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Complex Antitrust Harm in Platform Markets

 |  April 23, 2017

Posted by Social Science Research Network

Complex Antitrust Harm in Platform Markets

By John M. Newman (University of Memphis)

Abstract:       Innovation yields massive welfare benefits—but it can also pave the way for novel types of anticompetitive harm. Under certain conditions, digital platforms can harness the power of reputation to steer users to favored suppliers. This steering forecloses non-favored suppliers in a related, though distinct, relevant market. Where favored suppliers are able to split the resulting rents with the platform, the strategy is rational. The resulting foreclosure reduces efficiency and consumer welfare.

Antitrust enforcers and courts should take the possibility of such harm into consideration when analyzing conduct in platform markets. This article identifies the requisite conditions for this complex harm. It then uses the recent Zillow–Trulia merger as a case study to illustrate how such harm can occur. It concludes that the FTC’s clearance of the merger may have constituted a false negative, and that the merger may be harming consumers.

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