Craigslist and monopoly power

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.

6 Replies to “Craigslist and monopoly power”

  1. I don’t think this is a question of monopoly at all. It simply looks like PadMapper doesn’t want to go through the effort of building it’s supply channel. I also don’t think the legal points are very complicated. 1) I have something to sell or rent and I place my ad with Craigslist. It’s my ad and I manage it myself and am responsible for it. I own it. 2) If i want to place my ad with PadMapper I can. If I think they’re better, I will. There’s a chance I might not want to place an ad with PadMapper — maybe they support something I disagree with, like Nazis or hockey. 3) Craigslist states they don’t own the ads, but they do own the compilation. That is what Craigslist built and entirely the product of their labor.

    1. In response to my post above … is it perhaps not possible to own a compilation? I’m thinking of phone books. I get unwanted phone books dropped off at my house because some company — not a phone company, just a phone book company — had to come up with someplace to put the ads they sell. (I hate them.) I think i recall that phone book listings were the subject of a court ruling. If I don’t have a say about where my ad goes I’ll be saddened because of points 2 and 3 above. However, even if phone book listings are somehow in the public domain there are still differences between those and Craigslist’s ads.

  2. I disagree with the premise that craigslist is in need of innovation. The site is stripped down and efficient, it’s users satisfaction rate is probably higher than Facebook’s, and it’s creators are satisfied with the status quo. Improving the interface, etc. leads CL down an endless road where it becomes more and more like the competition, and dilutes the very recognizable brand.

    And Dick C’s initial point is the only relevant one here: PadMapper can try to generate their own content. If there is demand for an improved CL (and there might be!), surely users will flock there. Piggybacking on the broad user base of CL isn’t the solution.

  3. Ah, that’s the darned thing about tipping markets and de factor standardisation: sometimes the wrong bloody network/ standard wins out!

    That said, the proposition that craigslist is un-innovative seems to me to be quite a subjective basis for an abuse of dominance case. Objectively, I am not really clear on what the abuse is. The story of leveraging from one market to another is problematic, as I think the relevant market is better seen as a two-sided market. In these markets, you will often see what looks like predatory pricing on one side of the market, in order to get the other side on board. But that does not equate to abuse.

    Abstracting from the details, perhaps the fundamental question here is what “special responsibility” does a dominant two-sided platform firm have to not undermine fair competition in the market? Is it sufficient that the e-Bays and facebooks of this world refrain from predatory pricing and the like, or do they have to go as far as provide access to “their” content to would-be competitors? I am not sure it’s clear-cut. Will leave it there for now…

  4. I have trouble with labeling Craigslist a monopoly, and especially comparing it with government monopolies.

    Government monopolies remain so by legal force. Only the post office may deliver first class mail. In most areas there is a single option for utilities such as water, electricity, natural gas, and up until recently telephone service. No other company may provide these services.

    In the case of Craigslist, there any monopoly has no legal force. Other classified ad sites exist, and new ones can start. Craigslist is only a monopoly to the extent that they are the most popular option, thus getting the most business. The case of eBay is similar. There are other auction sites, but they don’t get the traffic of eBay, so are not as good an option for either buyers or sellers.

    This seems to bring a new aspect of monopoly law. If a court declares Craigslist a monopoly, how does one break it up? Or does it have to become a regulated “utility”? In which case I have a nightmare image of Lily Tomlin from Laugh-in “we’re Craigslist, …”

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