Hybrid Differentiation and Competition Beyond Markets

Hybrid differentiation occurs when a platform discriminates among businesses in a related market in which it is not active itself with the aim to increase or maintain its competitive advantage elsewhere. An example is a platform blocking an app that interferes with its ability to gain revenues through advertising. Hybrid differentiation is particularly relevant where a platform builds an ecosystem or conglomerate around its main activity. As a competitive strategy beyond vertical integration that serves to protect the platform’s overall activities and business model, hybrid differentiation is different from the self-preferencing at stake in Google Shopping. This paper submits that the assessment of hybrid differentiation requires attention for the broader competitive strategies of dominant platforms going beyond traditional forms of leveraging and the relevant markets in which they operate.

By Inge Graef¹

I. INTRODUCTION

The Google Shopping saga has led to a fierce discussion about the theory of harm condemning self-preferencing by vertically integrated dominant firms as anticompetitive. This paper reflects on another type of discrimination, namely hybrid differentiation, whose effects are maybe even more complex and problematic than those of self-preferencing. Hybrid differentiation occurs when a platform discriminates among businesses in a related market in which it is not active itself in an effort to increase or maintain its competitive advantage within on