Monopoly Myths: Do Internet Platforms Threaten Competition?

The rapid growth of large platforms has caused some activists, scholars, and political officials to worry about their impact on competition. Concern seems to be aimed at two issues. First, certain companies, such as Amazon, sell directly to customers but also run a platform that connects third-party suppliers to customers. Some people are concerned that platforms could compete unfairly by using data about sales by third-party sellers to decide whether to develop and sell competing products. Second, because of network effects, many platform markets have one or two dominant players. Some advocates claim this harms consumer welfare and innovation. On top of that, some worry this position becomes self-sustaining because the data the platforms collect gives the companies an advantage their rivals cannot overcome. This report shows that these concerns are largely misplaced. Platforms create significant economic value. Far from being lazy monopolists that try to increase profits by artificially reducing supply, these companies seek to grow rapidly. They are constantly innovating to attract new users and retain the ones they have. To do this, they invest enormous amounts of money in research and development (R&D).