United States: Digital Platforms


US antitrust agencies' review of mergers involving online platforms is becoming more common as online companies increasingly seek strategic combinations. Online platforms often are multi-sided markets characterised by two sets of consumers and distinct product options for each side of the market. In an investigation of a merger involving online platforms, the agency's product market and entry analysis must take into account the reality that in many circumstances, the consumers on one side of the market face different option sets for products than the consumers on the other side of the market. While some of these mergers produce fantastical headlines1 regarding the antitrust impact of these deals, careful consideration of the likely effects of such deals often yields competitive effects analyses that are far more nuanced and ambiguous, and result in real efficiencies that dwarf any hypothetical antitrust harm.

Our review of recent matters in front of the Antitrust Division of the US Department of Justice (DOJ) and Federal Trade Commission (FTC) demonstrates that where the agencies find the absence of competitive harm on one side of the online platform's multi-sided market, correspondingly, the agencies do not find the likelihood of competitive harm on the other side of the platform. This is because each side of the platform is dependent on the other, even though each side is characterised by distinct sets of consumers. This interdependency in assessing harm comports with the consumer welfare standard that takes into account all consumers likely to be affected by a merger.

This chapter examines how the DOJ and FTC consider product market definition, competitive effects, and entry when investigating mergers of online platforms. We also address how efficiencies should be considered when analysing online platform mergers. Specifically, we will examine the FTC's and DOJ's respective closing statements in Zillow/Trulia and Expedia/Orbitz in connection with our impressions of the agencies' recent investigations of Alarm.com's acquisition of Icontrol and Vista's acquisition of Cvent.2 All four of these transactions were cleared by the agencies without remediation, but were subject to intense antitrust scrutiny.

How the FTC and DOJ analyse product offerings in multi-sided markets

FTC investigation of Zillow's acquisition of Trulia

The FTC's 2014 investigation into Zillow's acquisition of Trulia considered whether the combination of the two largest online real estate portals would result in anticompetitive harm for real estate agents and consumers seeking to buy or sell a home. Trulia and Zillow were both online platforms that contained a multi-sided product offering. On one side, the companies served real estate agents seeking an advertising platform, and on the other side, the portals provided an easy-to-use online mechanism for homeowners seeking to sell their home and home buyers looking to purchase one. The FTC's closing statement discusses the merger's effects on both sides of the market, but the investigation focused closely on harm to real estate agents.3

In its investigation, the FTC examined whether Zillow's and Trulia's products comprised a distinct advertising market for real estate agents, specifically whether real estate portals such as Zillow and Trulia constituted a relevant product market for all real estate agents or for a set of ‘high performing' agents that received a higher return on the advertising investment through the portal. The FTC's closing statement highlighted the existence of some qualitative evidence that supported such a product market definition, including evidence that the parties closely tracked each other's consumer traffic, site features and pricing. However, the FTC ultimately found that a hypothetical monopolist of all online real estate portal advertising would be unable to impose an SSNIP on real estate agents. In other words, advertising through online real estate portals was too narrow a market, as real estate agents had a number of other options that served as substitutes for online real estate portals to meet their advertising needs.

The facts demonstrated that real estate professionals spent a substantial portion of their marketing budgets on traditional offline forms of advertising (eg, newspapers, direct mail, billboards, yard signs, radio, and print) and within the online segment there were other advertising options (eg, realtor.com owned by News Corp, homes.com, homefinder.com, Redfin.com, individual brokerage websites, individual agent websites, search engine marketing, internet retargeting, and social media advertising). According to the agency, all of these options are substitutes to online real estate portals for real estate agents' advertising needs. Importantly, even if one were to set aside offline competition for real estate services, the FTC found that the merged entity would continue to face competition from other online portals such as Realtor.com, online brokerage services like Redfin.com, and other consumer facing online real estate products.4

The FTC's closing statement notes that FTC staff also investigated whether Zillow's acquisition of Trulia would reduce competition for consumers interested in researching home buying or selling online. However, prospective home buyers and sellers researching how to buy or sell a home are beneficiaries of the diverse advertising and marketing options used by real estate agents. The FTC recognised this interdependence between the two sides of the online platform and in its closing statement indicated that the merged entity would have strong incentives to develop new features and to grow its consumer audience in order to increase advertising revenue.5 In spite of initial press reports of concern about the merger's effects, after careful investigation, the FTC ultimately concluded that online real estate portals did not comprise a relevant product market and the merger was unlikely to harm competition.

