Two-Sided Internet Markets and the Need to Assess Both Upstream and Downstream Impacts

68 Am. U. L. Rev. 713 (2019).

* Pioneers Chair and Professor of Telecommunications and Law, Penn State University.

This Article explains how information, communications, and entertainment companies can acquire market dominance by erecting a platform serving both downstream consumers and upstream ventures via broadband networks. Operating in a two-sided market, these intermediaries can achieve fast growth as they serve diverse geographical markets without having to erect or lease all the infrastructure needed to reach end users. Intermediaries can quickly grow by accruing positive networking externalities and offering attractive services, thereby creating incentives to subscribe.

Intermediary platform operators have thrived in a largely deregulated marketplace based on the assumption that consumers have benefitted without the need for government oversight. However, the court of public opinion may have begun to shift from the view that platform operators present a universally positive value proposition. A proper assessment of consumer welfare must balance downstream enhancements, which are achieved through convenience, cost savings, free-rider opportunities, and innovation, with upstream costs, including uncompensated consumer data collection, privacy intrusions, reduced or eliminated consumer surpluses, and harm to information, communications, entertainment, and technology ventures. Such assessment also must take into consideration the earnings, employability, and stability of the workforce operating within the “gig economy.”

This Article explains how many of the platform intermediaries most likely to harm consumers and competition have benefitted by a reluctance of government agencies to examine upstream impacts. Such reticence stems from legitimate concerns about overreach, mission creep, and jurisdiction. It also may represent prudent concerns that the government should not handicap successful ventures at the expense of other market entrants. Concentrating on consumer impact steers agencies and reviewing courts toward a downstream emphasis because consumers reside on that side of the two-sided market. Additionally, a court might consider the relevant market as limited solely to one side.

On the other hand, this Article explains that upstream market assessments will become essential for a complete and statutorily-compliant evidentiary record. This Article examines the disagreement reflected in Ohio v. American Express Co.about whether the relevant market for credit card services requires courts to examine the transactions occurring on both sides of a platform that links vendors and consumers. The Supreme Court has validated the need to examine both sides of an intermediary’s market platform to determine the combined effects on consumers and competition when a credit card issuer tries to impose a contractual prohibition on upstream merchants “steering” consumers to an alternative credit card that offers lower processing fees. The lower court rejected the language as potentially raising consumer costs without considering whether such terms might accrue consumer benefits, such as financial rebates and airline miles.

This Article concludes that two-sided markets require assessments of the potential competitive and consumer benefits as well as the harms occurring on both sides in antitrust court and other regulatory proceedings. This approach does not favor more extensive government oversight, but instead supports a better calibrated assessment of the impact on competition and consumers.

Introduction

Many market segments in the large information, communications, and entertainment ecosystem have a dominant venture serving as an intermediary between upstream ventures—such as content creators, video programming aggregators, and software vendors—and downstream consumers.¹ With the successful development of a platform, intermediaries can serve a large percentage of the total number of available downstream users without having to install and operate all the broadband networks needed to switch, route, and deliver content.]mfn]There is a split between edge providers and end users over “‘who should pay who’ in interconnection arrangements”—edge providers contend that end users who pull data, such as Broadband Service Providers (BSPs), have the responsibility to ensure accessibility to data that will accommodate their requests, while BSPs claim that the duty to ensure data is in a reliable and usable form rests on edge providers. John Meisel, Reactions by Broadband Service Providers to the Growth of Video Streaming, 22 CommLaw Conspectus 267, 277 (2014); see also William Lehr & Douglas Sicker, Would You Like Your Internet With or Without Video?, 2017 U. Ill. J.L., Tech. & Pol’y 73, 103–06 (2017).[/mfn] These ventures can accrue what economists term “positive network[ing] externalities,”² where the overall value in a network and its ability to generate consumer benefits grows as more users participate. Broadband platform operators can quickly serve a global consumer population and convince prospective customers of the benefits in joining the bandwagon.³ Early mover success can quickly lead to “winner take all” market dominance,⁴ despite the availability of alternatives.⁵

Platform intermediaries can generate a compelling value position for consumers by opting to recover most, if not all costs, from upstream users, rather than split the financial burden between both upstream and downstream participants.⁶ Economists use the term two-sided markets⁷ to identify platform functions where transactions occur both upstream and downstream from the intermediary.⁸ Successful insertion of an intermediary platform has generated both positive and negative impacts on consumer welfare, competition, rate of innovation, employment, and other key factors.⁹ On the positive side, intermediaries can promote efficiency, economies of scale,¹⁰ and beneficial network externalities. On the negative side, intermediaries may leverage dominant market shares to extract high prices from both upstream and downstream participants after acquiring market dominance through a sustained period of below market pricing.¹¹ Additionally, they can erect barriers to market entry, acquire insurgent companies, and use comparative advantages to dominate in both core and related markets, such as the collection, processing, and sale of “Big Data”¹² about subscriber behavior.¹³

Intermediaries attempt to maximize market share in their decisions about cost recovery.¹⁴ Consumers may think platform operators offer “free”¹⁵ or subsidized services by appearing to recover all costs from upstream ventures.¹⁶ While consumers do have to pay for products and services, of which the advertising costs and other subsidies generate higher prices, consumers embrace marketing promotions that offer real or perceived subsidies.¹⁷ In exchange for free or below cost services, consumers allow intermediaries to compile information about their online behavior, location, purchases, searches, website visits, and other activities, which is then used by data analytics firms and advertisers to improve targeting of commercial advertisements.¹⁸ Privacy intrusions¹⁹ and the commodification of consumer behavior generate significant value that a platform operator can use to generate revenues in ways that most subscribers may not fully understand or quantify.²⁰

This Article asserts that any analysis of costs and benefits occurring via broadband intermediary transactions necessitates an assessment of impacts occurring on both sides of the platform. Heretofore, legislators, judges, regulators, policy makers, business executives, and academics have solely examined or emphasized the downstream impacts.²¹ This focus appears prudent because consumers, who vote with dollars, are situated downstream. Likewise, the most immediate and measurable consequences may appear on the downstream side.²² Considering the decision by intermediaries to shift costs upstream, analysts of two-sided markets may overestimate consumer benefits by failing to consider offsetting costs occurring when upstream transactions are examined.²³

The predisposition to concentrate on consumer impacts and identify welfare enhancement has existed well before the onset of internet-based intermediaries. For example, credit card vendors have offered subsidies, including cash rebates, to consumers even if they pay on time and trigger no offsetting interest charge.²⁴ Free to radio and television, broadcasters have offered consumers the opportunity for “free rider” consumption of content, without the obligation to purchase any of the goods and services advertised by upstream vendors.²⁵

This Article demonstrates how a dual analysis of both downstream and upstream impacts can result in a better calibrated impact assessment. In some cases, apparent harm to consumers and competition, such a contractual prohibition on vendors steering customers to credit cards with lower vendor fees, can be offset by consumer and competitive benefits, e.g., diversification of credit card types including ones offering rebates and airline miles.²⁶ In other instances, so-called false negative findings of no harm to consumers and competition can be corrected with the identification of detrimental impacts, particularly on the often-unexamined upstream side of the market.²⁷

Countervailing proof of harm may result from an assessment of the marketplace and consumer impact in upstream commercial transactions occurring directly and indirectly with downstream consumers. For example, consumers agree to intermediary mining, analysis, and sale of data about their wants, needs, interests, consumptive behavior, website visits, purchases, location, and internet searches.²⁸ This data has value that subsidizes the “free” access to content and other services.²⁹ Upstream vendors and intermediaries also can use data mining³⁰ to make frequent changes to their prices for goods and services.³¹ Such calibration has the potential to eliminate or reduce consumer surplus, which occurs when the charged price falls below what a consumer willingly would pay.³² Simply put, the value proposition of what broadband intermediaries offer combines both costs and benefits, and thus requires an assessment of both factors by consumers and government agencies that have jurisdiction to oversee the potential for harm to consumers and markets.

This Article identifies reasons the upstream impact analysis does not occur and provides recommendations on what consumers and governments should do to reduce or eliminate direct and indirect harms.

I. Two-Sided Markets in the Digital Broadband Ecosystem

Two-sided markets have operated in the economy for many centuries, well before the onset of the internet and broadband networks.³³ Recent examples include advertiser subsidized access to newspapers and broadcast media, wireless smartphone operating systems, commercial aviation reservation systems, dating matchmakers, and travel agencies.³⁴ Conversion of analog telecommunications infrastructure into high-speed broadband networks, fast processing computers, cheap and high capacity memory and data storage, and other technological innovations have led to a proliferation of platform intermediaries as well as the potential for them to achieve remarkably quick financial success.³⁵ Companies such as Airbnb, Alibaba, Amazon, Didi Chuxing, Facebook, Google, Netflix, Tencent, Twitter, and Uber have quickly achieved “unicorn” status with over $1 billion in market value.³⁶

The internet ecosystem favors two-sided market platforms because intermediaries can offer faster, better, smarter, cheaper, and more convenient solutions to consumers’ wants, needs, and desires than what traditional “bricks and mortar” ventures offer.³⁷ By interconnecting with broadband networks, digital platform operators can establish a global service footprint without having to invest startup funds on content distribution networks.³⁸ Two-sided market ventures are optimally suited to exploit the positive networking externalities available from widespread availability and robust consumer adoption.³⁹ Likewise, digital platforms can take advantage of first mover opportunities to acquire large market share and subscribership quickly.⁴⁰

A major business model for internet-mediated platforms masterfully uses flexibility in pricing to create the impression by prospective subscribers that their access to valuable content and services can occur without payment.⁴¹ Intermediary platforms can calibrate who pays and, in most instances, the direct payment of financial compensation comes primarily or exclusively from upstream ventures, such as advertisers.⁴² Advertising rates and other revenues can defray or eliminate the need for platform operators to require monetary payment from downstream subscribers.⁴³ Of course, consumers bear an obligation to provide something of great value: consent to the acquisition, processing, and marketing of data about their wants, needs, desires, web travels, location, interests, searches, etc.⁴⁴ Most platform users may underestimate the value of the privacy invading consumer data they relinquish freely.⁴⁵

Many of the internet unicorns, operating a digital platform, rely on advertiser subsidies, broadband network distribution, and the convergence of content and conduit to package a desirable internet-mediated service, such as social networking.⁴⁶ Digital platform operators surely enhance consumer welfare and offer a compelling value proposition as evidenced by their marketplace success.⁴⁷ However, these ventures do not operate as charities and their extraordinary market values reflects their current or prospective ability to accrue massive profits, largely from their ability to mine, analyze, collate, and market consumer data.⁴⁸

To acquire a full appreciation of broadband intermediary costs and benefits to consumers, one should examine the transactions that occur on both sides of the platform. For example, downstream subscribers may benefit from access to “free” content, but at a possibly substantial cost considering the effect of upstream data analysts, brokers and advertisers, as well as election meddlers, provocateurs, and purveyors of “fake news.”⁴⁹

II. Consumer Welfare Gains from Two-Sided Markets

Two-sided markets offer many benefits to consumers, largely because upstream ventures willingly pay intermediaries that in turn subsidize downstream access.⁵⁰ Having no direct financial payment to make, consumers may assume they pay nothing for opportunities to participate in beneficial transactions. For example, the legacy credit card model⁵¹ offers users the opportunity to purchase products and services without point of sale cash payments, a benefit in terms of both convenience and the opportunity to acquire a short-term loan without interest.⁵² Information, communications, and entertainment intermediaries provide access to many different types of software, applications, services, and diverse content, typically without requiring any direct payment.⁵³ A mutually beneficial transaction combines ample benefits for platform operators and consumers by updating the pre-existing model of subsidized access to services and content.⁵⁴

Digital broadband platform operators can afford such generosity because they extract a form of payment from downstream consumers who may not fully appreciate the value of what they relinquish, but who willingly do so through a binding contractual commitment.⁵⁵ Even as platform subscribers underestimate the value of what they must allow upstream ventures to use, the intermediary model has thrived and proliferated.⁵⁶

The massive increase in platform subscriptions helps broadband intermediaries quickly acquire scale economies⁵⁷ and efficiency gains by attracting growing numbers of users and spreading costs over an ever-increasing population of users.⁵⁸ The incremental cost for serving additional participants approaches zero because information, communications, and entertainment platforms have high initial investment costs but very low incremental costs incurred when adding users.⁵⁹ Broadband intermediaries also can accrue positive networking externalities⁶⁰as subscribership grows. When intermediaries reach a critical mass of popularity, non-users see the advantages in joining the bandwagon, further enhancing the comparative attractiveness of the most popular platform operator vis-à-vis other competitors and options.⁶¹

III. Consumer Costs from Two-Sided Markets

Unmeasured and often unrecognizedcosts offset readily identifiable, if overstated, benefits from two-sided platforms. In the short term, ventures like Amazon enhance consumer welfare by offering a growing inventory of products and services at lower prices, which is the product of operational efficiencies and the willingness to eschew profits in exchange for increasing market share and “shelf-space.”⁶² Similarly, advertiser-provided subsidies help create the impression among most consumers that they have more to gain in terms of “free” access to content, and even subscribers, who recognize the value in commodifying and selling their data, may perceive the benefits as exceeding the indirect costs.⁶³

