Two-Sided Platform Markets and the Application of the Traditional Antitrust Analytical Framework

Renata Hesse, Apr 19, 2007

It only takes working through a single matter that involves a two-sided market to recognize that the antitrust analysis can be a bit more complicated than with standard one-sided markets. The principle reason for the complication is evident from the descriptive moniker given these markets: they have two sides or, put more practically, they have two sets of independent customers. Generally, two-sided markets are characterized by (1) the presence of two distinct classes of customers for a vendor´s product or service, both of which are necessary for the existence of the product or service, and (2) indirect positive externalities between different classes of customers, meaning that the value of the product or service to one class of customer increases with the level of usage by the other customer class, at least up to a point. But why do these features make a difference in terms of the application of standard antitrust principles to these markets? Or, more colloquially, why is everyone talking about two-sided markets?

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• Hesse (April 2007)