Connecticut Public Interest Law Journal - A Topology of Multisided Digital Platforms

 
DanielTopology.jpg

Open Markets Institute policy analyst, Daniel Hanley, published an academic article where he analyzes the ways in which Big Tech companies, including Google, Amazon, Facebook, Apple and Microsoft, engage in anti-competitive behavior as a means of retaining their users — essentially reducing the options for users to seek business elsewhere.


Digital platforms dominate the marketplace. The largest platforms– Google, Apple, Facebook, Amazon, and Microsoft (collectively known as “GAFAM” )–have an unparalleled financial position in the marketplace, and collectively maintain at least a thirty-three percent market share in fifteen separate markets with user bases in the billions. These corporations are also consistently ranked as the largest companies on Earth by market capitalization.

The GAFAM companies transact and function as intermediaries with both buyers and sellers, which designates them as multisided businesses– more commonly known as platforms. The conventional business model consists of transacting with only consumers or sellers, known as single-sided firms. Although the veracity and legal significance of this difference between single-sided firms and multisided platforms are debatable, this article will accept the current schema that platforms operate under different conditions than their single-sided counterparts. Nevertheless, being able to transact with both buyers and sellers has led to the domination of platform businesses, specifically the GAFAM companies. The dominance of these digital platform companies and the various anticompetitive behavior they have engaged in warrants scrutiny of their industry and business operations.

Scholars have attempted to use the current antitrust framework and construct new regulatory rules that aim to curb the market power of multisided platforms. While many of these recommendations are laudable and necessary, particularly with the numerous antitrust investigations currently taking place against the GAFAM companies, this author believes that without explaining both the goals and effects of the anticompetitive behavior of multisided corporations, the proverbial cart is being put before the horse. Stated differently, for purposes of this article, the debate is not that multisided platforms can engage in and operate under different business activities, or even the extent to which a corporation being multisided or having multisided operations is or should be legally important to the determination of antitrust liability. Instead, this article details precisely what the goals and effects are of the conduct digital platforms engage in to take advantage of their multisided environment to enhance and entrench their market power.

In what follows, because of their market power, user bases, and anticompetitive conduct, this article will use the GAFAM platforms as representative examples of the kind of anticompetitive actions that digital multisided platforms can engage in. This article organizes the actions of multisided platforms into a framework that categorizes their characteristics and conduct by the goals multisided businesses are trying to achieve.

This framework consists of three categories: Amassing Characteristics, Entrenching Conduct, and Exploitative Conduct. These categories provide the framework for this article. Part I describes Amassing Characteristics, which are business conditions used by multisided platforms to obtain a significant user base. Part II details Entrenching Conduct, which are business practices multisided platforms can implement to inhibit users from leaving the platform and maintain their user base. Part III details Exploitative Conduct, which are the efforts and the ability of a multisided platform to leverage their existing user base to suppress competition, enhance its market power, and extract value from its entrenched user base.

No article cannot detail all the anticompetitive conduct platforms engage in, and not every single conduct described in this article applies to the GAFAM platforms equally or are exclusive to multisided platforms. However, exploring how and why multisided platforms exploit these characteristics and engage in specific business practices will provide several benefits to antitrust scholarship. First, this framework can elucidate the weaknesses of the current antitrust framework, the consumer welfare standard, and its ability to properly regulate or extinguish the market power of multisided platforms. Currently, the antitrust laws of the United States are focused primarily on price and output instead of analyzing the inherent market structure, methods of competition, or the incentives for specific types of conduct in individual industries. Such considerations are needed to properly regulate and understand the conduct of multisided firms, particularly as the prevalence of platform businesses increases.

Second, this framework can aid antitrust enforcers and scholars by focusing their attention on understanding how these practices cause market and consumer harm as well as incentivize anticompetitive conduct in the first place.

Lastly, this framework can aid antitrust enforcers and scholars to understand how the characteristics and conduct described in this article interact to facilitate market power, undermine competition, and, particularly when some of these practices are executed by platforms in unison, enable platforms to become resistant to future competition.14 Such analysis can encourage agencies, governments, and private litigants to use the antitrust laws to curb the market power of multisided platforms and provide justification for regulatory changes.


Read the full academic article here.