4 - E-Commerce Marketplaces

Summary

This chapter highlights the natural concentration limits in the context of digital platforms, concluding that e-commerce platforms lack the features of natural monopolies. Despite being characterized by a significant degree of network effects and scale economies, e-commerce is characterized by a large degree of product differentiation, representing a strong counterforce against natural concentration. Negating the applicability of the natural monopoly paradigm, this chapter eveluates the role that competition policy should play in e-commerce, a question that becomes particularly salient following rising calls to abandon the consumer welfare standard in favor of a plurality of objectives including protection of deconcentrated market structures, political pluralism, or inequality. This chapter suggests that stricter review of vertical mergers and more emphasis on issues market power leveraging are desirable for stronger enforcement in markets like e-commerce characterized by scale and network effects.