This article is written by Dheeraj Awasthi, a fourth year student pursuing B.A.LL.B at Rajiv Gandhi National University of Law, Patiala, specialising in Business Laws and Shubham Tiwari, a third year student pursuing B.A.LL.B at NALSAR, Hyderabad.

INTRODUCTION

Network effect is an evolving phenomenon and is most prevalent in the online markets all over the world. The firms operating on the Internet have transformed the world economy. Various business models have been adopted by the firms to influence the consumers and this has led to the formation of network size for every firm. For example, Amazon, which is one of the leading online markets in the world, has become an intermediary between sellers and buyers. Facebook, WhatsApp, Instagram, etc. have become part of daily lives of billions of customers. All this is happening because of the network size created by firms and this has led to the evolution of network effect.

The concept of network effect has been discussed widely in the further chapters of this article. However, sometimes, firms may adopt policies which can lead to anti-competitive conduct. In order maintain the market competition and to ensure the entry of new competitors in the market, competition authorities may impose such conditions which would regulate the market competition.

The phenomenon of network effect evolved significantly between 1985 and 1995 by researchers like Michael L. Katz, Carl Shapiro, Joseph Farrell and Garth Saloner. Network effect was popularized by Robert Metcalfe, stated as Metcalfe’s law. Network effect has proved to be beneficial for both firms and consumers. There have been a number of cases in which courts have given their interpretation about network effects and some of these cases shall be discussed broadly in this article.

CONCEPT OF NETWORK EFFECT

Network effect is a phenomenon in which use of any good or service increases the value of that good or service for other users. The best example is that of communication network in which the already existing user directly benefits from the use of that network by other user. It is also termed as network externality or demand-side economies of scale. Network effect may have a direct and indirect benefit to the user of good or service and this benefit depends positively upon the number of people that buy the same good or service or compatible good or service. Network effect gives an advantage to larger firms or network over smaller firms or networks unless and until the increasing costs do not overpower network effects. A definition by McKnight and Bailey can be useful in this regard: “A network externality is the benefit gained by incumbent users of a group when an additional user joins the group. The group can be thought of as a ‘network’ of users, hence the term network externality.”[1]

How network effect is created?

Though network is very beneficial for any business to grow, it is not possible for every business to create network effect. But if a business is able to create a network effect then it can be very helpful in the growth of that business and the implications of such network effect can be fruitful. The strategies to develop network effect is discussed below-

1. One of the first strategies to develop network effect is to initially attract users with a single-player tool and then, over time, get them to participate in a network. The tool helps get to initial critical mass. The network creates the long term value for users, and defensibility for the company. The best example is that of Instagram which initially attracted users by using cool photo filters. After this, it invited users to participate in posting and sharing photos via stories which has helped in creating network effect for it. It has also allowed users to participate on other networks such as Facebook by sharing photos on such networks.
2. Another option to create network effect is dominating extremely tiny markets. The producer needs to dominate its product in miniscule markets and then launching at a larger arena. This helped Facebook in creating network as it initially started in Harvard and currently it has a network of more than 1.5 billion people worldwide. This concept is called “Minimum Viable Critical Mass”.

• One more strategy to create network effect is to make your product fit for network effect market. The product is made fit for network effect by making it attractive for every user in the market and increasing the performance of product in the market with time and costs remaining marginally same.

1. Also, showing long-term commitment to the platform can be a good strategy for developing network effect. For example, after the launch of Microsoft in 2001, there have been speculations that Microsoft would quit gaming market but it displayed its commitment towards the product and has become a competing product in the world.

Types of Network Effects

Michael Katz and Carl Shapiro identified network into two types- Direct and Indirect.[2]

Direct Network Effect-

It has been defined as an effect in which the direct use of any good or service increases the value of that good or service for other users of that good or service. The value increases with the increase in number of users or customers. For example, the utility that a  customer derives from purchasing a telephone clearly depends upon the number of households or businesses that have joined telephone network.

