What's in Your Wallet (and What Should the Law Do About It?)

• Published in: The University of Chicago law review Vol. 87; no. 2; pp. 553 - 594
• Main Author: Sarin, Natasha
• Format: Journal Article
• Language: English
• Published: Chicago University of Chicago Law Review 01.03.2020; University of Chicago, acting on behalf of the University of Chicago Law Review
• Subjects: American Express Company; Antitrust; Consumer protection; Economic aspects; Law and legislation; Markets; Price increases; Prices; Symposium: Reassessing the Chicago School of Antitrust Law; United States. Consumer Financial Protection Bureau; UNITED STATES; Ohio; United States > US
• ISSN: 0041-9494; 1939-859X

In traditional markets, firms can charge prices that are significantly elevated relative to their costs only if there is a market failure. However, this is not true in a two-sided market (like Amazon, Uber, and Mastercard), in which firms often subsidize one side of the market and generate revenue from the other. This means consideration of one side of the market in isolation is problematic. The Court embraced this view in Ohio v American Express, requiring that anticompetitive harm on one side of a two-sided market be weighed against benefits on the other side. Legal scholars denounce this decision, which, practically, will make it much more difficult to wield antitrust as a tool to rein in two-sided markets. This inability is concerning as two-sided markets are growing in importance. Furthermore, the pricing structures used by platforms can be regressive, with those least well-off subsidizing their affluent and financially sophisticated counterparts. In this Essay, I argue that consumer protection, rather than antitrust, is best suited to tame two-sided markets. Consumer protection authority allows for intervention on the grounds that platform users create unavoidable externalities for all consumers. The Consumer Financial Protection Bureau (CFPB) has broad power to curtail "unfair, abusive, and deceptive practices." This authority can be used to restrict practices that decrease consumer welfare, like the antisteering rules at issue in Ohio v American Express.