MRLC Held the Seventh Seminar on Economic Analysis of Anti-monopoly: Theory and Practice of Bilateral Market

2015.11.13 - 2015.11.13

On the morning of September 13^th, 2015, MRLC invited Doctor Zhang Yanhua, the partner of Global Consulting Company, as the distinguished guest of the lecture “Economic Analysis of Anti-monopoly: Theory and Practice of Bilateral Market”, which was hosted by Associate Professor Meng Yanbei from law school of Renmin University. Professor Han Liyu from law school of Renmin University and Post Doctor Dong Dudu from School of Economics participated in the discussion. More than 40 doctoral students of Law school and postgraduate students attended the lecture and had interaction with the lecturer.

During the lecture, Doctor Zhang Yanhua shared a great amount of information, mainly including two parts: the first is the basic theories of bilateral market (multilateral platform); and the second is the analysis on how to apply the theory of bilateral market to Internet industry. In the first part, starting from the emerging of credit card, she defined the multilateral platform and pointed out that multilateral platform have three core values: matching and establishing the target audience, and saving cost through sharing. The multilateral platform has the important attribute of the indirect network effect; the customer to the platform is expected to increase the value of the platform, which depends on the number of the other party. To maximize the value of the platform, we need to analyze pricing strategy, design decisions, and to achieve regulatory control. Dr. Zhang specially emphasized on the two most critical pricing strategies; first, the price of platform on both sides should link with profit, the second is the price of platform may sometimes be lower than its marginal cost. These two strategies are in line with the basic characteristics of the multi platform industry, which is a common pricing strategy, and some other strategies depend on the characteristics of their respective industries to set the parameters and assumptions.

In the second part of the lecture, starting from the Internet industry, Dr. Zhang made a specific description on how to apply the theory of multilateral platform to the Internet industry. She believes that the multilateral platform is an important business model of the Internet industry, as the Internet platform can connect two or more different consumer groups to create value. They generally get through the acquisition of user attention to make profits, on the one hand providing products and services to attract users to browse the web, on the other hand, through the way to put an ad on the web site to grab some attention and sale the user's attention to buyers. In addition, the Internet platform can create value through the reduction of friction and reduce the cost, especially through mobile devices to achieve the integration of online and offline world. Subsequently, Dr. Zhang focused on analyzing the key issues of defining the relevant market and market forces of the Internet industry. She stressed the need to consider the parties in the relevant platform, how the parties influence each other, and how the behavior will affect the whole consumer; only the analysis of one side of the market may be very misleading. When make a concrete analysis, the first thing is to determine whether a particular product belongs to the multilateral platform. Namely, it needs to see if the product is free or less than the cost price. If the product is not free, we need to know whether the company's other products are free and whether there is a certain correlation with the product. We also need to know whether the value of the product is affected by the impact of other group access. Secondly, we need to analyze the competition constraints. When identify the service of either side of platform or single side company, we must evaluate the dynamic competition at the same time, including the addition of platform capabilities and cross platform access to the possibility. Competition constraints are also very important for the identification of abuse of dominant market position, on the one hand, the SSNIP method can be used to consider the price difference; if the competition results to free pricing, the difference of quality should be considered. In addition, we need to analyze the free side, on the one hand to evaluate the positive feedback effect between the product and other platforms; on the other hand, based on the link between the product and the platform, we can assess the extent to which other platforms or unilateral companies to limit their market power. Dr. Zhang suggested that we should use a more open and less rigid analysis path when analyzing the relevant market and market forces, evaluate the relationship between consumers, establish a framework of “business ecosystem” which is applicable to the bilateral platform, and use the concept of platform to evaluate the influence of market forces and benefits of users.

In the discussion and comment session, Dr. Dong Dudu discussed with Dr. Zhang about the dispute of defining the bilateral market and abuse of market dominance in practice. Analyzing from sales side and buyer’s perspective, he believes that there are two kinds of framework to analyze the case of abusing dominant position. In the present practice, the seller's perspective is used more often; he proposed his own views from the perspective of the combination of bilateral market theory and the theory of the buyer. From the perspective of the relationship between law and economics, Professor Han Liyu made comments on the lecture; he thinks the relationship between the two can be summarized as "economic investment, legal output", on the one hand, the practice requires continuous refinement of economic analysis on the case ruling, on the other hand, all discussion on economics should be eventually settled into the legal conclusion. In the end, Associate professor Meng Yanbei made a brief summary to this lecture, she believes that the learning and use of anti-monopoly law, not only need to continuously develop legal and economic analysis ability, but also must have a thorough grasp of the industry, which is the new requirement brought by case study and practice. In addition, she stressed that we need to grasp the relationship between the economic analysis and legal analysis, the economic analysis is essential to the study and research of the anti monopoly law, but the final analysis of antitrust cases must adopt the standard legal analysis method.