Transcript
What makes digital platforms, otherwise said, that market structure unique, are the things we know:
- Extremely high barriers to entry that make it hard for new entrants to break in and stay in.
- Network effects that lock users in, and there are no alternatives. When you’re on Facebook, you can only really communicate with other Facebook products, because they’ve availed interoperability for their own networks, but not other networks.
- And economies of scale and scope. Platforms can offer service to the next user for marginal, no, or negative cost. And economies of scope: Platforms can offer more and more and more tabs, more and more and more services, to their already expansive networks, without any resource limitations.
So I think the market is set up where digital platforms really tip towards monopolization. But also, the tech companies know that, and they’re taking advantage of that market structure:
- Hastening the tipping towards monopolization, in the ways that they limit interoperability only to native services, and deny network effects to other companies.
- The way they discriminate against nascent and potential rivals to drive consumers away from rivals without meaningfully competing for their loyalty or their service.
- How they acquire smaller companies for their IP, sometimes just to deprive it from other people, not even to use it. Or to acquire market segments of competitors. These are what we call anti-competitive acquisitions.
- And owning subsidiaries that compete at an advantage with competitors on their platform.
And that’s not fair to other small- and medium-sized businesses that could be offering better services to consumers. But we just can’t see them.
The digital platforms market, I’d say, it’s both the structure of the market that is innately prone to this tipping. And those big companies know that. And they operate in ways that take advantage of us not realizing or us not thinking that existing antitrust laws apply to them.
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