Both Sides Now: Buyer Damage Claims in Antitrust Actions Involving “Two-Sided” Markets

Abstract

Uniquely–in scope, if not in kind–American antitrust enforcement is a creature of private litigation. Under Section 4 of the Clayton Act, anyone injured by reason of an antitrust violation is entitled to recover treble damages, as well as attorneys’ fees and costs. Given the seemingly limitless breadth of this statutory language, much judicial attention has focused on limiting treble damage liability, either by adopting rules to restrict antitrust standing, prohibiting suits by indirect purchasers (for all the good that did), or requiring plaintiffs to demonstrate separately that the illegal activity was the “but for” cause of the plaintiff’s injury and that the injury resulted from the reasons that the conduct in question is considered anticompetitive (“antitrust injury”). A common factor among these closely related legal rules is that they deny recovery on policy or prudential grounds to parties who, in fact, have been adversely affected by a defendant’s conduct. In general, treble damage actions are brought either by an allegedly disadvantaged, horizontal competitor of the defendant or by a buyer who is vertically situated, either directly or indirectly, in relation to the defendant–although that by no means exhausts the universe of antitrust claimants. While both competitors and customers may be appropriate antitrust plaintiffs in cases involving two-sided markets, claims by buyers on one “side” of such markets present the most interesting new challenges. In virtually every private damages case, the court must determine the nature of the “but for” world, to wit: What would have happened to the plaintiff if the illegal conduct had never occurred? Sometimes this exercise is merely a debate over the amount of price inflation and/or the extent of restricted output. In other instances, the question is whether the plaintiff’s situation would have been materially different but for the defendant’s conduct, “all things” considered. However, in cases involving two-sided markets, the analysis is more complicated because courts must consider a second group of customers whose participation was necessary for the transaction to occur. These buyers are not only absent from the suit, but they may have economic interests that are in direct conflict with those of the plaintiff. In addition, as Evans and others have demonstrated, the differences in pricing strategies between two-sided markets and standard markets affect both liability and damage issues. This Article attempts to outline some of the complexities that arise when buyers on one side of a two-sided market bring an action for treble damages. In particular, careful attention must be paid to the requirement of “antitrust injury,” which demands that the purported harm that the plaintiff-buyer suffered be real not only in a “but for” sense, but also that it has resulted from an injury to competition that was a product of “that which makes the defendant’s conduct unlawful.”