1. IEB Seminar, 15 February 2019 EU Competition Law and Multi-Sided Platforms Alfonso Lamadrid

2. Alfonso Lamadrid
What is a platform?
Spain
IEB, Madrid

3. What is a platform?

4. Multi-sided platforms / markets / business models
“A market is two-sided if the platform can afffect the volume of transactions by charging more to one side of the market and reducing the price paid by the other side by an equal amount; in other words, the pricing structure matters, and platforms must design it so as to bring both sides on board” (Rochet & Tirole) “Put simply, a two-sided market is a market in which a firm sells two distinct products or services to two different groups of consumers (the two ‘sides’) and knows that selling more to one group affects the demand from the other group, and possibly vice versa. Thus, it is often said that a firm in a two-sided market needs to ‘get both sides on board’ to do business.” (Filistrucchi, Geradin & van Damme)

5. Two-sided business models
Traditional
Two-sided
Input
Sale

6. Two-sided business models
Readers
Advertisers
Merchants
Users
Drivers
Users

7. Classic network effects Indirect network effects

8. Network effects: A positive externality with very bad press
The doctrine and the application of the law in the face of network effects have tended to focus on their anticompetitive potential
E.g. Guidance Paper, ¶17, ¶20 Guidelines horiz. mergers, ¶72 Guidelines non-horiz mergers, ¶62 and ¶101
Network effects are a most effective basis for legal arguments challenging allegedly anticompetitive conduct:
Prices too high (e.g. MIFs- card payment systems)
Prices too low (e.g. Google Maps -Bottin case- and Android complaint)
Prices too stiff (MFNs in online distribution)
Exclusivity (Android)
Tying / Bundling (Microsoft WMP and IE)
Competitive Bottlenecks / Gatekeepers (Search engines, GDSs, ISPs, Credit Cards, Supermarkets, etc.)
Mergers (e.g. MCI/Worldcom, Worldspan/Travelport, Google/DoubleClick, Microsoft/Skype?)

9. Implications (I)
Platforms make users better off by harnessing indirect network effects
Advantages arise when platform manages to obtain a critical mass of users and balances and optimises the network
Identification of “platforms” / two-sided markets
Two-sidedness is a matter of degree, and is not exclusive to online settings
What matter are competitive constraints, not the competing business models
Online platforms might compete in same markets as non-platforms and offline platforms

10. Implications (II)
“This pattern of cross responses will generally affect each step of standard antitrust analysis, from product market definition, the competitive assessment, entry, efficiencies, etc.”
(European Commission, OECD Roundtable 2009)

11. Implications (III)
The features of multi-sided platforms may lead to market power/foreclosure are precisely the same ones in which they may be welfare enhancing
Competitive ambiguity derives from the existence of network externalities
How should enforcers deal with the ambivalence of a practice? How review courts should engage with the conclusions drawn from this ambivalence?

12. “Hey Siri, should we change competition law for online platforms?”

13. Why don’t you try applying it properly instead?

14. Lessons from the EU case law
Multi-sided platforms
Lessons from the EU case law

15. Multi-sidedness: key lessons
Competition law is business-model agnostic
One cannot look at different sides of a multi-sided business model in isolation
Multi-sidedness considerations are part of the legal and economic context to a given practice, not a side issue to examine in isolation as a last step in the analysis
The importance of the counterfactual
The real value and strength of network effects
Vertical integration in principle pro-competitive- Cross-market effects require showing anticompetitive foreclosure
Mere competitive advantages/disparity of treatment not enough
The assessment of pro-competitive effects must consider the benefits flowing to all sides of a multi-sided system
Non-competition issues are… well, not competition issues
In the face of doubt…

16. Competition law is business-model agnostic
Lesson #1
Competition law is business-model agnostic
(e.g. Pronuptia, Coty)

17. (Cartes Bancaires, Mastercard)
Lesson #2
One cannot look at different sides of a multi-sided business model in isolation
(Cartes Bancaires, Mastercard)

18. (Cartes Bancaires, Mastercard)
Lesson #3
Multi-sidedness considerations are part of the legal and economic context to a given practice, not a side issue to examine in isolation as a last step in the analysis
(Cartes Bancaires, Mastercard)

19. Lesson #4 The importance of the counterfactual
(and of inter-brand/platform competition)
(e.g. O2, ENS, Kali & Salz, E.ON, Nüngesser, Pronuptia, Krka)

20. Lesson #5
The real value and strenght of network effects (Cisco - Microsoft/Skype)

21. Lesson #6 Vertical integration in principle pro-competitive
Cross-market effects require showing anticompetitive foreclosure
(e.g. Bronner, Commercial Solvents, Télemarketing, Telefónica, Telia Sonera, Deutsche Telekom, Microsoft/Skype, GE/Honeywell, Tetra Laval)

22. Mere competitive advantages/disparity of treatment not enough
Lesson #7
Mere competitive advantages/disparity of treatment not enough
(e.g. MEO, PD I, Bronner, Telia Sonera,Slovak Telecom, Deutsche Telekom)

23. Lesson #8
The assessment of pro-competitive effects must consider the benefits flowing to all sides of a multi-sided system
(Mastercard)

24. Lesson #9
Competition is not limited to price, but non-competition issues are… well, not competition issues
(e.g. Asnef Equifax)

25. Lesson #10
In the face of doubt…
(e.g. Astra Zeneca, O2)

26. Multi-sided platforms
The us approach

27. SCOTUS clarifies US law on multi-sided platforms (Amex, the American Cartes Bancaires)
The U.S. Supreme Court has issued today its Opinion in the AMEX case. It is available here. This is likely to be the most discussed antitrust opinion in the decade. The lesson in a nutshell. Showing an apparent restriction on one side of a multi-sided platform is not sufficient to meet the burden of establishing prima facie anticompetitive effects. The plaintiffs’ argument “wrongly focusses on just one side of the market”. EU readers will wonder whether […]