Abstract

Facebook, the world’s largest online networking platform, is the subject of multiple antitrust investigations by various state and federal regulators. Yet scholars and practitioners remain divided on how to measure Facebook’s market power. Some argue that conventional approaches for identifying market power are suitable for the online networking market. This Article argues such conventional approaches are inadequate for assessing market power in online networking markets.This Article begins by introducing the traditional approaches that courts have employed to assess market power: the direct effects approach, the Lerner Index approach, and the market share approach. It next describes Facebook’s business model and shows that, because Facebook is a two-sided market, these traditional approaches should not be applied to Facebook.Instead, the Article proposes that the information gaps, switching costs, and entry barriers approaches are better suited for assessing the market power of online networking platforms. The Article thus concludes by proposing a legal framework for assessing market power in online networking platforms which employs such non-traditional approaches. While this Article uses Facebook as the main case study, this paper’s findings are equally applicable to similar online networking platforms.

Highlights

  • Digital platforms play an essential role in fostering economic growth

  • Traditional antitrust theories are ill-suited for assessing the digital marketplace because the essence of competition among online networking platforms lies in quality, access to information, and innovation instead of pricing and output.[17]

  • This Article aims to overcome these difficulties by advancing alternative approaches for demonstrating the market power of online networking platforms

Read more

Summary

INTRODUCTION

Digital platforms play an essential role in fostering economic growth. This is because they “facilitate trusted transactions between strangers on a digital platform,”[1] allowing users to communicate and transact efficiently over the internet. Traditional antitrust theories are ill-suited for assessing the digital marketplace because the essence of competition among online networking platforms lies in quality, access to information, and innovation instead of pricing and output.[17]. This Article aims to overcome these difficulties by advancing alternative approaches for demonstrating the market power of online networking platforms. This study suggests that the information gap approach, the switching costs approach, and the entry barriers approach are more suitable in defining market power of online networking platforms These approaches are growing in popularity among United States courts; the proposed framework does not present a dramatic break with established practice. Part V summarizes the study’s main findings and proposes a more viable legal framework for assessing market power in online networking platforms

TRADITIONAL APPROACHES TO ASSESS MARKET POWER
Direct Effects Approach
Lerner Index Approach
Market Share Approach
APPLYING TRADITIONAL APPROACHES TO THE ONLINE NETWORKING MARKET
Structure
Economic Effects in a Two-Sided Market
Limitations of Traditional Approaches to the Online Networking Market
Information Gaps Approach
Switching Costs Approach
Entry Barriers Approach
Findings
CONCLUSION
Full Text
Paper version not known

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.