FTC investigation of Alarm.com's acquisition of Icontrol

The FTC recently investigated Alarm.com's acquisition of Icontrol. Alarm.com and Icontrol both provided cloud-based platform solutions to security providers (including security dealers), which enabled the security providers to sell interactive security and home automation solutions to their subscribers. In its investigation, the FTC focused on one side of the online security services platform: security dealers. On the other side of the platform were the end-consumers: homeowners seeking a home security product.

During the investigation, the FTC examined whether the merging parties were likely to be the only companies able to offer open-source security software platforms to independent security dealers. FTC staff investigated whether sales of interactive security systems sold through the independent dealer channel constituted a relevant market. Alarm.com offered its interactive security software to the independent dealer channel. In contrast, Icontrol's interactive security products were white labelled and sold through other channels (eg, ADT). At the time of the investigation, Icontrol did not offer a product to the independent dealer channel, though its dealer product, Icontrol One, was in development. FTC staff sought to understand the likelihood of Icontrol One's entry into the dealer channel, and its ability to constrain Alarm.com's offering in the but-for world.

The facts of the investigation demonstrated that at the security dealer level, other software platforms such as Securenet, Honeywell Total Connect, and Digital Monitoring Products served as alternatives to Alarm.com and the prospective Icontrol One product. Additionally, Vivint, one of the fastest-growing security dealer providers, had developed its own software product, serving as yet another alternative. There was evidence that Google had plans to offer a dealer supported security product as well.

In narrowing the area of focus to one side of the platform - products sold through the independent dealer channel - the FTC's investigation into this product market set aside a plethora of other security solutions available to consumers on the other side of the platform: homeowners. In particular, the FTC discounted the importance of Honeywell's security products, which are by far the most prevalent security products available to both dealers and homeowners. Indeed, the facts of the investigation corroborated the variety of options available to homeowners when choosing a security system for their homes. Outside of the dealer channel, cable and telecom providers such as AT&T and Comcast offer their own home security products. There are also a number of retail products available for direct consumer purchase, including home security products that can be added to a consumers' existing smart home technology.

The FTC did not issue a closing statement for its investigation into Alarm.com's acquisition of Icontrol, but we can surmise that the broad option set of security solutions available to homeowners were relevant to the FTC's decision to allow the transaction to proceed. The ultimate success of Alarm.com's offering to the security dealer channel is driven by how many homeowner consumers choose to purchase an Alarm.com security solution from independent dealers. Post-merger, Alarm.com's software offering through the security dealer channel must compete with the multitude of options available to homeowners seeking security systems, disciplining any post-merger incentive and ability to raise the price or reduce innovation.

DOJ investigation of Expedia's acquisition of Orbitz

After a six-month investigation in 2015, the DOJ cleared Expedia's US$1.3 billion acquisition of Orbitz in spite of reported complaints from the hotel industry, consumer groups, and members of Congress.6 Expedia and Orbitz both offered travel websites that aggregated airline, hotel, and rental car booking information for consumers.

In its closing statement, the DOJ explained that it examined whether the merger was likely to harm competition on either side of the platforms offered by Orbitz and Expedia.7 On the consumer side, the DOJ found that the merger was unlikely to result in increased or additional charges. On the travel service provider side, the DOJ found that Orbitz was a small source of bookings for airlines, car rentals and hotels, and that Orbitz did not affect Expedia's commission charges. Additionally, the DOJ found that, beyond Expedia and Orbitz, travel service providers have alternative ways to attract customers and obtain bookings, including Priceline. Finally, the DOJ found that online travel services were rapidly evolving and pointed to recent entry by Google and expansion by TripAdvisor.

