Online Platforms and Vertical Integration: The Return of Margin Squeeze?

Abstract

When competition authorities struggle to assess abusive practices by online multi-sided platforms, the issue does not appear to be defining markets or determining market power; rather, the difficulty is finding a fitting theory of abuse. In the search for such theories, one candidate has been overlooked: margin squeeze. This infringement has for the most part been confined to the telecom sector, but its potential reaches beyond. Indeed, the conduct of online platforms could force margin squeeze out of retirement. This article starts from the foundations of margin squeeze theory, laying out the core principles and addressing possible misconceptions. The article then investigates whether margin squeeze theory could be applied to online platforms with the help of three case studies (involving app stores, search engines and online marketplaces). Before concluding, it contemplates the idea of neutrality underlying margin squeeze and related policies such as network neutrality.