Regulating for growth: rethinking competition policy

Governments around the world are asking more of their regulators. From the UK’s Digital Markets, Competition and Consumers Act 2024 (DMCC) to the EU’s Digital Markets Act (DMA), we’ve seen a slate of new legislation come into effect in the past couple of years. 

These acts mark a major evolution in regulatory thinking, especially in digital markets. And as policymakers signal new priorities, the question arises: can regulation truly promote growth?

“This regulation is not meant to curtail the success of companies, but it’s really rather meant to enable conditions for growth,” says Professor Annabelle Gawer, Chaired Professor in Digital Economy and director of the Centre of Digital Economy (CoDE) at the University of Surrey. “There had been a feeling among regulatory circles in part of civil society that the existing regulatory cadre and framework were not addressing some of the abuse-of-power problems – in particular, competition policy.”

‘This regulation is not meant to curtail the success of companies, but it’s really rather meant to enable conditions for growth’ – Professor Annabelle Gawer

This sentiment fueled the wave of ex ante regulation now taking hold in the UK, EU and beyond. But unlike the ex post enforcement that came before, which focussed on curbing specific abuses, new frameworks are seeking to pre-empt harms. And increasingly, they do so in the name of innovation and productivity.

How competition policy became a growth strategy

Daniel Gordon, partner at the Greenlight Group, traces the arc of how competition policy came to be seen as a growth tool. “There’s been a radical change in perception,” he says.

He looks back to the Blair-Brown era in the early 2000s, when government economists began linking competition to long-term productivity improvements. “There was increasing evidence that competition was a good driver of growth,” he notes. “[It] was an innovation to bring competition into growth, and it changed the context and the positioning of competition policy.”

This culminated in the Enterprise Act 2002, which “enhanced [regulatory] powers in a number of ways: merger powers, criminalisation of cartels, stronger market powers,” explains Daniel. But two decades later, he sees the pendulum swinging again – this time in response to concerns that regulatory action may be suppressing business dynamism. Recent governments, both Conservative and Labour, have publicly urged the competition authority to consider its impact on growth.

“We all in the competition community internationally need to look quite long and hard whether we’ve got the right tools,” Daniel adds.

A post-Brexit push for pro-growth regulation

For Alexander Baker, CEO of Fingleton, “the impact of Brexit has been really important.” With the UK no longer bound by EU treaties, its regulators have broader discretion – and more pressure to prove the UK is open for business. 

“The focus on growth in the UK has largely come about because of the perception of the UK as a destination for foreign direct investment and as a place to do business,” Alexander explains. He also notes a key procedural development: the government’s strategic steer to the Competition & Markets Authority (CMA), which introduces a new emphasis on growth. Other sectoral regulators – such as Ofwat, Ofgem and Ofcom – already have statutory duties to support economic development. “The CMA didn’t [have this duty],” says Alexander, “but now it’s had a very strong steer from the government that it should take into account its impact on growth.”

‘The focus on growth in the UK has largely come about because of the perception of the UK as a destination for foreign direct investment and as a place to do business’ – Alexander Baker

This directive is reflected in the ‘four Ps’ framework that now shapes the CMA’s approach: pace, predictability, proportionality and process. Alexander summarises: “Doing things quickly; being consistent […] and predictable; being proportionate in how they discharge their statutory functions; and really ensuring that the process doesn’t sit heavily on the organisations that interact with it.”

One such organisation is paying close attention to this regulatory development, given their business operations in the UK. According to Rory O’Donoghue, Global Competition Policy at Google, the company is making major positive contributions to the UK economy. “From our latest figures, Google’s products – search, Android and other products – generate over £110 billion worth of economic activity in the UK,” he says. “The Android app economy supports almost half a million jobs and nearly £10 billion in annual revenue for British developers. And we have extensive training programmes in the UK, encouraging startups, encouraging people to retrain and re-skill.” As the UK’s regulatory landscape evolves, Rory is among those calling for legislation that doesn’t choke innovation.

Principles, rules, litigation: comparing regulation in the UK, the EU and the US

These recent reforms set the UK apart from its international peers. The UK’s approach is principle-based, allowing the CMA to interpret broad objectives like ‘fair dealing’ and ‘open choice’. “The detail of how it does that isn’t set out in legislation,” says Alexander. “The CMA has to articulate, both through guidance and through its decisions, how it will deliver that for firms that it designates with strategic market status.”  

Meanwhile, the EU takes a less flexible approach. “The European model tends to prescribe rules. We’ve seen that with the Digital Markets Act and the Digital Services Act,” Alexander says. These pieces of legislation set out upfront the behaviours or ways of working that the regulator would like to see, and firms are judged against those rules, he explains. 

 “Contrast that to the US,” Alexander continues. “Predominantly, [it’s] a judicial system where the government has to litigate to achieve certain outcomes.” This more judicial process, he thinks, is “probably slower […] and potentially more challenging for the agencies in that system to achieve the policy outcomes they want.”

