ICYMI: SCOTUS Filings Highlight Importance Of Innovation & Consumer Benefit
This week, a number of amicus briefs have been filed in advance of the Supreme Court’s hearing of the Ohio vs. American Express case, which, as Bloomberg’s Joshua Brustein has reported, “could heavily influence any future antitrust action against tech firms,” especially multi-sided platforms. Critics are advocating that courts ignore the differences between one-sided firms and multi-sided platforms.
15 antitrust scholars, including Richard Epstein, Geoffrey Manne, and Joshua Wright, disagree, writing, “The fundamental economic insight is that, in two-sided markets, overall competitive effects cannot be inferred from conduct or effects on one side of the market alone.”
They added, “As the Second Circuit correctly noted, ‘[s]eparating the two markets allows legitimate competitive activities in the market for general purposes to be penalized no matter how output-expanding such activities may be.’ Such condemnation would chill firms from engaging in output-expanding, i.e., procompetitive, conduct, a result that undermines the very goals of the antitrust laws.”
This position mirrors that of The Court of Justice of the European Union, who – in a similar case in 2014 – argued in two-sided markets, in particular, courts must take into account “interactions between the relevant market and a different and related market.”
This week, CCIA echoed this view noting that, “ignoring the competitive realities of multi-sided firms would raise the risk of false positives and ‘interminable litigation,’ id., stifling pro-competitive conduct and pro-consumer innovation. It would allow plaintiffs to base a prima facie case on little more than a caricature of a multi-sided firm’s competitive position, penalizing healthy competition and deterring the development of valuable new products and services that benefit both competition and consumers.”
15 Antitrust Scholars, Including Richard Epstein, Geoffrey Manne, And Joshua Wright, Argue That Overall Competitive Effects In A Two-Sided Market “Cannot Be Inferred From Conduct Or Effects On One Side Of The Market.” “The fundamental economic insight is that, in two-sided markets, overall competitive effects cannot be inferred from conduct or effects on one side of the market alone. What happens on one side of the market necessarily affects the other side, and so the platform faces tradeoffs in attempting to balance the competing interests of the two sides. Numerous activities impact the distribution of costs and benefits across different sides of the market— but do not necessarily affect overall output.” (Babette E. Boliek, , James C. Cooper, Richard A. Epstein, Stephen Haber, Thomas Winslow Hazlett, Justin Hurwitz, Jonathan Klick, Thomas Lambert, Abbott Lipsky, Geoffrey A. Manne, Steven Semeraro, David J. Teece, Joshua D. Wright, Christopher S. Yoo, And John M. Yun, “Brief For Amici Curiae Antitrust Law And Economics Scholars In Support Of Respondents,” Supreme Court, 1/22/18)
CCIA Highlights That If Courts Only Look At Pricing Decisions On One-Side Of A Multi-Side Firm, It Could Prevent Streaming Services, For Example, From Attracting Enough Viewers To Secure Advertisers To Support The Business. “If, for example, a court could find market power based on the simple fact a multi-sided firm charges one set of customers a price that exceeds marginal cost, while providing services to another set of customers for free, it may prevent a video-streaming service (or traditional television network, for that matter) from attracting enough viewers to attract the highest quality content providers—even though the prices charged to both sides of the firm were reasonably related to the firm’s total variable costs.” (CCIA, “Brief Of Amicus Curiae The Computer And Comunications Industry Association In Support Of Respondents,” Supreme Court, 1/23/17)
The Court Of Justice Of The European Union Argued In Two-Sided Markets, In Particular, Courts Must Take Into “Account Interactions Between The Relevant Market And A Different And Related Market.” “In order to assess whether coordination between undertakings is by nature harmful to the proper functioning of normal competition, it is necessary, in accordance with the case-law referred to in paragraph 53 above, to take into consideration all relevant aspects – having regard, in particular, to the nature of the services at issue, as well as the real conditions of the functioning and structure of the markets – of the economic or legal context in which that coordination takes place, it being immaterial whether or not such an aspect relates to the relevant market. That must be the case, in particular, when that aspect is the taking into account of interactions between the relevant market and a different related market and, all the more so, when, as in the present case, there are interactions between the two facets of a two-sided system.” (Case C‑67/13 P, The Court Of Justice Of The European Union, 9/11/14)
15 Antitrust Scholars Highlight That Arguments For Ignoring The Structure Of Multi-Sided Markets “Would Untether Antitrust Law From Rigorous Economic Analysis And Harm Consumers By Increasing Significantly The Risk Of Error In Lower Courts.” “Acquiescing to Petitioners’ vague conception of a plaintiff’s prima facie burden would untether antitrust law from rigorous economic analysis and harm consumers by increasing significantly the risk of error in lower courts. This would leave litigants with little to no certainty regarding what evidence they should introduce, let alone what evidence a court would find persuasive in any given case, and no clarity as to what businesses can and cannot do.” (Babette E. Boliek, , James C. Cooper, Richard A. Epstein, Stephen Haber, Thomas Winslow Hazlett, Justin Hurwitz, Jonathan Klick, Thomas Lambert, Abbott Lipsky, Geoffrey A. Manne, Steven Semeraro, David J. Teece, Joshua D. Wright, Christopher S. Yoo, And John M. Yun, “Brief For Amici Curiae Antitrust Law And Economics Scholars In Support Of Respondents,” Supreme Court, 1/22/18)