The Identification and Measurement of Market Power and Entry Barriers in Markets Featuring 'Platform' Businesses

Abstract

In response to the increasing popularity and economic impact of companies in the Internet ecosystem, the Federal Trade Commission is being implored with vocal but factually vacant calls to revisit its approach to antitrust, and in particular market power, barriers to entry and anti-competitive practices including exclusionary and predatory conduct.

The long-stranding approach of traditional enforcement, applied throughout the Internet ecosystem, has and will continue to provide balanced protection in the event of market abuses that generate demonstrable consumer harm.

In particular, two features of platform businesses, discussed below, underscore both the value and dynamism of traditional antitrust enforcement:

1. In two-sided markets, the more users a platform can deliver—and the more engaged those users are—the more revenue it can derive from facilitating interactions with other users and with third-party affiliates. The larger the platform, the more consumers benefit.

2. Even in situations where network effects generate market leverage for the platform operator, potentially devastating competition is just a generation or two of new technology away—and arriving faster all the time.

Keywords: antitrust, FTC, platform business, market power, barriers to entry, exclusionary conduct, predatory conduct, consumer protection

JEL Classification: D40, K23, L14, L22, L43, L51, L86, L96, O33