Defining the Relevant Market in the Digital Platform Industry

Author Name KAWAHAMA Noboru (Faculty Fellow, RIETI) / TAKEDA Kuninobu (Osaka University)
Creation Date/NO. April 2017 17-J-032
Research Project Globalization, Innovation, and Competition Policy
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Digital platforms have generated a variety of innovation and tremendous benefits in our lives. But at the same time, there is concern that their characteristics such as multi-sidedness or economies of scale might give rise to monopolistic gatekeepers in the information and communications technology (ICT) sectors, and that these gatekeepers might abuse their dominant positions to force clients to accept unfavorable contracts or eliminate rivals. It has been discussed actively worldwide whether competition laws should be applied to digital platformers, and, if so, whether traditional market power analysis works well or not.

We address these problems by focusing on the "relevant market." Defining a relevant market has long been believed to be a prerequisite for market power analysis. However, there seems to be some difficulty in defining it for analyzing digital platforms. For example, when considering the interdependency between two or more distinct groups of customers, how many markets do we define? Platformers sometimes provide services for free. Can we define a relevant market in such situation? It is widely known the volume of data dictates the market position of the platformers. Can we evaluate the value of data in defining markets? We discuss these and other market definition problems under the title of "free market," "innovation market," and "data market."