Discussion paper

DP14895 Platform Mergers: Lessons from a Case in the Digital TV Market

This paper contributes to the analysis of mergers in two-sided markets, notably those in which
a platform provides its service for free on one side but obtains all its revenues from the other,
as in the digital TV industry. Specifically, we assess a decision of the French competition
authority which approved the merger of the broadcasting services of the TV channels involved
but imposed a behavioral remedy prohibiting the merger of their respective advertising sales
services. To do so, we build a structural model allowing for multi-homing of advertisers and,
using a comprehensive dataset, we estimate the demand of viewers and advertisers. Welfare
analysis suggests that the approved merger harms consumers (both viewers and advertisers)
and benefits the TV stations. In other words, the implemented behavioral remedy is ineffective.
On the broadcasting side, the merger tends to increase the amount of advertising, which
reinforces the negative externalities that advertisers generate for viewers; on the advertising
side, this impetus counterbalances the risk of an increase of market power, which restrains the
increase in advertising prices. Overall, the main lesson of our analysis is that, in the process
of designing competition or regulatory policy for two-sided markets, ignoring the interaction
between the two sides of platforms can result in unexpected outcomes.

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Citation

Ivaldi, M and J Zhang (eds) (2020), “DP14895 Platform Mergers: Lessons from a Case in the Digital TV Market”, CEPR Press Discussion Paper No. 14895. https://cepr.org/publications/dp14895-0