The Digital Transformation and What It Means for Litigation, Investigations, and Regulation

The digital transformation refers to changes in the production and distribution of goods and services throughout the economy resulting from the integration of internet-based technologies. It began with the launch of the commercial internet in the mid-1990s. As with most general-purpose technologies, the commercial internet, combined with other innovations, has gradually changed the economy overall through disruptive and incremental innovation, creation of new products and services, and the reinvention of old ways of doing things.

Almost every point of physical space now has internet connectivity because of the spread of mobile broadband, with exponentially rising speeds, through most of the populated areas of the world. That, along with faster and more pervasive fixed broadband, has resulted in almost everyone, almost all the time, wherever they are, having access to powerful computers, software, and other technologies. Through the internet, everyone—and all points of physical space—has the ability connect with everyone else. Smartphones and mobile apps, personal computers, and increasingly voice-activated devices provide access.

These technologies make new ways of doing things possible. Fast grocery delivery is enabled through the interconnection, in real time, of the store, customer, shopper, and driver. Telemedicine is aided through linking the doctor, patient, medical records, and diagnostic apps. Connected cars get software updates through mobile broadband and services provided in the cloud.

While much has happened since the launch of the commercial internet, and change seems rapid for those who have lived through the last three decades, these are still early days. Some areas, such as search, social, and to a lesser extent e-commerce, seem far along. Others, such as ridesharing, grocery delivery, telemedicine, and generative artificial intelligence, are just catching on after more than a decade of gestation. There are many new areas, such as the metaverse and decentralized finance, whose promise is unknown, and others that we don’t know about or haven’t even been thought of. The pandemic has sped up the transformation by forcing people to try digital solutions and overcome inertia.

The digital transformation likely will take many decades to work its way through the economy. After a quarter-century, e-commerce accounts for only 15 percent of retail sales in the US and less in many highly developed countries. It will take time for startups to seize opportunities in new areas and time for new innovations to reach fruition. As with other general- purpose technologies, such as electricity or the combustion engine, the full effects of the digital transformation will occur over decades.

Disputes arise in the digital economy for the same reasons as in the physical economy. Many issues are standard; just the subjects are different. They may arise more frequently because of the pace and scope of the disruption. Important new issues arise, however, because of unique features of digital business and ecosystems and the nature of their technologies.

Taking a longer view, the combination of new business models, facilitated by a global point-to-point communication system, and new technologies—some likely completely unforeseen today—will lead to continual efforts to adjust laws and regulations. Courts and authorities will see an increasing number of cases, in part just because the digital economy will become bigger and will lead to novel issues that society will need to sort out.

When the issues are standard, sound economic analysis requires a deep understanding of the digital economy, its underlying technologies, and often platform economics.

 

For more information, see David S. Evans, “TechReg: Rules for the Digital Economy,” Antitrust Chronicle, Competition Policy International (December 2021). https://www.competitionpolicyinternational.com/wp-content/uploads/2021/12/1-TECH-REG-RULES-FOR-THE-DIGITAL-ECONOMY-DAVID-S-EVANS.pdf

 

The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates.