Modular Market Definition
58 Pages Posted: 12 Jan 2021 Last revised: 3 Jan 2022
Date Written: December 2021
Surging interest in antitrust enforcement is exposing, once again, the difficulty of defining relevant markets. Past decades have witnessed the invention of many tests for defining markets, but little progress has been made, or even attempted, at reconciling these different tests. Modern market definition has thus become a confused agglomeration of often conflicting ideas about what relevant markets are and how they should be defined and used. The result—unpredictable and unreliable market boundaries—is an unsure footing for the complicated cases and policy questions now before us.
This Article responds to the problem of confused market definition with a simple but powerful approach to dealing with multiple tests for defining markets. The basic insight is that different tests scope markets appropriate for serving different needs. Helpful market definition can thus proceed in two steps. First, identify the substantive purposes for which markets are being defined in a particular application. Second, select the test that defines markets most suited to serving those purposes.
This modular approach to market definition offers several advantages over the current conflation of different tests. First, the modular approach promises greater predictability and reliability in market definition practice. Second, it provides a more legally honest and economically coherent explanation of how the various tests for defining markets fit together. Third, it contributes to ongoing policy discussions, clarifying how relevant markets work in antitrust law and how they can be leveraged to empower more efficient and effective enforcement practices.
Keywords: market definition; relevant market
JEL Classification: K21, L40
Suggested Citation: Suggested Citation