A Study On Platform’s Tying Strategy In Two-sided Markets

Two-sided markets are different from the traditional unilateral markets. Platforms need to compete for users on both sides of the platform in the two-sided markets and competition is more intense. In order to attract users to join both sides, the platform may choose to implement tying behavior such as Microsoft tying of operating system, Visa and Mastercard tying of debit cards.Recently, the European Commission and the US antitrust authorities seem to pay close attention to giant companies and high-tech industries, as the investigations into Microsoft, Google, Apple and other companies over the last years show. In this series of cases, the main focus of the European Commission and the US antitrust authorities is exclusionary behavior of dominant firms. As one of these exclusionary behavior by dominant firms tying has traditionally been considered to be anti-competitive. The motives and effects of tying in two-sided market is more complex and it increases the difficulty of tying antitrust. By comparing US and EU antitrust approach toward tying, we have found that there are differences between them, especially more prominent in the Microsoft case. With the continuous development of economic theory of tying, the framework of analysis in the U.S has been re-interpreted.However, the EU due to various reasons is in a relatively static state. The United States tying law has evolved from a per se prohibition to a rule of reason over the past decades. Meanwhile, the approach of tying in EU is more close to the modified per se rule and its essence is still the per se rule. So analysing the effect of tying, especially the effect of tying adopted by the platforms in two-sided markets is very important. We hope the analysis of tying can provide some valuable theoretical support for tying antitrust.In this article, I attempt from the economic point of view to analyse the tying behavior of the platforms in two-sided markets. This paper first summarizes the economic effects of tying.On this basis, I establish a oligopolistic model as the benchmark model. In this model, there are two platforms and one of them has market power in essential goods market. This paper intend to analyze the economic effect of tying by an essential goods monopolist in a two-markets and to analyze the impact on both sides of the user, platforms and the overall welfare of society. We also extend the basic model to analyze the tying effect when the rival platform is more efficient, when the content providers are muti-home and when the products provided by the rival is potentially substantial to the essential goods.Finally, referring to the models, we analyse the economic effect of tying in the Microsoft and Google cases in detail. And learning from the US and EU antitrust treatment toward tying, we consider the rule of reason is more reasonable comparing to the per se rule.