Platform Effects

48 Pages Posted: 29 Jan 2021 Last revised: 15 Dec 2021

See all articles by Thomas Nachbar

Thomas Nachbar

University of Virginia School of Law

Date Written: December 15, 2021

Abstract

Few issues have aroused more interest in both regulatory and academic circles than the role that “platforms” play in markets and society. Courts, commentators, and policymakers are confronting the challenges that platforms pose, from data privacy to content moderation to competition concerns over the concentration of economic power in a few large platform firms. The Supreme Court has recently decided what is likely to be the first of many cases on antitrust analysis of platforms. Major platform firms that dominate the economy—Google, Amazon, Facebook, and Apple—are facing intense scrutiny from regulators, including several pending bills aimed at regulating platforms.
This Article seeks to disentangle the many concerns about platforms, focusing on the role of antitrust, which has an outsized role to play in platform regulation. Platform and two-sided are not just descriptions of firms or markets; they carry with them specific market and wealth effects—what I call platform effects—that are distinct from other, similar economic characteristics of platforms, such as network effects. It is easy for courts to miss platform effects and their unique role in understanding platform business practices, as arguably happened in both the Supreme Court’s recent Ohio v. American Express case on antitrust analysis of two-sided markets and the pending Epic Games v. Apple antitrust litigation over Apple’s App Store. Nor is the problem limited to courts. Legislation recently introduced in Congress would replicate the errors made in the American Express litigation. Failure to recognize platform effects has caused substantial confusion about how platforms can both benefit and harm the economy. This Article clears some of that confusion.
Platforms are attractive targets for both antitrust enforcers and policymakers by virtue of their size and market concentration, and platform effects can provide an essential (and currently lacking) framework for thinking about the antitrust problems platforms pose. Recognition of platform effects requires thinking selectively about platforms and their specific business practices and alters antitrust analysis of platform markets in important and surprising ways.


Keywords: antitrust, platforms, network effects, price restraints

JEL Classification: K21

Suggested Citation

Nachbar, Thomas, Platform Effects (December 15, 2021). 62 Jurimetrics J. 1, Virginia Public Law and Legal Theory Research Paper No. 2021-10, Virginia Law and Economics Research Paper No. 2021-03, Available at SSRN: https://ssrn.com/abstract=3775205 or http://dx.doi.org/10.2139/ssrn.3775205

Thomas Nachbar (Contact Author)

University of Virginia School of Law ( email )

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Charlottesville, VA 22903
United States
434-924-7588 (Phone)
434-924-7536 (Fax)

HOME PAGE: http://www.law.virginia.edu/fac/tbn4n

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