Most consumers may not fully understand both the short- and long-term consequences of intermediary transactions,⁶⁴ particularly in terms of not easily quantified gains accruing to upstream ventures and platform operators, at least partially at the expense of downstream consumers.⁶⁵ Because intermediary platform users permit data mining without compensation, it could be assumed that such content constitutes a commodity or currency that the data miner can use, while at the same time claiming that no market-based transaction has occurred. Arguing that no market exists can bolster assertions that zero-price transactions have limited, if any, impacts on relevant market definitions made by antitrust courts.⁶⁶

Even in the short term, consumers may suffer from the loss of brick and mortar store competition, as well as from the consequences of more accurate assessment of consumer price sensitivity and increasingly invasive collection of subscribers’ consumption behavior and the brokering of such data by largely unregulated ventures.⁶⁷ At some point, online platform operators may consider their market position sufficiently impenetrable so that they can refrain from aggressive price cutting and forgoing near term profitability to acquire market share.⁶⁸

A. Dynamic Pricing Reduces Consumer Surplus

Platform operators and upstream vendors can develop sophisticated data analytics to help accurately set and frequently modify prices for commercial transactions.⁶⁹ Bear in mind that while some platform operators, such as Facebook and Twitter, rely almost solely on upstream advertiser payments,⁷⁰ other intermediaries combine that revenue stream with downstream sales of goods and services, e.g., Amazon, Airbnb, Didi Chuxing, and Uber.⁷¹

Dynamic pricing refers to the ability of product and service vendors to calibrate prices more frequently and accurately.⁷² Such calibration can help vendors eliminate or reduce what economists term consumer surplus: the opportunity to acquire a good or service at a price below what a consumer would willingly pay.⁷³ Digital intermediaries can acquire and analyze data about current consumer demand and available supply of products and services—e.g., the number of available Uber drivers in a specific locality.⁷⁴ Rather than set a fixed price, only occasionally raised or lowered, vendors can make frequent pricing changes based on current marketplace conditions calculated by proprietary software that processes freely acquired user data collected by the intermediary platform operator and forwarded to upstream vendors.⁷⁵

Arguably, dynamic pricing promotes overall marketplace efficiency by injecting more frequently and timely fine-tuning of prices based on changes in supply and demand.⁷⁶ However, consumers may consider it unfair and discriminatory, particularly when so-called surge pricing unexpectedly raises out of pocket costs significantly.⁷⁷ As demand increases, or supply drops, prices quickly rise above a level most consumers consider fair and reasonable.⁷⁸ Even though low demand and oversupply might trigger short term price reductions, consumers may focus on rapid and substantial surge prices.⁷⁹

Critics of a platform-dominated economy emphasize harm to both consumers and workers:

A “peer economy” of platform-arranged production will break down old hierarchies. Gig workers will be able to knit Etsy scarves in the morning, drive Uber cars in the afternoon, and write Facebook comments at night, flexibly shifting between jobs and leisure at will.

But is platform capitalism really a route to opportunity for labor, or just one more play for capital accumulation in an increasingly stratified economy?⁸⁰

The costs and risks borne by non-employee contractors surely challenge the view that they can combine flexible schedules and independence with certain and generous hourly earnings.

B. Lack of Transparency

Far too many platform operators rely on lengthy and obtuse subscription agreements to set out the terms and conditions for their acquisition, analysis, use, and sale of consumer data.⁸¹ These non-negotiable contracts of adhesion create enforceable rights for platform intermediaries, but few responsibilities and curbs on their data mining and sale.⁸² Worse yet, some major broadband platform intermediaries have allowed data acquisition and mining opportunities, directly or through third parties, far exceeding the ample options they have reserved.⁸³ To make matters worse, some platform operators do not disclose data security breaches in a timely manner,⁸⁴ or admit to instances where they have intentionally or inadvertently caused such privacy invasions to occur.⁸⁵

Platform intermediaries risk losing subscribers’ trust,⁸⁶ particularly when failing to disclose data breaches, and instances where third parties accessed and “mined” consumer data well beyond the scope of permitted uses.⁸⁷ When confronted with press accounts of data breaches or exceeding permissible data mining opportunities, some platform operators offer incomprehensible excuses, refuse to accept responsibility, or claim the breach or excessive use of subscriber data did no harm to subscriber privacy.⁸⁸

For example, the New York Timesreported that Facebook provided wireless smartphone manufacturers with access to subscriber data, including immediate location, without subscriber consent.⁸⁹ Rather than admit to this breach of trust and violation of the non-negotiable subscription agreement it wrote and required customers to accept, Facebook representatives claimed, with no proof, that consumers suffered no harm.⁹⁰ According to Facebook, the wireless manufacturers left such valuable consumer data inside handset memory storage so that it could only enhance the Facebook experience without any other sort of commercial exploitation by third parties.⁹¹ This response appears to create the impression that the handset manufacturers, which surely paid for the consumer data access opportunity, made no apparent use of the data other than to offer more convenient mobile access to Facebook service features. Apparently, this enhancement offsets any potential for consumer privacy invasion, intentional violation of contractual curbs, and national security threats when offering access to Chinese handset manufacturers accused of supporting espionage endeavors of their government.⁹²

C. Free Does Not Mean at No Cost

Internet users may have only vague notions that access to free services comes at some cost. Words like data mining and Big Data⁹³ have entered the vernacular so by now consumers should have some sense that the operators of platform services have devised ways to recoup costs and generate ample profits.⁹⁴ On its face, better and more accurately targeted commercials, thoughtful music and video recommendations, and reports on what products and services other buyers have combined can provide consumers with helpful data analytics.⁹⁵ Consumers still can free-ride subsidized services by not following through with initial and supplemental purchases as suggested by platform software.⁹⁶

On the other hand, most consumers seem uncertain about the marketplace value of their data, even though many intermediaries have business plans that derive most revenues from frequent auctions for highly calibrated advertising placements.⁹⁷ Advertisers underwrite consumer access to content and services through paid placements⁹⁸ on all the display screens currently in use (televisions, computers, smartphones, tablets, and wearables, such as watches). These micro-transactions add up, particularly for ventures such as Facebook⁹⁹ and Google¹⁰⁰ that have a global subscriber base making frequent service requests almost every day.

