Two Sides to the Story: An Economic Critique of Ohio vs. Amex

Abstract

The attractiveness of a platform to one side depends on the number of users on the other side. Platforms use pricing strategies — i.e., they offer lower/zero prices to one side and charge users on the other side — to attract users on one side. Successful platforms tend to grow because of network effects. While traditional antitrust would have viewed conduct by “dominant” entities stringently, recent antitrust enforcement has considered the economics behind such platforms and netted the harm to one side against the benefits to the other side when evaluating conduct. We explore whether this stylised view of the economics of platform markets has come at the expense of effects-based analysis of alleged anti-competitive conduct. Specifically, we analyse the Amex vs. Ohio case which dealt with whether anti-steering provisions instituted by credit card companies are anti-competitive. The US Supreme Court evaluated the anti-steering provisions in the context of a two-sided platform and ruled that Amex charged merchants higher fees to provide a more robust rewards program to its cardholders and “evidence of price increases on one side of a two-sided platform cannot be construed as an anticompetitive exercise of market power.” Effects-based analysis of Amex’s conduct would reveal that its outcome is the stifling of competition in terms of fees charged between credit card networks for usage by merchants. We contend that the US Supreme Court’s decision was akin to a template-based application of economic theory.