Antitrust and Platform Monopoly

Abstract

Contrary to common belief, large digital platforms that deal directly with consumers, such as Amazon, Apple, Facebook, and Google, are not “winner-take-all” firms. They must compete on the merits or otherwise rely on exclusionary practices to attain or maintain dominance, and this gives antitrust policy a role. While regulation may be appropriate in a few areas such as for consumer privacy, antitrust’s firm-specific approach is more adept at addressing most threats to platform competition.

When platforms exert market power over other firms, liability may be apt, but remedy presents another puzzle. For the several pending antitrust complaints against Google and Face-book, for instance, what should be the remedy if there is a violation? Breaking up large firms that benefit from extensive economies of scale and scope will injure consumers and most input suppliers, including the employees who supply labor. For many situations a better approach would be to restructure management, rather than assets, which would leave the platform intact as a production entity but make decision making more competitive. A second, better option to breaking up firms would be to require interoperability—and in the information context, mandate the pooling of valuable information. These measures could promote competition and simultaneously increase the value of positive network effects.

Finally, this Article examines another aspect of platforms—their acquisitions. For the most salient category of platform acquisitions of nascent firms, the greatest threat to competition comes from platforms’ acquisitions of complements or differentiated technologies. Current merger-enforcement tools are ill suited to analyze this new variation on competitive harm. New approaches are required.

Keywords: antitrust, monopoly, platforms, two-sided markets, Amazon, Facebook, Google, competition, natural monopoy