Indirect Network Effect-

It has been defined as an effect in which use of any good or service spawns the production of increasingly valuable complementary goods, which in turn increases the value of original good or service. Katz and Shapiro referred this as hardware-software paradigm. A good example of indirect network effect is computer operating system i.e., Windows. If the usage of Windows is made limited to few people then the software developers will restrict themselves to limited production but if there is increasing number of users of that operating system then it will inspire software developers to produce much and this in turn will increase the value of that operating system as there are increased number of software which will increase the usefulness of that operating system.

Rochet and Tirole identified another type of network effect- Two-sided network effect.[3]

Two-sided Network Effects-

It has been defined as a network effect in which increase in usage by one set of users increases the value of complementary product to another distinct set of users, and vice versa. Hardware/software platforms, reader/writer software pairs, marketplaces and matching services display this kind of network effects. In many cases, one may think of indirect network effects as a one-directional version of two-sided network effects.

Arun Sundarajan identified one more type of network effect- Local Network effect.[4]

Local Network Effect-

The microstructure of an underlying network of connections often influences how much network effects matter. For example, a good displays local network effects when rather than being influenced by an increase in the size of a product’s user base in general, each consumer is influenced directly by the decisions of only a typically small subset of other consumers, for instance those he or she is “connected” to via an underlying social or business network (instant messaging is a great example of a product that displays local network effects).

Implications of Network Effect-

Lock In

There is no dispute to the fact that network effect gives a dominant position to the entity in the market. Network effect transforms the nature of the competition. Due to the network effect, the good or service has sufficiently built a large installed base but it is more likely to retain customers even if there are other options offered by competitors in the market. This is called lock-in whereby the performance of products always increases over time and the cost of the product stays the same or decreases. Due to this lock-in, when better product is introduced in the market it might not get adopted even if there were economic advantages to its adoption. Also, the switching costs become so higher that the purchaser do not consider new product. One of the best examples of lock-in is Microsoft or QWERTY keyboard.

Tipping

A market is considered to have ‘tipped’ when one product or standard has become dominant. A market is tipping when it is sliding toward the eventual domination by a single firm. It is generally claimed that tipping occurs when a product has generated sufficient momentum with regard to network effects that its domination is inevitable. Although there is considerable vagueness in the literature, the general idea seems to be that after a period of struggle, one firm breaks out from the pack and tipping ensues. Tipping is generally considered as the increase in a firm’s market share dominance caused by indirect network effects.

Winner-Takes-All[5]

One of the most important implications of network effect is Winner-Takes-All. Many tech products grow more useful as more users use them, so larger the user base gets the more benefit the each user is able to derive. The immensely innovative organizations come up with far better products and services than their competitors and due to which they get enormous competitive advantage and users adhere to those organizations.

What not is a Network Effect

Virality

Both virality and network effect tend to magnify the value of the product by increasing usage of that product. But the difference between them exists and both are often confused to mean the same things. A viral product is one whose rate of adoption increases with adoption. Within a certain limit, the product grows faster as more users adopt it. A product with network effects gets more valuable as more users use it. Network effects are achieved only after a certain critical mass is reached but can prove to be a very strong source of value and competitive advantage beyond that point. There are many products which have network effects but are not viral and in the same manner, there are many viral products which do not have network effects. The recent example of virality is Sarahah app which allowed users to confess without disclosing their name. The app went viral for 10-15 days and after that the value of that product decreased and currently no one is asking about it.

Economies of Scale

An economy of scale is a cost advantage which arises due to the increased output whereas network effect tends to increase the cost of product by increasing the network even though the quality of the product becomes better. Network effects are distinct from economies of scale because they produce greater value for the marginal increase in cost. As networks grew larger, the cost increases, but the value of the product increases faster. Apple sells more iphones not because of network effects but due to economies of scale. However, the more people who want to chat using iMessage is because of network effect.

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NETWORK EFFECTS AND COMPETITION LAW

In online and communications market, network effect is being seen as a highly growing phenomenon. The firms which have formed a certain network size tend to increase the network size by involving in such strategies which will help them in increasing the network size of their product. Sometimes, the product which has already attained a certain network size tends to involve in such conducts which can be anti-competitive and have a tendency to grossly affect market competition. Thus, the competition law comes into role and it keeps a check on products with network effect so that they don’t use their dominant position or rather abuse that dominant position in the market to grow their network size. Such abuse of dominant position may give a chance to producer of that product to harm its rivals and that would affect the market competition which is against the objects of competition law.