Few would criticize Google and other ventures for failing to offer something of significant value or for having exceeded the boundary lines of capitalism and entrepreneurship. However, consumers increasingly may have begun to realize that “free access” to platforms comes at a significant cost. Economists remind us that there “is no free lunch”¹⁰¹ in commercial transactions and neither is there truly free access to internet-mediated content and services.¹⁰² Rather than require payment in currency, platform operators extract value from the consumer data they mine, process, collate, curate, analyze, and sell.¹⁰³ In effect, subscribers are both consumers of service provided by the intermediary, as well as the product of what the platform operator offers advertisers in exchange for monetary compensation.¹⁰⁴

IV. Reasons for Emphasis on Downstream Impacts

Government agencies have several rationales supporting their emphasis on downstream impacts of intermediary activities. The agencies can reasonably conclude that the most significant impact on consumers will occur in their direct interaction with the intermediary, perhaps discounting the significance of less direct interaction with upstream ventures whose access to consumers is specified in separate commercial agreements with the platform operator.¹⁰⁵

Privity of contract exists only between the intermediary and downstream consumers who may not even know with what ventures the intermediary also has established commercial relationships for sharing and deriving value from consumer data.¹⁰⁶ Indeed, the use of nondisclosure agreements between intermediaries and upstream ventures prevent government agencies and consumers from having a true sense of the potential for harm resulting from the widespread transactions that extract monetary value in consumer data acquisition, analytics, and sale.¹⁰⁷

While the upstream contracts may have substantial impact on consumers, government agencies understandably concentrate on short term, direct impacts, because existing policies emphasize an assessment whether market efficiency gains can be identified.¹⁰⁸ If such benefits appear, then the agencies can eschew further scrutiny, even if an arguably more extensive review would identify offsetting declines in consumer welfare.¹⁰⁹ Ventures can exploit privacy intrusions and data mining opportunities in the upstream side of an internet intermediary. This exploitation harms both consumers and competitors in core and adjacent markets.¹¹⁰ In this obscured and largely ignored space, much mischief and harm can occur, as evidenced by interference with the 2016 United States presidential election¹¹¹ and the referendum on whether the United Kingdom should leave the European Union.¹¹²

In addition to focusing on consumers and their opportunities for short term benefits, such as subsidies and free-rider opportunities, government agencies face other disincentives to look upstream. Currently prevailing political and economic policy promote reduced government oversight.¹¹³ Government agencies appreciate the negative public perception of appearing to expand their regulatory “wingspan.”¹¹⁴ The agencies risk triggering claims of mission creep by upstream stakeholders who also may assert that the government agencies lack jurisdiction to conduct any investigation.¹¹⁵

Allegations of overreach also may include arguments that the government agencies violate upstream vendors’ First Amendment speaker rights, particularly for information, communications, and entertainment ventures offering audio and video content,¹¹⁶ as well as advertising that qualifies for much of the speech protection accorded individuals.¹¹⁷ Similarly, government agencies risk triggering claims that they have impeded the rights of upstream ventures to engage in interstate commerce with platform operators.¹¹⁸

The reluctance to probe upstream activities may also stem from the increasingly questionable conclusion that upstream vendors do not operate in ways that might harm consumers. Belatedly, we have seen data mining generating significant and unexpected adverse consequences; including, direct impacts on presidential elections, manipulating public opinion through fake news,¹¹⁹ and acquiring data about consumers who have not consented to any sort of mining and may not even know their data has been extracted, analyzed, and sold.¹²⁰

Additionally, regulatory agencies may have concluded that previous enforcement actions and consent decrees provide sufficient safeguards.¹²¹ Such confidence appears misinformed or misguided in light of recent news accounts reporting on the lack of transparency and possible violations of existing Federal Trade Commission (FTC) consent decrees by Facebook, Google, and other intermediaries.¹²²

Government agencies—with clear jurisdiction to assess the potential for harm to consumers and competition—continue to use evaluative tools primarily created for and applied to bricks and mortar transactions.¹²³ While governments have applied these tools to information-age transactions—e.g., credit cards—until quite recently, the analysis largely has ignored the two-sided market structure and failed to appreciate that this industrial structure has significant potential for both benefitting and harming consumers.¹²⁴ With an emphasis on current market definition and share, government agencies may fail to see interaction between intermediaries and upstream ventures that have direct and indirect impacts on downstream consumers.¹²⁵ By emphasizing what can be identified and measured easily, government agencies fail to see more obscure offsetting costs and harms.¹²⁶

V. Ohio v. American Express Co. and a New Focus on Both Market Sides

A recent Supreme Court decision involving a credit card issuer provides insight on current disputes about the proper scope of market definition and analysis of platform intermediaries. Ohio v. American Express Co.¹²⁷ addresses how courts should define the relevant market¹²⁸ to prevent finding anticompetitive harms where little or none exist—a false positive—and perhaps also to avoid decision making that ignores consumer harms—a false negative.¹²⁹

In American Express Co., the conservative majority of the Court, endorsing recent economic doctrine championed by academics,¹³⁰ upheld a decision by the United States Court of Appeals for the Second Circuit to reject a district court’s relevant market determination in an antitrust review of an alleged vertical restraint of trade.¹³¹ The Supreme Court endorsed the finding that the district court should have assessed consumer impacts on both sides of the market served by the credit card issuing company: the downstream users of cards and the upstream vendors accepting cards for payment.¹³² The alleged vertical restraint involved so-called anti-steering contractual language that prohibited vendors, agreeing to accept American Express credit cards, from trying to persuade customers to use a different card that imposed lower “swipe fee”¹³³ processing costs on the vendor.

The district court suggested that relevant market and impact analysis of anti-steering contractual language required consideration of how anti-steering provisions affected both merchants and consumers—ostensibly a complete two-sided market assessment. However, the district court focused on how the anti-steering contractual language helped maintain higher swipe fees that harmed both competition among credit card issuers and consumers with apparently no offsetting benefits.¹³⁴

This court also determined that American Express had market power because it imposed twenty fee increases over a five-year period without losing market share in terms of the number of vendors accepting its cards and credit card transaction processing.¹³⁵ The district court concluded that in the absence of the anti-steering provisions, swipe fees to merchants and consumer costs would have been lower.¹³⁶ The court considered as corroborating evidence the decision by the Discover credit card company to abandon its business model of offering comparatively lower fees as an inducement for more vendors to accept the card for payment and in turn to acquire greater market share of credit card usage.¹³⁷ As the company having the smallest market share, Discover sought to differentiate its card with merchants; however, Discover could not acquire more market share because vendors could not encourage customers to use its credit card.¹³⁸

Both the Second Circuit Court of Appeals and the Supreme Court opted to examine market impacts on both sides of the credit card platform marketplace.¹³⁹ These appellate courts both concluded that to assess the complete impact of a credit card company’s anti-steering contractual language, judges should identify and consider the consequences of any positive or negative impact.¹⁴⁰ The Second Circuit Court of Appeals found the credit card network participants (card issuers, banks, and merchants) must consider the interdependency¹⁴¹

The functions provided by the credit-card industry are highly interdependent and, at the cardholder/merchant-acceptance level, result in what has been called a “two-sided market.” The cardholder and the merchant both depend upon widespread acceptance of a card. That is, cardholders benefit from holding a card only if that card is accepted by a wide range of merchants, and merchants benefit from accepting a card only if a sufficient number of cardholders use it.

