Two-sided market definition: some common misunderstandings

Abstract

ABSTRACT Market definition remains an important step in competition cases. The European Commission is in the process of updating its 1997 Market Definition Notice. One hotly debated topic is defining markets for two-sided platforms. In this article we address some of the main questions and misunderstandings about two-sided market definition, We discuss how the hypothetical monopolist test and critical loss analysis apply to two-sided platforms, and address questions such as: Should there be one market for the platform, or two markets (one for each side)? Is there a distinction in market definition between transaction and non-transaction platforms? What if the externalities flow in only one direction? What if the price is zero on one side of the platform? And can the market include non-platform competitors?