Digital markets and ‘trends towards concentration’

Abstract

The rise of dominant digital platforms presents a generational challenge to competition enforcers and, potentially more broadly, to the health and dynamism of our economy.In the past, many monopolists exerted control primarily over their own core products and services.Today's digital giants, however, can to a greater degree use their gatekeeper positions to pick winners and losers in adjacent markets, discourage switching to rival services, and punish entrepreneurs that come too close to the platform's domain.Moreover, digital platforms are becoming more common throughout the economy in industries beyond consumer technology, such as healthcare, energy and finance, underscoring the need for a coherent approach attuned to market realities.Platforms, however often defy simple horizontal competition and vertical distribution relationships.As a result, in addition to the antitrust concerns evident in traditional industries, competitive threats to digital platforms may also present in particular ways.The competition will often emerge in the form of disruptions that reduce dependence on the platform or undermine the network effects or moats that protect the platform's dominant position.For that reason, platforms' anticompetitive attempts to retain their position often target competitive threats, not just direct competitors.Mergers involving digital platforms heighten the risk that a platform can entrench its power.The relevant markets are characterized by the fast emergence, tipping, and ossification of digital networks.Platforms derive the vast majority of their value from interconnection and therefore depend on the innovation and investment of edge players to increase the value of the network as a whole.But such platforms also have or can generate strong conflicts of interest with respect to disruptive products and services that may threaten their power or durability, either in their core markets or in the adjacent markets into which they might seek to expand.Mergers can thus help platforms preserve their monopoly position and forestall competition by engaging in 'moat-building', a strategy through which platforms create barriers that protect their realm from outside threats.These tactics may differ from those employed by traditional monopolists.For example, platforms will often engage in serial acquisitions addressed not only at emerging threats within their core market-as a traditional monopolist might-but also at new component technologies, key intellectual property, and third-party

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