THE IMPACT OF AMEX AND ITS PROGENY ON TECHNOLOGY PLATFORMS.

• Author: Fujii, Kacyn H.

Big Tech today faces unprecedented levels of antitrust scrutiny. Yet antitrust enforcement against Big Tech still faces a major obstacle: the Supreme Court's 2018 decision in Ohio v. American Express. Popularly called Amex, the case imposed a higher initial burden on antitrust plaintiffs in cases involving twosided markets. Two-sided markets connect two distinct, noncompeting groups of customers on a shared platform. These platforms have indirect network effects, meaning that one group of customers benefits when more of the second group of customers joins the platform. Two-sided markets are ubiquitous in the technology sector, encompassing social media, search engines, and online marketplaces.

Many have observed that the Amex Court's reasoning drew on questionable economic principles, contrary to the typical approach in antitrust law. This Note examines and adds to these critiques through a novel analysis of lower-court cases post-Amex. This analysis reveals that Amex has resulted in inconsistencies and confusion in the lower courts, opening the door for technology defendants to manipulate Amex is definition of two-sided markets for their own benefit. To resolve these inconsistencies, this Note proposes a two-part legislative solution to curb Amex s reach.

TABLE OF CONTENTS INTRODUCTION I. AMEX AND TWO-SIDED MARKETS A. The Evolution of Antitrust Law B. Antitrust Modes of Analysis C. The Amex Formulation II. PROBLEMS WITH AMEX A. Amex s Application to Antitrust Analysis 1. Net-Effects Analysis Versus Separate-Effects Analysis. 2. Plaintiff s Burden . 3. Competition Between Two-Sided and One-Sided Markets B. Amexs Characterization of Two-Sided Markets 1. Simultaneous-Transaction Requirement 2. Strength of Indirect Network Effects III. SOLUTIONS A. Replacing the Simultaneous-Transaction Requirement with Narrow Categories of Two-Sided Markets B. Clarifying the Relationship Between One- and Two-Sided Markets C. Legislative Solutions Are Consistent with the Intent of the Sherman Act CONCLUSION INTRODUCTION

After years of growing concern about Big Tech's influence over our markets, data, and society more generally, in July 2020 the House Judiciary Committee's antitrust subcommittee held an unprecedented hearing that brought the leaders of Amazon, Facebook, Apple, and Google to Washington. (1) At the hearing, members on both sides of the aisle expressed concern over Big Tech's power, especially during the COVID-19 pandemic. (2) By September, the Federal Trade Commission (FTC) had begun investigating Amazon and gearing up to file a possible antitrust suit against Facebook. (3) In October, the Senate Commerce Committee unanimously voted to subpoena the CEOs of Facebook, Google, and Twitter. (4) Only days later, the House Judiciary antitrust subcommittee released a landmark report that concluded a sixteen-month investigation into Amazon, Facebook, Google, and Apple. (5) This report broke new ground by declaring that Google and Facebook had monopoly power and by indicating Congress's support for major antitrust legislation for the first time in decades. (6) The report also signaled that Congress would support stronger antitrust enforcement by federal and state enforcers. (7) The Department of Justice, the FTC, and multiple state attorneys general subsequently brought lawsuits against Google and Facebook for anticompetitive behavior. (8) Amid these lawsuits, Congress has continued to press forward with legislation that would make sweeping changes to antitrust law, such as a bill proposed by Senator Klobuchar in February 2021. (9)

Technology companies (10) have never faced this level of scrutiny, but existing antitrust law has limited power over Big Tech companies. Courts interpret the Sherman Act using the consumer welfare standard, which relies on economic measures like price to determine violations of antitrust law. (11) Typically, monopolies raise prices, which directly harms consumers. Technology companies are unique in that they offer their products for free or for very low prices making it difficult to demonstrate harm to consumers. (12)

