Critical Loss in Market Definition: Methods and Court Decisions
Journal of Antitrust Enforcement, Forthcoming
47 Pages Posted: 8 Jun 2021 Last revised: 25 Apr 2022
Date Written: June 7, 2021
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: Suggested Citation