Friso Bostoen’s new book, Abuse of Platform Power: Leveraging Conduct in Digital Markets under EU Competition Law and Beyond, outlines how antitrust agencies and policymakers should tackle market power in the platform economy. The following is an adaptation of the book’s introduction.
“The Four“—even the “Gang of Four” or “Four Horsemen.” Alternatively, if we don’t want to neglect Microsoft (and we don’t), the “Formidable Five,” “Frightful Five” or “Big Five.” You could bring the number all the way up to nine, but that’s overdoing it. And if the quantitative monikers don’t ring a bell, the acronyms will: GAFA(M), or FAANG if you kick out Microsoft and let Netflix join the party (even MAGA, but that acronym’s tainted). With some minor variations, everyone is talking about a group of tech companies that have so far ruled the 21st century, in particular Google, Apple, Facebook, Amazon and Microsoft. (The acronyms haven’t really kept it with reorganizations and name changes: Google has become Alphabet and Facebook was renamed Meta.)
While these five firms tend to be at the centre of public debate, this is not a book about them. Rather, it is a book about the way in which they—and the many businesses like them—operate, i.e., as platforms. Platforms play an increasingly important role in today’s economy by serving as intermediaries between consumers and suppliers, which is why they are said to operate in multisided markets. The economic literature on multisided markets has grown markedly, from its humble beginnings at the start of the 2000s to full books dedicated to the subject two decades later.
Platform economics helps us understand why a select group of online platforms have grown into the largest—or at least most highly valued—companies in existence today. Indirect network effects, learning from data, and strong economies of scale (due to near-zero marginal costs) have fuelled their growth. These characteristics can be self-reinforcing. Take indirect network effects: more users on one side of the platform attract more users on the other side, which draw still more users on the first side—and so on. This creates a positive feedback loop that that can result in platforms dominating their respective markets.
Many things can go wrong at the ‘adoption stage’, but if a platform ends up winning most of the market, it may come within the purview of EU competition law’s abuse of dominance provision (Article 102 TFEU). Dominance in itself is not a problem—only an abuse of that dominance is. In this work, I focus on one category of abuse, i.e., exclusion, and in particular the exclusion of suppliers that rely on the platform—so-called ‘intra-platform exclusion’.
One might wonder why a platform would exclude its suppliers in the first place, given that platforms rely on them for growth and monetize their interactions (e.g., through commission fees on suppliers’ transactions with consumers). The short answer to that question is vertical integration. Once platforms have achieved sufficient scale, they tend to integrate vertically, which means they produce their own goods or services and distribute them through their platform. After such vertical integration, the platform competes with certain suppliers, which may create an incentive to exclude them.
An incentive to exclude, paired with the ability to do so, sets off the alarms at competition authorities. Exclusion can take many forms, from explicit “delisting” (i.e., removing a competing supplier from the platform) to more subtle forms of discrimination (e.g., burying competing products deep down the platform’s search results). Suppliers certainly feel affected: in a 2016 public consultation, nine out of ten responding businesses voiced their dissatisfaction with the current platform–supplier relationship. In particular, they criticized platforms’ application of unbalanced terms and conditions, as well as the promotion of own products to the disadvantage of products provided by suppliers.
Suppliers are the immediate victim, but contemporary competition law’s main concern is whether consumers also suffer the consequences. Empirical and theoretical research suggests that this can be the case (see, e.g., here, here, here, here, here and here). The picture that emerges is, however, not black-and-white; rather, there are trade-offs. A certain type of conduct in a certain market setting can, for example, lower prices while hampering innovation, or it may increase quality while decreasing choice. Competition authorities have the difficult task of figuring out which course of action the trade-off advises. They do not have to do so in a vacuum, but within the framework of Article 102 TFEU that was developed through case law over the years.
Applying that framework to platform conduct has proven difficult. The Google Shopping case has (perhaps unfairly) become the poster child for that difficulty. Google demoted competing comparison shopping services in its search results while displaying its own service prominently on top. Did this constitute a quality increase (because consumers searching for a product were served the desired results more quickly) or rather a decrease (because competing services previously did a better job than Google)? Consumer choice certainly decreased as competitors were buried and there might be a long-term effect on innovation (but that is always difficult to establish). Even if we suspect net anticompetitive effects, which form of abuse do we observe? The European Commission (EC) put forward a general leveraging theory, which the General Court (GC) reinterpreted as discrimination, but there were almost as many different opinions as scholars discussing the case. And then there were the issues of timing (the case took almost seven years from opening the investigation to adopting a decision) and of remedies (which, according to critics, have changed little).