The markets with network goods behave in a different manner. In a market where there are two network goods with direct network effects and the two have their own installed bases, firms usually invest in new capacity and determine the prices of their product in such capacity. The quality of product differs and the prices of these products reflect the differences. The consumers will be different in both networks because network size depends upon the prices of goods or service. In a market where there are people more worried about complementary goods or service is a market with indirect network effect. In such market, competition is mainly influenced by number of people on side.

Thus, the main role of competition law is to prevent anti-competitive conducts and keep a check on dominant position of firms. The authorities mainly involve themselves in ex post intervention which is made after any such anti-competitive conduct has taken place. With this form of intervention, authorities do not influence directly the competitive process but make sure that the winners do not block the entry of new and more efficient competitors. This is the domain of antitrust policy. Usually, the ex post intervention in the market with network effects can take form of competition policy and is implemented by antitrust authorities.

In some cases, some practices that would be considered otherwise anti-competitive may reflect normal competition when there are network effects. Therefore, the application of competition policy should be done with high care.

Some of the important cases in which the relevance of network effects in competition law has been discussed are-

The Microsoft Case

Microsoft case, for the most part of it, is linked with network effects. The first part of case i.e., American part, focusing on tying of Internet Explorer to Windows in which Microsoft was put on trial for using its monopolist position in browser competition. By 1996, Windows was already the dominant operating system but the market for browsers was dominated by another firm, Netscape. At first glance, one may think that browsers and operating systems are not really competing, being more complements than substitute products. But the fact that a substitute product becomes a dominant makes this product the standard de facto to get an access to the Internet. It creates the potential threat that this substitute supports software products written in protocols incompatible with the ones used by Microsoft.

It was also alleged that some top executives at Microsoft feared that Internet could become a platform on which software products competing with the ones offered by Microsoft could be run. Much of the indirect network effects were at stake rather than direct network effects. At that time, most of the applications were running on Windows and the more applications were developed for Windows, the greater the utility of using Windows. The existence of Netscape was thought to be threat by Microsoft. It was then alleged that by tying Internet Explorer to Windows OS, Microsoft had lowered the incentives for consumers to adopt other browsers and thus for developers to optimize their application for other browsers. So the presence of network effects is probably what drove Microsoft to use this tying strategy.

In European part of Microsoft case, the European Commission raised a point about an abuse of dominant position on the market of operating systems. The case started with the complaints of Sun Microsystems that Microsoft had refused to provide information necessary for Sun to develop work server products compatible with Windows PCs. As Windows was the dominant player in the market for PC operating systems, all the applications were developed using the Windows language. By refusing to release the information pertaining to the interoperability server-PC, Microsoft prevented full interoperability between non-PC servers and PCs, and thus the development of potential competition in the server market. Thus, in the present case also, the presence of indirect network effects was the core of argument. Major applications can be run of Windows OS, so it prevented users to use other operating systems.[6]

Microsoft was also put under investigation for tying Windows Media Player in the same way as it had tied Internet Explorer and prevented competition. In its 2004 decision, the European Commission insisted several times on the role played by network effects to explain why Microsoft practices should be considered as an abuse of dominant position.[7] For instance, in the case of Media Player, tying induced more content developers to focus on Windows technology which in turn would convince more consumers to use the Windows technology. Thus, in Microsoft case, network effects were important for the motivation and the evaluation of the firm’s practices, aiming at preventing the development of content and the application for non-Windows products.

The AOL/Time Warner Case [8]

In this case, the interlinkage between network effect and competition law has been widely discussed. In this case, the two companies AOL and Time Warner were going to be merged and due to their existing network effects, they would have largely dominated the market. AOL was the world leader in Internet services, being a provider of Internet online services and offering messaging services. Time Warner was mainly a media and entertainment company. The proposed merger would have impacted several markets: online music (downloading and streaming), music player (DRM, compression, encryption), internet access, and paid-for content other than music. One important element was that AOL had a pre-existing agreement with another large music publisher, Bertelsmann. The merger had the first effect to give AOL control over a large share of publishing rights. But more importantly, the combination of a market power on the network (the Internet access and music player) and on contents (the music catalogue) was raising the possibility to exercise market power on both markets.

