This paper,  available here, looks at two questions regarding competition enforcement in platform markets: (i) how should one account for the distinct characteristics of platforms when defining an antitrust market; and (ii) how, if at all, should one weigh user groups’ gains and losses on different sides of a platform against one another.


In short, the authors argue that enforcers and courts should use a multiple-markets approach to multisided platforms, in which different groups of users on different sides of a platform belong in different product markets. This approach allows one to account for cross-market network effects without collapsing all platform users into a single product market. They further argue that enforcers should consider the price structure of a platform, and not simply its net price, when assessing competitive effects. This justifies the use of a separate-effects analysis, according to which anticompetitive conduct harming users on one side of a platform cannot be justified just because that harm funds benefits for users on another side of the platform. This, in turn, supports a final conclusion: that antitrust plaintiffs should only be required to prove the occurrence of competitive harm in a properly-defined market as part of their prima facie case, after which the burden to produce procompetitive justifications should shift to defendants.

The paper is structured as follows:

Part I discusses two potential approaches to antitrust enforcement concerning multisided platforms.

The authors discuss two possible approaches to anticompetitive effects in multisided markets. Under a separate-effects analysis, some platform users may suffer harm as a result of the platform’s policies (e.g. card merchants must pay a set fee to the card company, or booking platform participants will be unable to access cheaper rates) that benefit another side of the platform. By contrast, under a single-market approach, only if the prejudiced side of the platform was harmed more than the other side of the market benefitted will a platform be found to be acting anticompetitively.

The choice of whether to adopt a single- or multiple-markets approach, and of whether to a conduct a separate-effects or a net-effects analysis, can fundamentally shape the nature of the examination of whether a platform’s conduct is anticompetitive.

Part II discusses the surprising lack of consensus regarding what constitutes a multisided platform.

Some commentators emphasise the distinction between single-sided businesses and multisided platforms, and suggest that antitrust enforcement should reflect this distinction. Yet, it is much harder to distinguish single-sided business from multisided ones than one might initially suspect, which indicates that the nature of enforcement should not dramatically change based on whether a firm is labelled a multisided platform or not.

The authors consider that the original definition of a platform by Rochet and Tirole has two main limitations from an antitrust enforcement perspective. First, under this definition any firm that sets the prices it pays for inputs and charges for its outputs can be characterised as a platform because it facilitates “transactions” between its input suppliers and output buyers in a multisided market. A “standard” firm can therefore be squeezed into the multisided market pigeonhole by treating the prices it pays for inputs as negative prices charged to input suppliers for using the firm as a platform to reach buyers. Second, whether a firm constitutes a multisided platform may depend on its conduct.

Several other definitions for multisided platforms have been proposed, but there is still no consensus on the matter. In the absence of consensus, the authors believe that a good approach for antitrust purposes is to define a firm as a multisided platform when: (i) Cross-platform network effects occur in at least one direction. Cross-platform network effects exist when the presence of members of group A as users on one side of the platform makes the platform more attractive to members of group B on another side. (ii) The firm facilitates interactions between two or more groups of users. (iii) The firm can set distinct prices to different user groups; and (iv) The firm has market power with respect to those groups.

While they acknowledge that this definition also runs the risk of being overbroad, the authors contend that it contains a cluster of factors that allows the key antitrust issues to be confronted without extensive definitional debate. From these definitional difficulties, the authors draw an important implication: it would be a mistake for antitrust enforcement to differ drastically based on the threshold, and easily manipulated, question of whether an investigated company is classified as a multisided platform or not.

Part III turns to the primary role of market definition in assessing market power in platform settings.

This section begins by reviewing the underlying purpose of market definition in antitrust analysis. While often critical to the outcome of antitrust cases, market definition is not an end in itself but rather a tool to determine whether an arrangement has the potential for genuine adverse effects on competition. The same evidence can often be used to show that a firm possesses market power and has harmed competition; in those instances, formal delineation of market boundaries is unnecessary.

For some platforms, market definition has been established for many years. For newspapers, for example, it is established since the 1950s that they operate in two-markets, an approach that has been broadly adopted for advertising-based markets. One reason for adopting such a multi-market approach is that, in addition to violating the principle of substitution, defining a single two-sided market risks confusing the market with a firm’s business model (e.g. consider Youtube’s advertisement-revenue model with Netflix’s subscription fee model). A second reason is that the single-market approach can be problematic when competitive conditions differ on the two sides of a platform. A third reason is that some platforms allow multi-homing on one side but only single-homing on the other, which may impact the level of competition on each side of the platform.

