A Practical Guide to the Hypothetical Monopolist Test for Market Definition

Potomac Papers in Law and Economics 06-01

49 Pages Posted: 28 Oct 2006 Last revised: 28 Apr 2008

Malcolm B. Coate

U.S. Federal Trade Commission (FTC)

Jeffrey H. Fischer

U.S. Federal Trade Commission (FTC)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2007

Abstract

The hypothetical monopolist test has been used to define antitrust markets for over 20 years. However, many of these applications occur within the enforcement agencies and thus the implementation process is not fully transparent to antitrust practitioners. This paper provides a study of 116 market definition decisions from the Federal Trade Commission's archives. We find the agency rarely has trouble defining both product and geographic markets; in fact, the demand-side market definition process is relatively simple in over half the cases reviewed. In many of the remaining matters, critical loss, analysis of natural experiments, and various studies of data patterns are undertaken to identify the relevant market. These studies show a remarkable variety in data requirements, sophistication and analytical technique. Supply side considerations affect a few markets and price discrimination supports more focused analysis in about ten cases.

Keywords: mergers, markets, antitrust, guidelines, Federal Trade Commission

JEL Classification: K21, I40

Suggested Citation

Coate, Malcolm B. and Fischer, Jeffrey H., A Practical Guide to the Hypothetical Monopolist Test for Market Definition (October 2007). Potomac Papers in Law and Economics 06-01. Available at SSRN: https://ssrn.com/abstract=940667 or http://dx.doi.org/10.2139/ssrn.940667

Malcolm B. Coate (Contact Author)

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

601 Pennsylvania Avenue, NW
Washington, DC 20580
United States

Jeffrey H. Fischer

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

600 Pennsylvania Ave., NW
Washington, DC 20580
United States
202-326-2656 (Phone)
202-326-2625 (Fax)

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