Am. Express Co., 838 F.3d at 185–86. between both merchants and cardholders, because

price changes on one side can result in demand changes on the other side. If a merchant finds that a network’s fees to accept a particular card exceed the benefit that the merchant gains by accepting that card, then the merchant likely will choose not to accept the card. On the other side, if a cardholder finds that too few merchants accept a particular card, then the cardholder likely will not want to use that card in the first place. Accordingly, in order to succeed, a credit-card network must “find an effective method for balancing the prices on the two sides of the market.”¹⁴²

Both appellate courts undertook a comparison of costs and benefits affecting both vendors and credit card users.¹⁴³ While anti-steering rules mandated by credit card issuers can constitute an illegal vertical restraint on trade by reducing competition among credit card companies, the courts considered the potential for offsetting positive financial impact on credit card users through more generous and diversified benefits, e.g., financial rebates and enhanced travel services.¹⁴⁴

For example,

In order to remain competitive on the cardholder side of the platform, a payment-card network might need to increase cardholder rewards—or, in other words, cut prices to cardholders. This, in turn, might diminish the network’s profitability from the hypothetical price increase. If the network chose in that situation not to increase cardholder rewards, then merchant attrition likely would continue increasing as a result of the reduction in cardholders. Over time, the reduction in transactions could make the hypothetical price increase unprofitable.

Id. at 202.

Analysis by the Second Circuit Court of Appeals emphasized how variance in costs incurred by both vendors and credit card users can impact both sides of the platform operated by a credit card issuer.¹⁴⁵ Considering the interdependency of product and service vendors and consumers using credit cards, the court identified two joint market effects not considered by the district court: (1) the impact of anti-steering rules on the level of card issuer market competition, and, (2) the impact of credit card issuer anti-steering rules on their incentives to offer usage inducements to consumers.¹⁴⁶ While the credit card marketplace is concentrated with only four companies and evidences substantial barriers to market entry, the Second Circuit Court of Appeals noted the ease with which consumers can shift card allegiance based on many factors including the costs incurred by using a specific card and the financial inducements offered by credit card issuers to encourage consumer loyalty.¹⁴⁷

The Supreme Court’s conservative majority affirmed the Second Circuit Court of Appeals’ analysis and conclusion that the lower court should have assessed the consumer impact of transactions occurring on both sides of the credit card issuer’s platform:

Price increases on one side of the platform likewise do not suggest anticompetitive effects without some evidence that they have increased the overall cost of the platform’s services. Thus, courts must include both sides of the platform—merchants and cardholders—when defining the credit-card market.¹⁴⁸

The Court determined that both sides of an intermediary platform require examination because two inter-related transactions take place, each of which affect both upstream and downstream participants.¹⁴⁹ By examining the marketplace impact on both sides of the American Express platform, the Court identified consumer and competitive benefits that offset the harm to consumers identified by the district court.¹⁵⁰ Identifying this benefit would not occur if a court examined impacts on just one side of the intermediary’s transactions when identifying what constitutes the relevant market for credit card services.¹⁵¹ Because credit card anti-steering contractual terms might not constitute an unlawful vertical restraint on trade, the reviewing court could avoid a false positive finding of anticompetitive harm to consumers by acquiring a complete evidentiary record, including an assessment about the potentially favorable impact of the anti-steering contractual language on both vendors and consumers.¹⁵²

The dissenting opinion in American Express Co., written by Justice Breyer and joined by the three other liberal Justices, disputed the lawfulness of the two-sided market examination.¹⁵³ Both camps agreed that an alleged vertical restraint required a “rule of reason” analysis that has three analytical steps.¹⁵⁴ The Court factions disagreed on whether the first step identification of the relevant market includes participants on both sides of the intermediary platform.¹⁵⁵ If only the downstream consumer side requires analysis, then the plaintiffs more readily could identify substantial anticompetitive effects and meet its evidentiary burden, thereby triggering the second step where the defendant must identify procompetitive rationales for the restraint.¹⁵⁶ If successful, the burden shifts back to the plaintiff to demonstrate that the procompetitive efficiencies could be reasonably achieved through less anticompetitive means.¹⁵⁷

The Court majority determined that had the district court assessed the competitive and consumer impact of the anti-steering rules on both sides of the market, it would not have concluded that the plaintiffs had satisfied their initial burden of introducing evidence of substantial anticompetitive harm.¹⁵⁸ A persuasive case for financial harm had been made with the narrow focus on downstream consumers because higher swipe fees clearly result in higher merchant costs, at least some of which will flow through to consumers.¹⁵⁹ However, the district court could have identified offsetting consumer benefits when considering what “rewards” American Express provides its customers.¹⁶⁰

Justice Breyer, in dissent, strongly asserted that the district court had no reason to expand its market impact analysis, noting that no antitrust case precedent supports doing so.¹⁶¹ Additionally, he noted case precedent does not favor judicial netting or balancing of competitive benefits and harms occurring in different markets.¹⁶²

The sole focus on the immediate impact of higher swipe fees on downstream credit card users ignores other factors that might reduce or eliminate a conclusion of anticompetitive harm, such as higher prices to consumers.¹⁶³ A more nuanced, calibrated, and granular analysis considers the credit card ecosystem as both two-sided and segmented by card issuer marketing strategies.¹⁶⁴ Swipe fee pricing strategy constitutes a key differentiator for which credit cards a vendor would accept, but other factors come into play, particularly on the consumer side.¹⁶⁵ Some consumers might want a credit card that offers generous financial rebates and other subsidies, such as airline miles.¹⁶⁶ Others might want one that offers a low short-term interest rate on balance due transfers.¹⁶⁷ Others might willingly pay for the privilege of tapping a benefit-rich inventory, including airline lounge access, “free” baggage allowances on specific airlines, concierge-provided travel assistance, and early opportunities to buy Broadway and concert tickets at face value.¹⁶⁸

