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Market Definition and Market Power in Payment Card Networks

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Author Info

  • Erich Emch

    (Economic Analysis Group, Antitrust Division, U.S. Department of Justice)

  • T. Scott Thompson

    (Bates White, LLC)

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    Abstract

    We discuss competition among payment card networks, and in particular how antitrust practitioners might approach questions or market definition and market power in these markets. Application of the hypothetical monopolist test to define markets, and the use of traditional metrics to measure market power, may be less straightforward for card networks than for many markets. The interrelationships between network pricing to merchants, to bank issuers of payment cards and indirectly, to final consumers, complicates the analysis. The "two-sidedness" of the market does not, however, overturn the basic logic of the hypothetical monopolist test or traditional measurements of market power. We demonstrate some practical ways to apply these antitrust principles to competition among payment card networks.

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    File URL: http://www.bepress.com/rne/vol5/iss1/4/
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    Bibliographic Info

    Paper provided by Department of Justice, Antitrust Division in its series EAG Discussions Papers with number 200609.

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    Length: 16 pages
    Date of creation: Mar 2006
    Date of revision:
    Handle: RePEc:doj:eagpap:200609

    Contact details of provider:
    Postal: Department of Justice Antitrust Division 450 Fifth Street NW Washington, DC 20530
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    Web page: http://www.justice.gov/atr/
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    Cited by:
    1. Filistrucchi, L. & Geradin, D.A.A.G. & Damme, E.E.C. van, 2012. "Identifying Two-Sided Markets," Discussion Paper 2012-008, Tilburg University, Tilburg Law and Economic Center.
    2. Tosza, Katarzyna, 2009. "Payment Card Systems as an Example of two-sided Markets - a Challenge for Antitrust Authorities," MPRA Paper 23822, University Library of Munich, Germany.
    3. Jean-Charles Rochet, 2007. "Some economics of horizontal integration in the payments industry," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City.

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