A Law and Economics Analysis of Tying in Digital Platforms: Comparing Tencent and Android

This article discusses tying effects in digital platforms from a comparative law and economics perspective. It first illustrates, from an economic perspective, that tying may generate pro-competitive effects and anti-competitive effects at the same time. On one hand, tying can serve as a way of cross-subsidization in platform business models, generating value for different sides of the market. On the other hand, tying in digital platforms may foreclose competition in the short term and in the long term. When these two types of effects are both obvious, conducting a trade-off analysis becomes crucial. Subsequently, the article compares the approaches adopted by the Supreme People’s Court of China and the EU Commission in the cases Tencent and Android, finding that both the Supreme People’s Court and the EU Commission to some extent failed to incorporate convincing and detailed economic analysis into their case assessments. Instead, they tended to impose different asymmetric standards of proof on parties, potentially leading to error costs (false positives or false negatives) and inconsistencies. In the end, we provide suggestions for competition policy in China and the EU on how to deal with the possible coexistence of pro- and anti-competitive effects of tying in digital platforms.