Tying of “Free Goods” in Digital Platform Markets

As dominant platforms offer related services and expand into adjacent markets, there are serious concerns for anticompetitive tying that may serve to extend their market power to other markets. In this article, I review recent theoretical developments in the leverage theory of tying in relation to digital platform markets where goods are often provided for “free.” With zero pricing, the monopolist of the primary good may be unable to appropriate a rival firm’s efficiencies through the pricing of the primary product and therefore have an incentive to resort to tying to foreclose the rival firm and expropriate any rents associated in the tied product market. I also briefly discuss practical issues that may pose challenges in putting theory into practice. In particular, given potential precompetitive and efficiency-enhancing effects of tying, a rule of reason approach that carefully balances pro- vs. anticompetitive effects would be advisable.

By Jay Pil Choi¹

I. INTRODUCTION

As a few big digital platforms, collectively known as “Big Tech,” FAANG,² or GAFAM,³ play an increasingly important role in our daily lives, competition authorities and regulators around the world are expressing concerns about their market domination and potentially imposing unfair terms on businesses and consumers as gatekeepers. In particular, more scrutiny is called for any actions taken by these firms that may enhance their existing market power or limit the entry by more or equa