Working paper

Digital platforms and antitrust

The market power of online platforms raises concerns that they may engage in anti-competitive practices, but traditional (ex-post) antitrust intervent

Publishing date
23 November 2020
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Digital platforms are at the heart of online economic activity, connecting multi-sided markets of producers and consumers of various goods and services. Their market power and their privileged ecosystem positions raise concerns that they may engage in anti-competitive practices that reduce innovation and consumer welfare. This paper deals with the role of market competition and regulation in addressing these concerns. Traditional (ex-post) antitrust intervention will be less effective in markets driven by network effects unless it is combined with a proper (ex-ante) regulatory framework. Antitrust tools should focus on value creation and its distribution before focusing on competition. The scope of regulatory intervention should satisfy three criteria: i) value creation from operation of the platforms does not decrease due to the policy intervention; in particular, interventions should not reduce network effects; ii) allocative efficiency is based on distributing the value created in a fair way among market participants e.g. use of the Shapley Value. Fair and transparent rules must govern the platform ecosystem; iii) dynamic efficiency and competition ensure that incentives for market misconduct and anticompetitive strategies such as artificial entry barriers are eliminated. Market interventions that target a firm’s market power should ideally retain value creation while also encouraging small firm entry and innovation. Data has a central role in online markets. Value creation is reinforced through a recursive a data capture and data deployment feedback loop which is enabled by machine learning technologies. A regulatory intervention that facilitates data sharing mechanisms, such that data will not only confer value to market leaders but also to their competitors to the benefit of consumers, is crucial for creating more competitive and innovative digital markets.

Recommended citation:
Parker, G., G. Petropoulos and M. Van Alstyne (2020) ‘Digital platforms and antitrust, Working Paper 06/2020, Bruegel

About the authors

  • Georgios Petropoulos

    Georgios Petropoulos joined Bruegel as a visiting fellow in November 2015, and he has been a resident fellow since April 2016. Since March 2022, he has been a non-resident fellow. Since March 2019, he is a Marie Curie Skłodowska Research Fellow at MIT and Bruegel and post-doctoral fellow at the MIT Initiative on the Digital Economy. Georgios’ research focuses on the implications of digital technologies on innovation, competition policy and labour markets. He is currently studying how we should regulate digital platforms, what the relationship between big data and market competition is as well as how the adoption of robots and information technologies affect labour markets and firms’ market returns. He holds a bachelors degree in Physics, master’s degrees in mathematical economics and econometrics and a PhD degree in Economics. He has also studied Astrophysics at a Master's level.

  • Marshall Van Alstyne

    Marshall Van Alstyne is one of the world’s foremost experts on platform strategies and network business models. He is a frequent speaker, board level advisor, and consultant to both startups and global firms.
    His research has received numerous academic awards and appeared in top journals such as Science, Nature, and Harvard Business Review. Interviews appear regularly across Bloomberg, the New York Times, the Wall Street Journal and National Public Radio. Prof. Van Alstyne is a research scientist at MIT, tenured professor at Boston University, and graduate of Yale and MIT. His consulting includes such firms as British Telecom, Cisco, Haier, IBM, Intel, Microsoft, Pearson, and SAP. He holds multiple patents; and was among the first to measure individual dollar output from social networks and IT. His coauthored work, with Geoffrey Parker, of two-sided markets and platforms as inverted firms are now taught and applied worldwide.

  • Geoffrey Parker

    Geoffrey Parker is a professor of engineering at Dartmouth College where he also serves as Director of the Master of Engineering Management Program. In addition, he is a research fellow at MIT’s Initiative for the Digital Economy where he leads platform industry research studies and co-chairs the annual MIT Platform Strategy Summit. Prior to joining Dartmouth, Parker was a professor of business at Tulane University. He received a B.S.E. from Princeton and M.S. and Ph.D. from MIT. Parker has made significant contributions to the field of network economics and strategy as co-developer of the theory of “two-sided” markets. He is co-author of the book “Platform Revolution.” His current research includes studies of platform business strategy, data governance, smart cities and energy systems, financial services, and electronic healthcare record systems. Parker’s research has been funded by grants from the National Science Foundation, the Department of Energy, the states of Louisiana and New York, and numerous corporations.  He serves or has served as department editor and associate editor at multiple journals and as a National Science Foundation panelist. Parker won the Thinkers50 2019 Digital Thinking Award, along with Marshall Van Alstyne, for the concepts of the inverted firm, two-sided markets, and how firms can adapt and thrive in a platform economy. Parker is a frequent keynote speaker and advises senior leaders on their organizations’ platform strategies. Before attending MIT, he held positions in engineering and finance at GE Semiconductor and GE Healthcare. Additional information can be found at ggparker.net, @g2parker, and Google Scholar.

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