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. This assumption supports dramatic changes, both proposed and enacted, to the application of competition and antitrust law in platform markets. However, in his view this lacks empirical support. The historical development of technology markets shows that incumbent platforms have often been challenged successfully by innovative entrants.
Nestor Duch-Brown & Wouter Vergote then build on this theme, noting that while advances in economic theory, econometrics, and data availability have helped antitrust authorities to fine-tune their approach to market definition in traditional brick and mortar markets, new insights have upended the applicability of the same tools in an online context. The article discusses several complexities laid bare by developments in the economics of digital platform markets: zero-price markets, personalized pricing, the single versus multi market approach to market definition, single-homing versus multi-homing, and non-generic complementarities in digital platform ecosystems.
Turning to more concrete matters, Liliane Giardino-Karlinger & Rossitza Kotzeva discuss the European Commission’s review of its Market Definition Notice (“MDN”), which had remained unaltered since its adoption in 1997. Among the novelties in the revised “Draft MDN” as published in November 2022 is additional guidance in relation to market definition in digital markets, such as multi-sided markets, aftermarkets, and digital eco-systems. This guidance builds on the significant experience built in the last two decades both in the realm of merger control and in antitrust enforcement. The article critically assesses the guidance and places it in the vital context of recent litigation. On a similar contemporary theme, Andreea Antuca, Gunnar Niels & Helen Ralston-Smith discuss market definition as it relates to two-sided platforms. Drawing on the judgment of the UK Competition Appeal Tribunal in BGL/Comparethemarket v. Competition and Markets Authority, the article addresses some of the main questions relating to multi-sided market definition.
Rosa M. Abrantes-Metz & Albert D. Metz note how the U.S. Supreme Court’s Amex decision introduced and strengthened a deal of economic jargon into the legal lexicon; including “multisided platforms,” “transaction platforms,” “indirect network effects” and “two-sided analysis.” As the authors note, however, sometimes such colorful terms precede any precise, scientific definition. What, after all, is a “two-sided analysis?” For that matter, how – formulaically – are indirect network effects defined and measured? The authors explore some generally accepted concepts, how they relate to measures of market power, and how they support the calculation of at least one source of antitrust damages, the price overcharge.
Taking a continental European perspective, Jens-Uwe Franck & Martin Peitz discuss how the German antitrust authority has designated Alphabet, Meta, and Amazon as so-called “19a firms.” As a result, they are potentially subject to specific competition law interventions under a special procedure. In these three designation decisions, market definition plays an important role. However, as the authors note, the authority’s considerations were made at a somewhat aggregate level, potentially abstracting its decisionmaking from key differences across market segments.
Finally, Jørgen Veisdal returns to brass tacks. While the term “platform” is now ubiquitous in everyday language, its precise definition remains ambiguous. This is arguably for technical reasons (which are trivial to grasp), but seemingly difficult to communicate to the public at large. For example, do Microsoft’s platforms warrant the same attention from regulators as Meta’s or Alphabet’s? Technically, what distinguishes one from the other; and what are the implications for policy makers?
In sum, the set of articles in this edition of the Chronicle constitute a valuable contribution to the ever-evolving debate on how to approach market definition in innovative, contemporary markets. Each brings unique insight from a particular perspective, which will of no doubt be of value to our readers.
As always, many thanks to our great panel of authors.
Sincerely,
CPI Team
