Market Definition

We explain the “hypothetical monopolist test” that has become the standard methodology for identifying relevant antitrust markets in merger cases, and discuss two approaches to implementing the test. We then focus on the implementation of the test when firms offer multiple products or services, either inside or outside the candidate market, and discuss the “hypothetical cartel test” introduced in the 2010 U.S. Merger Guidelines

Disaggregating Market Definition: \u3ci\u3eAmEx\u3c/i\u3e and a Plural View of Market Definition

The orthodox view of market definition in antitrust cases is that the same principles of market definition should apply at all stages of an antitrust analysis, and, in particular, that markets should be defined for virtually all purposes by reference to demand-side substitutability. Commentators have struggled to reconcile the Supreme Court’s recent decision in Ohio v. American Express Co.—in which the majority combined services to cardholders and services to merchants into a single antitrust market, despite the evident lack of substitutability between them—with that familiar view. In this short Article, we suggest that this effort at reconciliation may be unnecessary, and perhaps even undesirable. Against the orthodox view, we claim that market definition should be “disaggregated” such that the correct approach to market definition may vary depending on the element of the antitrust analysis for which it is being used. Thus, while market definition based on substitutability is an appealing tool for the assessment of market power, it may not be appropriate for the evaluation of competitive effects in all cases under Section 1 of the Sherman Act. The majority opinion in AmEx can (and perhaps should) be understood as an implicit—albeit cryptic—endorsement of a disaggregated approach to market definition. I. Introduction II. The AmEx Majority Opinion ... A. Overview ... B. Market Definition ... C. Analysis of Competitive Effects III. AmEx and a “Plural View” of Market Definition ... A. The Unitary View ... B. The Plural View IV. AmEx and the Integrity Principle V. Conclusio

Market Definition: Use and Abuse

A “market” can be rigorously and precisely defined quantitatively, but the information to do so is typically not available. Instead, markets are often defined based on qualitative information, leading to the possibility of errors. I make some practical suggestions to mitigate such errors. When markets are correctly defined, it is the change in market shares that is central to the antitrust analysis, though this is not how courts typically use market definition and shares to analyze Section 2 cases. Unfortunately, there is only a weak link between change in market share and change in competitive performance, and that is why market definition and the use of market shares are very crude tools of analysis. That is why their best use is as safe harbors to quickly screen out frivolous cases from those where the economic forces governing industry behavior need to be carefully studied. But, I explain why even this use of market definition and market shares can be problematic in Section 2 cases.

Arbitrage, market definition and monitoring a time series approach

This article considers the application to regional price data of time series methods to test stationarity, multivariate cointegration and exogeneity. The discovery of stationary price differentials in a bivariate setting implies that the series are rendered stationary by capturing a common trend and we observe through this mechanism long-run arbitrage. This is indicative of a broader market definition and efficiency. The problem is considered in relation to more than 700 weekly data points on gasoline prices for three regions of the US and similarly calibrated simulated series. The discovery of a single common trend is consistent with competitive pricing and a broad market definition, but the finding of a single weakly exogenous variable affects this conclusion

Lessons from \u3ci\u3eAmex\u3c/i\u3e for Platform Antitrust Litigation

I. Introduction II. A Brief History of a Long Litigation ... A. The District Court Rules for Plaintiffs Based on a One-Sided Market Definition ... B. The Second Circuit Reverses, Applying a Two-Sided Market Definition ... C. The Supreme Court Affirms, Embracing a Two-Sided Market Definition III. Lessons from Amex ... A. Lesson One: A Full Rule of Reason Analysis—Not Some Form of Relaxed Review Advocated by the Government—Applies to Vertical Agreements Between a Platform and Customers on One Side of the Platform ... B. Lesson Two: For That Rule of Reason Analysis, a Plaintiff First Must Define a Relevant Market That Includes Both Sides of Two-Sided Transaction Platforms C. Lesson Three: When the Relevant Market Is Two-Sided, a Plaintiff Must Demonstrate That the Challenged Conduct Harmed Competition in the Market as a Whole IV. Misperceptions About Amex ... A. Fallacy One: Two-Sided Market Definition Does Not Apply to “Mature” Platforms ... B. Fallacy Two: A Platform’s Conduct Should Be Condemned If Platform Consumers on One Side Are “Subsidized” by Those Who Do Not Use the Platform … C. Fallacy Three: Amex Will Complicate and Confuse Antitrust Analysis in a Wide Range of Case

Antitrust market definition using statistical learning techniques and consumer characteristics

Market definition is the first step in an antitrust case and relies on empirical evidence of substitution patterns. Cross-price elasticity estimates are preferred evidence for studying substitution patterns, due to advances in IO econometric modelling. However, the data and time requirements of these models weigh against their universal adoption for market definition purposes. These practical constraints — and the need for a greater variety of evidence — lead practitioners to rely on a larger set of less sophisticated tools for market definition. The paper proposes an addition to the existing toolkit, namely an analysis of consumer characteristics for market definition purposes. The paper shows how cluster analysis can be used to identify meaningful groups of substitutes on the basis of homogeneity of their consumer profiles. Cluster analysis enforces consistency, while recent bootstrap techniques ensure robust conclusions. To illustrate the tool, the paper relies on data from a recently concluded radio merger in South Africa.market definition substitutes media demography clusters bootstrap

Quantitative competition analysis: Stationarity tests in geographic market definition

The paper focuses on the delineation of geographic markets in competition analysis, investigating the use of both quantitative and qualitative evaluation in the market definition exercise. To this end, the first part is devoted to a conceptual framework for market definition (adopted from Haldrup (2003)). Thereafter, a variety of price tests are explored that can be applied within the quantitative part of the framework. Similar to Forni (2004), the paper emphasizes the use of stationarity tests (that is, tests for the existence of unit roots) – illustrating their application to a recent competition investigation in South Africa.Market definition, Delineation, Quantitative, Stationarity tests, Prices, Geographic, SSNIP, Hypothetical monopolist, Competition, Unit root, Price ratio, Antitrust

Critical loss analysis in market definition and merger control

The last couple of years have seen an increasing interest in critical loss analysis, both, in academia and in practice. This development is documented by various research papers, high-level exchanges between antitrust experts as well as an increasing number of case decisions which make use of some form of critical loss analysis. In this context, it is the aim of this article to describe the general method of critical loss analysis, to assess important properties of the concept, to show how critical loss analysis has to differ between market definition exercises and the evaluation of the competitive effects of horizontal mergers and to discuss applications of critical loss analysis in recent cases. The results suggest that the application of critical loss analysis in practice is often not as straightforward as the rather simple theoretical concept might suggest. In fact, the method has to be applied with great care in order to receive meaningful results. --Antitrust,competition policy,market power,market definition,merger control,unilateral effects