Horizontal Merger And Antitrust Regulation Of Platform Enterprises

In recent years,platform economy is emerging rapidly.Platform economy has already covered shopping,travelling,social contact and entertainment and has shown strong economic vitality.With the rise of platform economy,the trend of horizontal merger has emerged in the platform enterprises.In recent years,there have been a large number of cases of horizontal merger of platform enterprises in China such as DiDi and Kuaidadi.com,58.com and Ganji.com,Ctrip and Qunar.com,Meituan and Dianping.com and so on.After the merger of platform enterprises,whether the price will be increased or not? Whether total social welfare will be reduced or not? How should antitrust regulator deal with platform enterprises' merger? These problems have aroused hot discussion in all sectors of society,but there are still big disputes.There are significant differences in the operating mode of platform enterprises compared with traditional enterprises.Platform enterprise connects two or more sides of users,and provides intermediary service for transactions between users.The utility of one side of users gained from the access to platform enterprises will be improved with the other side of users' increase of scale,which is called cross network externality(or cross network effect).The exsistence of cross network externality,will have an important impact to the horizontal merger and antitrust regulation of platform enterprises.Therefore,it is necessary to carry out a separate study on the horizontal merger of platform enterprises.Methods of theoretical modeling,numerical simulation,case analysis were used in this thesis.Based on two-sided market theory,this thesis described the horizontal merger behavior of platform enterprises.This thesis mainly studied the changes in equilibrium price,profit and total social welfare after the horizontal merger of platform enterprises.Based on the theoretical study,innovative ideas of antitrust regulation were put forward.From an industry perspective,platform enterprise may have the phenomenon of excessive entry.Take group-buying and P2 P as examples,when in the peak period of industry development,there are thousands of platform enterprises.The study in this thesis showed that free entry of platform enterprises will cause reduce of all enterprises' profit and network effect gained by users,which will be unfavourable to the promotion of total social welfare.On the other hand,free entry of platform enterprise will cause reduce of optimal access fee and traffic cost of users,which will be helpful to increase total social welfare.Take the number of enterprises when total social welfare is maximized as the optimal state,this thesis finded that no matter the intensity of cross network externality is strong or weak,the number of enterprises under the status of free entry is always more than or equal to the number of enterprises which maximizes total social welfare.So from the view of optimal market structure of platform enterprise,horizontal merger of platform enterprise will be helpful to close to optimal market structure.In traditional theory of enterprise merger,the two factors that affect the change of enterprise's price after merger are promotion of market power which will lead to higher price and increase in production efficiency which will lead to a decline in price.However,this thesis deemed that for platform enterprise,the role of cross network externality should be considered.If completely monopoly will not be formed after merger,exsistence of cross network externality will have pressure to reduce price of platform enterprise.This is because market competition still exists after merger,if platform enterprise increases price of any side of users,it will lead to a serious loss of users.After the horizontal merger of two platform enterprises,they can choose to retain only one platform or keep two platforms operating independently.When only one platform is retained after merger,if the intensity of cross network externality is weak,the pressure to reduce price is small at this time,profit of platform enterprises involved in the merger will always be improved.However,if the intensity of cross network externality is strong,the pressure to reduce price is greater,so the negative impact on profit is greater.Under this circumstance,profit of platform enterprises involved in the merger will be improved only when cost saving is large.When two platforms are retained after merger,if the intensity of cross network externality is strong,platform enterprises involved in the merger can monopolize the market and squeeze out the enterprise that is not involved in the merger.If the intensity of cross network externality is weak,complete monopoly will not be formed,but profit of platform enterprises involved in the merger will always rise.Platform enterprises should make decision on whether to retain two platforms or one platform.If the intensity of cross network externality is strong,platform enterprises should choose the mode of retaining two platforms.If the intensity of cross network externality is weak,platform enterprises should make further decisions on the size of cost saving.Under this circumstance,when cost saving is larger after merger,only one platform should be retained.When cost saving is small after merger,two platforms should be retained.The changes of total social welfare after platform enterprises' horizontal merger will have an important impact on the antitrust regulation of platform enterprises' horizontal merger.This thesis finded that when the intensity of cross network externality is weak,horizontal merger of platform enterprises may have a negative impact on total social welfare.When the intensity of cross network externality is strong,horizontal merger of platform enterprises will not have a negative impact on total social welfare.If the phenomenon of users' multi-homing is considered,this thesis finded that if there are more multi-homing users,it will be more helpful to increase total social welfare after platform enterprises' horizontal merger.Although horizontal merger of platform enterprises is not necessarily harmful to total social welfare,the behavior of restricting competition after merger may have a negative effect on total social welfare.This thesis finded that if platform enterprise prohibits the users' multi-homing behavior,it will lead to a great possibility of a decline in total social welfare.What's more,with the increase in the proportion of multi-homing users,the prohibition of multi-homing by platform enterprises will increase the possibility of decline of total social welfare.When the proportion of multi-homing users is more than a critical value,the prohibition of multi-homing after merger by platform enterprises will certainly damage total social welfare.In addition,if platform enterprise migrates part of users from the original market to new market,it will help platform enterprise to gain higher scale of users and higher profits in new market.When the intensity of cross network externality is weak,if the scale of users' migration is large at this time,it will have a negative impact on total surplus gained by users and total social welfare.When the intensity of cross network externality is strong,if the scale of users' migration is large at this time,the platform enterprise that has obtained the user migration will form a complete monopoly in the new segment market.Based on the conclusions obtained from the theoretical research,this thesis put forward several innovative ideas for the adjustment of antitrust regulation of platform enterprises' horizontal merger.First of all,the role of cross network externality should be taken into full consideration.It is because the existence of cross network externality has a favorable impact on the improvement of total surplus obtained by users and total social welfare,which should be fully evaluated.Secondly,the attention on market share should be properly desalinated.This is not only because the market share of platform enterprises is difficult to be checked accurately,but more importantly,the higher market concentration of platform enterprises may be helpful to increase total social welfare on the contrary.Thirdly,the focus of regulation should be shifted to create a good market competition environment.This is because that relative to horizontal merger behavior of platform enterprise itself,the act of restricting competition after merger is more likely to have a negative impact on total social welfare.Forthly,finding new antitrust regulation indicators,such as the proportion of multi-homing users and the relative intensity of cross network externality.This thesis did a complete research on horizontal merger of platform enterprises,which is a beneficial supplement to theory of enterprise merger in industrial organization and two-sided market theory.The study of this thesis also has practical application value,which can provide reference for the pricing decision of platform enterprises after horizontal merger.The study of this thesis can provide a reference for the development planning of the industry of platform enterprises and theoretical basis for the antitrust regulation of platform enterprises' horizontal merger.