Journal of Corporation Law, 2019, Forthcoming
49 Pages Posted: 2 Aug 2018 Last revised: 22 Sep 2021
Date Written: July 24, 2018
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 has important implications for antitrust policy. A hallmark of two-sided markets — those in which platforms operate — is the need to get both sides on board. Each side’s demand for the platform’s service depends on active participation on the other side. As such, it is important to consider whether a platform’s restrictive practice might be reasonably necessary to maintain a critical mass of participating users on both sides of the market. 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. 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 task is conventionally reserved for the last stage of antitrust’s rule of reason burden-shifting framework—after the defendant has demonstrated a countervailing efficiency that warrants balancing. The majority was also confused on the economic issues, characterizing a restraint on inter-platform “steering” 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 antitrust challenges presented by platforms and platform competition, with focus on conduct evaluated under the rule of reason. I conclude that, while platform economics does necessitate a number of important considerations, it does not warrant the upheaval of the antitrust laws that the AmEx majority prescribed. Rather, the established rule of reason framework already provides sufficient flexibility to address platform conduct. Moreover, by allocating burdens with reasonable parity, it is far better equipped to arrive at the right conclusions.
Keywords: Platforms, Antitrust, Two-sided Markets, American Express, AmEx, Platform Competition, Rule of Reason, Payment Cards, Credit Cards, Price Parity, Steering
JEL Classification: K21, L40, L42, L22
Suggested Citation: Suggested Citation