Antitrust Market Definition: the Hypothetical Monopolist and Brown Shoe

Abstract

The purpose of antitrust law is to control monopoly. As a result, it should employ a test that identifies monopoly accurately. That identification is the function of market definition. This brief essay evaluates the two most popular methodologies for market definition, namely, the hypothetical monopolist test (HMT) and the so-called “Brown Shoe” factors articulated by that 1962 decision. Operationally, the HMT is superior in virtually every way. The Brown Shoe factors are nearly always overinclusive, underinclusive, or irrelevant. For that reason most courts have embraced the HMT, as well as the federal enforcement Agencies, including in the 2023 Merger Guidelines. Their most significant limitation is that they depend on sales and substitution data. As a result, poorer alternatives must be used when these data are not available.