Benjamin Edelman and Damien Geradin, ‘An Introduction to the Competition Law and Economics of “Free”’ (2018) Competition Policy International Antitrust Chronicle September 201

As the authors of this paper – which can be found here – say in the abstract: ‘Many of the largest and most successful businesses today rely on providing service at no charge to at least a portion of their users. Free services often delight users, yet also create a series of challenges for competition policy, including impeding entry, inviting overproduction on quality, and increasing the risk of deception and overpayment. This short paper presents these problems, examines the strategies that entrants can attempt when competing with free service, and considers possible regulatory responses.’ The paper’s main message is that, while free services have undeniable appeal to consumers, they can also impede competition and market entry. Competition authorities should be correspondingly attuned to allegations arising out of “free” services and should at least enforce existing doctrines strictly in affected markets. The paper is structured as follows: A first section provides an overview of businesses offering free goods or services. Some business…

Andrea Pratt and Tommaso Valletti ‘Attention Oligopoly’

In this paper, which can be found here, the authors develop a model of digital platforms as attention brokers that have proprietary information about their users’ product preferences and sell targeted ad space to upstream industries. The paper argues that increased concentration among attention brokers can lead to reduced entry, higher prices and less product variety in upstream industries. In a nutshell, the argument runs as follows. A monopolistic attention broker has an incentive to create an attention bottleneck by reducing the supply of targeted advertising. If an attention broker reduces the number of ads it sells, it will reduce the number of upstream firms that have access to consumers, thus increasing their market power. This bottleneck strategy can generate higher total profits for the upstream industry that are partly captured by the platform through higher total ad revenue. However, under standard conditions, this supply reduction hurts consumers who face less choice and higher prices. A corollary of this argument…

Daniel Madrescu on The SSNIP Test and Zero-Pricing Strategies: Considerations for Online Platforms (2017) CoRe 1 1

This paper, which can be found here, argues argues that market definition in online platforms requires us to revisit how the hypothetical monopolist test is applied. Given that one side of the market is often free, the application of the small but significant non-transitory increase in price (SSNIP) test will have to be overhauled. In the case of zero-pricing strategies commonly used by online platforms, the only feasible option for assessing demand elasticity for the purpose of performing the hypothetical monopolist test requires us to adopt a quality-oriented analysis, and to deploy a test based on the effect of a small but significant non-transitory decrease in quality (SSNDQ). The paper is structured as follows: Section 2 looks at the use of zero-pricing strategies by online platforms, and at the implications of these strategies in the context of market definition. Online platforms are intermediaries that cater to two or more separate customer groups by facilitating an interaction between them. The success of…