Does Antitrust Have Digital Blind Spots?
59 Pages Posted: 6 May 2020 Last revised: 16 Jun 2020
Date Written: May 5, 2020
Antitrust law is at a crossroad. Over the past forty years, following the consumer welfare standard as its guiding principle, it has evolved into a coherent and evidence-based approach to adjudication of individual disputes and the shaping of antitrust institutions. While calls to reform or reshape the antitrust enterprise are not new, the rise and influence of digital markets and “multisided platforms” have spawned new calls for antitrust reformation from academia and politicians across the political divide. The premise shared by antitrust reformers in both chambers of Congress and academia is that reformation is needed to cure “blind spots” in antitrust’s ability to identify and remedy anticompetitive conduct in digital markets. The embodiment of these concerns is found in high-profile digital reports produced by think tanks and competition agencies, which target a number of economic features and practices of digital platforms to illustrate how current antitrust jurisprudence has failed to properly constrain monopolistic behavior. Central to the reformers’ claim that antitrust suffers from blind spots in digital markets are a number of key presumptions. First, that digital platforms are characterized by impenetrable network effects which lead to and preserve “winner takes all” or “winner takes most” outcomes. These effects allegedly prevent competitors with better products and technology from competing. Second, that self-preferencing, such as with private label products, and setting defaults on digital devices are harmful to consumers when used by platforms with large market shares. The idea is that users are improperly steered away from rival products to those of dominant platforms. Relatedly, there is a view that the recent Supreme Court decision in Ohio v. American Express is indicative of the inability of U.S. courts to properly assess the intricacies of network effects and platform conduct within the current framework. The stakes are high. The costs of getting it wrong can lead to considerable economic harm, as platforms represent an increasingly important part of the global economy and improper antitrust condemnation of potentially procompetitive behavior will stifle innovation and deprive consumers of features and products that they enjoy. To date, there has been no systematic response to these key presumptions driving the conclusions in the influential digital reports. I examine each of these presumptions and explain why they are not well-grounded. I examine how network effects can differ in nature and scope depending on the context and type of platform. Further, I explicitly develop a framework to assess platform defaults to guide reform discussions. Finally, I explain the Supreme Court’s decision in American Express as properly melding the rule of reason approach with economic learning on multisided platforms. I conclude with what appears to be the most radical proposal in the current debate: that current antitrust law and enforcement actually are sufficient to properly assess and adjudicate conduct involving digital platforms, with unclouded vision.
Keywords: Antitrust, antitrust reform, consumer welfare standard, digital markets, multisided platforms, network effects, monopoly, monopolies, monopolistic behavior, Ohio v. American Express
JEL Classification: K20, K21, K22, K29
Suggested Citation: Suggested Citation