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Author

Shin-Ru Cheng

Date of Award

7-2021

Author's School

School of Law

Degree Name

Doctor of Juridical Science (SJD)

Degree Type

Dissertation

Abstract

Digital platforms contribute significantly to the world’s economic growth. The platform’s business model—two-sided market—has established more efficient, even costless marketplaces for business and consumers. However, the largest digital platforms’ incredible number of users and resources and their dominant position in the market have raised severe antitrust concerns. Recently, the United States and other jurisdictions have filed several antitrust cases against giant digital platforms. Under Section 2 of the Sherman Act, conduct that “cause[s] an increase in market power […] that is not competition on the merits” is illegal. The Act requires the existence of substantial market power. Courts have generally found a platform’s substantial market power on the ground of their large market share. However, this view has recently been challenged by scholars and practitioners. Large market share does not necessarily lead to market power if potential competitors can freely enter the market. Yet, assessing digital platforms’ market power is critical in antitrust enforcement; it can make or break the case. Considering the digital platforms’ nontraditional business models, this dissertation aims to explore two main issues: (1) what approaches are most suited to assess digital platforms’ market power, and (2) whether or not the platforms have substantial market power under the selected approaches. Due to scope limitations, this research chose Facebook for the case study. Beyond traditional literature, this dissertation demonstrates that information gaps, switching costs, and entry barriers are the most suited approaches to assess digital platforms’ market power. Under the switching costs approach, this dissertation conducts an empirical study, showing that Facebook users switch frequently to other online networking platforms. This fact implies the absence of substantial switching costs to lock- in the users on Facebook. Under the entry barriers approach, this research examines the emergence of new networking platforms to challenge Facebook, showing that Facebook’s competitive advantage in data is insufficient to foreclose new entrants. This finding implies that Facebook’s database and analysis ability do not lead to substantial entry barriers. In sum, this dissertation concludes that the online networking market in the United States is still competitive. Neither substantial switching costs nor entry barriers are found based on currently available data. Accordingly, Facebook may not possess substantial market power despite its large market share. This conclusion provides antitrust enforcers and courts a new perspective to reconsider digital platforms’ market power in future investigations.

Chair and Committee

Professor Lee Epstein, Supervisor

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