World Bank – Digital Conglomerates in East Asia

The World Bank's research focuses on the challenges faced by competition authorities in East Asia regarding digital markets and their efforts to combat anti-competitive behavior. The report emphasizes the importance of competitive markets for development, productivity growth, and economic innovation. The dynamics of digital markets pose new risks to competition, necessitating a reevaluation of traditional antitrust and merger control tools. Given the significant role of conglomerates in East Asian economies, the report explores the dynamics of digital conglomerates in the region. The report offers a data analysis of conglomerate mergers and a mapping exercise of digital conglomerates in five East Asian countries. It reviews the challenges faced in disciplining the anti-competitive effects of digital conglomerates, particularly through mergers, and provides policy recommendations for the way forward. The main target audience of the report includes policymakers, competition authorities, and researchers in East Asian economies, as well as other countries interested in leveraging international experiences. Conglomerates are common in East Asian markets and can lead to improvements in firm efficiency and access to essential inputs. In the case of digital markets, conglomerates can enhance product quality, reduce transaction costs, and ensure access to key elements of digital business models. However, conglomerates also raise the risk of anti-competitive behavior, which can negatively impact investment, innovation, and competitiveness. These risks are heightened in digital markets, where data and algorithms play a significant role in market power. The mapping exercise of conglomerates in East Asia reveals their expansion into adjacent markets within the digital economy. Unlike global digital platform firms that initially focused on online search and social media, East Asian conglomerates started with e-commerce and ride-hailing. They have pursued vertical integration by acquiring logistics companies and partnering with local retailers. Regional players from China, Singapore, and Japan have a substantial presence in the region, investing in local digital firms and the digital units of offline conglomerates. The private sector has been the driving force in most countries, while state-led firms have a limited presence. The report highlights the significant merger and acquisition activities undertaken by digital conglomerates to enter adjacent markets.