When evaluating a two-sided transaction platform, U.S. courts look at the competitive effects on both sides of the platform. While the parameters for applying two-sided market definition remain subject to debate and development, courts have provided the following guidance in evaluating two-sided transaction platforms:
- Assessing competitive price requires examining the two-sided price, or “net price,” of a transaction on the platform; evidence related to price solely on one side is insufficient to demonstrate anticompetitive effects.
- Prices are supracompetitive only where the net prices charged to each side of the platform combined exceed the prices that would have been charged in a competitive market.
- The platform’s indirect network effects may require it to charge one side more than the other and design its relative price structure to “bring both sides onboard.”
- Measuring damages requires accounting for countervailing effects to each side of the platform.
See, e.g., Amex, 138 S. Ct. at 2287; US Airways, Inc. v. Sabre Holdings Corp., 938 F.3d 43, 57, 59; In re Payment Card Interchange Fee & Merch. Disc. Antitrust Litig., 2022 WL 14865281, at *12 (E.D.N.Y. Oct. 26, 2022).
Two-Sided Market Definition in the EU
Debate is ongoing in the EU over whether and when reviewing authorities should apply the single-market approach (i.e., two-sided market definition) or a “multi-markets” approach to market definition in cases involving multi-sided platforms. Unlike the two-sided market approach, the multi-markets approach involves defining separate markets for each customer group and considering the cross-group network effects both at the market definition stage and at subsequent stages of a competition law analysis. See, e.g., Judgment of 11 September 2014 in Case C-67/13 P, Groupement des cartes bancaires v Commission, ECLI:EU:C:2014:2204, paras. 77-80.
The EU courts also balance multi-sided platforms’ competitive effects differently. Unlike the U.S. courts’ combined weighing of competitive effects from each side of a platform, EU courts cannot offset anticompetitive effects on only one side of the platform with procompetitive advantages on the other side absent evidence of “appreciable objective advantages” in the market at issue. See, e.g., Judgment of 11 September 2014 in Case C-382/12 P, MasterCard and Others v Commission, ECLI:EU:C:2014:2201, para. 242.
Although the Commission and EU courts have generally preferred the multi-markets over the single-market approach, the Commission’s recently released draft revised Market Definition Notice offers new guidance for multi-sided platforms. The Commission may define the relevant market for multi-sided platforms as either a single market (i.e., two-sided) or separate markets for each side of the platform (i.e., multi-market). The Commission may also consider non-price elements in assessing substitution, including product functionality, intended use, evidence of hypothetical substitution, industry views, barriers to entry, and switching costs.
As reviewing authorities on both sides of the Atlantic continue to tailor market definition to fit evolving multi-sided platforms, more and more industries may be subject to analysis where competitive effects including price are considered only when combined and netted together to take into account how those platforms operate and simultaneously serve two sets of customers in the real world.