In this more segmented marketplace, a credit card company might execute a strategy of demanding comparatively higher swipe fees of vendors to generate more generous and desirable credit card user rewards.¹⁶⁹ Another company might use lower swipe fees as an incentive for more vendors to accept purchases using the card.¹⁷⁰ Arguably, such differentiation promotes a competitive marketplace both in terms of what inducements credit card companies must offer consumers and which card a consumer will use for each transaction.¹⁷¹

The Court majority noted that American Express uses a marketing strategy geared towards attracting wealthier card users likely to make more expensive purchases.¹⁷² This strategy does not primarily rely on revenues accruing from interest payments by card users not making full payment within a short grace period.¹⁷³ It compensates for comparatively fewer transactions and monetary loans with higher swipe fees involving more expensive purchases.¹⁷⁴ Two major credit card issuers, MasterCard and Visa, use a different strategy that is less reliant on swipe fees than on credit card user interest payments.¹⁷⁵

The American Express Co.case emphasizes the need for courts and, by extension, regulatory agencies, to consider the relationship between upstream and downstream market participants in terms of their interdependency and their relationship with the platform intermediary.¹⁷⁶ In the credit card ecosystem, the availability of alternative credit cards and the ease with which consumers can change allegiances evidence a competitive credit card platform marketplace with significant consumer sensitivity to comparative costs and benefits accruing from the use of specific cards.¹⁷⁷ Some credit card users attempt to maximize downstream subsidies and rebates by acquiring many different cards from banks offering generous inducements to apply and strategically using the one card that confers the best benefits for each transaction, e.g., Card A for gasoline, Card B for airline tickets, Card C for restaurants.¹⁷⁸

The division of the Supreme Court on a liberal versus conservative fulcrum in this case may identify what constituencies and economic doctrine each faction favors. The majority persuasively demonstrates that in the credit card ecosystem, two complementary and inter-related transactions take place.¹⁷⁹ In his dissent, Justice Breyer suggests that “the complementary relationship between the products is irrelevant to the purpose of market definition,”¹⁸⁰ emphasizing that his understanding of antitrust law and economics was that market analysis should be limited to substitutes.¹⁸¹ Justice Breyer objects to the majority’s decision to determine a net market impact of the anti-steering contract provisions by combining the negative impact of higher merchant swipe fees and the positive impact on consumers able to tap into more and better credit card services and rewards.¹⁸²

While not using the same term, the Court majority considers card user and card accepting vendors as jointly participating in transactions that affect each other and thereby bind them and their markets together.¹⁸³ The majority decision deems this integration as evidence that “indirect network effects”¹⁸⁴ apply to both parties, because “the value of the two-sided platform to one group of participants depends on how many members of a different group participate.”¹⁸⁵ Arguably, a relevant market analysis requires impact assessment on both sides of an intermediary platform because

[r]aising the price on side A risks losing participation on that side, which decreases the value of the platform to side B. If participants on side B leave due to this loss in value, then the platform has even less value to side A—risking a feedback loop of declining demand.¹⁸⁶

The majority held that the plaintiffs did not meet their burden of proving anticompetitive effects in the relevant market, because “the product that credit-card companies sell is transactions, not services to merchants.”¹⁸⁷ As a result, the majority argues, the plaintiff must show anticompetitive effects on “the two-sided credit-card market as a whole” by proving that “Amex’s anti steering provisions increased the cost of credit-card transactions above a competitive level, reduced the number of credit-card transactions, or otherwise stifled competition in the credit-card market.”¹⁸⁸

A. Impact of Ohio v. American Express Co.on Internet Intermediaries

American Express Co.addressed credit card transactions that include a large percentage occurring in traditional bricks and mortar locations.¹⁸⁹ The case considered the potential for false positive findings of anticompetitive harm should a reviewing court limit its examination to the downstream impact on consumers.¹⁹⁰ In light of the speedy growth in electronic commerce transactions, we should consider the impact of American Express Co.on the two-sided market platforms that operate via the internet. Many of these transactions have the potential to trigger a false negative finding of no consumer harms if reviewing courts and regulatory agencies solely examine the downstream impact and ignore offsetting harms generated by upstream transactions between the intermediary platform operators and third parties running the gamut from data brokers and advertisers to foreign governments seeking to meddle in elections and fake news disseminators.¹⁹¹

The Court noted that its decision did not endorse universal assessment of both sides of a two-sided market.¹⁹² However, the case offers a strong precedent for doing so to avoid making an incomplete or wrong marketplace assessment.¹⁹³ Arguably, the case provides a rationale for two-sided market examinations when the risk of either a false positive ora false negative exists.¹⁹⁴ This motivation to conduct a macro-level analysis stems from the likely consequences that limiting analysis to one side of the market, while consistent with traditional relevant market definition,¹⁹⁵ misses significant direct, secondary and even tertiary impacts.

Justice Breyer’s dissent and the friend of court filings by antitrust law and economics scholars make a persuasive argument that the long-standing rule of reason analysis of vertical restraints, such as the anti-steering provisions, contemplates a properly calibrated relevant market definition.¹⁹⁶ Expanding the relevant market to include offsetting harm does come across as a netting or cost/benefit analysis in contrast to the conventional process where a court only looks for a market of substitutes and assesses the potential for harm directly to these competitors.¹⁹⁷ The Supreme Court has endorsed a market definition that considers instances where Peter gets robbed—reduced competition among credit card companies—but Paul gets paid—consumers benefit from enhanced and more valuable credit card services.¹⁹⁸ Without examining both sides of a platform intermediary market, courts would miss both substantial offsetting activities that can contribute benefits (or costs) directly to participants on each side, and even to non-participants.¹⁹⁹

In a broader context, without examining both sides of the platform, courts would not see favorable or harmful impacts that could reduce the likelihood of the court making a false positive or false negative determination of consumer harm. Secondary impacts for internet platforms include the potential for disrupting business models used by brick and mortar vendors of products and services.²⁰⁰ Tertiary impacts include how internet platforms affect and change labor relations, civil society, elections, what constitutes a reasonable expectation of privacy, and the potential for loss of trust in a variety of public and private transactions.²⁰¹

If antitrust courts interpret their statutory mission to examine how vertical restraints affect consumers, then the analysis arguably should include a relevant market definition and thorough examination including the positive and negative impact that the platform model has on consumers. For internet platforms, this process may become increasingly difficult as both positive and negative impacts may be difficult to quantify.²⁰² However, the difficulty and potential for imperfect calculations should not foreclose the analysis. In the American Express Co.case, the offsetting benefits from enhanced card user services were recognized, but not specifically quantified by the reviewing courts.²⁰³ Nevertheless, the Supreme Court majority was confident that the enhancements to the welfare of a specific card-using group of consumers offset the costs to all vendors accepting credit cards and arguably all consumers likely to incur higher prices because of increased swipe fees.²⁰⁴

