Preserving Competition in Multi-Sided Innovative Markets: How Do You Solve a Problem Like Google?

Download Full Text PDF

Volume 10, Issue 1 (Jun 2012)

The unique characteristics of the search advertising industry encourage the development of anticompetitive monopoly power, facilitating the rise and dominance of companies like Google. First, the search advertising industry is subject to multi-sided network effects that create a positive feedback loop. An increase in the number of customers on one side of the market attracts increased numbers of customers on the other side, enabling dominant firms to entrench their market power. Second, and relatedly, the search advertising industry operates in an innovative market where firms compete not to outdo competitors on price but rather to displace one another’s products entirely. In such a market, a dominant firm can acquire potentially displacing (but not substitutive) technology and thereby control future innovation, freeing itself from the burden of innovating further to maintain competitive advantage. Current regulatory enforcement, informed by traditional antitrust analysis, does not adequately account for the impact of multi-sided network effects or innovation-to-displace on competition. Retooling the regulatory regime governing merger enforcement, allowing the agencies tasked with enforcement to broaden their inquiries when investigating anticompetitive behavior of these firms, is therefore necessary to preserve competition in multi-sided innovative markets.

Kristine Laudadio Devine, Preserving Competition in Multi-Sided Innovative Markets: How Do You Solve a Problem Like Google?, 10 N.C. J.L. & Tech. 59 (2009), available at http://ncjolt.org/wp-content/uploads/2016/09/04_10NCJLTech592008-2009.pdf.

The North Carolina Journal of Law & Technology has adopted the Open Access Program, a part of the Scholar’s Copyright Project created by Science Commons. Authors designate the conditions under which their articles are licensed. By downloading articles, you agree to comply with the license terms specified. Please contact NC JOLT at eic.ncjolt@gmail.com with permissions inquiries.