The rise of digital platforms as a business model and a critical infrastructure for the digital economy is causing increasing trepidation among scholars and competition policy enforcers. In response to concerns about negative effects of platform dominance on investment and innovation, policies that were in place since the 1990s to keep the digital economy free from traditional regulation are being reconsidered. In these discussions, competition is considered an essential mechanism to harness the social and economic benefits of digital platforms, as it serves to attenuate potential risks to innovation, democracy, and to the media industry.This dissertation contributes to these discussions theoretically and empirically. It addresses three important, interrelated aspects of the debate. Self-contained chapters explore the challenges of designing comprehensive responses to safeguard and promote competition in digital markets. One of the topics investigated is whether digital platforms harm sector innovation by acquiring too many start-up firms. This analysis uses a unique data set of venture capital, IPO, and M&A activity that includes more than 40 thousand deals reported worldwide between 2010 and 2020. A second topic is the development of an empirically tested, conceptual framework for the assessment of market power in digital markets. The insights gained from exploring these two topics are then integrated into a discussion of alternative scenarios for the design of policy and regulatory regimes that aim at promoting competition for and on digital platforms. The empirical analysis of hundreds of big tech start-up acquisitions shows that venture capital funding for innovation increased after the acquisitions analyzed. However, this effect is short-lived and other concerns arise. The findings suggest that a closer review of these mergers by better-equipped competition policy enforcers would be beneficial to deal with the complexities of digital markets. Although new competition policy instruments may be needed, strict ex ante remedies may not bring the right incentives to promote digital innovation. The proposed conceptual framework for market power assessment showed the need for new tests in addition to the traditional evaluation of the competitive structure of platform markets. Also, it was possible to conclude that policy remedies, to have significant impact in promoting competition in digital markets, should be enforced jointly in both user- and supplier sides of the platforms. Furthermore, the results of an online survey experiment with 550 participants suggest that an analysis of user responses to different levels of digital ads and data collection procedures bundled with online services would greatly improve assessments of market power. Finally, the analysis of alternative proposals of competition policy and regulatory regimes for digital markets suggests that carefully designed remedies, that observe country-specific developmental conditions and challenges, are key to effectively promote competition without harming incentives for innovation and investment. The analysis also supports a very limited use of ex ante, policy remedies to boost competition for incumbent digital platforms. Overall, this dissertation expands scientific knowledge on how the strong benefits of the platform economy can be preserved while protecting competition and the incentives for innovation in digital markets. It develops theoretically and empirically grounded contributions that will help policymakers and regulatory agencies in the development of workable approaches to promote competition in digital markets. It also explores the complementarity of antitrust and regulation, and ways to better orchestrate these instruments with each other and with varying national and regional contexts.
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