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Yale Law Journal


For markets characterized by significant economies of scale, scholars and policy- makers o�en advance open-access and interoperability requirements as superior to both regulated monopoly and the breakup of dominant firms. In theory, by compelling firms to coordinate in the development of common infrastructure, these requirements can replicate the advantages of scale without leaving markets vulnerable to monopoly power. Examples of successful coordination include the provision of electricity, intermodal transportation, and credit-card networks.

This Article offers a qualification to this received wisdom. By tracing the Depository Trust and Clearing Corporation’s path to monopoly in the U.S. securities clearing and depository markets, it demonstrates that open-access and interoperability requirements can serve as instruments by which dominant firms obtain and entrench their monopoly power. Specifically, by imposing high fixed costs to connect to common infrastructure, allowing dominant firms to dictate the direction and pace of innovation and investment, and reducing the scope for product differentiation, these requirements can prevent smaller firms from competing with their larger rivals. In these ways, open access and interoperability can exacerbate the very problems they were designed to address.

Our analysis helps to explain why important components of our financial infrastructure have become too big to fail. It also helps explain why, despite their highly concentrated structure, U.S. securities clearing and depository markets still exhibit relatively high levels of innovation and in- vestment. More broadly, our analysis offers a cautionary tale for policymakers seeking to employ open-access and interoperability requirements to curb growing market power in Big Tech, social media, finance, and elsewhere. Open access and interoperability are unlikely to constrain market power unless larger firms are unable to dictate decisions about innovation and investment, and unless the costs of building, maintaining, and connecting to common infrastructure are allocated in a way that does not discriminate against smaller firms. Where this is not possible, open access and interoperability are unlikely to forestall monopoly control, though they might still improve market efficiency by exposing incumbents to the threat of new entry.

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