Online platforms and vertical integration: The return of margin squeeze?

When competition authorities struggle to assess abusive practices by online multi-sided platforms, the issue does not appear to be defining markets or determining market power; rather, the difficulty is finding a fitting theory of abuse. In the search for such theories, one candidate has been overlooked: margin squeeze. This class of abuse has for the most part been confined to the telecom sector, but its potential reaches beyond. Indeed, the tendency towards vertical integration and subsequent conduct of online platforms could renew the relevance of margin squeeze as an analytical tool. To test this relevance, the article first examines the foundations of margin squeeze theory, while also addressing possible misconceptions. It then investigates whether this theory could be applied to online platforms with the help of three case studies (involving app stores, search engines, and online marketplaces). Where a company not only owns the digital infrastructure but also uses it to provide products, we find that margin squeeze can provide an appropriate assessment framework for anti-competitive conduct. Before concluding, the article contemplates the idea of neutrality underlying margin squeeze and related policies such as network neutrality.