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 balance in a comprehensive way.
- The second question is whether barriers to entry in platform markets stifle competition. In line with the analyses of the articles above, they conclude that this will have to be determined on a case-by-case basis, taking into account network effects.
The third, fourth and fifth questions focus on the implications of platform power on price, namely:
- The third question is whether, when a platform coordinates the transactions between its various sides, this could amount to price fixing. After reviewing a number of articles and cases concerning Uber’s activities, the authors conclude that platforms might run afoul of traditional antitrust prohibitions on price fixing. However, this may have the effect of hindering desirable innovation in market organisation.
- The fourth question is whether the use of digital pricing by a platform can amount to either illicit tacit collusion or unfair first–order price discrimination. They conclude that this is an area of the law to which more attention should be devoted, since ‘policymakers will have to identify new legal frameworks—within and outside traditional antitrust frameworks—to assess the implications for market power and consumer welfare, and address resulting concerns.’
- The fifth question looks at whether digital platforms can engage in predatory pricing. They argue that, given the dynamics of digital platforms, the standards for predatory pricing may need to be adapted. They further suggest that policymakers should also consider whether predation might occur even when a firm does not operate below costs, but relies instead on an asymmetric pricing scheme that lowers prices significantly on one side of the market to promote user growth. Such a scheme could enhance network effects that would raise switching costs and the platform’s ability to charge higher prices on the other side of the market.
The sixth, seventh and eighth questions are concerned with the digital nature of platform markets:
- The sixth question is whether a platform’s collection and use of data might raise anticompetitive concerns. Here, the authors map out the debate on the topic, relying (very) heavily on OECD work on big data and competition.
- Question seven is concerned with leveraging. In particular, it seeks to determine the circumstances under which platforms will be able to leverage their market power into other markets. Such practices are an acknowledged part of the business-model of platforms in the digital sphere, but it is unclear how competition law should deal with such efforts. The authors suggest that ‘especially in data–driven platform markets characterized by strong network and lock–in effects – and in new technological contexts that might otherwise be ripe for competitive innovation – policymakers should look hard at whether the aspects of a platform’s power combine in a way that threatens to compound losses to consumer welfare’.
- The last question tries to determine when platform market power might inappropriately restrict consumer choice about personal privacy. It is concluded that: ‘Just as lock–in effects might prevent consumers from adopting more efficient alternatives, in the platform era such competition-constraining consequences might prevent consumers from other choices guaranteed to them, and must be considered in any examination of a platform’s market power.’
Comment; Despite its very misleading title, the paper provides an interesting overview of various challenges that the digital economy raises for competition law – including competition law’s role within wider efforts to deal with the digital age and reform the State’s regulatory architecture. It contains more questions than answers, but I suppose that’s an accurate reflection of where we are at the moment.