David Evans, Jan 30, 2015
Software platforms anchor vast global communities of users, application developers, device manufacturers, content providers, advertisers, and others. They drive innovation by enabling entrepreneurs, often anywhere in the world, to develop “applications” and to reach all the users of the platform, often anywhere in the world. These applications are sometimes the foundation of substantial businesses. The value of these software platforms, and their ability to support large communities, depend on the ability of the platform to promote positive externalities and reduce negative externalities. Software platforms usually impose rules and standards and often exclude participants that harm others in the community, and reward participants that benefit others in the community. Competition policy should presume that these governance systems, and the restrictions they place on platform participants—including their possible expulsion from the platform—are efficient and pro-competitive. Software platforms could, however, employ governance systems to foreclose competition. These restrictions, therefore, should not be lawful per se. Rather, courts and competition authorities should employ screens to protect pro-competitive restrictions and isolate anticompetitive ones. The application of these screens should be neutral to the licensing model chosen by the software platform creator. There is, in particular, no basis for imposing limitations that are, in effect, tougher on software platforms that use an open-source license model than on software platforms that use a proprietary license.
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