United States: Tech Mergers

Nature of two sided markets

Even before the covid-19 pandemic, e-commerce was a pillar of the economic marketplace. In 2018 alone, e-commerce made up almost one-sixth of all US retail[2] and has shown no signs of stopping. E-commerce’s extraordinary growth, however, is not merely a function of consumer demand. Online platforms such as Amazon and Etsy have reduced the barriers to entry for prospective sellers, providing those sellers with opportunities to scale and turn a profit without the hassles typically associated with owning a business. Even brick-and-mortar establishments such as Target and Walmart have joined the e-commerce fray, with the latter becoming the second largest online retailer in the United States.[3]

Facilitating e-commerce’s rise is the growing prevalence of two-sided marketplaces. Broadly, two-sided marketplaces bring together buyers and sellers onto a platform to facilitate an exchange of goods or services.[4] Take, for example, Etsy. Etsy provides a platform to sellers of unique goods to list their wares on its website for buyers to purchase. In exchange for providing sellers access to buyers, Etsy charges a seller a transaction fee as well as a payment processing fee.

Two-sided marketplaces are unique because of their dependence on indirect network effects. These indirect network effects ‘exist where the value of the two-sided platform to one group of participants depends on how many members of a different group participate’.[5] Simply put, the size of the network of a platform influences its overall success. Sellers would not be willing to sell on Etsy if there were no buyers. And, conversely, buyers would not be willing to purchase goods on Etsy if their options from sellers were limited.

Market definition

These indirect network effects are especially important for defining a relevant product market in US courts. As the US Supreme Court has noted, ‘two-sided platforms cannot raise prices on one side without risking a feedback loop of declining demand.’[6] This indirect network effect mitigates the anticompetitive effects typically associated with higher prices. In other words, if Etsy’s transaction fees are too high, sellers will choose other options or pass on these prices to consumers. This then affects the number of buyers who turn to a website like Etsy because they are unable to find a wide variety of goods they want to buy or at the prices they prefer.

Indeed, because the increase in fees on the seller side of the market may affect the buyer side, the US Supreme Court requires that any market definition ‘be defined to include both [sellers] and [buyers].’[7] Otherwise stated, ‘[p]rice increases on one side of the platform . . . do not suggest anticompetitive effects’ unless there is ‘some evidence that they have increased the overall cost of the platform’s services’.[8] Any allegations of anticompetitive behaviour must therefore point to increases in the overall costs of transactions ‘above a competitive level’ for both buyers and sellers to successfully demonstrate that such behaviour is anticompetitive.[9]

Competitive effects

To assess the competitive effects of a merger between platforms, the US Supreme Court has been clear: ‘Only other two-sided platforms can compete with a two-sided platform for transactions.’[10] The US district court’s decision in the Sabre/Farelogix shows how courts have adopted the US Supreme Court’s approach when reviewing US antitrust regulators’ attempts to block a merger. As noted above, in United States v. Sabre, et al., the court denied the DOJ’s request for an injunction because only Sabre was a two-sided platform.[11] Even if both platforms were two-sided, however, the anticompetitive effects of a merger between two-sided platforms would need to ‘reverberate . . . to such an extent as to make the two-sided . . . platform market, overall, less competitive.’[12] This framework suggests that Etsy and Target, though both engaged in E-commerce, would not necessarily be competitors. Target is a one-sided marketplace that sells its own goods online. Etsy sells no products at all, but instead provides a service for buyers and sellers. And, even if both Etsy and Target were two-sided marketplaces, the anticompetitive effects would need to occur on both the buy and sell sides to be unlawful.


The recent examples of the DOJ and the FTC’s enforcement actions suggest that the US antitrust enforcement agencies may continue to demand structural remedies with upfront buyers and divestitures of entire business units. However, the current political landscape across the US antitrust agencies suggests that the agencies may shift toward heavier scrutiny of divestiture buyers in tech mergers that could take longer periods to negotiate and that may eventually lead the parties to abandon their transactions. Throughout 2021, DOJ and FTC officials have reiterated their general scepticism of private equity divestiture buyers and their incentives for them to compete aggressively and invest and innovate over the long term.