Like the examples discussed above, the DOJ's investigation of Expedia and Orbitz demonstrates the interdependence of the two sides of an online platform offering. On one side, consumers had a variety of alternatives to meet their travel booking needs, such that Expedia and Orbitz would be unable to increase charges post-merger. And reflective of the various alternatives available to consumers, Expedia and Orbitz represent one of many booking sources for travel service providers such that the DOJ concluded anticompetitive harm from the merger was unlikely. Despite reported concerns from the hotel industry, consumers and members of Congress, the DOJ's thorough investigation demonstrated that online travel services did not comprise a relevant market and that competitive harm was unlikely to result from the merger.

DOJ investigation of Vista's acquisition of Cvent

The DOJ recently investigated Vista's US$1.65 billion acquisition of Cvent. The transaction combined the two leading suppliers of event management and strategic meetings management software under Vista ownership: Cvent and Lanyon. Cvent and Lanyon were also the two leading providers of eRFP platforms for event planners, and related marketing solutions for hotels and venues. Strategic meetings management services help companies control the cost of meetings and assess their effectiveness, and are used by event planners working for large companies. Lanyon, Vista's subsidiary, and Cvent, the acquisition target, both offered strategic meetings management software, which are multi-sided online platforms utilised on one side by event planners, and on the other side, as a source of marketing and advertising placement for hotels and meeting spaces.

The DOJ investigation of Vista/Cvent focused on whether event planners working for large enterprises needed Lanyon's or Cvent's strategic management software products to manage their meetings. The facts demonstrated that the vast majority of large enterprises did not use Lanyon's or Cvent's strategic meetings management software and those that did switched away from Lanyon or Cvent to other alternatives.

The DOJ did not release a closing statement regarding the transaction, but given the focus of the investigation, it is likely the DOJ concluded that hotels and other meeting spaces did not depend on Lanyon or Cvent for their advertising and marketing needs or in order to fill their event spaces. Indeed, the investigation demonstrated that a substantial number of hotels and venues did not utilise Lanyon or Cvent for marketing and advertising and that only a small portion of overall hotel advertising was spent with Cvent or Lanyon. Vista's acquisition of Cvent is another example of the interdependence of the two sides of an online platform. Because event planners use a variety of methods (in addition to strategic meetings management software) to meet their venue sourcing needs, consumers on the other side of the platform, hotels and event spaces, must diversify their advertising to attract event planners.

Entry plays an important role in agency review of online platform products

Entry plays an important role in agency review of online platform products because companies poised to enter or expand into a market under investigation may render competitive harm unlikely. In the online platform mergers discussed in this article, the markets in which the companies operated present the US antitrust agencies with novel issues unique to nascent, dynamic, high-tech marketplaces. For example, in Zillow/Trulia, online real estate services had seen significant entry and development since the parties launched in 2006. While the FTC was considering the merger, the online home shopping portal Realtor.com was acquired by Rupert Murdoch's News Corp, and third-party investors made significant contributions to competitors Redfin.com and Movoto. The parties advocated that these rivals would spur the post-combination Zillow to continue to innovate and to seek to grow its consumer audience. In closing the investigation into Zillow/Trulia, the FTC stated (in a footnote) that the competitive dynamics of the real estate market were rapidly changing, implying that additional changes, including entry or expansion, may be ongoing and forthcoming, but adding the caveat that depending on those changes, a narrower market may be relevant in the future.8

Entry and expansion played an important role in the Alarm.com/Icontrol investigation as well. As described above, Icontrol had not yet offered a product to the security dealer channel that was the focus of the FTC's concern, begging the question of what other potential competitors were poised entrants on the competitive horizon. Additionally, through the acquisition, Icontrol sold its cable-based security platform to Comcast, facilitating Comcast's expansion in the home security space with its rapidly growing Xfinity product. Finally, the proliferation of smart home technology and the internet of things increasingly includes home security products and features in the smart home. Through smart home technology, homeowners can choose to add home security products to an existing technology, such as Google's Nest thermostat. In the aggregate, all of these developments were likely to pose competitive constraints to Alarm.com's operations post-merger.

