Policy Implications of User-Generated Data Network Effects

User-generated data (UGD) network effects are an exciting and novel economic force. They upset conventional market competition dynamics, and they lead to the formation of dominant data platforms with market power that spans different and seemingly unrelated markets. This article explains that UGD network effects are a blessing and a curse. They provide dominant data platforms with the opportunity to generate welfare-enhancing efficiencies as well as welfare-reducing anticompetitive harms. After exploring the economic opportunities and social threats, this article explores the implications of UGD network effects on competition policy. Drawing on traditional network effects theory, this article proposes and critically examines a host of remedial approaches for policymakers to consider. These remedies include modernized public utility-style regulation, open access policies, and adjusted standards for anti-monopolization and merger scrutiny

User-Generated Data Network Effects and Market Competition Dynamics

This Article defines User-Generated Data (“UGD”) network effects, distinguishes them from the more familiar concept of traditional network effects, and explores their implications for market competition dynamics. It explains that UGD network effects produce various efficiencies for digital service providers (“data platforms”) by empowering their services’ optimization, personalization, and continuous diversification. In light of these efficiencies, competition dynamics in UGD-driven markets tend to be unstable and lead to the formation of dominant multi-industry conglomerates. These processes will enhance social welfare because they are natural and efficient. Conversely, countervailing UGD network effects also empower data platforms to detect and neutralize competitive threats, price discriminate among users, and manipulate users’ behaviors. The realization of these effects will result in inefficiencies, which will undermine social welfare. After a comprehensive analysis of conflicting economic forces, this Article sets the ground for informed policymaking. It suggests that emerging calls to aggravate antitrust enforcement and to “break up” Big Tech are ill-advised. Instead, this Article calls for policymakers to draw inspiration from traditional network industries’ public utility and open-access regulations

Evergreening At-Risk

Brand-name pharmaceutical manufacturers leverage patent protection, regulatory loopholes, and the atypical economics of the prescription drug market to strengthen and prolong market exclusivity for their products. These phenomena, commonly known as “evergreening,” are among the most pressing and unsolved public policy challenges on the national agenda. With far-reaching implications on public health, social justice, and innovation policy, the evergreening epidemic has captured growing attention from Congress, the president, the judiciary, regulatory authorities, and the general public. Irrespective of nationwide uproar, the concept of evergreening remains surprisingly misunderstood and grossly undertreated. This article fills these gaps. First, this article defines evergreening—thus far a confused and obscure concept—as a problem of skewed overpatenting incentives. It explains how brand-name manufacturers leverage follow-on “improvement” patents to strengthen and prolong market exclusivity for existing drugs. In light of this leverage, brand-name manufacturers’ incentives to pursue improvement patents far exceed the social value of such improvements. Then, inspired by generic manufacturers’ “at-risk” market launches, this article proposes an original remedial approach to scale back brand-name manufacturers’ overpatenting incentives. When generic manufacturers venture into the drug market to compete with a branded drug that is still under patent protection, they expect to earn generous duopoly profits alongside brand-name manufacturers. At the same time, however, they also risk losing these profits if an infringement lawsuit materializes against them and the challenged patents are proved valid and infringed. Mirroring this logic, this article proposes that brand-name manufacturers be required to evergreen at risk. Thus, brand-name manufacturers making monopoly profits by enforcing follow-on patents that prolong market exclusivity for existing drugs, would also expect to lose these additional profits if the challenged patents are subsequently proved invalid. Instead, these wrongly obtained monopoly profits would be vested with the first generic manufacturer to successfully invalidate the patent and open the market to price-reducing competition. This approach aligns the divergent interests of brand-name and generic manufacturers with the social interest—enforcing follow-on patents that are likely to cover nontrivial improvements while invalidating those patents that are likely to cover trivial improvements

Policy Implications of User-Generated Data Network Effects

User-generated data (UGD) network effects are an exciting and novel economic force. They upset conventional market competition dynamics, and they lead to the formation of dominant data platforms with market power that spans different and seemingly unrelated markets. This article explains that UGD network effects are a blessing and a curse. They provide dominant data platforms with the opportunity to generate welfare-enhancing efficiencies as well as welfare-reducing anticompetitive harms. After exploring the economic opportunities and social threats, this article explores the implications of UGD network effects on competition policy. Drawing on traditional network effects theory, this article proposes and critically examines a host of remedial approaches for policymakers to consider. These remedies include modernized public utility-style regulation, open access policies, and adjusted standards for anti-monopolization and merger scrutiny

User-Generated Data Network Effects and Market Competition Dynamics

This Article defines User-Generated Data (“UGD”) network effects, distinguishes them from the more familiar concept of traditional network effects, and explores their implications for market competition dynamics. It explains that UGD network effects produce various efficiencies for digital service providers (“data platforms”) by empowering their services’ optimization, personalization, and continuous diversification. In light of these efficiencies, competition dynamics in UGD-driven markets tend to be unstable and lead to the formation of dominant multi-industry conglomerates. These processes will enhance social welfare because they are natural and efficient. Conversely, countervailing UGD network effects also empower data platforms to detect and neutralize competitive threats, price discriminate among users, and manipulate users’ behaviors. The realization of these effects will result in inefficiencies, which will undermine social welfare. After a comprehensive analysis of conflicting economic forces, this Article sets the ground for informed policymaking. It suggests that emerging calls to aggravate antitrust enforcement and to “break up” Big Tech are ill-advised. Instead, this Article calls for policymakers to draw inspiration from traditional network industries’ public utility and open-access regulations