Multi-homing In Markets With Network Effects: What Interpretation In A Merger’s Context?

Thu Mar 01 10:19:00 EST 2018
By Dr. Alexandre Carbonnel

The role of network effects has been a key element in the assessment of recent mergers by the European Commission, notably in Microsoft/Skype, Facebook/WhatsApp, and Microsoft/LinkedIn. The markets concerned by these transactions share some similarities in the sense that consumers tend to multi-home or, in other words, use services from more than one supplier. The European Commission generally maintains that, in markets with network effects, multi-homing attenuates the risk that a transaction leads to a significant impediment to effective competition. 

In this article, Dr. Alexandre Carbonnel shows that the likelihood of unilateral effects in markets where network effects are present is not necessarily attenuated by the existence of multi-homing. This means that the implications of multi-homing on competition in this context cannot be generalized. In particular, the article shows that these implications depend on consumers’ preferences and their demand for the services provided. Furthermore, the article highlights the need to measure more accurately the intensity of use of services in order to better assess the impact of the transaction on competition.

Alexandre Carbonnel, “Multi-homing in markets with network effects: what interpretation in a merger’s context?” European Competition Law Review, Vol. 39(4), 2018, pp. 174–179. Subscribers of Westlaw or the European Competition Law Review may download a copy of the article here: http://www.sweetandmaxwell.co.uk/Catalogue/ProductDetails.aspx?recordid=455&productid=7051