Digital Platforms and the Transactions Cost Approach to Competition Law

Abstract

In recent years, several competition authorities around the world have announced major investigations into potential anti-competitive behaviour by digital platforms. Not all of that behaviour harms downstream consumers. This has contributed to a growing ‘existential crisis’ at the foundation of competition law: What is the harm that competition law is designed to address? How, exactly, does competition law promote economic welfare? Separately, the literature on ecosystems emphasises the central role of non-generic complementary investments as a defining feature of ecosystems, and the power this can give to ecosystem orchestrators over their associated complementors. We draw these strands together to show how a recently-proposed economic foundation for competition law, drawing on the transactions cost literature, provides a consistent, compelling, and economically-sound foundation for competition policy towards digital platforms going forward.

Keywords: [digital platforms, ecosystems, competition law, competition policy, transactions cost approach, sunk investments, complementors, hold-upmma separated]

JEL Classification: K21, L4, L14, L51, L86,