Nicholas Banasevic ‘The European Commission’s Android Decision and Broader Lessons for Article 102 Enforcement’ CPI Antitrust Chronicle December 2018

The aim of this article, which can be found here, is to analyse some of the main issues that arose in the European Commission’s Google Android decision, and to place these issues in the context of hotly debated broader themes relating to antitrust enforcement in hi-tech markets. The author is head of unit at the European Commission, so his analysis may be more authoritative than other ones, at least until the full decision is published.  The piece is structured as follows: Section II provides an overview of the Commission’s decision. Android is an open-source smart mobile operating system. Google started providing the core version of Android commercially to smartphone and tablet manufacturers (“OEMs”) for free, but included a range of contractual requirements relating to the terms for obtaining Google’s associated proprietary apps (e.g. Google’s search app) and services. The free and open-source provision of Android was a key part of getting all major OEMs signed up, which led (by 2011) to Google…

Randal Picker ‘Google Android Antitrust: Dominance Pivots and a Business Model Clash in Brussels’ CPI Antitrust Chronicle December 2018,

This paper, which can be found here,  argues that the Android decision is an exercise in platform engineering by European antitrust authorities. The decision makes a statement about acceptable entry paths for firms dominant in one market into another by demanding that a successful firm pivot away from the practices that consumers found valuable, and that indeed led to the emergence of dominance in the first place. In doing so, the Commission appears to undervalue the virtues of business model competition. The paper is structured as follows: Section II describes the European Commission’s interactions with Google. Google’s core business consists of organic horizontal search results matched with ads paid for by third parties. This, of course, is the classic business model of media markets offering consumers content – sometimes for a fee, sometimes for free – and charging advertisers that want to reach those consumers. So-called vertical search competitors, on the other hand, offered specialised search results. On November 30,…

Giovanna Massarotto ‘From Standard Oil to Google: How the Role of Antitrust Law Has Changed’ (2018) World Competition 41(3) 395

This paper, which can be found here, explores the evolution of antitrust over time, and how some of the challenges with network businesses are recurring issues for competition law. It is structured as follows: Section 1 examines the evolution of antitrust law over time. Before the introduction of antitrust law, markets were generally subject to self-regulation. Antitrust was introduced to regulate a number of business practices without engaging in full-fledged regulation. Nonetheless, antitrust has teeth and can be quite intrusive. A first example of this can be seen in the Standard Oil case. Standard Oil’s success was mainly due to a set of mergers and trusts it entered into with its competitors and railroads. The result of this success was that, by the 1890s, most businesses had to deal with Standard Oil or with one of the constituents of its extensive trust l. In order to address the  ‘evil of restriction of output’, the Supreme Court ordered the dissolution of the…

John Yun on ‘Understanding Google’s Search Platform And The Implications For Antitrust Analyses’ (2018) Journal of Competition Law & Economics 14(2) 311

The paper, which can be found here, seeks to describe the precise nature of the various anticompetitive claims against Google, and to develop an economic framework and empirical test to assess these claims. In particular, the paper seeks to develop a conceptual framework to assess claims of leveraging monopoly power and foreclosure of vertical search competitors that could be empirically tested and applied in other jurisdictions or future investigations in platform-settings with related allegations. The paper is structured as follows: Section II describes the precise nature of the antitrust claims against Google. Google operates a multisided platform that offers users free access to its content. In turn, it sells access to those users to advertisers who wish to convert those users to purchasers. Advertising platforms must compete for both users and advertisers. These platforms attract users through quality content, more relevant and less intrusive ads, and lower prices (typically, at free or highly subsidised prices). Ad platforms attract advertisers by having users,…

Michael Katz ‘Platform economics and antitrust enforcement: A little knowledge is a dangerous thing’ (2019) Journal of Economics and Management Strategy 28 138

This article, available here, argues that, while the economics of multisided platforms have led to important insights for antitrust policy, academic knowledge falls short of providing useful advice to enforcement agencies and courts on a number of critical topics. The author identifies several areas in which economics research could potentially make significant contributions to the practical antitrust treatment of platforms. The paper is structured as follows: Section 2 discusses various economic definitions of platforms. When should a firm be defined as a multisided platform? As has been widely noted among academics, there is a lack of consensus regarding the definition of a multisided platform. For purposes of antitrust economics, a fruitful way to rephrase the question is to ask: under what conditions is it important to account for cross‐platform interactions to ensure an accurate understanding of industry equilibrium, and when is it meaningful to examine just one side of a firm’s operations? The paper reviews a number of definitions that have been…

Friso Bostoen ‘Online platforms and vertical integration: the return of margin squeeze?’ (2018) Journal of Antitrust Enforcement 6 355

The main challenge with anticompetitive conduct by online multisided platforms is finding a fitting theory of harm. The author argues here that one candidate theory has been overlooked: margin squeeze. Margin squeeze, occurs where a dominant undertaking charges a price for the product on the upstream market which, compared to the price it charges on the downstream market, does not allow an equally efficient competitor to trade profitably in the downstream market on a lasting basis. In other words, margin squeeze takes place when an upstream operator forces his downstream competitor—who is just as efficient—off the market by squeezing his profit margins. This class of abuse has for the most part been confined to the telecom sector, but its potential reaches beyond. Indeed, the tendency towards vertical integration and subsequent conduct of online platforms could renew the relevance of margin squeeze as an analytical tool. The paper is structured as follows: Section II outlines the fundamental elements of margin squeeze. This section…

Patrick Todd ‘Intra-platform exclusion in software markets’ (2018) Journal of Antitrust Enforcement 6 409

This article, available here, analyses situations where platform operators design their platforms in a way that is liable to exclude intra-platform competitors. Exclusion in intra-platform markets require certain intricacies that existing theories of harm in antitrust law do not anticipate; thus, applying those theories unyieldingly is liable to cause confusion and result in judicial error. Authorities must formulate policies that detect anticompetitive exclusion without deterring innovation, and apply that policy consistently across comparable cases. Existing cases reveal that some authorities and courts have been taking a sensible approach to intra-platform exclusion, whereas others, especially in the EU, have shown a tendency to protect excluded intra-platform firms at the expense of consumer welfare. The paper is structured as follows: Section II defines software platforms and describes platform owners’ relationships with third-parties that distribute services through their platforms. Software platforms are code-based infrastructures that facilitate exchanges and transactions through the creation of one or multiple downstream ‘intra-platform’ markets. Through a platform, users can transact with…

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…