The parties' scale is unlikely to constrain entry in mergers of online platforms

When considering the likelihood of entry in mergers of online platforms, the scale of the merging parties is important, but should not be overstated. Because mergers involving online platforms are frequently in nascent, rapidly developing, high-tech industries, the scale of the merging parties can leave an incorrect impression that the likelihood of competitive harm is somehow correlated with the parties' scale. For example, Zillow and Trulia were the first and second most visited online real estate search platforms, and there was concern that the merger would ‘concentrate too much power in one company.'9 This impression of the merging parties' scale was overstated, in part because real estate markets are local in nature. Indeed, the FTC highlighted the local aspect of competition in its closing statement, stating that there was no reliable evidence as to the magnitude and proportion of high-performing agents that exist in any particular zip code.10

Similarly, the DOJ found that in spite of Expedia's scale, which would have increased as result of the acquisition of Orbitz, ‘the evidence suggests that the online travel business is rapidly evolving. In the past 18 months, for example, the industry has seen the introduction of TripAdvisor's Instant Booking service and Google's Hotel and Flight Finder with related booking functionality.'11

Network effects are unlikely for nascent online platform products

Network effects, the phenomenon whereby a product or service gains additional value the more people use it, may constrain entry or expansion into online platform markets. This is because the more consumers use one side of an online platform, the more value the platform has to consumers on the other side of the platform. A product that enjoys momentum created by network effects generally benefits from increased market share as the product becomes more attractive than its alternatives. Network effects also deter entry into a market by diminishing the likelihood of an entrant's success. The concept of network effects in antitrust cases gained popularity in Microsoft.12 Microsoft's operating system rose to dominance as a result of network effects; the more consumers used the Microsoft operating system, the more third-party developers built products to run on Windows, which in turn attracted more users.13

However, in the nascent, rapidly changing, high-tech online platform markets that we observed in this article, network effects often are inapplicable, though theoretically possible. By definition, products in a nascent market will not have reached a level of maturity or market adoption sufficient for the presence of network effects. In order for network effects to present a constraint, there must be an unassailably defined relevant product market and a consequential likelihood of competitive harm. For example, although Lanyon and Cvent were the two leading providers of strategic meetings management services, the evidence demonstrated that many options existed for the consumers on both sides of the platform, rendering a relevant product market comprised of Lanyon's and Cvent's online platform products unsustainable.

Efficiencies on one side of the platform may negate harm on the other

This article has focused on how the US antitrust agencies' product market and entry analysis implicate the likelihood of competitive effects in mergers of online platforms. In the closing statements issued in Zillow/Trulia and Expedia/Orbitz, any agency finding relating to efficiencies was unmentioned, likely because the agencies' analysis dispelled of competitive harm prior to reaching any efficiencies likely to result from the merger. Of course, efficiencies may be derived from the combination of two online platforms and may manifest in one or both sides of the platform.

Indeed, the Horizontal Merger Guidelines contemplate how efficiencies inextricably linked to the relevant may be treated in mergers. In footnote 14, the Guidelines state:

In some cases, however, the Agencies in their prosecutorial discretion will consider efficiencies not strictly in the relevant market, but so inextricably linked with it that a partial divestiture or other remedy could not feasibly eliminate the anticompetitive effect in the relevant market without sacrificing the efficiencies in the other market(s). Inextricably linked efficiencies are most likely to make a difference when they are great and the likely anticompetitive effect in the relevant market(s) is small so the merger is likely to benefit customers overall.14

We submit that this footnote is applicable to online platform mergers that contain multi-sided markets. Assume a merger of online platform products is characterised by interdependent multi-sided markets. This merger is likely to result in efficiencies on one side of the platform that would subsume any likely harm on the other side of the platform. Consistent with our analysis and observations of the agencies' actions, we believe that such a merger should be permitted to proceed in accordance with the consumer welfare standard if the efficiencies on one side of the market are likely to generate sufficient benefits to customers on that side of the market in a magnitude greater than the harm to customers on the other side of the market.


The agencies' recent focus on the merger of online platforms is significant and likely to continue in the future as platform owners look to reap the benefits of consolidation, including the elimination of duplication of efforts and gaining efficiencies related to scale. Often, these platforms expend considerable resources on R&D, and thus the need to merge to more efficiently meet these R&D demands becomes more acute over time.

