TRANSACTION VERSUS NON-TRANSACTION PLATFORMS: A FALSE DICHOTOMY IN TWO-SIDED MARKET DEFINITION. (9th December 2019)

• Record Type: Journal Article
• Authors: Niels, Gunnar
• Is Part Of: Journal of competition law & economics. Volume 15:Number 2/3(2019)
• Page Start: 327
• Page End: 357
• Publication Date: 2019-12-09
• Subjects: Antitrust law -- Periodicals; Competition, Unfair -- Periodicals; Foreign trade regulation -- Periodicals; International economic relations -- Periodicals; Competition, International -- Periodicals; 343.072
• DOI: 10.1093/joclec/nhz016
• Languages: English
• ISSNs: 1744-6414

Abstract

Abstract: When it comes to market definition in two-sided markets, an idea that has gained traction—among academics, competition authorities and even the US Supreme Court—is the distinction between transaction and non-transaction platforms. However, this distinction has no theoretical underpinning in the context of the hypothetical monopolist test (HMT). The hypothetical monopolist sets profit-maximising prices on both sides, as a function of own-price elasticities and externalities between the sides, regardless of whether the platform is transaction or non-transaction. I address the various theoretical and practical arguments put forward in support of the distinction between transaction and non-transaction and explain why none of these justify a different approach to market definition. I also discuss why some of the policy suggestions made by proponents of the distinction—for example, that a single market should be defined for transaction platforms but separate markets for non-transaction platforms—reflect some confusion about how the HMT works.