A Topology of Multisided Digital Platforms

By Daniel Hanley (Open Markets Institute)

Digital platforms dominate the marketplace. The largest platforms–Google, Apple, Facebook, Amazon, and Microsoft (collectively known as “GAFAM”)–have an unparalleled financial position in the marketplace, and collectively maintain at least a thirty-three percent market share in fifteen separate markets with user bases in the billions. These corporations are also consistently ranked as the largest companies on Earth by market capitalization. The GAFAM companies transact and function as intermediaries with both buyers and sellers, which designates them as multi-sided businesses–more commonly known as platforms. The conventional business model consists of transacting with only consumers or sellers, known as single-sided firms. Although the veracity and legal significance of this difference between single-sided firms and multi-sided platforms are debatable, this article will accept the current schema that platforms operate under different conditions than their single-sided counterparts. In what follows, because of their market power, user bases, and anti-competitive conduct, this article will use the GAFAM platforms as representative examples of the kind of anti-competitive actions that digital multi-sided platforms can engage in. This article organizes the actions of multi-sided platforms into a framework that categorizes their characteristics and conduct by the goals multi-sided businesses are trying to achieve. This framework consists of three categories: Amassing Characteristics, Entrenching Conduct, and Exploitative Conduct. These categories provide the framework for this article. Part I describes Amassing Characteristics, which are business conditions used by multi-sided platforms to obtain a significant user base. Part II details Entrenching Conduct, which are business practices multi-sided platforms can implement to inhibit users from leaving the platform and maintain their user base. Part III details Exploitative Conduct, which are the efforts and the ability of a multi-sided platform to leverage their existing user base to suppress competition, enhance its market power, and extract value from its entrenched user base. This framework can aid antitrust enforcers and scholars to understand how the characteristics and conduct described in this article interact to facilitate market power, undermine competition, and, particularly when some of these practices are executed by platforms in unison, enable platforms to become resistant to future competition. Such analysis can encourage agencies, governments, and private litigants to use the antitrust laws to curb the market power of multi-sided platforms and provide justification for regulatory changes.

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