Market Definition and the Identification of Market Power in Monopolization Cases: A Critique and a Proposal

33 Pages Posted: 31 Oct 2008

See all articles by Philip B Nelson

Philip B Nelson

Economists Incorporated

Lawrence J. White

New York University (NYU) - Leonard N. Stern School of Business, Department of Economics

Date Written: November 2003

Abstract

Although there is agreement on the basic economic principles that should apply to monopolization cases, there is no widely accepted paradigm for market definition or the identification of market power in such cases. This contrasts with the SSNIP paradigm of the DOJ-FTC Horizontal Merger Guidelines, which has gained wide acceptance in the two decades since its introduction. Moreover, misguided notions of market definition in monopolization cases still fall into a repeat commission of the â¬Scellophane fallacyâ¬? of U.S. v. du Pont (1956).To correct this problem, we propose asking the following question in monopolization cases where exclusionary practices are alleged: Would preservation of the allegedly foreclosed competitor or group of competitors have led to a small but significant nontransitory decrease in price (SSNDP) by the defendant? This SSNDP test can help define the relevant market and, more importantly, can allow courts to focus directly on the anticompetitive effects of the defendantâ¬"s actions and thereby on the exercise of market power.

Keywords: antitrust, monopolization, exclusionary practices, market definition

Suggested Citation

Nelson, Philip B and White, Lawrence J., Market Definition and the Identification of Market Power in Monopolization Cases: A Critique and a Proposal (November 2003). NYU Working Paper No. EC-03-26. Available at SSRN: https://ssrn.com/abstract=1292646

Philip B Nelson

Economists Incorporated ( email )

Washington, DC 20036
United States

Lawrence J. White

New York University (NYU) - Leonard N. Stern School of Business, Department of Economics ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

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