This month’s CLIP is a recent thought piece on defining markets for digital platforms from the influential US academic Herbert Hovenkamp, the “dean of American antitrust law” according to the New York Times and “the most influential antitrust scholar of our generation” according to Wikipedia.
Typically insightful, the piece pre-dates the dismissal of the Federal Trade Commission (FTC)’s case against Facebook by a US federal court on 28 June. The FTC alleges that Facebook has for many years pursued a systematic anticompetitive strategy, including its 2012 and 2014 acquisitions of Instagram and WhatsApp. Without addressing the substantive legal issues the court found that the FTC had not proved that Facebook held monopoly power in a market for personal social networking services. Among other criticisms, the Court found that the FTC had provided no market share figures for Facebook.
Prof Hovemkamp points out that platforms like Facebook and Amazon provide bundles of services that may be quite dissimilar. For example, he notes that Facebook offers “general messaging, two-party chatting, posting of photographs and videos, discussion boards, a marketplace and digital advertising, and even a kind of dating platform”. Nonetheless, defining a single market may be appropriate where offering a bundle of products either:
- reduces the platform’s costs as a result of joint costs or economies of scope; or
- combines products that consumers value more highly when they are used together (complements).
However, Prof Hovenkamp cautions that market definition is not the end of the story. Even if market power is established, careful thought must also be given to appropriate remedies in the event that anti-competitive conduct is found. Simply forcing divestments of products that customers value more when they are supplied together may make the situation worse rather than better.
The FTC now has until 19 August to amend its suit.