Thus, the European Commission raised argument that if merger takes place, the entity would be in a position to dictate the market and that would be against competition policy. Thus, the European Commission mainly feared that such merger can prevent new merger was finally accepted but on the terms that the company would not be not anymore the leading source of publishing rights.

Ola Cabs Case in India [9]

In this case, the informant alleged that the opposite Party, armed with moneybags from various funding agencies, had unleashed a series of abusive practices of unfair conditions, predatory pricing etc. to establish its monopoly and eliminate otherwise equally efficient competitors, who cannot indulge in such predatory pricing in the radio taxi services market in the city of Bengaluru. It was contented that the opposite party, under the brand name Ola cabs is offering various unrealistic discounts and rates to lure the customers and unviable incentives to its drivers thereby resulting in business loss for the Informant. It was also alleged that such conduct is resulting in ousting the existing players out of the market and is also creating entry barrier for the potential players.

The informant also stated that the radio taxi business model relies heavily on the network effect. That a competitor’s practice of unduly luring away drivers from its network significantly reduces its ability to serve customers and similarly a competitor’s low prices to customers also lured away customers from using its network. Under such situation, the informants’ ability to bounce back from a reduced business was extremely difficult and next to impossible. The informant had pointed out that the opposite party was fully aware of the effects of killing the competitor’s network and instead of using good operational and ethical business practices; it had allegedly adopted predatory pricing tactics.

NETWORK EFFECTS AND ANTI-COMPETITIVE CONDUCTS

Network effect is beneficial to companies for promoting their product in the markets but sometimes it can also be used by companies to promote anti-competitive conducts to keep away the rivals from entering into the market. Such conducts can be very harmful for market competition and would prevent the entry of entrepreneurs in the market. Such type of conducts are generally witnessed in markets where one enterprise is already in a dominant position and it may use its dominant position to capture the market even when new and better technology is introduced. The purpose of antitrust law is to protect consumers from anti-competitive actions by firms, not to pick technological winners. Generally, the activities of an enterprise with network effects are pro-competitive which are committed towards increasing network size and maintaining price and developing the market for complementary products. But sometimes such activities become anti-competitive because they exclude rivals and give way to predatory pricing. Some of the anti-competitive conducts which have been found to be generally used in market of network effects are-

Mergers and Acquisitions

Mergers and Acquisitions are most common conducts in which firms make such type of tying which can generally be anti-competitive. Consider the example of two competing producers of hardware and software. Firm A produces a hardware product that is preferred by a large majority of consumers, but it still faces competition from Firm B in both hardware and software. Firm A decides to tie its hardware sales and software sales together. Now, some consumers who want the preferred hardware manufactured by Firm A have to purchase a software product that they prefer less. In this way, the Firm A has used its network effects to foreclose competition for the other firm and eventually this action is against competition law.

In a market with network effects, Firm A has the possibility of recouping its short run losses. By bundling the sale of its hardware and software, Firm A may detach enough customers from Firm B to destroy its viability as a network, tip the market and it will create difficulty for new firms to enter the market. Thus, the presence of Network effect in the market can create an anti-competitive purpose behind a merger or acquisition.

The US Supreme Court has held that two requirements must be met for per se antitrust liability. First, the tied products must be sufficiently distinct.[10] Second, there must be sufficient market power in the tying good to generate a danger that monopoly power may be extended into the market of tied product.[11] If these two requirements are met, then the merger or acquisition is per se illegal. And if these two requirements are not met, then the merger or acquisition is examined under the rule of reason.[12] The criticism of this jurisprudence is that a monopoly has no incentive to extend its market power over complementary goods because it can collect the full monopoly rent up front, just as the monopoly owner of an essential facility may.[13]

However, there can be some pro-competitive reasons for the merger or acquisition as well. First, mergers or acquisition may ensure the quality of the product.[14] For Example, a company which manufactures may make a merger or acquisition with the company which provides repair services and parts and such services will be available to the purchase of product. This will only enhance the quality of the product and will maintain company’s reputation. Second, mergers or acquisitions help in reducing the risk of product purchase by increasing the value of the product.[15] For example, if a firm with good reputation makes a merger or acquisition with other firm having comparatively less reputation, then such merger will help only in increasing the value and reputation of the product with less reputation. Third, a merger or acquisition may stimulate a demand for complementary products.[16]

