Determination of market power in two-sided markets

Because of the growing importance of digital markets, competition authorities are faced with an increasing number of cases connected with two-sided markets. An important prerequisite of most of these cases is the determination of market power. However, adequate methods of analyzing market power which are typically applied with one-sided markets cannot be easily applied to two-sided businesses. Recent methods invented for the analysis of two-sided markets are often too complex and have therefore only little practical use. For this reason, the paper provides an alternative approach to determine market power in two-sided markets. At first, the two-sided market needs to be determined as a whole. Both market definition as well as determination of market power cannot be restricted to one market side. Knowledge of the underlying business model is therefore important. Market definition, however, should help to identify the main competitors. A precise definition of the relevant market instead is not necessary. In a third step, the relevant factors for market power are identified and finally the degree of market power can be estimated. © 2017, List-Gesellschaft e.V.