3 digitalisation : a challenge for... 3. 1... competition policy but it is equally clear that an effective competitive framework cannot be carved in stone but needs to adapt to changes in the environment. competition law therefore needs to evolve in order to be effective in the digital age as well. platforms are a central business model of the digital economy. nearly all major internet companies have transformed themselves into platform providers, be they google, facebook, amazon or alibaba. markets in the platform economy, however, have a tendency to become concentrated. for two reasons. returns to scale are one reason. most of the time, the goods being sold are information - based goods sold globally via the internet. this involves substantial fixed costs but minimal variable costs. consider search engines, for example. once they have been set up, they can serve tens of thousands of users inexpensively. there are certainly some costs associated with any search query. however, the total costs rise relatively slowly compared with the number of users. network effects are another factor. the more people use it and the more data it contains, the greater the attractiveness of a platform. both properties favour the market leader and make it difficult for new entrants to gain a foothold in the market. such network effects occur even in cases where the platform ’ s users are not in direct contact with one another. for example, consumers are drawn to platforms offering an attractive array of goods and services. sellers in turn flock to those platforms in large numbers where they can find a broad base of possible purchasers of their products. the economist jean tirole has therefore compared digital platforms to large cities : even though most of their residents don ’ t know each other, they all benefit from the fact that cities are home to many firms and offer a rich cultural life. 12 network effects and returns to scale in the digital sphere enable individual firms to prevail. mention is often made in this connection of the rise of “ superstar ” firms which can use their market power to reap higher profit margins and make it difficult for competitors to enter the market. in future, policymakers and antitrust regulators will need to pay particular attention to these problems of digitalisation to prevent the markets from becoming a real - life game of monopoly in which only one player wins and all others lose. indeed, such steps towards modernisation are being investigated. the european commission, for instance, has just received an expert report, and germany ’ s federal government has

rome investment forum 2016 fixing and completing the european economic and monetary union : the costs of the unfinished banking union remarks by valeria sannucci deputy governor of the bank of italy rome, 16 december 2016 over the last few years, europe has undertaken numerous reforms in different areas, from fiscal to banking and financial stability, in what has been an ambitious response to the urgent need to resolve the problems that followed the outbreak of the global financial and sovereign debt crises. several initiatives have been taken to strengthen european banks : from the definition and application of common rules, to the consolidation of truly european authorities. the banking union is a vital element of this strengthening process. the single supervisory mechanism, which was completed in an extraordinarily short period of time, entails very extensive and deep integration of national authorities. while the monetary union mostly consisted in the sharing of decision making, the ssm envisages the integration of daily operational processes to be carried out at national and centralized level. the establishment of the ssm, followed by that of the single resolution mechanism, could have been a prelude to a paradigm shift in the level of european integration. however, this has not yet materialized. on the contrary, the banking union is still under construction and significant obstacles remain on the path to its completion. our presence here today therefore provides a timely opportunity to discuss what remains to be done, how to go about it, and ultimately to stress once again how important it is to complete this project, as has been repeatedly highlighted by researchers 1 and numerous representatives of the eurosystem, first and foremost the ecb president. it is important not only for the sake of the banking union project in itself, but also for the achievement of the broader european project. it was no accident that the original blueprint for banking union rested on three pillars ( banking supervision, crisis management, and deposit insurance ) : each one is an integral part of the financial architecture needed to safeguard the soundness and the stability of any banking system, and to break the vicious circle between banks and sovereigns. this is particularly important in europe where, in spite of the multiplicity of sovereign states involved, we aim to achieve a single european banking market with european players. the first pillar of banking union, the single supervisory mechanism, avoids misaligned incentives by ensuring that appropriate regulatory and supervisory standards are enforced and, at the same time, levels the playing field for cross - border banking. the second pillar, an 1 among others, balassone f