Post by account_disabled on Mar 11, 2024 22:34:07 GMT -5
We are pleased to share this paper by: Jorge Padilla, Senior Managing Director and Head of Compass Lexecon Europe, member of Fide International Academic Council; joe perkins, Senior Vice President and Head of Research at Compass Lexecon based in London and Salvatore Piccolo, University of Bergamo (Dept. of Economics), Compass Lexecon and CSEF, Bergamo, Italy. The study has been published in the Journal of Industrial Economics on May 20th and can be accessed via the Wiley Online Library. Abstract The competitive strategies of 'gatekeeper' platforms are subject to enhanced scrutiny. For instance, Apple and Google are being accused of charging excessive access fees to app providers and privileging their own apps. Some have argued that such allegations make no economic sense when the platform's business model is to sell devices. In this paper, we build a model in which a gatekeeper device-seller facing potentially saturated demand for its device has the incentive and the ability to exclude from the market third-party suppliers of a service that consumers buy via its devices.
Foreclosure is more likely if demand growth for the platform's devices is slow or negative, and can harm consumers if the device-seller's services are inferior to those offered by the third parties. 1 Introduction The economic significance of online marketplaces, such as Apple's App Store and Google Play, has increased over time. Apple's App Store and Google Play earned gross revenues of around €70 billion in 2019, of which almost €10 billion was in Europe. Access to consumers via such platforms has stimulated rapid innovation; over 2.5 million apps are available on Google Play, and more than 1.8 million on the App Store. This is the bright side of their 'gatekeeper' role. Because of their broad and loyal customer bases, Apple's App Store and Google Play constitute critical Phone Number List distribution channels. App developers distributing through them can reach a large number of users at once. But this also allows platform providers to charge app providers significant listing fees and (ad valorem) commissions. On the App Store and Google Play, these amounts to 30% of revenues in the first year, and 15% in subsequent years. Some app developers have complained against these charges. Others have argued that gatekeeper stores restrict their commercial ability so that they cannot avoid these costs.
These complaints have attracted considerable policy and regulatory interest and media attention. For example, the European Commission is investigating whether Apple's rules for the App Store violate antitrust laws.1 In the US, Epic Games filed lawsuits against Apple and Google in August, 2020, alleging that restrictions on possible payment methods for apps violate the Sherman Act and harm consumers.2 The Dutch competition authority carried out a market study into mobile app stores in 2019, and recommended further investigation into either former before regulation or greater use of competition law in the sector.3 More broadly, reviews of digital competition have supported a more active approach to regulation and antitrust enforcement, including Crémer et al. [2019], US House Committee on the Judiciary [2020] and Digital Competition Expert Panel [2019]. Complainants argue that some platforms exploit their gatekeeper status to extract excessive rents from app developers and/or to favor their own apps to the detriment of their rivals. Some commentators have dismissed these allegations as illogical, arguing that such conduct would be counterproductive for the platforms themselves, since they benefit from the availability of highly valuable third-party apps in their stores. Our paper investigates the plausibility of this argument, seeking to identify when a gatekeeper platform might have an incentive to abuse its market position. To this end, we build a stylized model showing that the incentive of platforms selling devices to abuse their gatekeeper role relates to the evolution of demand for these devices.
Foreclosure is more likely if demand growth for the platform's devices is slow or negative, and can harm consumers if the device-seller's services are inferior to those offered by the third parties. 1 Introduction The economic significance of online marketplaces, such as Apple's App Store and Google Play, has increased over time. Apple's App Store and Google Play earned gross revenues of around €70 billion in 2019, of which almost €10 billion was in Europe. Access to consumers via such platforms has stimulated rapid innovation; over 2.5 million apps are available on Google Play, and more than 1.8 million on the App Store. This is the bright side of their 'gatekeeper' role. Because of their broad and loyal customer bases, Apple's App Store and Google Play constitute critical Phone Number List distribution channels. App developers distributing through them can reach a large number of users at once. But this also allows platform providers to charge app providers significant listing fees and (ad valorem) commissions. On the App Store and Google Play, these amounts to 30% of revenues in the first year, and 15% in subsequent years. Some app developers have complained against these charges. Others have argued that gatekeeper stores restrict their commercial ability so that they cannot avoid these costs.
These complaints have attracted considerable policy and regulatory interest and media attention. For example, the European Commission is investigating whether Apple's rules for the App Store violate antitrust laws.1 In the US, Epic Games filed lawsuits against Apple and Google in August, 2020, alleging that restrictions on possible payment methods for apps violate the Sherman Act and harm consumers.2 The Dutch competition authority carried out a market study into mobile app stores in 2019, and recommended further investigation into either former before regulation or greater use of competition law in the sector.3 More broadly, reviews of digital competition have supported a more active approach to regulation and antitrust enforcement, including Crémer et al. [2019], US House Committee on the Judiciary [2020] and Digital Competition Expert Panel [2019]. Complainants argue that some platforms exploit their gatekeeper status to extract excessive rents from app developers and/or to favor their own apps to the detriment of their rivals. Some commentators have dismissed these allegations as illogical, arguing that such conduct would be counterproductive for the platforms themselves, since they benefit from the availability of highly valuable third-party apps in their stores. Our paper investigates the plausibility of this argument, seeking to identify when a gatekeeper platform might have an incentive to abuse its market position. To this end, we build a stylized model showing that the incentive of platforms selling devices to abuse their gatekeeper role relates to the evolution of demand for these devices.