Understanding Online Markets and Antitrust Analysis

Competition Policy and Antitrust

Article Snapshot


Jingyuan Ma and Daniel Sokol


Northwestern Journal of Technology and Intellectual Property, Vol. 15, pp. 43-52, Spring 2017; University of Florida Levin College of Law Research Paper No. 17-22


This paper considers the application of traditional antitrust analysis to online markets. This paper identifies several ways in which online markets differ from regular markets. Most online markets are multi-sided, and entry barriers are low.

Policy Relevance

Online markets change rapidly. Careless application of traditional antitrust concepts to online markets can harm innovation and consumers.

Main Points

  • The definition of markets online is complicated and challenges traditional antitrust analysis.
  • Many online markets are “multi-sided” markets; in these multi-sided markets, a platform provides services to consumers for free and uses consumer data to direct advertising to consumers; different platforms, such as Google and Facebook, compete against one another for ad revenue.
  • Competition authorities sometimes misidentify multi-sided markets by considering only one side of the market; furthermore, when a service is provided for free, one cannot use traditional methods to calculate market share.
  • The availability of cloud computing, low app development costs, and the ease of collecting and analyzing data means that entry barriers in online markets are low; Snapchat and Instagram quickly made inroads on Facebook, though they started with a far smaller user base.
  • Traditional antitrust analysis focusses on the costs consumers face in switching from one platform to another; online, the cost of switching tends to be low, and most consumers use more than one platform (called “multi-homing”).
  • Online markets are typically multi-sided, and involve both direct and indirect network effects.
    • In a one-sided market, “consumers” are treated as a single group; in a multi-sided market, consumers with different preferences should be considered separately.
    • The benefits of a multi-sided market require participation and coordination of many different groups.

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