Analysing Exclusive Dealing in Two-Sided Markets: Marketplaces for Video Games

Abstract

Competition law in the EU has a rich history dealing with exclusive dealing (ED). Past economic analysis has informed the view that ED is not by its nature a tool of exclusion and can serve other goals and purposes. Yet, sometimes exclusive dealing may require economic analysis.1 This is particularly true when we look at entry into adjacent markets by large firms that are under greater scrutiny to begin with and whose business practices are sometimes generally under suspicion of having anticompetitive effects.2 This article proposes a theoretical framework and an empirical analysis for analysing ED in a two-sided market. I analyse Epic Games Store, an entrant into online computer game distribution which included ED as a cornerstone of its entry strategy. The purpose of the article is not to provide evidence of anticompetitive conduct in this special case. The conduct in our example is likely not in violation of European competition law as it is the entrant that uses ED to take on an incumbent with a very high market share. Instead, I demonstrate the trade-off between efficiency and consumer choice in a marketplace that can be analysed in the framework of two-sided markets. The economic theory of two-sided markets has gained increasing prominence in antitrust.3 However, analysis rarely moves beyond the assertion that traditional tests and tools are inappropriate and sometimes misleading.