Predation or Competition: Demystifying the Dilemma in Platform Markets

Abstract

Predatory pricing, as an instrument of abuse of dominance, has always been a conundrum for antitrust regulators, academia, and businesses alike. Starting from the very rationality of predatory pricing strategy to various tests that form part of the assessment framework adopted by competition agencies and courts, there has hardly been a consensus. This paper starts by highlighting how frictions and dilemmas have been further intensified in digital economy markets and highlights how, faced with “hyper-competition,” and riding on network effects and big data, deep discounting and abysmally low pricing is the most widely adopted pricing strategy. This calls for a revised assessment framework to ensure that competition authorities do not end up penalising efficient low pricing. To this end, the paper highlights myths associated with low pricing strategies which may not merit antitrust intervention, while also pointing out fallacies of the existing assessment framework. The paper further suggests an alternative dominance assessment and pitches for developing novel theories of harm that factor in the characteristic features of digital markets.