Platform mergers: lessons from a case in the digital TV market

Marc Ivaldi and Jiekai Zhang
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Marc Ivaldi: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Jiekai Zhang: Department of Management and Organisation, Hanken School of Economics, P.O. Box 479, FI-00101 Helsinki, Finland.

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Abstract: This paper contributes to the analysis of mergers in two-sided markets, notably those in which a platform provides its service for free on one side but obtains all its revenues from the other, as in the digital TV industry. Specifically, we assess a decision of the French competition authority which approved the merger of the broadcasting services of the TV channels involved but imposed a behavioral remedy prohibiting the merger of their respective advertising sales services. To do so, we build a structural model allowing for multi-homing of advertisers and, using a comprehensive dataset, we estimate the demand of viewers and advertisers. Our evaluation provides evidence that the remedy has been ineffective at limiting the increase in prices and amounts of advertising, due to the cross-side externalities between viewers and advertisers. Without resulting in significant positive effects on the viewers' surplus, the remedy has also drastically increased the advertisers' total cost. Nevertheless, the remedy has benefited the competitors of the merging channels. The main lesson of our analysis is that, in the process of designing competition or regulatory policy for two-sided markets, ignoring the interaction between the two sides of platforms can result in unexpected outcomes.

Keywords: Two-sided market; Platform merger; Advertising; TV market; Competition policy (search for similar items in EconPapers)
Date: 2022-03-26
New Economics Papers: this item is included in nep-com, nep-cul, nep-law, nep-pay and nep-reg
Note: View the original document on HAL open archive server: https://hal.science/hal-03881366v1
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Published in The Journal Of Industrial Economics, 2022, 70 (3), pp.591-630. ⟨10.1111/joie.12274⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03881366

DOI: 10.1111/joie.12274

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