The EC has also been pursuing investigations into Apple, Facebook and Amazon. All of these are building on its earlier Microsoft cases (and the company is once again facing a probe). Along the way, the perception grew that EU competition law (enforcement) is inadequate in digital markets. When that is the case, the natural step is to adopt sector-specific regulation. The EU has a long tradition of regulating network sectors, the archetypical example being telecommunications. And indeed, EU lawmakers followed this playbook when adopting the Digital Markets Act (DMA). At the same time, governments in Germany, the UK and elsewhere took matters into their own hands by either amending their national competition laws or adopting their own platform-specific instruments.
In this book, I clarify the assessment of potentially abusive practices by online platforms, in particular vis-à-vis suppliers (i.e., the businesses making use of the platform to market their products). The building blocks of that assessment are, on the one hand, a strong grasp of the economic and technological operation of online platforms and, on the other hand, a deep analysis of abuse of dominance law. While contemporary platform cases are used to illustrate the issues at hand, the legal principles relied on go back much further. And while the names of the now-prominent platforms pop up throughout this book, the theory applies to any dominant online platform.
The book is structured as follows. Part 1 gives the necessary introduction into the platform economy. In Section 1, the search for a definition offers the opportunity to lay bare the essential characteristics of online platforms. A platform typology helps understand that not every platform is alike—a diversity that competition law and regulation need to recognize. Section 2 dives into platform economics and business strategy. Business strategy in particular helps us understand how platforms, in the course of their operation, can run into competition law. I illustrate that strategy by reference to the main online platforms that exist today, i.e., online marketplaces, app stores, search engines and social networks. Section 3 concludes by categorizing potentially abusive platform conduct. In particular, it distinguishes intra-platform exclusion from inter-platform exclusion, platform exploitation, and platform appropriation.
Part 2 zooms in on intra-platform exclusion—the main topic of this book. Section 4 tackles two preliminary questions. First, as there is no abuse without dominance, it looks at how market power manifests itself in an online platform context. Second, it studies the normative framework, i.e., the goals and methods of competition law, particularly as they relate to platforms. Next, we move on to the different forms of intra-platform abuse. Importantly, each form of abuse comes with a legal test, which determines under which conditions a certain type of conduct becomes abusive. Those legal tests form the core of every section.
Section 5 starts with the most general intra-platform abuse, leveraging, i.e., the use of market power in one market, the platform market, to distort competition in an adjacent market, the suppliers’ market. Upon closer inspection, however, leveraging is not so much a specific abuse as a container term for other forms of intra-platform exclusion. Nevertheless, examining the mechanism, incentives and effects of platform leveraging helps us understand the dynamic at the heart of intra-platform abuses. The next sections closely examine the more specific forms of intra-platform abuse, i.e., tying (Section 6), refusal to supply (Section 7) and margin squeeze (Section 8). I show how these traditional forms of abuse should be updated to the online platform context. Even on a modern understanding of the existing forms of abuse, however, there is still potentially abusive platform conduct that escapes Article 102 TFEU. To fill that gap, Section 9 suggests relying on a form of non-price discrimination infused with insights from the neglected disruption of supply case law: ‘disruptive discrimination’.
Even prima facie abusive conduct can still be justified. Platforms, which need to govern their ecosystems as ‘private regulators’, have especially good reasons to take exclusionary actions. Section 10 goes over the most important justifications: reducing transactions and search costs, ensuring financial viability, guaranteeing the quality of users on the platform, and safeguarding the security and privacy of users on the platform.
Part 3 concerns platform regulation beyond Article 102 TFEU. Section 11 sets out the framework for such regulatory intervention. The next two sections examine the two crucial components of each regulation—its scope (Section 12) and its obligations (Section 13)—with a strong focus on the latter. Platform-specific regulation such as the DMA serves as illustration, but the goal is to illuminate the trade-offs inherent in types of interventions—not specific instruments. The interventions surveyed are merger control (horizontal and vertical), non-discrimination (through behavioural rules and through structural separation), portability and interoperability, forced access, and break-up.
Excerpted from Abuse of Platform Power: Leveraging Conduct in Digital Markets under EU Competition Law and Beyond, published by Concurrences, 2023.
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