Digital platforms and the transactions cost approach to competition law

Abstract

Abstract For the past few decades, competition authorities around the world have said they seek to promote consumer welfare. However, in recent years, several national competition authorities have announced major investigations into behavior by digital platforms—including some behavior that does not immediately harm downstream consumers. This has reopened old questions about the fundamental purpose of competition law: What is the harm that competition law is designed to address? How, exactly, does competition law promote economic welfare? Separately, the literature on ecosystems emphasizes the central role of non-generic complementary investments as a defining feature of ecosystems and the power this can give to ecosystem orchestrators over their associated complementors. We draw these strands together to show how a recently proposed economic foundation for competition law, drawing on the transactions cost literature, provides a consistent, compelling, and economically sound foundation for competition policy toward digital platforms going forward.