Craigslist dominates the classifieds market in the US. But as everyone who has ever used it knows, it is primitive. It reflects an older Internet era that is pre-search and pre-nice interface design. But it is a platform for businesses to post ads and for consumers to search listings.
Recently, Craigslist has moved to block third parties that built better interfaces of Craigslist ads. One of these services is Padmapper — tagline: “Making apartment hunting suck less.” Now Padmapper does not use Craigslist data directly but gets it from 3 Taps. 3 Taps, in turn, appears to get their data from Google’s cache which itself stores Craigslist listings. But Craigslist are suing both Padmapper and 3 Taps for copyright infringement.
It is a complicated matter on some legal points. For instance, Craigslist has apparently claimed not to own user’s ads which makes it tricky as to who owns copyright. But what I’m interested in is 3 Taps counter-claim for abuse of monopoly power. Basically, they claim that Craigslist, by blocking data being lifted — directly or indirectly — from its site is preventing the development of other better services.
Let’s begin with the obvious. If Craigslist prevents third parties from tapping into its data, it is preventing the development of better services. Basically, it controls innovation in this way and given the market power it has by virtue of network effects, it can stifle innovation. More to the point, as I mentioned above, that innovation is sorely needed.
Now why Craigslist should want to do this is hard to fathom. It isn’t really a standard for-profit company. It may be that it is concerned that someone utilising its data will generate an alternative platform that is better but also gathers network effects and then decides to act like a standard for-profit company. Although while it is free, surely that possibility is constrained.
The question here, however, is not about Craigslist’s motives but whether it should be able to do this as a monopolist in the relevant market. It seems to me that that case rests on separating out the products of services to sellers (e.g., landlords) and services to buyers. Padmapper wants to innovate on services to buyers but in order to do so it needs to access seller ads. So to compete in a market for better apartment search, it needs access to apartment listings. Because of network effects, Craigslist controls that. So in traditional antitrust, this is a case of a monopolist in one product leveraging its power to keep its monopoly in another product. Unless I’m missing something, this seems pretty straightforward.
Basically, it looks like Craigslist is acting like an old time government monopolist and is just closed and non-responsive to developments. But there is an entire set of innovators out there ready to step in. Take a look at this chart [HT: Terry Taoussanopoulos]. Wherever Craigslist are there is potential innovative improvements to be made and people willing to make them.