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.