Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Tuesday, August 4, 2020

Digital Platforms and Antitrust

Digital Platforms and Antitrust

Geoffrey Parker

Dartmouth College

Georgios Petropoulos

Massachusetts Institute of Technology (MIT); Bruegel

Marshall W. Van Alstyne

Boston University – Questrom School of Business; Massachusetts Institute of Technology (MIT) - Sloan School

Date Written: May 22, 2020

Abstract

Digital platforms are at the heart of online economic activity, connecting multi-sided markets of producers and consumers of various goods and services. Their market power, in combination with their privileged ecosystem position, raises concerns that they may engage in anti-competitive practices that reduce innovation and consumer welfare. This paper deals with the role of market competition and regulation in addressing these concerns. Traditional (ex-post) antitrust intervention will be less effective in markets driven by network effects unless it is combined with a proper (ex-ante) regulatory framework. Antitrust tools should focus on value creation and its distribution before focusing on competition. The scope of regulatory intervention should satisfy the following three criteria: i) value creation from operation of the platforms does not decrease due to the policy intervention; in particular, interventions should not reduce network effects; ii) allocative efficiency is based on distributing the value created in a fair way among market participants e.g. use of the Shapley Value. Fair and transparent rules must govern the platform ecosystem; iii) dynamic efficiency and competition ensure that incentives for market misconduct and anticompetitive strategies such as artificial entry barriers are eliminated. Market interventions that target a firm’s market power should ideally retain value creation while also encouraging small firm entry and innovation. Data has a central role in online markets. Value creation is reinforced through a recursive a data capture and data deployment feedback loop which is enabled by machine learning technologies. A regulatory intervention that facilitates data sharing mechanisms, such that data will not only confer value to market leaders but also to their competitors to the benefit of consumers, is crucial for creating more competitive and innovative digital markets.

https://lawprofessors.typepad.com/antitrustprof_blog/2020/08/digital-platforms-and-antitrust.html

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