By JK Bahr, Vanderbilt University
In January, the Justice Department sued Google, claiming the tech company abused a monopoly in online advertising by seizing control of tools built on top of its platform. Google—along with Amazon and Apple—have faced similar antitrust charges in Europe in the last two years, and both sides of the Atlantic have proposed sweeping changes to regulating tech giants (with success in Europe and stalls in the U.S.).
However, a new study co-authored by Vanderbilt professor Sruthi Thatchenkery suggests that while unblocking competition with antitrust interventions prompts innovation on the platforms, profitability might still elude small companies. The reasoning why has to do with the interdependence of platform markets; this paper sheds light on platform markets, informing regulators on how better to protect both tech consumers and entrepreneurs.
How competition functions differently in platform markets
In the report, Thatchenkery and her co-author, Riitta Katila of Stanford, address the complexity of competition and innovation in platform ecosystems. These marketplaces create unique interdependence among companies: major tech companies build a base product and other companies create apps and systems that leverage it. A platform can take many forms, and in recent years each category has come to be dominated by one or two key players.
- Marketplace: Amazon or Alibaba for e-commerce
- Online Advertising: Google and Meta
- Operating Systems: Microsoft, Apple and Google
Platform success requires gaining a critical mass of ‘complementor’ companies (that sell products, apps, or services on the platform) as well as consumers (who buy the products, apps, or services). Platforms often entice companies to join with assets like development tools, software integrations, or basic tech infrastructure that these complementors might struggle to build on their own.
However, the symbiosis goes awry when the platform company begins offering the same apps and services as its complementors. Platforms often give their own apps and services unfair advantages or even exploit their market power to block rivals. But the research finds that antitrust action against the platforms has consequences for complementors.
“Restraining a dominant platform may reduce its motivation or ability to share assets,” Thatchenkery said. “That makes the profit implications of antitrust actions less straightforward [than for innovation], particularly for resource-constrained complementors.”
