Redefining the Relevant Market: Abandonment or Return to Brown Shoe

53 Pages Posted: 12 Apr 2023 Last revised: 13 Apr 2024

Date Written: March 29, 2023

Abstract

Defining relevant markets is arguably the most important requirement in antitrust litigation. The process went from being a simple, mostly generalized, and implied concept between the 1890s and the 1940s to a fully outlined process in the 1960s, where it became a centerpiece in antitrust litigation. Initially, judges and litigants constructed relevant markets by analyzing readily accessible and understandable qualitative data – using a method commonly known as the Brown Shoe process, which is derived from the Supreme Court’s landmark 1962 decision and its progeny.

Today, however, defining a relevant market in antitrust litigation consists of litigants applying an assortment of controlling Supreme Court decisions and predominantly, since 1982, complex econometric tests. Concerning the use of econometrics to define relevant markets, the process is almost entirely based on abstract, confusing, highly subjective, and unnecessary economic theory. Due to the use of econometric tests and lower courts distorting or ignoring the Supreme Court's Brown Shoe process, judges frequently use the process as a means to dismiss antitrust claims brought by plaintiffs. Such a circumstance inhibits the enforcement and development of the law and is contrary to what the Supreme Court and Congress intended.

To remedy the problems created by the econometric process of defining relevant markets, this Article recommends two alternative approaches. The first option is to completely abandon the process of defining the relevant market altogether. Instead, clear bright-line rules should determine the illegality for most antitrust conduct – particularly for mergers, exclusive deals, and tyings. The bright-line rules should be fixed to easily calculable and accessible financial metrics such as revenue, profit, total assets, or the size of the transaction. This proposal can be implemented through the Supreme Court overturning its Brown Shoe precedent, amendments to the antitrust laws from Congress, or from federal administrative agencies (such as the Federal Trade Commission) employing their broad rulemaking power to regulate unfair methods of competition or unfair or deceptive acts or practices. Alternatively, enforcers, particularly those working for the federal or state government, and judges should exclusively use and rely on the Supreme Court’s controlling qualitative approach to define relevant markets the Court developed in Brown Shoe co. v. United States and its progeny.

This Article will detail that both proposals offer significant benefits to the public and antitrust enforcers. Many of the criticisms against both proposals are unfounded, misguided, overblown, or are, in fact, desirable. Moreover, whatever disadvantages exist with either proposal, the benefits far outweigh the asserted costs of the current econometric methodology. Both proposals facilitate the equitable and robust administration of the antitrust laws and ensure that our political economy is of the kind Congress intended when it enacted the antitrust laws.

Keywords: antitrust, relevant market, econometrics, qualitative, Brown Shoe, defining

JEL Classification: K21, L4, G34, G38

Suggested Citation

Hanley, Daniel, Redefining the Relevant Market: Abandonment or Return to Brown Shoe (March 29, 2023). Available at SSRN: https://ssrn.com/abstract=4404081 or http://dx.doi.org/10.2139/ssrn.4404081

Daniel Hanley (Contact Author)

Open Markets Institute ( email )

655 15th St. NW
Suite 800
Washington, DC 20005
United States

HOME PAGE: http://https://www.openmarketsinstitute.org/

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