The outcome of these four merger investigations provides some guidance into how the US antitrust agencies will review these online platform mergers for evidence of competitive effects. Delineating the metes and bounds of the relevant market (on both sides of the platform) as well as determining the likelihood of anticompetitive effects and efficiencies is a complex exercise that often yields results different from first blush impressions. As more of these mergers are proposed, we expect a continued evolution of the appropriate analytical framework by which the agencies should consider the review of online platform consolidation.


  1. Industry op-eds decrying a merger as an anticompetitive market consolidation generally appear after each online platform deal is announced. See, eg, Jacob Davidson, ‘What a Zillow/Trulia Merger Might Mean For Consumers', Time (28 July 2014), available at http://time.com/money/3047329/zillow-trulia-merger-consumers/; Drew FitzGerald, ‘Antitrust Paradox Hangs Over Expedia-Orbitz Deal', Wall Street Journal (16 February 2015), available at www.wsj.com/articles/antitrust-paradox-hangs-over-expedia-orbitz-deal-1424128832; Elizabeth West, ‘Cvent Earnings Grow Ahead of $1.65 Billion Merger', Business Travel News (11 May 2016), available at www.businesstravelnews.com/Meetings/Cvent-Earnings-Grow-Ahead-of-1-65-Billion-Merger; Julie Jacobson, ‘What's the Impact of Rumored Comcast, Alarm.com Purchase of Icontrol?', Security Sales & Integration (16 June 2016), available at www.securitysales.com/business/operations/impact_of_rumored_comcast_alarm-com_purchase_of_icontrol/.
  2. WSGR represented Trulia, Icontrol, and Cvent in the FTC and DOJ investigations.
  3. Statement of Commissioners Maureen K Ohlhausen, Joshua D Wright, and Terrell McSweeny, Zillow, Inc./Trulia, Inc. (19 February 2015), available at www.ftc.gov/system/files/documents/public_statements/625671/150219zillowmko-jdw-tmstmt.pdf [hereinafter ‘Zillow/Trulia Closing Statement'].
  4. Id. at 2.
  5. Id.
  6. See Vin Gurrieri, ‘DOJ Won't Challenge $1.6B Expedia-Orbitz Tie-Up', Law360 (16 September 2015), available at www.law360.com/articles/703770/doj-won-t-challenge-1-6b-expedia-orbitz-tie-up.
  7. Press Release, U.S. Dep't of Justice, Justice Department Will Not Challenge Expedia's Acquisition of Orbitz (16 September 2015), available at www.justice.gov/opa/pr/justice-department-will-not-challenge-expedias-acquisition-orbitz [hereinafter ‘Expedia/Orbitz Closing Statement'].
  8. Zillow/Trulia Closing Statement at n.1.
  9. Tim Logan, ‘FTC Oks Zillow-Trulia Merger, creating real estate behemoth', LA Times (13 February 2015), available at www.latimes.com/business/realestate/la-fi-ftc-zillow-trulia-merger-20150213-story.html.
  10. Zillow/Trulia Closing Statement at 2.
  11. Expedia/Orbitz Closing Statement.
  12. U.S. v Microsoft Corp., 84 F. Supp. 2d 9, (D.D.C. 1999). The DOJ alleged that by virtue of Microsoft's dominant operating system, it was able to employ tying and other exclusionary conduct to foreclose competition in the market for internet web browsers. As the DC Circuit stated: ‘The question in this case is not whether Java or Navigator would actually have developed into viable platform substitutes, but (1) whether as a general matter the exclusion of nascent threats is the type of conduct that is reasonably capable of contributing significantly to a defendant's continued monopoly power and (2) whether Java and Navigator reasonably constituted nascent threats at the time Microsoft engaged in the anticompetitive conduct at issue.' Id. at 79.
  13. Id. at 20.
  14. U.S. Dep't of Justice & Fed. Trade Comm'n, Horizontal Merger Guidelines § 10, n.14 (2010), available at www.justice.gov/atr/file/810276/download.


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