Niamh Dunne ‘Competition Law (and its Limits) in the Sharing Economy’ Forthcoming, Nestor Davidson, Michèle Finck and John Infranca (eds.), Cambridge Handbook on Law and Regulation of the Sharing Economy (Cambridge University Press)

As the title indicates: ‘This contribution (which can be found here) considers the potential application of competition law—specifically, the ‘antitrust’ rules governing anticompetitive unilateral or coordinated conduct—within the sharing economy.’ The sharing economy is described as a sector marked by recurrent characteristics, such as: (i) its underlying economic rationale is the under-utilisation of durable goods or other assets, which generates excess capacity that can be rented out; (ii) sharing economy businesses provide classic examples of ‘disruptive’ innovation, which originates outside a value network and displaces it; (iii) the innovations that underpin the sharing economy are rooted in the internet and mobile technologies; (iv) sharing economy businesses are often platforms in multi-sided markets; (v) sharing economy firms frequently conflict with regulatory regimes that control and limit the activities of competitors, resulting in recurrent critiques that such competition is inherently ‘unfair’. The paper is structured as follows: Section II examines how prohibitions against anticompetitive unilateral conduct may apply to the sharing economy. It begins…

Kate Collyer, Hugh Mullan and Natalie Timan “Measuring Market Power in Multisided Markets’

This paper – a contribution to OECD work on how to deal with multisided market which can be found here –  seeks to provide pragmatic suggestions on how to measure market power in multi-sided markets. It is quite practical: it draws operational conclusions on how to adapt existing enforcement and merger assessment tools to address some of the challenges posed by multi-sided markets. The paper is structured as follows: The first section of the paper sets out some important features of multi-sided markets, including indirect network externalities, single-homing and multi-homing, price structures, and tipping. These have been discussed extensively in previous posts, so I’m not going to elaborate on them here. Suffice it to say that: ‘The standard results from one-sided markets do not apply directly to multi-sided markets and any assessment of market power needs to take this into account explicitly. Many of our standard tools for assessing market power are more complex to apply in multi-sided markets and…

David Evans and Richard Schmalensee ‘Network Effects: March to the Evidence, Not to the Slogans’ (2017) Antitrust Chronicle

The basic position of this paper – which can be found here – is that: ‘Competition authorities (…) with support from some dismal scientists, saw the dark side of network effects. Firms could rig the race to become the winner and thereby “tip” the market to make themselves monopolies. And even if a firm won fair and square, network effects would result in insurmountable barriers to entry and would be the font of permanent monopoly power. (…) A recent argument in this debate is that online platforms have troves of data that make network effects even more potent. Unfortunately, this view of network effects evolved from a seminal economic contribution to a set of slogans that don’t comport with the facts.” A first section looks at the economics of networks. This covers the origins of theoretical studies on this topic – which focused on telephone networks and fax machines, and standard-tipping (i.e. the VCR-BetaMax war). Theoretical refinements to the theory…

Mark Anderson and Max Huffman, ‘The Sharing Economy Meets the Sherman Act: Is Uber a Firm, a Cartel, or Something in Between?’ (2017) Columbia Business Law Review 859

This is a rather long piece – which you can find here – that tries to understand how antitrust should be applied in the context of the sharing economy. I think the spur for this piece is the recent price-fixing case brought against Uber in New York. Regardless of the incentives for writing the paper, it tries to identify the various approaches that antitrust can adopt regarding digital platforms and to determine which one is better suited. The paper also argues that: “Unique to sharing economy enterprises is a structure that approaches a single entity while remaining a set of agreements among individual actors. This structure results in a sharing of economic risks among the participants in a sharing economy enterprise which can incentivize efficiencies in operation that ordinarily are found in a single entity. The article concludes that those efficiencies can overcome anticompetitive concerns about coordination on competitively sensitive matters.” The paper begins by observing that: “antitrust law has…

Maurice Stucke and Ariel Ezrachi “Looking Up in the Data-Driven Economy’ (2017) CPI Chronicle May

This paper – which you can find here – argues that analyses of the impact of internet platforms on competition should not only take into account the behaviour of these platforms towards their consumers downstream, but also towards their input/content providers. The paper begins with the observation that U.S. antitrust policy (aside from cartel enforcement) has been plagued by a number of shortcomings. Competition has declined since the 1970s, along with the number of new businesses being created, while market and profit concentration have increased. There is a risk of these trends being reinforced by the emergence of big data and AI. This is not something which is inherent to these technological developments: big data and AI’s effects on society depend on how firms employ them, how markets are structured, and whether firms’ incentives are aligned with society’s interests. At times, big data and big analytics can promote competition and welfare by making information more easily available and by providing access to…

Frank Pasquale “When Antitrust Becomes Pro-Trust: The Digital Deformation of US Competition Policy” CPI ANTITRUST CHRON. (May 2017).

This paper – which can be found here – argue that “in digital industries in particular — such as search engines and social networks — U.S. merger review has been lax”. According to the author: “Massive digital platforms have exacerbated an old problem in American antitrust law — the tension between the efficiencies that mergers achieve in theory, and the pressure they inevitably create for firms in, or adjacent to, the industry of the merged firms, to themselves combine in order to better compete.” Problems are said to arise from adherence by antitrust enforcers to three myths that rationalize market power online: The Myth of Easy Platform Switching – This theory holds that consumers can and will easily shift from Google to Yahoo, or from Amazon to Barnes & Noble, or from Uber to Lyft. In reality, however, a long history of personalisation of results (through machine learning algorithms), network effects and lock-in make it hard to switch providers. The Myth of the…

Jens Prufer and Christoph Schottmüller ‘Competition with Big Data’ CentER Discussion Paper 2017-007

This working paper – which can be found here – attempts “to better understand data-driven markets: i.e. markets where the cost of quality production is decreasing in the amount of machine-generated data about user preferences or characteristics (henceforth: user information), which is an inseparable by-product of using services offered in such markets”. The authors start from the assumption that data-driven markets are characterized by imperfect competition and subject to indirect network effects. In the light of this, they try to determine: (a) under which conditions a duopoly can be a stable market structure in a data-driven market; (b) when the propensity to market tipping (i.e. to monopolization) becomes overpowering; (c) the conditions that allow a dominant company in one data-driven market to leverage its position into another market. The paper begins, at least implicitly, by distinguishing between indirect network effects (which mix supply and demand effects. They occur where increased demand leads to decreasing costs in obtaining a product input – in…

David Evans ‘THE EMERGING HIGH-COURT JURISPRUDENCE ON THE ANTITRUST ANALYSIS OF MULTISIDED PLATFORMS’

This paper – available here – reviews various court decisions adopted between September 2014 and 2016 that apply competition law to matters involving multisided markets. The paper is short, and the structure is quite simple: after summarizing the key differences between multisided markets (the author insists in calling them matchmakers) and traditional businesses, it reviews the aforementioned court decisions. The article is quite short, and provides a succinct overview of these cases and their implications for antitrust analysis of matters involving multisided platforms. These include three decisions regarding payment cards, including the US Court of Appeals decision on American Express  and the European Court’s decisions in Groupement des Cartes Bancaires and MasterCard; the GoogleMaps decision by the Cour d’Appel de Paris; and the Telcent decision by China’s Supreme People’s Court. The conclusion is that all these decisions recognize that platforms serve multiple interdependent groups of customers, and that the interactions between these groups matter for the substantive analysis of antitrust…