A 2018 Supreme Court opinion presents another major obstacle to enforcing antitrust laws against technology companies. (13) Ohio v. American Express Company (Amex) created a framework for regulating two-sided markets (interchangeably referred to as two-sided platforms) under antitrust law. (14) In a two-sided market, two distinct customer groups create benefits for each other through their shared interest in a particular product or service. For example, platforms like Uber rely on demand from each side of the market--drivers and riders--to succeed. Two-sided platforms are ubiquitous in the technology sector and the economy in general; prominent examples include credit- and payment-card systems, search engines, online marketplaces, social media, newspapers, airline- and restaurant-reservation systems, and ridesharing services. (15) Under Amex, antitrust plaintiffs bear the additional burden of showing net anticompetitive harm on both sides of a two-sided market. (16) In addition, Amex's broad definition of two-sided markets may shield many Big Tech companies from antitrust liability. (17)

Many scholars have speculated about how Amex will affect Big Tech and antitrust law in general. (18) While scholars have critiqued Amex and analyzed some post-Amex cases, (19) this Note is the first to examine Amex's impact on Big Tech by pulling together several recent lower-court decisions. It also offers a novel legislative compromise that would limit Amex's reach without overturning it outright. In doing so, this Note provides a politically divided Congress with another option to consider as they debate changing the antitrust laws. Part I overviews the evolution of antitrust law and explains how Amex has modified antitrust analysis for two-sided markets. Part II analyzes recent lower-court cases to illustrate Amex's inconsistencies and demonstrate how Amex makes it even harder to rein in Big Tech. Part III responds by proposing legislation to limit Amex's holding to a narrow set of two-sided markets that can be adjusted to meet new antitrust challenges.

1. AMEX AND TWO-SIDED MARKETS

   Given its potential impact on the technology sector, Amex has been called the most consequential antitrust decision of the decade. (20) This Part presents background on the purpose and development of antitrust law prior to the Amex decision. Section I.A describes the evolution of antitrust law. Section I.B introduces current modes of antitrust analysis. Section I.C explains how Amex modified antitrust analysis for two-sided markets.

   1. The Evolution of Antitrust Law

      Antitrust law is governed primarily by the Sherman Act, which was passed in 1890 to promote fair competition in the economy. (21) The Sherman Act's broad language allowed courts to play a large role in its interpretation, effectively making it a common law statute. (22) Thus the Sherman Act's application has varied in accordance with changing public values and goals surrounding antitrust enforcement since its enactment.

      The framers of the Sherman Act were concerned with a small number of firms having too much power. (23) They also wanted to make sure that firms played fairly so that small businesses would have the chance to compete. (24) To achieve these goals, courts first relied on structuralism, the idea that certain market structures can impede competition. (25) For example, when there are fewer firms in a market, it is easier for them to collude and engage in oligopolistic behavior like price fixing. (26) Until the 1960s, courts blocked mergers that they determined would result in too much market concentration. (27)

      In the 1970s, however, the Supreme Court replaced structuralism with the "consumer welfare" standard propounded by the Chicago School of economics and antitrust. (28) The Chicago School defines consumer welfare as allocative efficiency across both consumers and producers. (29) Under this standard, behavior that results in efficiency gains to either consumers or producers should be upheld under antitrust law. (30) This is based on the belief that firms will try to maximize profits and efficiency, which ultimately helps consumers through lower prices and better products. (31) In other words, even if there is no direct benefit to consumers, the Chicago School subscribes to the view that greater efficiencies for companies will eventually help consumers.

      The consumer welfare standard focuses on empirical harm to the market as measured by economic indicators, especially price. (32) Given this focus on economics, plaintiffs must also show actual anticompetitive harm instead of merely showing that the market structure typically leads to anticompetitive behavior. (33) Under the Chicago School standard, it is not enough to show that Google, for example, has monopoly power--plaintiffs must demonstrate that Google's specific behavior resulted in anticompetitive harm to the market. Moreover, vertical agreements (agreements between firms at different levels of the production chain, like manufacturers and retailers) receive less scrutiny than horizontal agreements (agreements between competitors) under the Chicago School approach. (34) This shift from structuralism to the Chicago School approach has thus led to lax antitrust enforcement and a greater reliance on economics in antitrust law. (35)

   2. Antitrust Modes of Analysis

      The first section of the Sherman Act reads: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." (36) Initially, the Supreme Court read this to prohibit all restraints of trade, defined as any activity that limited competition. However, all kinds of activities limit competition, such as agreements between small businesses to not compete with each other or to share information on...