Online Services and the Analysis of Competitive Merger Effects in Privacy Protections and Other Quality Dimensions

Abstract

This paper presents a model of competition in privacy and/or quality oered to consumers in two-sided online markets in which revenue is derived from advertising. I review a number of the previously reported barriers to including a loss of competition over privacy provisions in antitrust analyses. A standard method for analyzing the eects of mergers on prices can be applied to the eects of mergers on non-price competition, such as competition in the level of privacy or quality oered to consumers. The model and results provide tools that competition authorities can use to improve the analysis of the eects of mergers on the consumer side in such two-sided online markets, hopefully leading to a more complete analysis of the eects on competition for consumers and better enforcement decisions. The technique can also be adapted for use in analyzing quality competition in other contexts. � This research is supported in part by the Media Democracy Action Fund, a project of the Sixteen Thirty Fund. I am grateful for the helpful comments of Joseph Farrell, Allen Grunes, Gene Kimmelman, and participants of the 2016 Antirust Enforcement Sympsium in Oxford, UK, and the 2016 CRESSE Conference in Rhodes, Greece. The views expressed in this paper are solely those of the author and do not necessarily re‡ect the opinions of Bates White or its clients.