Digital Platforms and Antitrust Law

Privacy and Security, Competition Policy and Antitrust and Innovation and Economic Growth

Article Snapshot

Author(s)

Keith Hylton

Source

Boston University School of Law, Law and Economics Research Paper No. 19-8, 2019

Summary

Some allege that large “big data” platforms can easily harm innovation by excluding rivals, but some controversial platform conduct benefits consumers and does not appear to harm innovation.

Policy Relevance

Digital platforms do not require reform of antitrust law.

Main Points

  • Large “big data” platforms dominate the market because of economies of scale; when more consumers use Google, Google harvests more data, and can use it to improve its search methods.
     
  • Google’s costs of monitoring content are low, because of immunity from lawsuits under the Communications Decency Act: Google removes offensive content that harms its own reputation, but allows content that imposes costs on individuals, such as material that violates copyright law.
     
  • Observers describe three types of anticompetitive behavior available to digital platforms, including exclusion of rivals from a technological “kill zone,” acquisition of rival startups, and denial of competitors’ access to data.
     
  • A technological “kill zone” is observed when a firm such as Apple creates its own version of a popular app.
     
    • Consumers benefit from inclusion of a useful functionality within the platform.
       
    • The healthy growth of app stores shows that venture capitalists rarely hesitate to fund startups in the “kill zone.”
       
  • The theory that a large firm's offering of a new technology in the kill zone violates antitrust law is plausible, but courts should ask for solid evidence that the new technology would have grown to rival the platform.
     
  • Some support antitrust scrutiny of large platforms’ acquisitions of potential competitors, such as Facebook’s acquisition of Instagram; however, Facebook’s acquisition of Instagram might have benefitted consumers and advertisers.
     
  • Requiring Google to share data with competitors or the government might do more harm than good, because this would reduce Google's incentives to harvest and process data, and would raise serious privacy issues.
     
  • Claims that Google's expropriation of search sub-platforms violated competition law are doubtful.
     
    • Consumers may easily click to reach rival search services like Bing.
       
    • No search sub-platform is likely to rival Google.
       
    • Google has no reason to expropriate a sub-platform before its developers recoup their costs, as this would cause developers to flock to Bing.
       
  • In a two-sided market, a platform (such as a credit card company) serves two distinct groups of users (for example, consumers and merchants).
     
    • Ohio v. Amex ruled that an antitrust court must consider both groups in assessing market power.
       
    • In the Amex case, restraints on merchants generated significant benefits for consumers, and so did not violate antitrust.
       
  • Antitrust may be applied effectively to two-sided markets; for example, Amex does not prevent a court from finding a platform such as a search engine has a monopoly because of structural factors such as a large market share and the existence of entry barriers.
     

Get The Article

Find the full article online

Search for Full Article

Share