Market Power Parasites: Abusing the Power of Digital Intermediaries to Harm Competition

By Noga Blickstein Shchory & Michal Gal (University of Haifa)

Some digital information intermediaries, such as Google and Facebook, enjoy significant and durable market power. Concerns regarding the anti-competitive effects of such power have largely focused on conduct engaged in by the infomediaries themselves, and have led to several recent, well-publicized regulatory actions in the US and elsewhere. This article adds a new dimension to these concerns: the abuse of such power by other market players, which lack market power themselves, in a way which significantly harms the competitive process and undermines the integrity of the relevant in-formation market. We call such abusers “market power parasites.”

We provide three examples of parasitic conduct in online information markets: (1) black hat search engine optimization, (2) click fraud, and (3) fraudulent ratings and reviews. In each of these examples the manipulating parasite utilizes the infomediary’s market power to potentially turn an otherwise limited fraud into a manipulation of market dynamics, with significant anti-competitive effects.

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