Preventing monopolistic and anti-competitive practices on the internet
Restricting anticompetitive practices in electronic commerce
In the area of data networks, it is essential that policy makers protect consumers against monopolistic and anticompetitive practices. Policy makers should use appropriate competition policy and regulatory remedies to ensure that consumers have open platforms for network access, and that private control over network bottlenecks are not used to exercise control over essential network navigation tools or content.
1. For the Internet to be a market infrastructure, consumers must be provided with a means to access (browsers) and to find (search services) online shops. Accordingly, these two markets are the first to play out a competitive game. In the browser market, monopolization may occur naturally because of the network effects inherent in software products. One browser will do fine as any other. In the search and directory service market, however, products being sold are contents, and Web searchers, unlike surfers, will prefer efficient search results to ad-strewn contents of little relevance. The chance of any search service becoming a monopolistic gatekeeper is extremely low in such a market, especially since the internet does not have a fixed point of entry.
1. Several economic factors reduce the chance of generating or sustaining monopoly profits in the digital marketplace. These include: a) without the costs to build a chain of physical stores, firms can enter and exit readily; b) costs of duplicating successful technologies or business practices of one's competitors are much lower than in physical markets; c) locking in customers with proprietary technologies becomes challenging when patents and business practices are imitable and rational consumers equipped with smart agents are less swayed by reputation; d) products are customized, further segmenting the market and offering opportunities for niche competitors; and e) the network effects and the economies of scale, which tend to drive traditional computer and software industries toward monopolization, are less prominent in personalized services.
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