than they are when they buy
    from store or order from a catalogue
  • reflect existing legal protection available to
    consumers in more traditional forms of commerce
  • encourage private sector initiatives that include
    participation by consumer representatives
  • emphasise the need for co-operation among
    governments, businesses and consumers

A quote from John Vickers
  • The growth of e-commerce can be hugely beneficial
    to consumers, businesses and the economy. It
    gives consumers the ability to shop around far
    more easily than in the past and so encourages
    price competition and innovation among suppliers.
    Part of our job is to help make it a more secure
    channel by ensuring suppliers fulfil their
    obligations. Implementation of the
    distance-selling regulations and our role in the
    creation of the TrustUK approvals body for
    e-commerce codes are just two ways we are doing

Unfortunately ...
  • only 44 percent of e-businesses complied with the
    basic requirements of the Data Protection Act of
  • Web sites inform visitors how information that
    visitors provide will be used
  • Web sites keep data secure and refrain from
    sharing it with third parties without permission
  • 52 percent of the 637 businesses visited by OFT
    failed to comply with the UK's Distance Selling
  • businesses must provide full disclosure of
    refund, exchange and order cancellation policies

Competition policy and e-commerce in non-OECD
  • State ownership
  • multi-industry conglomerates
  • large MNCs vs little SMEs
  • small markets
  • income and endowments inequality
  • institutional weakness
  • information asymmetries

Trade and Competition Policy
  • need for
  • enhanced competition in telecoms to facilitate
    lower priced access to the Internet
  • greater competition in international parcel
    delivery services
  • streamlined customs procedures

  • Goldstein OConnor, E-commerce for development,
    OECD Devt Ctr, Oct 2000
  • OECD, Competition Issues in Electronic Commerce,
  • Office of Fair Trading, E-commerce and its
    implications for competition policy, Aug 2000
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