Commissioner Joshua D. Wright and John Yun
83 Geo. Wash. L. Rev. 2130
Published in Connection With the Law Review’s 2014 Symposium “The FTC at 100”
In this Essay, the authors argue that in cases involving digital platforms,
the Federal Trade Commission—when alleging unfair acts or practices in violation
of section 5 of the Federal Trade Commission Act—must adopt the
insights from platform economics and apply them within the legal framework
of section 5(n), as informed by the Commission’s Policy Statement on Unfairness.
After outlining the development and rise of digital platforms and discussing
of the importance of digital platforms to consumers and the
marketplace, this Essay sets forth a brief overview of the basic economics of
multisided platform markets and points out the key differences between these
markets and traditional markets as well as their corresponding implications
for consumer welfare. The Essay then describes the evolution of the Commission’s
unfairness authority in consumer protection cases—including the statutory
requirement that the agency conduct cost-benefit analysis—and examines
how the Commission has performed such cost-benefit analyses in recent cases.
The Essay critiques the Commission’s decision in the recent Apple case as an
example of the potential pitfalls for consumer protection in multisided markets
when the Commission conducts a cost-benefit analysis without arming itself
with the basic economic insights from platform economics. Untethered from
the appropriate economic framework, the Commission’s logic allows it to condemn
product design decisions whenever it can imagine an alternative design
it believes survives a cost-benefit test. As the number of consumer protection
cases involving digital platforms inevitably rise, the authors recommend that
the Commission instead apply insights from platform economics within the
well-established legal framework of section 5(n) and the FTC Policy Statement
on Unfairness.