Facebook/WhatsApp merger-[17]

The very recent example of merger and acquisition where network effects was widely discussed is Facebook and WhatsApp merger. The European Commission has authorized, under the EU Merger Regulation, the proposed acquisition of WhatsApp Inc. by Facebook, Inc. both of the United States. Facebook (via Facebook Messenger) and WhatsApp both offer applications for smartphone (so-called “apps”) which allow consumers to communicate by sending text, photo, voice and video messages.

The consumer communications apps market is characterized by network effects, that is to say the value of the service to its users increases with the number of other users. Network effects may allow the entity which enjoys a large network to keep its competitors out of the market. Given their popularity, both WhatsApp and Facebook Messenger already have large customer bases. However, a number of factors mitigate the network effects in this particular case. Indeed, the Commission found that the consumer communications app market is fast growing and characterized by short innovation cycles in which market positions are often reshuffled. Moreover, launching a new app is fairly easy and does not require significant time and investment. Finally, customers can and do use multiple apps at the same time and can easily switch from one to another.

As regards social networking services, the market investigation showed that their boundaries are continuously evolving. Some third parties suggested that WhatsApp is important element was that AOL had a pre-existing agreement with another large music publisher, Bertelsmann. The merger had the first effect to give AOL control over a large share of publishing rights. But more importantly, the combination of a market power on the network (the Internet access and music player) and on contents (the music catalogue) was raising the possibility to exercise market power on both markets.

Thus, the European Commission raised argument that if merger takes place, the entity would be in a position to dictate the market and that would be against competition policy. Thus, the European Commission mainly feared that such merger can prevent new merger was finally accepted but on the terms that the company would not be not anymore the leading source of publishing rights.

Exclusionary Contracts

The second anti-competitive conduct which is very common to network industries may be the exclusive contracts. When a new product needs to enter the market, it requires a critical number of users to enter the market and such number may be denied if a sufficient number of users are bound by exclusionary contracts. Such exclusive contracts can be signed by the users when they are given an incentive of discount, even when they know that they can’t move to other product even with better technology is offered to them. The dominant firm is more than compensated for the discount because it maintains its monopoly position.

However, there might be some pro-competitive reasons for which exclusionary contract can be made. Therefore, the courts have held that exclusive contracts must be viewed from the lens of rule of reason. For example, exclusive contracts may help firms engage in long-term planning by fixing prices and fixing future supply, which reduces the risk to the supplying firm of incurring fixed costs in production. This reasoning has led the Supreme Court to adopt a rule of reason approach to exclusive contracts.

In Standard Oil Co. v. United States,[18] the Supreme Court held that an exclusive or requirements contract may be anti-competitive under reasonableness analysis if it forecloses too much of the market. The Court later refined this standard in Tampa Electric Co. v Nashville Coal Co.[19] which remains perhaps the leading case on exclusive dealing. Tampa Electric held that rule of reason analysis required a determination of whether the exclusive dealing arrangements significantly impeded the ability of others to enter or to remain in the market. In Jefferson Parish Hospital District No.2 v. Hyde,[20] the court held, “Exclusive dealing is an unreasonable restrain on trade only when a significant fraction of buyers or sellers are frozen out of a market by the exclusive deal”.

In India also, the court have held exclusive contracts as illegal. In Consumers Guidance Society v. Hindustan Coca Cola Beverages,[21] CCI held that “It is clear from the above definition that any exclusive agreement or arrangement restricting the purchaser from buying or procuring any goods or services form any other supplier is anti-competitive as such exclusive arrangements limit the sources of supply and therefore, limit the competition. Similarly, any agreement which refuses to deal with any other person other than the person with whom exclusive agreement has been made is anti-competitive. These exclusionary practices are vertical agreements and they infringe the law if they have effect of reducing/limiting competition”.

Thus, the current law is well-equipped to deal with potential challenges of network industries and exclusive contracts. If network industries use exclusive contracts to foreclose the competition then the violation of competition law has taken place.

