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Market Definition and Market Power in Payment Card Networks

Author

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  • Erich Emch

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

  • T. Scott Thompson

    (Bates White, LLC)

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.

Suggested Citation

  • Erich Emch & T. Scott Thompson, 2006. "Market Definition and Market Power in Payment Card Networks," EAG Discussions Papers 200609, Department of Justice, Antitrust Division.
  • Handle: RePEc:doj:eagpap:200609
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    File URL: http://www.bepress.com/rne/vol5/iss1/4/
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    Cited by:

    1. Filistrucchi, L. & Geradin, D.A.A.G. & van Damme, E.E.C., 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. Dittmann, Heidi & Kuchinke, Björn A., 2016. "Sharing Economy and Regulation," 27th European Regional ITS Conference, Cambridge (UK) 2016 148665, International Telecommunications Society (ITS).
    4. 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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