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
Summary
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
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