Visa-Mastercard and the Identification of Collusive Practices in Two-Sided Markets

Authors

  • Duy D. Pham

Abstract

In the last couple of decades, several new businesses have come to dominate the high-tech sector, such as Google and Amazon. Pioneering research by French economists Jean-Charles Rochet and Jean Tirole has identified these businesses as two-sided markets or platforms. Two-sided platforms are novel because they require a business to bring on board two sets of customers so that they can engage in mutually beneficial interactions. The more users there are on the platform the more indirect network effects that are generated. Nevertheless, two-sided platforms are complex and this complexity makes it difficult to determine when their practices are anticompetitive and when they are procompetitive. A recent case that tries to grapple with the complex issues presented by two-sided platforms is the Competition Tribunal's decision in Commissioner of Competition v Visa-MasterCard (Visa-MasterCard). The decision addresses allegedly collusive practices engaged in by credit card networks. These networks are two-sided platforms where banks, merchants and credit cardholders interact. The purpose of this Paper is to provide guidance on how to properly identify collusive practices in two-sided markets. First, the Paper provides an overview of the economics of two-sided markets. Second, it analyzes the Visa-MasterCard decision to demonstrate the errors that should be avoided when trying to differentiate procompetitive from anticompetitive behaviour in two-sided markets. Third, it analyzes the U.S. Department of Justice's Apple e-books case to provide a fuller picture of collusive practices in two-sided markets. Lastly, it lays out plausible collusive theories of harm.

Downloads

Published

2016-01-01

How to Cite

Pham, D. D. (2016). Visa-Mastercard and the Identification of Collusive Practices in Two-Sided Markets. Canadian Competition Law Review, 29(1), 1–27. Retrieved from https://cclr.cba.org/index.php/cclr/article/view/700