Finance Control

Economical and Legal Analysis on Defining Relevant Market in the Internet Industry under Antitrust

MAO Xiao, TIAN Faxiang, CHEN Boyi

An Article Submitted to Prof. Li Zhang

For the Course of Academic Communication in English

June. 2015

Economical and Legal Analysis on Defining Relevant Market in the Internet Industry under Antitrust

MAO Xiaoa, TIAN Faxiangb, CHEN Boyic,

a KoGuan Law School, Shanghai Jiao Tong University

b Department of Mathematics, Shanghai Jiao Tong University

c Antai College of Economics and Management, Shanghai Jiao Tong University

Abstract

As the key step in antitrust enforcement, defining relevant market of a certain product or service plays a vital role in antitrust lawsuits. However, little was done on finding out methods of defining relevant markets of the Internet industry, most of which are two-sided markets. Using economical and legal analysis methods, this paper analyzes the new characteristics of two-sided markets and changes in the two traditional defining qualitative methods: demand-substitution method and supply-substitution method. We then analyze the method of “a small but significant and non-transitory increase in price” [hereinafter “SSNIP”], the widely-used quantitative method in detail and its possibility of being applied in two-sided markets. This paper also provides a brief and general analysis on the limitation of traditional theories and some new thoughts to improve them.

Key words

Defining relevant market; antitrust law; two-sided market; Internet industry.

Table of Contents

1 Introduction 4

2 Basic theory of the relevant market under antitrust 4

2.1 The concept of relevant market and the importance of defining it 4

2.2 General introduction to the methods of defining relevant market in two-sided platforms 5

3 Basic theories of two-sided markets 5

3.1 The definition and classifications of two-sided markets 5

3.2 The economical characteristics of two-sided markets. 7

3.3...