Posted by Social Science Research Network
By Erik Hovenkamp
Platforms like Uber, Google Search, and Hulu pervade the modern economic landscape. A platform caters to distinct but deeply-interdependent “sides” of customers that derive value or revenues from one another, such as the merchants and cardholders on a credit card network, or the advertisers and consumers on a social media platform. Platform economics creates some important challenges for antitrust policy. A hallmark of two-sided markets—those in which platforms operate—is the need to “get both sides on board.” It is important to consider whether a restrictive practice might be reasonably necessary to accomplish this. But it is just as important not to overstate the novelties of platform commerce and their propensity to justify restraints on trade.
The Supreme Court did just that in its recent AmEx decision. In a 5-4 split, the majority held that a plaintiff cannot make an initial (and rebuttable) showing of harm without demonstrating a net injury across both sides of the market. This kind of onerous balancing act is conventionally reserved for the last stage of the rule of reason’s burden-shifting framework—after the defendant has demonstrated a countervailing efficiency worth balancing. The majority was also confused on the economic issues, characterizing AmEx’s “no-steering” restraint as a courtesy to consumers, when in fact it deprives them of a valuable option while simultaneously undermining price competition market-wide.
This paper considers the general question of how the antitrust laws ought to confront platforms and platform competition, with emphasis on conduct evaluated under the rule of reason. I also address the issues raised in AmEx—both the economic aspects of the original antitrust claim and the broader questions of law raised on appeal. I conclude that, while platform economics does necessitate a number of important considerations, it does not warrant an upheaval of the antitrust laws, contrary to what the AmEx majority suggests.