Platform economics and antitrust enforcement: A little knowledge is a dangerous thing

• DOI: http://doi.org/10.1111/jems.12304
• Date: 01 January 2019
• Author: Michael L. Katz
• Published date: 01 January 2019

Received: 22 August 2018

|

Accepted: 24 August 2018

DOI: 10.1111/jems.12304

Platform economics and antitrust enforcement: A little

knowledge is a dangerous thing

Michael L. Katz

1,2

1

Sarin Chair Emeritus in Strategy and

Leadership, Haas School of Business,

Berkeley, California

2

Professor Emeritus, Department of

Economics, University of California,

Berkeley, Berkeley, California

Correspondence

Michael L. Katz, Sarin Chair Emeritus in

Strategy and Leadership, Haas School of

Business, University of California,

Berkeley, CA 94720‐1900.

Email: mlkatz@berkeley.edu

Abstract

Although the economics of multisided platforms has developed important

insights for antitrust policy, there are critical respects in which the body of

academic knowledge falls short of providing useful advice to enforcement

agencies and the courts. Indeed, there is a substantial risk that recent

scholarship will be misapplied to the detriment of sound antitrust policy, as

evidenced by the US Supreme Court’s recent decision in American Express.In

this note, I identify several areas in which economics research could potentially

make significant contributions to the practical antitrust treatment of platforms.

KEYWORDS

antitrust enforcement, platform economics, rebuttable presumption

“Justice Stephen Breyer’s dissent mocks the majority's economic reasoning, as will most economists, including

the creators of the “two‐sided markets”theory on which the court relied. The court used academic citations in

the worst way possible —to take a pass on reality.”

—Wu (2018b) commenting on the Supreme Court’s American Express opinion.

1

|

INTRODUCTION

Although multisided platforms have long been subject to antitrust enforcement,

1

the antitrust treatment of multisided

platforms has recently received heightened attention because of the importance and visibility of certain platforms,

especially Amazon, Facebook, and Google.

2

The explosion of academic research on platform economics over the past

15 years offers the promise of greatly improving the antitrust treatment of multisided platforms. However, while

platform economics has developed several important insights for antitrust policy,

3

there are important respects in which

the body of academic knowledge falls short of providing practical advice to antitrust enforcement agencies and the

courts. Consequently, there is a substantial risk that recent scholarship will be misapplied to the detriment of sound

antitrust policy—a risk that the US Supreme Court’s recent decision in American Express both illustrates and increases.

4

In this note, I identify several areas in which economics research could potentially make significant contributions to

the antitrust treatment of multisided platforms. My focus is not on the analysis of specific forms of conduct

(e.g., exclusive dealing, predatory pricing, or merger), many of which have been subject to considerable attention in the

literature.

5

Instead, I focus on what might be termed the “infrastructure”of an antitrust case.

J Econ Manage Strat. 2019;28:138–152.wileyonlinelibrary.com/journal/jems138

|

© 2019 Wiley Periodicals, Inc.

I testified as the government’s economic expert in United States v. American Express and United States v. Visa USA, Inc. This note does not draw on

any confidential materials from either matter. I am grateful to Julian Wright and an anonymous referee for extremely helpful comments.

ORIGINAL ARTICLE