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Antitrust in Zero-Price Markets: Applications

64 Pages Posted: 28 Oct 2015 Last revised: 13 Sep 2017

John M. Newman

University of Memphis - Cecil C. Humphreys School of Law

Date Written: October 27, 2015

Abstract

“Free” products have exploded in popularity along with widespread Internet adoption—but many of them are not truly free. Customers often trade their attention or personal information to access zero-price products. This exchange dynamic brings zero-price markets within the scope of antitrust law. But despite the critical role that such markets now play in modern economies, the antitrust enterprise has largely failed to account for their unique attributes.

In response, this Article undertakes two primary tasks. The first is to address particular areas of current antitrust doctrine that require revision or reinterpretation in the face of zero prices. Topics addressed include consumer standing (can attention or personal information qualify as “property” under the Clayton Act?), market definition (is the SSNIP-based hypothetical-monopolist test still workable?), market power (can the traditional emphasis on “power to control price” be refocused on more relevant modes of competition?), defenses (is there a viable “free goods” defense?), and damages (can attentional or informational harms be quantified with the requisite degree of accuracy?).

The second task is to examine applications of antitrust law to particular types of strategic conduct. Toward this end, the Article surveys and critiques the existing antitrust case law involving zero-price markets. Though this analysis reveals some flawed judicial reasoning, it also identifies an encouraging trend toward honest attempts to grapple with the distinctive difficulties posed by zero-price markets.

Keywords: antitrust, economics, free products, free goods, Google, Facebook, Instagram, Microsoft, Apple, two-sided markets, Internet products, high-technology markets, SSNIP, SSNIQ, SSNIC, market power, market definition

JEL Classification: D11, D12, D18, D21, D41, D42, D43, D6, D60, D61, K2, K20, K21, L12, L4, L40, L41, L42, L44

Suggested Citation

Newman, John M., Antitrust in Zero-Price Markets: Applications (October 27, 2015). Washington University Law Review, Vol. 94, No. 1, 2016; University of Memphis Legal Studies Research Paper No. 150. Available at SSRN: https://ssrn.com/abstract=2681304 or http://dx.doi.org/10.2139/ssrn.2681304

John Newman (Contact Author)

University of Memphis - Cecil C. Humphreys School of Law ( email )

One North Front Street
Memphis, TN 38103-2189
United States
9016783224 (Phone)
9016783224 (Fax)

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