In a new commentary addressing the Department of Justice’s recent defeat in attempting to block the merger of Sabre and Farelogix, AAI Vice President of Legal Advocacy Randy Stutz argues that the district court’s opinion betrays fundamental failings in the Supreme Court’s analytical approach to “two-sided” markets as adopted in the 2018 Ohio v. American Express (“Amex”) case. The commentary, “We’ve Seen Enough: It Is Time to Abandon Amex and Start Over on Two-Sided Markets,” argues that the Sabre court’s application of Amex is clearly incorrect and should be easily reversed on appeal, because it ignores that mergers between two-sided and one-sided firms can harm competition in one-sided markets. But regardless, the case shows why the Amex approach to two-sided markets is unworkable and incoherent.
Amex involved a government challenge to anti-steering rules that American Express imposes on merchants to prevent them from encouraging customers to use cheaper payment alternatives. The Court in Amex held that the government failed to define a proper relevant market. Rather than focusing on harm to competition on the merchant side of the two-sided credit card market, the Court held that the government should have defined a market for credit card “transactions” that analyzes the merchant and cardholder sides together, as component parts of a single, jointly consumed product.
Stutz argues that, contrary to the rule that antitrust law protects competition, not competitors, Amex protects competitors that have platform business models at the expense of competition on either side of the platform. In the course of doing so, Amex converts the economic process of defining antitrust markets from a tool for illuminating competitive effects into a tool for hiding them. And worse, nobody knows how or when to apply Amex’s divergent approach to market definition, which ordinarily depends on the economic force of demand substitution and continues to do so for the remainder of the economy.
The commentary concludes that it is already clear, after only two years, that the Amex opinion must be narrowly cabined by the federal courts or else should be legislatively overturned by Congress. Otherwise it risks serious harm to antitrust law and competition.