Antitrust Chronicle^® – Defining Platform Markets

Dear Readers,

Market definition is perhaps the fundamental step in any antitrust analysis. If competition rules are to seek to regulate markets, and markets (by definition) consist of consumers and suppliers, this should not come as any surprise.

However, market definition continues to raise perplexing issues for regulators, litigants, and courts alike. This is because markets constantly evolve, and their patterns of supply and demand may elude the tools that may have been developed decades before, in an entirely different context. 

Traditional tools used to define markets were based on classical economics, in turn based on concepts such as supply and demand, which could easily be captured by reliance on price-sensitivity as a proxy to determine whether two sets of goods formed part of the same relevant market. However, this analysis is rendered more complex in today’s markets, where, quite often, goods or services are offered free of charge at the point of consumption, with the supplier earning a margin through other activities, such as the associated supply of advertising (e.g. on a search or social media platform).

The articles in this Chronicle address the issues that parties face as the old tools are incrementally updated to account for modern market dynamics. 

Jonathan M. Barnett opens by noting the widely held assumption that platform technology markets are particularly prone to monopoly outcomes due to network effects and switching costs.&n