Innovation as a Competitive Constraint on Online Platforms in European Competition Law: The Industry Life Cycle and Dominant Designs in Digital Markets

Abstract

Although market power in platform-mediated markets seems to be ubiquitous, in some cases it may be short-lived due to innovation. Innovation can make an undertaking redundant or an entrant fuelled by innovation can take away market power of established undertakings. European competition law struggles to distinguish between these two situations. The theory of the industry life cycle and the concept of dominant design might help to understand when market power is a persisting problem and when innovation may make market power short-lived. All industries follow a similar pattern, where the emergence of a dominant design is the key turning point, signifying when innovation is no longer a competitive constraint. In abuse of dominance and merger control cases this theory might help in different ways to inform our assessments of several competitive constraints on online platforms.