There is (still) a lot of confusion around the question of how to deal with two-sided platforms in an Article 102 TFEU context. On the one hand, there are situations where the two-sidedness of the market explains why it makes perfect sense in terms of business to provide the service “below cost” or even “for free” or why it is necessary to “tie” the customer. If this element is disregarded it would lead to the wrong conclusion that there is an abuse, although we are dealing with a normal characteristic of the market (type I mistake). On the other hand, the two-sidedness of the market does not lead to immunity from competition laws. It would be wrong to assume that because a market is a two-sided market, showing some complementarities would suffice to make tying that prevents market entry legal. While this kind of hands-off approach is sometimes suggested in the literature, in practice if adopted it would lead to a serious under-enforcement of competition rules (type II mistake). Hence, there is a need to apply antitrust law to harmful tying practices of two-sided digital platforms. Harm can occur, for instance, if the two-sided market and contractual practices are such that market access is hindered. This chapter explores the possibilities and difficulties the application of antitrust law in this particular context is likely to generate.
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Edited by Paul Nihoul and Pieter Van Cleynenbreugel
A considerable share of the unilateral practices that have attracted antitrust enforcer attention in the EU and US has only minor exclusionary aspects. Instead, concerns about innovation and consumer welfare being harmed appear to arise significantly under other theories of harm, such as distortion of rewards for innovation. When concerns based on exclusion from the market are absent or do not meet the general standards for exclusionary conduct (e.g. exclusionary abuses or monopolization), practices need to be addressed using other methods (e.g. as forms of exploitative abuses or unfair methods of competition). Examples of reliance on unfairness powers to address innovation concerns include investigations into alleged abuses of standards-essential patents and grant-backs, or cross-licensing imposed on licensees. Some investigations into internet platforms (e.g. Google investigations in the EU and US), essentially appear to concern alleged unfairness of conditions imposed on other firms or consumer deception, rather than pure theories of exclusion. While allowing certain potentially problematic practices beyond exclusionary conduct to be remedied, the exercise of such unfairness powers raises questions about the identity, limits and general standards of antitrust. This chapter examines the theories exploring which innovation and ultimately consumer welfare may be harmed absent exclusion, and the antitrust standards under which such concerns could be addressed in a way amenable to innovation and consumer welfare.
Jonas Severin Frank and Wolfgang Kerber
Patent settlements between originator and generic firms in the pharmaceutical industry have been challenged by antitrust and competition authorities in the US and the EU. In particular, settlements with large ‘reverse payments’ to generic firms raise the concern of collusive behaviour for protecting weak patents and delaying price competition through generic entry and therefore harming consumers. However, it is still heavily disputed under what conditions such patent settlements are anticompetitive and violate antitrust rules. This chapter scrutinizes what economic analysis has so far contributed to our knowledge about the effects of these patent settlements and the possible rules for their antitrust treatment. An important claim of the chapter is that the problem of patent settlements can only be understood if analyzed from a narrow antitrust perspective and taking into account its deep interrelationship with the problems (and the economics) of the patent system. Therefore three different channels of effects are identified, through which patent settlements can influence consumer welfare: (1) price effects, (2) innovation incentive effects, and (3) effects via the incentives to challenge weak patents. The chapter critically analyzes the existing economic studies and identifies a number of research gaps, especially in regard to trade offs between different effects. It suggests that policy solutions for these patent settlements should also be sought in combination with patent law solutions.
Online platforms have come to play an increasingly important role in hotel room bookings. Online travel agents (OTAs) have imposed so-called rate parity clauses in the contracts with their hotel partners. These are contract clauses laying down the hotelier’s obligation to display the same room prices across sales channels. Within the European Union, different national competition authorities have reacted differently to the anticompetitive nature of such clauses. The main contribution of this chapter consists in highlighting those diverse approaches and in outlining some of challenges of applying traditional competition law enforcement tools to rate parity clauses.
The object of this chapter is to dissect the antitrust treatment in the US and under EU law of joint research and development agreements (joint R & D), discussing issues such as innovation and competition in innovation, and whether these issues are taken into consideration when scrutinising R & D collaborations. The notions of ‘innovation markets’ and ‘innovation competition’ will be analysed. This chapter suggests that R & D collaborations would possibly benefit from a more intense antitrust scrutiny in reference to certain industries and conduct, while generally the lenient attitude should continue. It seems clear that neither legal nor economic research has been able to present and agree on a test that is able to distinguish the ‘bad’ R & D collaborations from the ‘good’. Before we have such a test, antitrust authorities should tread with care. The antitrust analysis should be based on conclusions from economic research in the creation and sustainment of innovation – innovation competition. Thus, the antitrust scrutiny would need to distinguish between incremental innovation efforts by often large and specialised firms already present in the market where the product or technology to be invented will be inserted. Then dominance, competitors and market power may be identified since it may be predicted with some certainty that the innovation will materialise and how the market will react to the innovation. On the other hand, efforts to create radical or disruptive innovations conducted by R & D-intensive firms in collaboration with other firms or universities are often difficult to predict and are generally pro-competitive. In reference to joint R & D to create radical or disruptive innovations, identifying exclusionary effects on future markets or on R & D is difficult.
Pieter Van Cleynenbreugel
This chapter identifies and distinguishes four different types of scholarship and policymaking on the relationship between competition law and innovation. Scholarship varies to the extent that it considers innovation to be an exogenous or external value to the competition law protection framework and conversely an endogenous or internal value. In addition, different scholars frame innovation either as a positive or a negative value that needs to be addressed by (competition) law. Distinguishing those different kinds of scholarship, the chapter offers a framework in which the different chapters throughout the volume can be understood better.