Blog Martijn Snoep: The 2025 Dutch general election: attention for market power needed

When Dutch voters return to the polls in snap elections in late October, they have a choice between many different political parties. As democracy is the opposite of concentrated political power, so is competition the opposite of concentrated economic power (or market power). Like autocrats, businesses with concentrated market power do not need to bother with vying for the favor of their customers. Market power thus leads to reduced welfare as a result of higher prices, reduced quality, and less innovation. Very large businesses with market power can even be more powerful than countries such as the Netherlands. In social market economies therefore, one of the most important duties of the government and its independent authorities such as ACM is preventing and combating market power. This duty is crucial to the well-functioning of our economy and of our society at large.

Generally speaking, ACM, together with the European Commission, is pretty well able to prevent and combat market power. Still, some help from the legislature is needed in light of several recent developments. With the Dutch general election fast approaching, these gaps deserve attention from our political parties once again.

Market power in the cloud

Following an extensive market study in 2022, ACM found that, with regard to their IT needs, Dutch businesses and government agencies run the risk of getting ensnared by several major US providers of cloud services. In essence, such services consist of large-scale data storage, and are linked to various applications, ranging from word-processing to advanced AI models. Once buyers have a contract with a cloud provider, it often becomes technically difficult or financially unattractive to fully or partially switch or to combine applications from different providers.

Not only does this lead to market power with all the consequences that come with it, but it also leads to a strategic risk for the businesses and public institutions involved, and, ultimately, to a risk for the strategic autonomy of the Netherlands and Europe. The fact is that the US government will always have more control over cloud providers located in the US than does the EU, let alone the Dutch government. That begs the question: who controls the proverbial ‘kill switch’ of these companies? This dependency poses a systemic risk that cannot be solved easily, and thus calls for a coordinated (whole-of-government) strategy from the legislature, policymakers, IT procurement, and regulators such as ACM (see also my previous blog: Blog Martijn Snoep: Competition authorities have a role in creating new European suppliers | ACM). The recently announced Dutch Digitalization Strategy (NDS) is a first step, on which others can build, but several tricky choices still need to be made – preferably as soon as possible. How much dependency on companies with market power do we find acceptable, how do we reduce our dependency, and how do we give alternative European suppliers of cloud services and crucial applications a leg up?

Marker power through small acquisitions

Acquisitions can create and strengthen market power, which is why ACM assesses in advance those acquisitions that exceed certain turnover thresholds. When it comes to market power too, prevention is better than cure. Unlike its counterparts in various other EU countries, ACM cannot assess acquisitions below those turnover thresholds, not even if these create or strengthen market power, while the past few years have shown that small acquisitions can indeed be harmful. ACM does not want to, nor can it, assess all small acquisitions in advance, but it does ask the legislature to grant it a call-in power, so that, in the case of a reasonable presumption of market power, it can assess smaller acquisitions too. (Blog Martijn Snoep: Small mergers, big problems | ACM). That call has thankfully been answered in the form of a bill that was recently submitted to the Dutch House of Representatives. By linking this call-in power to a turnover threshold increase, the administrative costs for businesses will go down: fewer acquisitions need to be notified while ACM cost levels remain constant. ACM thus does not need any additional resources either. All of this will prevent disproportionate administrative pressure and costs. Moreover, a call-in power offers businesses without market power a bigger opportunity to grow through acquisitions, because, in the current situation, a company with market power may outbid them in most cases.

Market power without illegal conduct

The use of platforms, data, and algorithms by businesses can lead to more competition, but it can also lead to less competition. Real-world experience from the past few years has shown that economies of scale, network effects, and specialization can lead to reduced prices and higher quality, but that they can also contribute towards market power, where one or several businesses call the shots, and entry by new entrants has become practically impossible. In such situations, the businesses involved often do not illegally abuse their market power, but they do find clever ways to keep prices high or reduce quality. Moreover, they do not feel the need to innovate when the threat of competition is small, and the market is quiet and stable. None of this is illegal, but it does run counter to the public interest.

At the moment, ACM is already able to launch market investigations if it merely suspects that a market is not functioning properly without there actually being a suspicion of any illegal conduct. For example, ACM last year completed an investigation into the savings market, and is currently conducting a market investigation into vet clinics, and also one into airline ticket prices determined by algorithms. However, if it indeed turns out that a market is not functioning properly, ACM cannot do anything beyond advising the legislature to step in by introducing new legislation. Passing and implementing new laws takes a lot of time, while the harm continues to be inflicted. Various countries, such as Germany and the United Kingdom, have therefore granted their competition authorities the power to impose proportional obligations on businesses, for example aimed at lowering barriers to entry for new entrants or lowering barriers to switch for buyers. This creates a new dynamic on the market, and it undermines market power. The recent Draghi report on EU competitiveness recommended introducing such a New Competition Tool at the EU level as well (Blog Martijn Snoep: Updating competition enforcement | ACM and Speech Martijn Snoep: the New Competition Tool, the why and the how | ACM – in Dutch). More dynamism leads to new opportunities for new competitors, lower prices, better quality, and more innovation. Since ACM already carries out investigations and gives advice, this additional power of imposing obligations (depending on how it is organized) does not need to have any budgetary consequences.

With the Dutch general election just around the corner, this is the time to look at how we can combat market power better in order to ensure that markets function well. In doing so, we will also increase economic dynamism in those markets, without adding disproportionate administrative pressure and costs. The solution is within reach.

Martijn Snoep
Chairman ACM