Wanted: A Market Definition Paradigm for Monopolization Cases

New York University, Center for Law and Business, Working Paper No. 99-002

13 Pages Posted: 13 Jul 1999

See all articles by Lawrence J. White

Lawrence J. White

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

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Date Written: February 1999

Abstract

For the wide range of antitrust cases involving allegations of monopoly or monopolization (or variations on that theme), the presence of market power is a necessary prerequisite for finding liability. In turn, the definition or delineation of a relevant market is essential for measuring a defendant's market share -- a key determinant of the presence or absence of market power. Unfortunately, there are few or no intellectual underpinnings for the market definition process in monopolization cases. This void contrasts sharply with the substantial conceptual developments of the past two decades with respect to the market definition process in antitrust merger analysis, as embodied in the Merger Guidelines of the U.S. Department of Justice.

This article contrasts the achievements in the merger analysis area with the continuing dilemmas and conundrums in the monopolization area with respect to market definition. In the latter area the "cellophane fallacy" (which is explained), combined with the frequently cloudy state of firm-level profit data, continues to create confusion as to when the presence of competitors is an indication of the absence of market power and when their presence is the consequence of the exercise of market power. Underlying this confusion is the absence of a clear market definition paradigm for these monopolization cases. Until such a paradigm is developed, the confusion will persist, as will a pattern of erratic and inconsistent outcomes in alleged monopolization cases.

JEL Classification: L12, L43

Suggested Citation

White, Lawrence J., Wanted: A Market Definition Paradigm for Monopolization Cases (February 1999). New York University, Center for Law and Business, Working Paper No. 99-002. Available at SSRN: https://ssrn.com/abstract=164869 or http://dx.doi.org/10.2139/ssrn.164869

Lawrence J. White (Contact Author)

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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