In re Visa Check/Mastermoney Antitrust Litigation: A Study of Market Failure in a Two-Sided Market

Abstract

In the wake of landmark antitrust litigation in the high technology and payment systems industries, antitrust commentators and economists have increasingly focused on the unique issues raised by two-sided markets. This attention intensified following the merchant class action against Visa and MasterCard, In re Visa Check/MasterMoney Antitrust Litigation (“In re Visa Check”), in which the defendants unsuccessfully contended that the merchants could not prove antitrust injury because their damage theory supposedly did not account for the two-sided nature of the payment card market. Visa and MasterCard argued that to assert a damage claim in a two-sided market, buyers must show an overcharge impacting both sides of the market, regardless of which side they are on. According to Visa and MasterCard, the merchants had not done so and, therefore, their claims should have been dismissed on summary judgment. This paper explains why, contrary to Visa’s and MasterCard’s spin, In re Visa Check provides an example of a strong antitrust damages claim in a two-sided market. In fact, the case demonstrates that subverting competition on one side of the market can facilitate and exacerbate the cartelization of the other. Consequently, buyers on either side of the market have suffered antitrust injury and need not prove an overcharge affecting both sides to prevail. Before examining In re Visa Check in more detail, this article will explain the characteristics of two-sided markets and outline why these markets sometimes raise unique issues.