Excessive Litigation by Business Users of Free Internet-Platform Services

55 Pages Posted: 18 Jun 2012 Last revised: 28 Jul 2022

See all articles by David S. Evans

David S. Evans

Market Platform Dynamics; Berkeley Research Group, LLC

Date Written: August 7, 2012

Abstract

In the last decade a number of Internet-based multi-sided platforms have emerged that provide free services to, in some cases, millions of businesses. More such platforms are being spawned as the Internet-based economy grows. This Article argues that under current norms in adversarial proceedings, such as those involving competition policy, these platforms are likely to face large numbers of complaints in multiple jurisdictions, a substantial likelihood that at least one of these complaints will result in a false-positive decision against the platform, and material risk of a false-positive decision that results in catastrophic consequences. These effects result from a combination of business users of free services receiving a free litigation option they can pursue if they have any complaints; an adverse-selection problem that results from free services being particularly attractive to start-ups that do not have or want to invest capital in their businesses; and the sheer number of free-business users resulting in a high cumulative probability of at least one false-positive decision. After documenting these phenomena, this Article argues that government policymakers, including competition authorities and courts, should adopt a heightened level of scrutiny concerning complaints from free business users. This heightened level of scrutiny is necessary to counteract the impact of excessive litigation on innovation by multi-sided platforms.

Keywords: platforms and litigation, platforms and free services, multi jurisdiction platform cases

Suggested Citation

Evans, David S., Excessive Litigation by Business Users of Free Internet-Platform Services (August 7, 2012). University of Chicago Institute for Law & Economics Olin Research Paper No. 603, Available at SSRN: https://ssrn.com/abstract=2085029 or http://dx.doi.org/10.2139/ssrn.2085029

David S. Evans (Contact Author)

Market Platform Dynamics ( email )

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Berkeley Research Group, LLC ( email )

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