Qualitative Market Definition

62 Pages Posted: 1 Apr 2022

See all articles by Thomas Nachbar

Thomas Nachbar

University of Virginia School of Law

Date Written: March 18, 2022

Abstract

Modern antitrust law has come under intense criticism in recent years, with a bipartisan chorus of complaints about the power of technology and internet platforms such as Google, Amazon, Facebook, and Apple. A fundamental issue in these debates is how to define the “market” for the purposes of antitrust law. But market definition is highly contentious. The Supreme Court case that launched modern market definition has become the name of an economic blunder: the “Cellophane fallacy,” and the Justices in 2018’s Ohio v. American Express case disagreed with each other so strongly that the dissent described the majority’s approach as not only “wrong” but “economic nonsense.” Partially in response to the controversy in American Express, recent judicial, legislative, and regulatory proposals have even suggested doing away with market definition in some antitrust cases.

The root problem, this Article shows, is that modern market definition has been treated in antitrust as a matter of quantitative economics, with markets defined by economic formulas (such as the Lerner Index) lacking a connection to widely held social understandings of competition. Antitrust law needs to augment these quantitative approaches by explicitly acknowledging qualitative aspects of markets, including the normative visions of competition they represent. When more fully considered, the Lerner Index itself represents a vision of competition, but it is a vision is one that no society would want to pursue.

Paying attention to the normative meaning underlying quantitative measures is hardly radical; such qualitative factors have been part of market definition since its origin. The Cellophane fallacy itself was originally advanced not as a point about economics but about the content of the antitrust law. This Article argues that market definition is necessarily normative and describes an approach for including qualitative criteria in market definition so that market definition accurately reflects the types of competition antitrust law seeks to protect.

Keywords: antitrust market definition economics

JEL Classification: A12, A13, D41, K21

Suggested Citation

Nachbar, Thomas, Qualitative Market Definition (March 18, 2022). Virginia Law Review, Vol. 109, 2023, Virginia Public Law and Legal Theory Research Paper No. 2022-26, Virginia Law and Economics Research Paper No. 2022-04, Available at SSRN: https://ssrn.com/abstract=4060956

Thomas Nachbar (Contact Author)

University of Virginia School of Law ( email )

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Charlottesville, VA 22903
United States
434-924-7588 (Phone)
434-924-7536 (Fax)

HOME PAGE: http://www.law.virginia.edu/fac/tbn4n

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