VI. Identifying Essential Elements in the Necessary Upstream Analysis

The American Express Co.case highlights the importance of relevant market assessment as well as consideration whether consumers have competitive and functionally equivalent options.²⁰⁵ While the dissent expressed concern that the majority opted to consider both sides of the credit issuer’s platform, it emphasized how doing so resulted in a finding that the plaintiff had failed to meet its evidentiary production burden in the first of three steps in a rule of reason analysis regarding an alleged vertical restraint of trade.²⁰⁶ Such a determination terminates the case, because the second step in a rule of reason analysis occurs only if plaintiffs meet their burden in the first step.²⁰⁷

Had the case proceeded to the second step, the defendants would have had the opportunity to introduce evidence including how credit card accepting vendors’ payments to American Express generated consumer benefits.²⁰⁸ The defendants also could demonstrate that even in a concentrated market of four major credit card suppliers, consumers can regularly switch and thereby face no lock-in, unlike many internet markets dominated by a single venture.²⁰⁹ This evidentiary production would have introduced upstream market transactions into the record, so arguably no justice objected to such an analysis of the merchant side of American Express’s platform provided it takes place in the proper rule of reason investigative sequence.²¹⁰

To calculate both the benefits and costs of an internet ecosystem intermediary’s commercial activities, governments and consumers alike should assess what occurs both downstream and upstream. Looking at one market side risks both false positives and negatives, the former likely occurring when considering only subsidized and free rider content access opportunities downstream and the latter likely occurring when considering only the costs incurred by upstream participants.

Downstream impacts—particularly consumer welfare enhancements—appear more easily identified and quantified.²¹¹ On the other hand, upstream impacts are easily obscured as they occur behind the scenes²¹² and involve different types of participants, including many not keen on having their actions detected.²¹³ On this upstream side of the digital intermediary, much harm can beset participants in the internet ecosystem—and even non-participants areat risk.²¹⁴ If Russian and other provocateurs successfully interfered with the 2016 United States presidential election,²¹⁵ then all citizens have a stake in upstream market analysis irrespective of whether they participated in any particular type of internet-mediated transaction such as receiving fake news and other provocations from foreign agents keen on influencing voters’ presidential choice.²¹⁶

Broadband intermediaries have new and extraordinary ways to monitor, surveil, collect, and sell subscriber data to purchasers whose identity need not be disclosed.²¹⁷ This changes the value position of what the intermediary offers because the ability to “mine” subscriber data has value that can provide a substantial and new revenue stream for platform intermediaries, but only if subscribers ignore potentially high costs they have to incur.²¹⁸ Just as a court might overestimate downstream harm to consumers absent an examination of ameliorating upstream benefits, so too might a court overestimate the level of downstream benefits of advertiser content subsidies absent adequate consideration of the offsetting costs to consumers and society from upstream data mining.²¹⁹

Data mining can impose higher costs on consumers even considering the possible joint benefit of better calibrated advertising placements.²²⁰ If better targeting of advertisements constituted the only consequence of data mining, then many participants would have confirmation that the process in the aggregate constitutes a win-win proposition.²²¹ However, data mining can impose significant privacy-invading, sinister, and harmful costs on downstream consumers.²²² Additionally, “winner-take-all” market dominance can create incentives for most consumers to rely on a single venture unlike the incentives and ease in switching credit cards to maximize benefits from any single transaction.²²³

If the potential harm from attempts to meddle in elections via social networks appears too speculative, other more frequent and negative impacts of data mining warrant consideration. For example, measurable consumer welfare and surpluses decline or evaporate when vendors use data mining for dynamic pricing.²²⁴ Digital intermediaries offer vastly improved opportunities for data mining to enhance vendors’ understanding of the particular wants and needs of consumers as well as their immediate elasticity of demand.²²⁵

Largely unregulated transportation companies, not obligated to provide service under a fixed tariff, can extract maximum revenues based on data mining of current supply and demand.²²⁶ While economists might welcome this practice as more efficient and rational, consumers might consider the transaction unfair and exploitative.²²⁷ Dynamic pricing violates some consumers’ sense of fair play even if such price discrimination is lawful and efficient.²²⁸

Consumers generally expect to pay the same advertised or listed price and probably would not respond favorably if they came to understand that data mining improves the ability of merchants to “size up” the individual consumer and calculate a price aimed at eliminating any consumer surplus.²²⁹ Consumers understand price differentials such as volume discounts and delivery costs.²³⁰ Once informed that data mining makes dynamic pricing more prevalent and effective, they might temper their satisfaction with the subscription contract they passively accepted.

A. A Complete and Thorough Assessment of Platform Costs and Benefits

Many consumers, judges, government regulators, and legislators do not fully understand the tradeoffs occurring when digital broadband intermediaries dominate market segments, including internet search, social networking, and internet-mediated, retail commerce.²³¹ One can readily appreciate the upside consumer benefits in having access to advertiser-supported content and internet markets subsidized by ventures willing to forego short-term profits for longer-term market share and diversification.²³² A more difficult undertaking calculates what direct and indirect costs consumers incur, presently and in the future, for the opportunity to access what a unicorn “freely” offers.²³³

Widely embraced economic doctrine favors a reluctance by government to interfere with marketplace activities, particularly when identifiable, near-term cost savings and other welfare enhancements flow to consumers.²³⁴ However, it has become increasingly clear that consumers have to contribute more value than what they might infer from widespread promotion of “free” and subsidized access.²³⁵ That insight occurs even with a cursory assessment of what transactions occur on the upstream side of an intermediary’s market.²³⁶ The platform must generate sufficient revenues to subsidize subscriber access to goods and services without direct, out-of-pocket payments.²³⁷ For example, Google constantly conducts advertisement placement auctions, the ample revenues of which subsidize its free services, such as search, email, mapping, language translation, computer and wireless handset operating systems,²³⁸ storage, and word processing.²³⁹

Digital platform subscribers need to know the consequences of commodification of their consumer data, just as courts need to assess the full impact of upstream and downstream transactions.²⁴⁰ In light of the potential for upside benefits and downside costs, courts should challenge the conventional wisdom that assumes intermediaries massively enhance consumer welfare, and should expand scrutiny to transactions on both sides of the platform.²⁴¹ While consumers need to exercise greater care, so too do government agencies and courts having statutory responsibilities to assess the potential for consumer harm and to establish safeguards.²⁴²