Predatory Pricing

Whether it is a market with network effect or not, price determination has been one of the most prevalent strategy by the firms. The predatory firm sets its prices low enough to run its competitors out of business. After all other firms are gone from the market, the predatory firm raises the price of the product to recover its losses. There are several conditions laid down by courts to prove that the firm has used the strategy of predatory pricing to run its competitors out of business.[22] First, the lower prices offered by predatory firm must pose a disproportionate burden on victimized firm i.e. the targeted firm must have made more losses due to predatory pricing or it must have less access to capital markets and therefore be unable to cover a period of losses.[23] Second, after the predatory firm has run other competitors out of business, it must be certain that it can recover losses incurred by charging lower prices without providing entry to other firms after it raises the prices of product. This requirement was recognized by US Supreme Court in Zenith Radio Corp v. Matsushita Electric Ind. Co.[24] in which it held that the burden of proof had not been satisfied because the plaintiff did not show how the defendant could have expected to recoup its losses.

The pricing strategies by dominant firms may signal potential competitors that entry will be punished and no profits can be earned by entering into such market. However, there are very less number of cases in which the conditions required for proving predatory pricing have become successful. The recent case in this regard is Bharti Airtel v. Reliance Jio,[25] in which Bharti Airtel accused Reliance Jio of predatory pricing by offering free services to the users. The main allegation was that Reliance Jio has used its financial strength in other markets to enter into the telecom market. The Competition Commission of India was not satisfied with the submissions made by the informant and held that sufficient conditions for predatory pricing were not satisfied.

There are very rare cases in which all the conditions of predatory pricing are satisfied and the predatory firms can damage competition by cutting prices. Thus, in my view, the antitrust law should punish even those firms which show a possibility of predatory pricing by cutting prices. Even the US Supreme Court held in Zenith Radio Corp. v. Matsushita Electric Ind. Co.,[26] that the courts must endorse cautionary approach. The Court worried explicitly about the effect of predatory pricing litigation on pro-competitive conduct,[27] and required that, to survive summary judgment, the plaintiff must show that the defendant would likely succeed in driving out competition and have the ability to recoup short-run losses after predation.[28]

Foreclosing an Essential Facility

Another very common strategy observed in network markets is denying access to an essential facility. The firms may foreclose such facility which is essentially required by other firms and in this way it can greatly affect the competition. To understand how a network owner may benefit from excluding a rival from an essential facility, consider the case of two competing firms which manufacture both software and hardware. Suppose firm A makes its software incompatible with the hardware of firm B. If Firm A’s software is preferred by enough consumers, the number of users of B’s hardware may decline sufficiently such that B’s hardware is no longer a viable network, and the market tips in favour of A. In this way, the firm has greatly affected the competition. In Reliance Jio case,[29] one more allegation made by Airtel was that the Jio was using its network created by free services to foreclose an essential facility of calling.

One great example of an essential facility is transportation network with a bottleneck owned by a rival firm. In US v. Terminal Railroad Ass’n of St. Louis,[30] the US Supreme Court held that the Sherman Act prevented the railroads owning a vital bridge from denying competitors railroads access to that bridge. Further, the Court provided that access had to be granted on equal terms. This case held that foreclosing an essential facility may greatly affect the competition.

CONCLUSION

Network effects play a very important role in the development of any product especially in online businesses. Most of the communication and information services over the Internet have gained reputation globally because of the network effects. Competition policy with regard to network effect has been quite lenient because of the conditions laid down by courts which need to be fulfilled to prove a violation of Competition law. There are some conclusions which can be reached after analyzing the present research work.

The important conclusion which can be drawn is that the role of competition law should be lenient towards network effects as far as it does not grossly violate market competition. Network effects actually benefit society because of market concentration. Due to this market concentration created by network effect, the utility for every user of the product increases. Thus, for network markets, the role of competition policy should be reduced and the firms should be given some freedom while promoting their product.

Another conclusion which can be drawn is that sometimes network effects can lead to inefficient choice of network. Due to this inefficient choice of network or standard, there can be some delay in the adoption of best technology. Thus, the competition policy should not intervene at the early stage when consumers are actually giving their try for the best technology.