As regulation of digital markets is still being tested, it’s unclear what the outcomes of various policies will ultimately be. “It will be interesting to see, as these different models play out over time, which tends to support growth more,” Alexander notes.

AI and the shape of competition to come

One distinguishing aspect of digital markets is the centrality of innovation. Traditional antitrust frameworks focus on price, output and concentration. But in today’s platform economy, value creation often comes from ecosystems, data and R&D.

‘Competition takes place through innovation rather than through traditional variables.’ – Daniel Gordon

“The sorts of areas where these tensions tend to arise is in dynamic innovation – digital markets,” says Daniel. “Competition takes place through innovation rather than through traditional variables.”

Artificial intelligence adds a new layer of urgency and uncertainty. “AI is now creating competition at every level of the AI stack,” says Rory, “from the funding layer to chip design and manufacture, to the compute infrastructure, to the talent model sizes [and] deployment use cases.”

‘Competition in this space is as robust as it’s ever been. We simply don’t know where the next innovation and breakthrough is going to come from.’– Rory O’Donoghue

He sees rapid innovation as evidence that competition remains healthy, even if market shares haven’t shifted much. “The changing way that people are interacting with these new services means that the way that we view disruption [and] market entry is very different now,” he explains. “Competition in this space is as robust as it’s ever been.” He also thinks that innovation is set to continue apace: “We simply don’t know where the next innovation and breakthrough is going to come from.”

A better toolkit for a new market reality

Across the board, there is a clear sense that traditional antitrust tools – designed for static, price-based markets – are ill-equipped for today’s digital ecosystems.

“Competition policy has built up a lot of tools and is very good at looking at traditional markets,” Daniel explains. “It tends to look at the measures: concentration, market power, profitability, excess price.” But in dynamic platform environments, where innovation is the main axis of competition, these tools don’t easily apply. “They really just haven’t been developed to understand the drivers of innovation in the same way that they have for the traditional markets,” he says.

Alexander offers a specific example of this blind spot. “Regulators get it wrong when it comes to advertising-funded platforms,” he argues. “As soon as a better platform comes along for achieving what [advertisers] are trying to achieve, that money will flow in a different direction.” That kind of dynamic doesn’t always appear in product comparisons, but Alexander thinks that it’s significant. “Regulators might be misdirecting themselves as to the competition that ultimately matters – it may not be between firms that look the same.”

To correct this, Daniel and Rory call for more tailored, context-aware interventions. “If you look at the big platforms, any fair assessment would say: look, they do innovate quite a lot,” Daniel says. “They spend a very high proportion of their revenues, compared to other companies, on R&D.”

In his view, regulators need to develop a better understanding of the platforms they are overseeing. “[Regulators need to] actually understand what’s going on with [a] particular platform, where the problem lies,” he says, and then focus on “how we preserve its innovation incentives and its willingness and ability to innovate, alongside encouraging entry where that is healthy.”

For Rory, a sector-by-sector strategy is key, particularly as AI reshapes digital markets in real time. “Policymakers should be looking more at a risk-based approach,” he says. “When we look at economic growth and at competition regulations specifically, I think it’s important to recognise the trade-offs that come from any regulations,” Rory continues. “We at Google have seen in other jurisdictions that onerous prescriptive regimes can have negative consequences for users and for innovation.”

Growth as a goal

Ultimately, growth-oriented regulation has to encourage fair competition while avoiding excessive interference. Daniel thinks that the right regulatory approach also needs to be grounded in economic reality. “If we are going to focus more growth in these tech markets, it’s really important that we take a nuanced and intelligent approach that understands the incentives and abilities, both on small players and on large players, […] to deliver those wider spillover effects that are good for the economy and long-term trend growth,” he says.

In Alexander’s opinion, outcomes are still uncertain. “There is a question about whether or not all of this stuff will actually work, whether or not it will lead to higher growth,” he says. And he also shares a reminder that there are many factors at play: “Growth and the dynamism of markets rely on a lot more than just competition policy – for example, education policy, tax policy [and] immigration policy all play into whether or not a country has dynamic and growing markets, particularly in the digital space.”

For Rory’s part, “AI is too important not to regulate, but too important not to regulate correctly.” He also believes that AI could, in fact, encourage growth by supporting infrastructure, research and development, skills and retraining, and adoption and implementation, adding: “That will be important to unlocking the types of growth that the UK government wants.”

Join the conversation with Platform Leaders

This panel with Alexander Baker, Rory O’Donoghue, Daniel Gordon and Annabelle Gawer was part of the Platform Leaders event hosted by Launchworks & Co on the 5th of June 2025. The online conference brought together hundreds of participants from the global Platform Leaders network, including entrepreneurs, investors, academics, policymakers and industry practitioners.

Platform Leaders is a forum for experts to engage with the most pressing questions at the intersection of business and technology. For more insights, full session recordings and in-depth articles, or to stay informed about upcoming events, visit the Platform Leaders website and subscribe. To watch the full event, you play the video below.