Insights/Dialogue & Events
Superstar firms – A threat to competition and democracy?
Dec 2022

Is there a problem with competition?

At our anniversary edition of the Forum for Economic Dialogue we focused on questions around superstar firms and their impact on society. The speakers examined the topic from several perspectives, with the regulatory as­pect in the foreground.

After all, the majori­ty of speakers agreed, dominant firms bring more harm than good. The market power of superstar firm has far-reaching negative con­sequences, such as a declining market dyna­mism, fewer startups, lower wages.

Panelists also shared concerns about superstar firms’ influence on the political discourse. Accord­ingly, the role of the state and antitrust law was discussed in detail with a fo­cus on the new EU legislative pro­posals Digital Services Act (DSA) and Digital Markets Act (DMA), which go beyond antitrust law.

At our anniversary edition of the Forum for Economic Dialogue we focused on questions around superstar firms and their impact on society. The speakers examined the topic from several perspectives, with the regulatory as­pect in the foreground.

After all, the majori­ty of speakers agreed, dominant firms bring more harm than good. The market power of superstar firm has far-reaching negative con­sequences, such as a declining market dyna­mism, fewer startups, lower wages.

Are dominant firms doing more harm than good?
Are dominant firms doing more harm than good?

Quotes

The excessive power of “Big Techs” goes beyond economics, requiring a strong political reaction. The debate is multidimensional and affects a number of different public policies.
Centre for European Policy Studies (CEPS)
Joaquín Almunia
Antitrust law or competition law should be applied to labor markets in the same way as it is applied to product markets.
University of Chicago Law School
Eric A. Posner
What should antitrust be doing? In the current political economy, we recognize that size matters, which is the product of technological changes, progress, and other factors.
Keystone Strategy
Cristina Caffarra
There is a tradeoff between the value that superstar firms generate in the economy and the power of their technology that retains other firms to enter the market.
UPF Barcelona
Jan Eeckhout
Digital companies should be seen as organizations, not as traditional firms. They provide an ecosystem of services and activities to facilitate other companies' and people's growth.
Meta/Facebook
Eliana Garcés
Innovation is a major player to maintain a vibrant market economy.
Roche Holding
Christoph Franz
Too big to fail is a market failure with huge systematic risk and a topic of inequality and fairness.
ETH Zurich
Isabel Z. Martínez
Major shareholders don’t actively encourage firms to compete aggressively, they leave them alone.
Oxford University
Martin Schmalz
The rapid rise of superstar firms presents a dilemma for policymakers: are restrictions needed for this development or does the value of high productivity, products, innovation, and contribution to economic growth justify their market power?
University of Zurich
David Dorn

Dominant firms in the digital age

Since 1980, the world economy has experienced an increase of dominant firms. Dominant firms face limited competition in their market and exert monopoly power. Why has this happened, and why did it start in 1980? The rise of dominant firms has a direct impact on customers who pay higher prices, but it also has far-reaching implications for the macroeconomy. Widespread market power leads to wage stagnation and a decline in the labor share, it increases wage inequality, it slows down business dynamism, it reduces the number of startup firms and lowers innovation.

In Public Paper #12 Eeckhout reviews the determinants of the rise of dominant firms, discusses the causes and consequences, and proposes directions for policy solutions.

Since 1980, the world economy has experienced an increase of dominant firms. Dominant firms face limited competition in their market and exert monopoly power. Why has this happened, and why did it start in 1980? The rise of dominant firms has a direct impact on customers who pay higher prices, but it also has far-reaching implications for the macroeconomy. Widespread market power leads to wage stagnation and a decline in the labor share, it increases wage inequality, it slows down business dynamism, it reduces the number of startup firms and lowers innovation.

In Public Paper #12 Eeckhout reviews the determinants of the rise of dominant firms, discusses the causes and consequences, and proposes directions for policy solutions.

2022_superstar_firms_threat_to_competition_and_democracy_aside2
  • Are Meta and Co. to blame for income inequality? Article SRF News 13.11.2022 read

  • 'Competition can also lead to greater fairness' Interview with Jan Eeckhout Watson 12.11.2022 read

  • Sind Meta und Co. Schuld an der Ungleichheit der Einkommen? Artikel SRF News vom 13.11.2022 lesen

  • «Wettbewerb kann auch zu mehr Gerechtigkeit führen» Interview mit Jan Eeckhout Watson vom 12.11.2022 lesen

  • «Big-Tech verantwortlich für wachsende Ungleichheit?» Rendez-vous mit David Dorn SRF vom 9.11.2022 hören