The subject of vertical restraints is well-trod territory in antitrust. Most of the cases, and economic literature, have focused, however, on the physical world of manufacturers and distributors. This paper considers what’s new and different about the digital world that matters for the antitrust analysis of vertical restraints. Cases and economic learning from the physical world remain highly relevant. What makes the digital world different is the prominence of intermediaries, most of which are multisided platforms, and the implications of the Internet and other information technologies for these intermediaries and the businesses that rely on them. After describing key features — including critical mass, multi-homing, and platform governance regimes — this paper considers important aspects of analyzing vertical restraints in the digital world. It then considers several applications involving platform rules, exclusive contracts, and MFNs for digital intermediaries.
By David S. Evans1
Most cases and economic analyses involving vertical restraints have focused on the physical world of manufacturers and distributors. Commerce, however, is moving rapidly to a digital world populated by firms where the provision of goods and services depends heavily on Internet connections. For the analysis of vertical restraints, this digital world could involve the same principles just different facts. To a large extent that’s the case. Certain features of di...