Thus, the role of competition policy with regard to network effects shall not be very stringent. A network effect is a growing phenomenon and the laws of countries will take some time to adapt to the behavior of consumers in network markets. This subject needs some time to evolve and then it would be easier for competition authorities to determine anti-competitive conducts which will grossly affect market competition.

[1] LW McKnight and JP Bailey (eds), Internet Economic (MIT Press, 1997) 6, note 3.

[2] ML Katz and C Shapiro, “Network Externalities, Competition and Compatibility” (1985) 75 American Economic Review 424.  Available at, http://brousseau.info/pdf/cours/Katz-Shapiro%5B1985%5D.pdf.

[3] See, http://www.rchss.sinica.edu.tw/cibs/pdf/RochetTirole3.pdf.

[4] See, http://oz.stern.nyu.edu/papers/lne.pdf.

[5] See, http://www.utdallas.edu/~liebowit/netwext/ellig%20paper/ellig.htm.

[6] See, http://ec.europa.eu/competition/publications/cpn/2010_1_12.pdf.

[7] “The nature of the barriers to entry in the client PC operating system market serves to reinforce the conclusion that Microsoft holds a dominant position in this market. These barriers to entry derive from the network effects in the market.” Decision of European Commission, 24.03.2004

[8] See, https://idei.fr/sites/default/files/IDEI/documents/conf/trading2016/rapport/network_effect.pdf.

[9] M/s Fast Track Call Cab Private Ltd., v. M/s ANI Technologies Pvt. Ltd., Case No. 06 of 2015, decided on 03/09/2015. Available at, http://www.cci.gov.in/sites/default/files/06201533.pdf.

[10] See, e.g., Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 21 (1984) (holding that by definition a tying arrangement cannot exist unless two separate products are involved).

[11] See, e.g., Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451 (1992). Kodak reinforced the rule that market power in the tied product had to be illegal to invoke antitrust liability. Kodak had tied the sale of parts to its repair services, id. at 458. Because it lacked monopoly power in the market for copiers, Kodak claimed that its tie was not illegal, id. at 466-7. The Supreme Court upheld the court of appeal’s reversal of summary judgment in favour of Kodak, holding that there was a genuine issue of fact over whether or not purchases of copiers had been locked in to the capital good purchased from Kodak, giving Kodak power in the aftermarket, id. at 477.

[12] See Stanford Technology Law Review, 2002 STAN. TECH. LAW REV. 4. Available at, https://law.stanford.edu/stanford-technology-law-review-stlr/.

[13] See David Reiffen & Andrew N. Kleit, Terminal Railroad Revisited: Foreclosure of an Essential Facility or Simple Horizontal Monopoly? 33 J. L. & ECON. 419, 420 (1990). The authors conclude that the Terminal Railroad Association behaved like a horizontal monopoly and allowed others into the network, but at a super-competitive price.

[14] See ROBERT H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 147-48 (1978).

[15] See J. Gregory Sidak, Bundling in Software Industries, 18 YALE J. ON REG. 1, 8-9 (2000).

[16] See John L. Peterman, The International Salt Case, 22 J. L. & ECON. 351 (1979).

[17] See, http://europa.eu/rapid/press-release_IP-14-1088_em.htm.

[18] Standard Oil Co. v. United States, 337 U.S. 293 (1949).

[19] Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 230 (1961).

[20] Jefferson Parish Hospital District No.2 v. Hyde, 466 U.S. 2 (1984).

[21] Consumers Guidance Society v. Hindustan Coca Cola Beverages, on 23 May, 2011, CCI, Case No. UTPE-99/2009 & RTPE-16/2009.

[22] ROBERT H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 147-59 (1978).

[23] Ibid.

[24] Zenith Radio Corp. v. Matsushita Electric Ind. Co., 475 U.S. 574, 589 (1986).

[25] Bharti Airtel v. Reliance Jio, Case No. 03 of 2017, decided on 09/06/2017.

[26] Zenith Radio Corp. v. Matsushita Electric Ind. Co., 475 U.S. 574 (1986).

[27] Ibid., 593-94.

[28] Ibid., 589.

[29] Supra note 23.

[30] US v. Terminal Railroad Ass’n of St. Louis, 224 U.S. 383 (1912).