Nonetheless, a single-market approach has been suggested for transaction platforms such as payment networks (e.g., Visa) or online auction sites (e.g., eBay), which facilitate transactions between users on the two sides of the platform and are largely paid based on the volume of completed transactions. It is argued that a single-market approach makes much more sense in this case because no platform competes to facilitate only one side of the transaction: unless both sides choose to use the platform to complete their transaction, there is no transaction over that platform at all. Hence, competitive pressures should be assessed at the transaction level. Moreover, a virtue of the single-market approach is that it focuses attention on the potential interactions of users on different sides of the platform. There are, however, two broad arguments against the use of the single-market approach, even when restricted to transaction platforms. The first builds on the principle that relevant markets contain substitute products, since two very different groups utilize the transaction service, and their interests are not fully aligned. The second argument is that the competitive conditions on the two sides of a transaction platform may be very different from one another.

As a result, the authors argue that a multiple-markets approach is always preferable. This is because such an approach adheres to the fundamental reasons why antitrust defines product markets and, within product markets, identifies market power. While it is essential to account for any significant feedback effects and possible changes in prices on both sides of a platform when assessing whether a particular firm has substantial market power, this can be achieved through a multi-market approach. However, this will require changes to the tools deployed to define markets in order to take into account cross-platform network effects. One way to do this within the multiple-markets framework is to apply a hypothetical monopolist test and consider price changes on one side of the platform while holding prices on the other side constant, and examine whether there are significant, plausible feedback effects. If there are no such effects, then focusing on a single side manifestly will give a clear overall picture; if there are feedback effects, however, then they must be taken into account to avoid reaching misleading conclusions.

Part IV addresses competitive effects between and within markets.

Both the literature and real-world experience demonstrate one user group may benefit from the platform’s conduct while another is harmed. This raises the question of whether—and if so, how— one should balance welfare gains enjoyed by one group of users against welfare losses caused by anti-competitive conduct suffered by another group of users.

The authors argue for separate-effects analysis. This approach rejects the view that anticompetitive conduct harming users on one side of a platform can be justified so long as that harm funds benefits for users on another side of the platform. The authors conduct an overview of US antitrust law that shows that courts have long rejected net-welfare defences, and argue that this reflects the foundational antitrust principle that competition promotes economic efficiency and buyer welfare. Second, they argue that the net-benefit argument is ripe for manipulation: ‘Could airlines claim to be platforms that bring together pilots and passengers? Applying the flawed logic of the net-effects approach, one might conclude that collusion among airlines to raise fares on one side of the platforms would be fine as long as it led to higher wages for airline pilots on the other side, which it plausibly would in the case of unionized pilots.’ Third, they argue that there is not a sufficiently tight linkage between net price and consumer welfare to allow enforcers to rely on the net price alone to the exclusion of the platform’s price structure. A central point of the literature on two-sided platforms is that the price structure, as well as the net, two-sided price level, matter for competition and welfare – which requires antitrust analysis to examine not only the net-price but also its individual components.

Part V develops a normative framework for how antitrust law should treat market definition and cross-market effects, in addition to noting the practical implications of such analysis.

Courts and enforcers should apply existing antitrust principles in ways that account for the economic forces present within multisided platforms. First, and most fundamentally, the antitrust treatment of a firm should turn on the nature of its conduct and its competitive environment, and not on whether a firm is labelled a platform. Second, it is appropriate to use the multiple-markets approach to market definition. However, in order to reach sound conclusions about market power, competition, and consumer welfare, any significant linkages and feedback mechanisms among the individual markets on different sides of a platform must be taken into account. Third, antitrust analysis has consistently rejected, and should continue to reject, the notion that harm to competition can be justified on the grounds that it also confers benefits to another group of users. Fourth, courts should consider price structure and not simply the net price, or two-sided price level, in assessing consumer welfare effects.

The authors then consider how the structured rule of reason should incorporate this analytical framework for multisided platforms. Under a structured rule of reason, the plaintiff has the initial burden to present a prima facie case of harm to competition. Plaintiffs should not be required to show that there is net harm after balancing effects on both sides of the platform. This is for two reasons: (i) users on each side of a platform are entitled to the benefits of competition and (ii) it can often be difficult for the plaintiff to establish the precise effects of a conduct on the net, two-sided price or the quality levels of the services the platform offers each side. This justifies a shifting to the defendant of the burden of showing that the challenged conduct leads to prices or quality levels that are no worse for the plaintiff users as a result of this conduct.


Comment: This is a good and very clear paper. It goes beyond my skills and ability to comment on the feasibility of the proposed approach, particularly when compared to other suggestions that have been made in this regard. I can nonetheless say that this article is surely a valuable addition to the literature.

This piece seems to reinforce a related point that I have made in earlier reviews: debates about how to deal with platform markets seem to rely on implicit assumption about what is the relevant standard for identifying anticompetitive conduct (e.g. total welfare v. consumer welfare) and about what the normative goals of competition law are (e.g. to increase economic efficiency v. to protect competitive processes v. to improve consumer welfare). These assumptions do not usually come to the fore in run-of-the-mill cases. Cases in the new economy, however, seem to continuously raise these exoteric theoretical matters – which is, of course, one reason why they are so interesting.

Author Socials A weekly email with competition/antitrust updates. All opinions are mine

What do you think?

Note: Your email address will not be published