Richard Ward ‘Testing for Multisided Platform Effects in Antitrust Market Definition’ (2017) University of Chicago Law Review 84 2059

The paper – which can be found here – begins by observing that, if the relevant market is defined as including all sides of the platform, this creates a broader space of allowable trade-offs between pro- and anti-competitive effects than if the definition encompasses fewer sides. Thus, it matters crucially to case outcomes whether and how courts incorporate “multi-sidedness” during market definition. This paper suggests an approach that courts should follow when making such decisions. Part I explores the challenges inherent in market definition. First, it outlines how the US case law requires market definition in antitrust analysis, and describes how this case law structures market definition analyses. Second, the practical difficulties of pursuing market definition exercises in practice are explored. Part II addresses the added challenge of deciding whether a relevant market should comprise all, some, or no sides of the platform. It describes the economic approach to multisided platforms – which I will not focus on here, because…

Kenneth A. Bamberger and Orly Lobel ‘Platform Market Power’ (2018) 32 Berkeley Tech. L.J. 1051

In this paper – which can be found here – the authors seek to develop a framework for considering the market power of platform companies that use digital technology to connect a multisided network of individual users. Throughout, they use Uber as an example.  The framework identifies a number of questions that may be helpful in assessing whether a platform has market power. The first question one should ask is whether the success of a platform is a result of innovation or of undesirable regulatory arbitrage. The authors argue that understanding the net impact of digital platforms requires careful inquiry into the gains arising from the entry of platforms into mature markets and their disruption of staid industries; and to the harm they may pose to regulatory protections set out to protect valuable social goods. This means that antitrust law cannot be asked to answer – as it has been asked to do by some authors – questions of regulatory…

Paul Bates ‘Network effects, antitrust, and falsifiability’ (2017) Journal of Antitrust Enforcement 5(3) 341

This  (short) piece – that can be found here – makes a rather straightforward argument: as competition law confronts new business models enabled by new technologies, it is important to advance theories of harm that are scientific – in the Popperian sense that they must be drawn in such a way as to allow one to demonstrate that the theory might be wrong (or, as the technical jargon puts it, falsified). The paper begins with a description of network effects, before describing how quality is at the heart of a number of cases concerning digital platforms. network effects mean that increased concentration – and reduced competition – may improve the perceived quality of the product. This leads to a heretical question: ‘should we relax antitrust enforcement when network effects are strong? (…) as big data and network effects become more common in the economy, competition enforcement should become less aggressive so as to allow the benefits of network effects to…

Peter Menell  ‘Economic Analysis of Network Effects and Intellectual Property’ in Ben Depoorter & Peter S. Menell (eds.), Research Handbook on the Economics of Intellectual Property Law: Vol I. Theory (2018)

This piece – which can be found here – is a rather long , but very comprehensive book chapter that surveys and integrates the economic, business strategy and legal literatures on IP, competition and network effects. It is structured as follows: Part I introduces network effects. I have done this to death in the past, so I’m not going to repeat it here. Suffice it to say that the author looks mainly at demand side network effects, and what its implications are for IP and competition policy: ‘In a static economic model (i.e., one without innovation), consumers benefit from robust competition within product standards. Open access to product standards encourages realization of network externalities. Although bandwagon effects can enhance consumer welfare in a static context, they can also make it more difficult for developers of improved platforms to enter the market. Consumers and suppliers of complementary products can face significant switching costs in migrating from one platform to another.’ Like…

Cento Veljanowski “Credit Cards, Counterfactuals, and Antitrust Damages” Journal of European Competition Law & Practice (2018) 9(3) 146–160

This paper – which can be found here – provides an overview of the UK MasterCard litigation. Mr. Veljanowski is likely very well placed to discuss this:  he was one of the two economic experts involved in a case recently decided by the CAT on the matter. He also seems to publish a paper about every court decision concerning the MasterCard litigation (see my post of 24 March 2017, regarding the Arcadia v MasterCard case). The paper begins with a quick overview of the MasterCard litigation. As a result of the European Commission’s MasterCard decision, there are currently about 25 separate standalone and follow-on retailer actions making their way through the English courts concerning MasterCard and Visa’s card systems’ interchange fees. The first decision in these cases was adopted by the CAT last year (Sainsbury v MasterCard). The second one was the Arcadia v MasterCard case I posted about on 10 February. There are also more recent decisions by the…

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…