Regulatory agencies with jurisdiction to safeguard consumers and reviewing courts should better calibrate the tools they use to investigate the potentially harmful effects of platform intermediaries on competition and consumers, with emphasis on the potential for privacy intrusions, unfair trade practices, market concentration, subscriber lock-in, and anticompetitive tactics.²⁴³ The goals for recalibration should focus on acquiring a better understanding of platform operator practices and their impacts rather than serve as a justification for more intrusive government oversight.²⁴⁴

Such a holistic approach can better assess the costs and benefits generated by platform intermediaries. It does not always support an analysis on both market sides, but a thorough assessment provides greater certainty in conclusions to concentrate solely on one side. For example, the Supreme Court undertook an analysis of both market sides of a dominant local newspaper and concluded that only the downstream side mattered in Times-Picayune Publishing Co. v. United States.²⁴⁵ In this case, the Court opted to focus solely on downstream market effects, considering a newspaper platform as one-sided because the impact of an alleged vertical restraint largely affected only one side.²⁴⁶ The Court determined that requiring advertisers to buy placements in both morning and evening editions of the newspaper primarily benefitted consumers by increasing financial subsidies available to them in the form of subsidized subscriptions and single edition prices with only insignificant direct or indirect effects on the local marketplace for newspaper advertisements.²⁴⁷

Regulatory agencies should bolster and enforce requirements that digital intermediaries fully and transparently disclose the nature and scope of their data mining and sales to third parties. The European Union has sought to identify and implement best practices in data protection and transparency through its General Data Protection Regulation (GDPR).²⁴⁸ While this comprehensive regulation may overreach and impose excessive and costly procedural requirements,²⁴⁹ it does identify fundamental consumer rights worthy of protection and enforcement.²⁵⁰ These include easier ways to know what data companies hold about individuals, clear responsibility for organizations to obtain informed consent before collecting information, timely disclosure of data breaches, the right to secure corrections to inaccurate data, opt-out opportunities, and an enforcement mechanism for violations.²⁵¹

The GDPR offers additional consumer safeguards that might hamper the business plans of digital intermediaries and advertiser-supported access to content.²⁵² These include the right to be forgotten—i.e., the mandatory elimination of information about a person deemed non-representative and potentially damaging and private, for example information about prior criminal convictions, and other judicial proceedings, such as a bankruptcy filing and revenge pornography.²⁵³ The GDPR also requires data portability that confers elements of an ownership right to consumers including the power to authorize transfer of personal data from one data mining and analytics firm to another.²⁵⁴ These two safeguards present significant procedural and substantive challenges and risk violating core constitutional values, such as press freedom to research and disclose facts and property ownership rights.²⁵⁵

While the European Union may have overreached with the breadth, scope, and business disruption presented by the GDPR, the United States and other nations lag in consumer protection.²⁵⁶ A significant minority of the Supreme Court expressed hostility toward any judicial examination of both market sides served by a platform intermediary.²⁵⁷ At the very least, a complete forensic examination of market effects from both sides makes sense given an understanding of what lurks upstream.

Conclusion

The value proposition presented by the diverse set of broadband platforms requires consumers and governments to consider costs and benefits generated by transactions occurring on both sides of the intermediary’s market. Singular focus on just one of the two sides risks an inaccurate finding, either a false positive that no anticompetitive or consumer harm has occurred, or a false negative finding the absence of problems even as they cause direct or indirect damage.²⁵⁸ Much of the potential for actual or potential harm lies in the often-obscured transactions between the digital platform and upstream data miners, analysts and brokers, content providers, and advertisers.²⁵⁹ In this often-murky place, much mischief and worse behavior can occur that reduces or eliminates the benefits flowing downstream to consumers.²⁶⁰

The Supreme Court’s conservative majority appears to have embraced relatively new economic doctrine supporting a netting of competitive and consumer impacts on both sides of a digital platform with an eye toward bolstering its baseline preference to support corporate flexibility free of government oversight.²⁶¹ However, doing so has generated a new precedent that in application may not always favor a libertarian outcome.

To be consistent, courts embracing a two-sided market analysis, should be equally comfortable with two outcomes:

(1) the reversal of a false positive finding of anticompetitive harm by factoring offsetting beneficial effects on consumers and competition occurring on the other side of a platform; but also

(2) the reversal of a false negative finding of no anticompetitive harm when factoring countervailing damage occurring on the other side of the platform that a one-sided market analysis would have missed.²⁶²

Validating an examination of platform-generated benefits and harms can help courts update increasingly suspect assumptions about how markets work, particularly via digital broadband networks. Much revered, so-called Chicago School marketplace assumptions and antitrust prescriptions²⁶³ have become suspect,²⁶⁴ including the view that rational commercial actors (such as Amazon) would never pursue below market pricing in light of the unlikely opportunity of recouping current losses in the future.²⁶⁵ Likewise, a laser focus on efficiency and consumer welfare, as espoused by Robert Bork,²⁶⁶ may require a longer timespan that considers whether immediate and easily measured, short-term consumer welfare enhancements are partially or completely offset in the longer-term, particularly in light of what can be discovered with an evidentiary analysis of upstream transactional effects.²⁶⁷

Consumers and governments often cannot fully assess the consequences of the growing importance of dominant platforms in the global economy.²⁶⁸ Intentionally limiting the scope of forensic investigation to just one of two market sides risks increasing the likelihood of an incomplete assessment whether consumers and competition benefit or suffer from the “centripetal pull of producers and consumers, and of users and advertisers, toward dominant platforms.”²⁶⁹

Even the most popular and trusted platform operators, such as Facebook, Google, Yahoo, and Twitter, have become unintentional and unacceptably passive conduits for a toxic mix of “fake news,” identity theft, disinformation, propaganda, defamation, extortion, and character assignation.²⁷⁰ Reluctance among government agencies and courts to examine upstream transactions and platform subscribers’ unwillingness or inability to read and understand their service agreement combine to create opportunities for people and ventures with bad intent to escape detection and sanction.²⁷¹ We may soon reach a point where the failure to act may significantly reduce the value position in platform transactions and the level of trust needed to support ever-expanding use.

If stakeholders in the internet ecosystem will not self-regulate and sanction bad actors, government may have to intervene. For already authorized involvement, such as antitrust law enforcement, courts should recalibrate their relevant market definitions to include both sides of an intermediary platform because transactions occurring on either side have direct and indirect impacts on users both upstream and downstream. Rather than violate case precedent and law, this holistic approach updates the evidence-collection process to reflect changes in how an increasing percentage of personal and commercial transactions take place.

Two-Sided Internet Markets and the Need to Assess Both Upstream and Downstream Impacts

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