The adoption of the cross-elasticity of demand and hypothetical monopolist test instruments to indicate pro-competitive digital platforms: a brief contribution

Abstract

Background: Brazil has been seeking to establish guidelines to frame digital platforms from an economic perspective, notably aiming to prevent single-homing and its resulting consequences. Generally, discussions in Brazil focus on proposals developed by developed countries that seek to more strongly regulate digital platforms that intermediate supply and demand, the marketplaces. Many of these proposals aim to replace traditional instruments for analyzing the relevant market, whether in structural analyses or in the case of conduct, with less rigorous approaches subject to some degree of subjectivity.

Objective: the objective of this article is to demonstrate that traditional antitrust instruments, notably the cross-elasticity of demand and the hypothetical monopolist test, are sufficient to assess whether these digital platforms are pro-competitive or not, particularly in a country where a portion of the population is still excluded from the consumer market and where markets are not yet fully developed.

Method: as a method, a simplified view of Schumpeter's theory of disruptive innovation, as presented by Christensen, will be adopted. According to this theory, such innovations are those capable of creating new markets, giving non-consumers access to become consumers and democratizing access to products and services. Therefore, the methodology is conceptual and illustrated by institutional documents and examples from two successful digital marketplace platforms in Brazil: Uber and iFood.

Conclusions: this work sought to demonstrate that the instruments of cross-elasticity of demand and the hypothetical monopolist test can be used to indicate whether a digital platform should be considered pro-competitive, even when it tends to monopolize its relevant market.