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Testing for Multisided Platform Effects in Antitrust Market Definition

 |  October 25, 2017

Posted by Social Science Research Network

Testing for Multisided Platform Effects in Antitrust Market Definition

By Patrick R. Ward (University of Chicago)

Abstract:     Because market definition is frequently outcome determinative, it is both a central and contested part of antitrust litigation. Recognition of business methods known as multisided platforms presents the challenge of whether and how to incorporate their characteristically interconnected groups during market definition. This paper asks if a court’s antitrust market definition analysis should be subject to a test for multisided platform effects. Answering in the affirmative, the paper contends that the positive-law mandate of fine-grained and flexible analysis is well satisfied by the primitives from which applied theorists build industrial organization models of multisidedness. It then proceeds to specifically identify those primitives and to translate them into the factors of a permissible legal test for excluding or including multisidedness. In so doing, it synthesizes a large body of case law and economic theory.

Of note, the paper provides an in-depth treatment of the market-definition problem at issue in Ohio v. American Express, which is before the Supreme Court this term. Because rule-of-reason analysis allows courts to trade off pro- and anticompetitive effects within the relevant market, defining the market serves to establish the space of permissible tradeoffs. Importantly, defining the relevant market to include all sides of the platform creates a broader space of allowable tradeoffs than when the definition encompasses fewer sides. Thus, it matters crucially whether and how courts incorporate multisidedness during market definition. The paper’s test is a methodological approach to that inquiry.

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