The Cellophane and Merger Guidelines Fallacies Again

12 Pages Posted: 2 Jun 2001

See all articles by Pierluigi Sabbatini

Pierluigi Sabbatini

Government of the Italian Republic (Italy) - Italian Competition Authority

Date Written: May 24, 2001

Abstract

The Cellophane Fallacy is a very familiar topic in antitrust literature. The expression comes from the famous antitrust case of the 50's when the United States Supreme Court made an overly broad definition of the relevant market, thereby failing to detect the market power of du Pont, which held a virtual monopoly on cellophane. In the presence of a concentrated market structure the Merger Guidelines method (1982) also fails, leading to overestimation of the size of the relevant market. Given these similarities the Merger Guidelines Fallacy and the Cellophane Fallacy are generally taken to be identical. In fact, however, the two fallacies arise for different reasons and need to be clearly distinguished. This paper traces the origins of the two fallacies and provides a correction for the Merger Guidelines approach.

Keywords: Market definition, Horizontal Merger Guidelines, demand elasticity

JEL Classification: K2, L4

Suggested Citation

Sabbatini, Pierluigi, The Cellophane and Merger Guidelines Fallacies Again (May 24, 2001). Available at SSRN: https://ssrn.com/abstract=271113 or http://dx.doi.org/10.2139/ssrn.271113

Pierluigi Sabbatini (Contact Author)

Government of the Italian Republic (Italy) - Italian Competition Authority ( email )

Piazza Verdi 6/a
00187 Roma, 00198
Italy
0039 0685821369 (Phone)
0039 0685452369 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
1,467
rank
11,050
Abstract Views
6,938
PlumX