Competition authorities delimit 'relevant markets' chiefly through price-based tools such as the SSNIP (small but significant and non-transitory increase in price) test, which becomes inapplicable when a service is supplied at a monetary price of zero, as with search engines, social networks, messengers, and ad-funded platforms. Sauermann's 2018 analysis of zero-price business models in competition law finds that revenue-based merger-notification and market-power thresholds and established methods of market definition reach their limits for free offers, and that further research is required to adapt the established repertoire of economic methods to these business models. The unresolved task is to carry out that adaptation for market definition. In the cited literature it is specified through the conceptually accepted qualitative alternatives — the SSNDQ test (a small but significant non-transitory decrease in quality) and the SSNIC test (a small but significant non-transitory increase in non-monetary costs such as data privacy or attention) — which remain to be turned into operational measurement protocols: how to define and measure quality changes, what magnitude of deterioration is competitively significant, and how to treat non-monetary costs that differ across users. Later literature (OECD 2018, EU case law, the 2024 EU Market Definition Notice, and isolated empirical studies such as conjoint-based delineation of free messenger services) has settled the conceptual acceptability of quality- and cost-based tests but not their operationalization, so the protocol-building problem remains open.

Background

In most antitrust systems, an abuse-of-dominance or merger analysis begins by defining the relevant product and geographic market: the set of products and areas over which a hypothetical monopolist could profitably exercise market power. The standard economic tool is the hypothetical monopolist test, usually implemented as the SSNIP test — asking whether a small (conventionally 5–10%) but significant and non-transitory increase in price would cause enough customers to switch to substitutes to make the increase unprofitable. Cross-price elasticity of demand between candidate substitutes — how strongly demand for one product responds when the price of another changes — is the complementary quantitative signal.

Large parts of the digital economy supply services at a monetary price of zero, funding them through advertising or data (two-sided platforms, where one user side pays nothing and another advertiser side pays; the users 'pay' in non-monetary currencies such as personal data, attention, or exposure to advertising). For such offers the SSNIP test is inapplicable: there is no positive price to raise, and the monetary price cannot be lowered to probe substitution. Because the zero-price side often drives network effects (a messaging or social network service is more valuable the more people use it), substitution responses are also entangled with network effects rather than with price alone.

Proposed qualitative analogues replace the price change with a non-price change. The SSNDQ test asks whether a small but significant and non-transitory decrease in quality (for example in privacy protection, usability, security, or innovation) would cause enough users to switch to make the deterioration unprofitable. The SSNIC test instead asks whether a small but significant and non-transitory increase in the non-monetary costs users bear — giving up more data, spending more attention, viewing more advertising — would do so. Both names are variants of the same hypothetical-monopolist logic. They face three linked operational obstacles that the literature has identified but not solved. First, 'quality' is multidimensional and lacks a common measurement unit across services and users. Second, there is no agreed analogue of the 5–10% price convention: no convention fixes what magnitude of quality deterioration or cost increase counts as 'small but significant' in the competitive sense. Third, non-monetary costs are heterogeneous across users — the subjective price of privacy or attention varies widely — and behavioral evidence suggests consumers respond to 'free' offers differently than to small positive prices (the zero-price or free effect), complicating any inference from hypothetical quality changes to switching behavior.

Sauermann (2018), analyzing digital zero-price business models from a German competition-law perspective, concluded that revenue-based thresholds and the established repertoire of economic market-definition methods reach their limits for such models and that substantial further research is needed to adapt that repertoire — a call the subsequent literature has specified as making SSNDQ- and SSNIC-type tests measurable in practice. The question predates him (Evans 2011 on the economics of free products; Newman 2015 and Gal and Rubinfeld on the antitrust analysis of zero-price and free-goods markets) and has been taken up institutionally (the OECD's 2018 examination of quality considerations in digital zero-price markets; EU decisional practice; the European Commission's 2024 Market Definition Notice) and empirically (conjoint-analysis-based market delineation for free messenger services), without producing an accepted operational protocol.

Problem Statement

Develop operational measurement protocols that make market definition for zero-price services economically executable by competition authorities. Building on the conceptually accepted tests — SSNDQ, which asks whether a small but significant and non-transitory decrease in quality would cause enough user switching to be unprofitable, and SSNIC, which asks the same for a small but significant and non-transitory increase in users' non-monetary costs — the problem is to supply the missing operational layer, specifically: (1) how to define and measure the relevant quality changes (for instance in privacy protection, usability, security, or advertising load) so that a hypothetical deterioration is well specified and comparable across users; (2) what magnitude of such a deterioration or cost increase is competitively significant, replacing the 5–10% convention of the SSNIP test with a defensible quality- or cost-based threshold; and (3) how to treat heterogeneous non-monetary costs such as data privacy and attention, which differ across users and lack a common numeraire (a common unit of account in which different users' costs could be expressed and compared), including how to account for behavioral anomalies such as the zero-price effect in observed or stated switching responses. The operational layer sought is a protocol that adapts established economic market-definition methods to zero-price markets — that is, that makes quality-based and non-monetary-cost-based hypothetical-monopolist tests executable — by addressing these three components for zero-price market definition as such, not for a single service, jurisdiction, or dataset. Such a protocol gives, for each of the three components, an operational procedure — the measurable inputs the procedure requires, the decision rule that converts those inputs into a market-definition conclusion, and the stated scope within which the procedure applies. Scope relative to the source: the source's open call extends to the established repertoire of economic methods generally, including revenue-based thresholds — which it notes were already partly addressed legislatively through transaction-value merger-notification thresholds — whereas this problem targets the market-definition component that the source explicitly identifies as reaching its limits for free offers.

References

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