James Musgrove, Jun 13, 2013
At the 2013 American Bar Association Section of Antitrust Law Spring Meeting I had the honor to chair a session entitled Both Sides Now: What’s Special About Two Sided Markets? The program benefitted from the participation of some of the leading legal and economic thinkers on this issue, including Dr. David Evans, who is a leader in the economics of two-sided markets; Renata Hesse of the Department of Justice, who has had cases involving and written about two-sided markets; Joseph Simons of Paul Weiss, who similarly has worked on a number of two-sided market matters; and Christian Ahlborn of Linklaters with the European perspective on two-sided markets.
The interesting take away, as an observer, was that there was general agreement on the existence and theoretical relevance of two-sided markets-or more properly, two-sided platforms-but where the speakers failed to come to agreement, and where the jurisprudence seems to have failed to come to ground, is the question of what the practical, case-altering implications of market platforms being two-sided means. There can be no debate that meaningful portions of the economy-in the range perhaps of 15 percent – 25 percent-operate in two-sided systems. So, this is not merely an academic debate, it has huge practical implications for the economy.
Dr. Evans explained why a number of the traditional antitrust tools which we employ, including the Lerner Index, the SSNIP test, critical loss formulas, upward pricing pressure formulas, elasticity demand—to name a few—are not applicable, or must be applied differently, in the case in two-sided platforms. There does not appear to be any significant debate about this, but the question is, given the acceptance of these facts, why don’t we see very much impact on cases?
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