Merging parties, especially in technology and digital platforms, should expect that US antitrust agencies will continue to be aggressive in their enforcement and may urge the parties to settle or to continue to face increased scrutiny. As seen during the past year, in the face of challenges by US authorities, several merging parties involved in digital or technology mergers (Visa/Plaid or CoStar/Rentpath) abandoned their transactions.

Synthesis: trends, differences across agencies

From 2019 to the first half of 2021, the DOJ and the FTC were active in technology and digital market merger enforcement. The agencies continued to focus on both horizontal and vertical mergers across the tech and digital sectors, and they continued to focus on transactions involving innovative competitors.

Looking forward, with the White House Council Competition, FTC Chair Lina Kahn, and DOJ Assistant Attorney General for the Antitrust Division-nominee Jonathan Kanter at the helm of antitrust policy in the United States, this merger enforcement trend will likely continue. In addition, the White House’s Executive Order on Promoting Competition in the American Economy specifically directs heightened attention to competition in the technology sector by drawing attention to ‘serial mergers, the acquisition of nascent competitors, the aggregation of data, unfair competition in attention markets, the surveillance of users, and the presence of network effects’.[13] Technology companies and digital platforms should anticipate more scrutiny in the form of voluntary access letters, requests for additional information and documentary material, longer periods to negotiate divestitures and other remedies, and a potential review of past acquisitions. Technology companies should also expect more cohesion in antitrust enforcement across the federal government, including more coordination across agencies and increased coordination with foreign competition agencies on these issues.


1 George L Paul is a partner, D Daniel Sokol is a senior adviser and Gabriela Baca is an associate at White & Case LLP. Any views expressed in this publication are strictly those of the authors and should not be attributed in any way to White & Case LLP. The authors gratefully acknowledge the contributions of Michael Kucharski and Alexander Andresian.

2 Fareeha Ali, ‘US Ecommerce Sales grow 15.0% in 2018’, Digital Commerce 360 (13 March 2019), https://www.digitalcommerce360.com/2019/03/13/us-ecommerce-sales-grow-15-0-in-2018/.

3 Amy Baxter, Amazon, Walmart, eBay Are Top E-Commerce Retailers, Retail Leader (11 May 2021), https://retailleader.com/amazon-walmart-ebay-are-top-e-commerce-retailers.

4 See, e.g., Ohio v. Am. Express Co., 138 S. Ct. 2274, 2280 (2018) (‘[A] two-sided platform offers different products or services to two different groups who both depend on the platform to intermediate between them.’).

5 Ohio v. Am. Express Co., 138 S. Ct. 2274, 2280 (2018).

6 Ohio v. Am. Express Co., 138 S. Ct. 2274, 2285 (2018); United States v. Sabre Corp., 452 F. Supp. 3d 97, 136-37 (D. Del. 2020) (finding that Ohio v. Am. Express Co. applies beyond the credit card industry and extends to the airline booking industry, and therefore Farelogix does not compete with Sabre, which offers a two-sided platform).

7 Ohio v. Am. Express Co., 138 S. Ct. 2274, 2287 (2018).

8 Ohio v. Am. Express Co., 138 S. Ct. 2274, 2286 (2018).

9 Ohio v. Am. Express Co., 138 S. Ct. 2274, 2278.

10 Ohio v. Am. Express Co., 138 S. Ct. 2274, 2287 (2018).

11 See e.g., United States v. Sabre Corp., 452 F. Supp. 3d 97, 138 (D. Del. 2020) (noting that one of the parties to a merger is ‘a one-sided player’ and the other party is a ‘two-sided transaction platform’ and therefore ‘DOJ cannot prevail on its claim as a matter of law’).

12 United States v. Sabre Corp., 452 F. Supp. 3d 97, 138 (D. Del. 2020).

13 White House, Executive Order on Promoting Competition in the American Economy, 9 July 2021, available at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/.

Get unlimited access to all Global Competition Review content