Online Exclusive Dealing,Developmental Stage and the Governance of Digital Platforms
Scientific governance of online exclusive dealing by digital platforms is one of the most controversial regulatory issues worldwide.Current research and antitrust cases often bifurcate into opposite conclusions of right or wrong.This paper proposes a synthetic direction,proposing a flexible regulatory stance and regulatory measures based on the developmental stages of the digital economy and case-by-case analysis.By constructing a tripartite game model,the paper analyzes the impact of online exclusive dealing on market competition and social welfare at different developmental stages of digital platforms.The research identifies an"investment protection effect"and a"choice restriction effect"of online exclusive dealing and further explores how different developmental stages of the online economy affect the performance of these two effects.The investment protection effect refers to the pro-competitive effect of online exclusive dealing by reducing free-riding on digital platform investments,which would make online and offline sellers compete more efficiently and thus increase social welfare.The choice restriction effect refers to the potential negative impact of online ex-clusive dealing on competition(between platforms)and welfare,as it may limit the choice of platform consumers and therefore the competition between platforms.This paper finds that the net welfare of online exclusive dealing is determined by the interplay of the investment protection and choice restriction effects,and thus varies across different stages of development.In the early stages of the digital economy(i.e.,the user accumulation period),digital platforms often have to compete with their offline counterparts for consumers'attention.Such competition sometimes drives platforms to invest in promotion activities,including online and offline advertising,galas,and celebrity endorsements,in order to provide information about online products to consumers who previously only engaged in offline transactions.This investment is crucial to attract consumers to switch from offline to online,while suffering from free-riding by ri-val platforms.Certain exclusive agreements can ensure that the investing platforms benefit exclusively from their investments,thereby incentivizing such investments and contributing to digitalization.As a result,the investment protection effect often out-weighs the choice restriction effect at this stage.As the online economy enters the"stable and mature period",the online user base becomes more established and stable.The social welfare becomes susceptible to the quality of products and services sold on-line.It turns out that the anti-competitive impact of online exclusive dealing(i.e.,the choice restriction effect)may potentially over-shadow the pro-competitive impact of the investment protection effect,resulting in negative net welfare.A case study of Alibaba's implementation of exclusive dealing during shopping festivals validates these mechanisms.This paper suggests that regulators could consider regulating online exclusive dealing(by digital platforms)based on the de-velopment stage of the digital economy.In the stage of user accumulation,the positive effect of online exclusive dealing should be emphasized,highlighting its role in incentivizing investment and promoting digitization,and comparing exclusive dealing to pat-ents.In the stable and mature stage,the negative effect of online exclusive dealing should be recognized and a case-by-case analy-sis of its competition effect should be conducted.The contribution of this paper is that it includes both online and offline channels in the analytical framework and highlights the stage-specific characteristics of the digital economy that would affect the net welfare of online exclusive dealing by digital plat-forms.In addition,the paper proposes a synthetic direction for regulation that emphasizes the developmental stages of the digital economy,providing a theoretical basis and policy guidance for the further governance of digital platforms.
Online and Offline CompetitionOnline Exclusive DealingDevelopmental StageDigital PlatformPlatform Gover-nance
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