Corporate & Securities Law

Evans on Antitrust & the Global Internet Economy

From the Northwestern University Law Review Colloquy, David Evans explores the implications of the emerging global internet economy for antitrust.  Here’s the closing two paragraphs:

We can expect the web-based industries will follow the same trajectory, and thus far they have. Massive entry has taken place. As with many new industries, we remember the YouTubes that succeeded but we forget that Google Video and hundreds of other start-ups tried and quickly failed. There are some differences, though, which suggest more antitrust controversy will result, sooner. The first is speed. Although the notion of ?Internet Time? may have been exaggerated, it is true that web-based firms can achieve leading positions in many countries around the world very quickly. The second is complexity. Almost all of the leading web-based firms have intricate multi-sided business models. The third is interconnectedness. The web-economy is interconnected, which leads to dependencies and rivalries that can create conflict and antitrust complaints.

As a result, the competition authorities and courts will have a challenging set of issues to deal with concerning the web-based economy in the years to come. The future will bring merger cases as firms seek to consolidate to achieve economies of scale and indirect network effects; refusal-to deal cases as closed platforms deny others access to their communities; predation cases as rivals complain about ?free? offerings that foreclose if not destroy them; tying cases as platforms use software platform technologies to add features and functions which in some cases will foreclose their rivals; and exclusive dealing cases as platforms lock up traffic to achieve indirect network effects. Courts and competition authorities should exercise care in balancing the need to protect long-run social welfare against the need to stop anti-competitive strategies in this highly dynamic and complex part of the economy.

Go read the whole thing.

Full post as published by Truth on the Market on February 16, 2009 (boomark / email).