Critical Loss in Market Definition: Methods and Court Decisions

Journal of Antitrust Enforcement, Forthcoming

George Mason Law & Economics Research Paper No. 21-13

47 Pages Posted: 8 Jun 2021 Last revised: 25 Apr 2022

See all articles by Malcolm B. Coate

Malcolm B. Coate

Independent

Shawn W. Ulrick

U.S. Federal Trade Commission (FTC)

John M. Yun

George Mason University - Antonin Scalia Law School, Faculty

Date Written: June 7, 2021

Abstract

Critical loss analysis is an empirical tool used to define relevant markets in antitrust law. The existence of two different critical loss methodologies, however, complicates its application. Harris and Simons introduced the first approach, which focused on evaluating the market-level effect of a small, but significant and non-transitory increase in price (“SSNIP”). Later, O’Brien and Wickelgren, along with Katz and Shapiro, introduced a firm-level approach to critical loss to derive a test that applies mathematical models of demand systems, foundationally based on a single-firm SSNIP, to proxy for a market-level price increase. A critical loss controversy evolved as the two tests can, but do not necessarily, generate different relevant markets. This paper examines the choice between the two methodologies—guiding practitioners and courts as to when each approach makes the most sense.

Keywords: Barry Harris, Joseph Simons, Horizontal Merger Guidelines, Hypothetical Monopolist Test, critical loss analysis, market definition, merger analysis

JEL Classification: K20, K21, K29, L11

Suggested Citation

Coate, Malcolm B. and Ulrick, Shawn W. and Yun, John M., Critical Loss in Market Definition: Methods and Court Decisions (June 7, 2021). Journal of Antitrust Enforcement, Forthcoming, George Mason Law & Economics Research Paper No. 21-13, Available at SSRN: https://ssrn.com/abstract=3862051 or http://dx.doi.org/10.2139/ssrn.3862051

Malcolm B. Coate

Independent ( email )

Shawn W. Ulrick

U.S. Federal Trade Commission (FTC) ( email )

600 Pennsylvania Ave., NW
Washington, DC 20580
United States

John M. Yun (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

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