The Reed Smith Guide to the Metaverse - 2nd Edition

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In January 2022, the European Commissioner for Competition, Margrethe Vestager, whose responsibilities also include Digital Regulation, was quoted as stating that competition authorities “should start thinking about [the metaverse] now.” While almost all competition authorities and legislative bodies around the globe have made digital markets a priority area for enforcement, this call to action is one of the first times that the head of one of the major antitrust authorities has explicitly recognized the need to consider the future of competition enforcement in the metaverse. The emergence of the metaverse and the reinforcement of the ever-increasing pervasiveness of digitization will undoubtedly come under close scrutiny from competition regulators worldwide.

However, to date, there are more questions than answers on how this should be done. Indeed, Ms. Vestager’s comments note a concern that developments are occurring that need to be followed, but that the competition authorities are still trying to work out how to ask the right questions to understand potential competition concerns.

  • As the world becomes increasingly interconnected, how will competition law enforcers adjust to this trend, and will the individual competition authorities be able to find a way to work together to address issues on a global, rather than a piecemeal, individualized basis?
  • At what stage should regulators intervene? If they intervene too soon, innovation could be stifled, and if too late, the market could “tip,” causing substantial distortion of competition, risk of monopolization, and emergence of mega-corporations.
  • Do regulators have a choice at all of balancing intervention, just in case they risk falling behind rapidly changing digital developments?
  • Will the competition tools that have been or are currently being developed to address powerful digital platforms prove to be sufficient, or will they be outdated even before they are effectively applied?
  • Will there be a way to provide legal certainty for companies doing business in the metaverse, and will there be guidance that companies can rely on when adapting their business models to the new age?
  • What steps should be taken to safeguard consumers in the metaverse jungle?

Even at this early stage, it is possible to identify a number of issues competition authorities across the world will have to grapple with. The competition issues the metaverse is likely to create can be looked at from different perspectives, including

  1. the infrastructure needed in the metaverse,
  2. operating a business in the metaverse, and
  3. the roles of users in the metaverse.
Key takeaways
  • Competition law enforcers are adjusting to our increasingly interconnected world.
  • The challenge for regulators is to keep markets open and free, while ensuring companies can do business with consumers on a fair basis.
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