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2CPI Antitrust Chronicle April 2022
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SEVEN MYTHS OF MARKET DEFINITION
By Sean P. Sullivan
Roughly a year into control of the federal antitrust agencies, President
Biden’s antitrust team is turning its attention to policies and enforcement
practices. They seem poised to start, as antitrust so often does, with mar-
ket deﬁnition. This is an appropriate target for review but also perilous ter-
ritory for the administration. Even slight missteps in market deﬁnition could
spell disaster for broader enforcement objectives. To help policy work start
from a solid foundation, this essay identiﬁes seven common myths of mar-
ket deﬁnition and explains how to avoid them.
THE DECLINE, FALL, AND RENEWAL OF U.S.
LEADERSHIP IN ANTITRUST LAW AND POLICY
By Eleanor M. Fox
A “REVITALIZATION OF ANTITRUST”: TOUGH TALK
AND BROAD PROMISES IN THE FIRST YEAR OF
THE BIDEN ADMINISTRATION
By Karen Hoffman Lent & Michael Sheerin
SEVEN MYTHS OF MARKET DEFINITION
By Sean P. Sullivan
UPDATING THE MERGER GUIDELINES: A DYNAMIC
By Jay Ezrielev & Joseph J. Simons
BEGINNINGS OF AN ANTITRUST REVOLUTION?
By Sandeep Vaheesan
BIDEN’S ANTITRUST: THE TRANSFORMATION IS
HERE BUT WILL IT LAST?
By Steven Cernak & Luis Blanquez
CPI ANTITRUST CHRONICLE
CPI Antitrust Chronicle April 2022
3CPI Antitrust Chronicle April 2022
Roughly a year into control of the federal antitrust agencies, President Biden’s antitrust team is turning from lofty goals and aspirations to the
honest work of converting those objectives into practicable policies and enforcement practices. They seem poised to start, as antitrust so often
does, with market deﬁnition.
The DOJ’s and FTC’s recent Request for Information on Merger Enforcement asks sixteen questions about whether and how the Agen-
cies should revise market deﬁnition.2 It implies interest in revising market deﬁnition under other headings as well.3 Individual remarks by Assistant
Attorney General Kanter highlight market deﬁnition as a special target of reform efforts.4 And market deﬁnition and market structure analysis are
among the subjects addressed in a recent wave of proposed antitrust legislation in Congress.5
Market deﬁnition is an appropriate focus of review. Improvements to how the Agencies and the courts approach market deﬁnition could
enhance not just the clarity of antitrust analysis but also the impact and efﬁciency of enforcement efforts. By the same token, however, changes
to market deﬁnition should not be undertaken lightly. The negative consequences of even slight missteps could quickly overwhelm every other
beneﬁt the administration seeks to unlock. Market deﬁnition is that important.
It is thus alarming to see some old points of confusion swirling about in the current discussion. Several examples of confused thinking
are apparent in the Agencies’ Request for Information. Others will undoubtedly be introduced by responsive commentary. Still others lurk in the
background context from which the current push for policy reform emerges. To help policy work start from a solid foundation, the following iden-
tiﬁes seven common myths of market deﬁnition and explains how to avoid them.
I. MYTH #1 - MARKET DEFINITION IS A NECESSARY STEP IN RULE OF REASON ANALYSIS
Decades of briefs and court opinions have peddled the shopworn claim that “[d]etermination of the relevant market is a necessary predicate to
a ﬁnding of a violation of the Clayton Act.”6 Not one has ever offered a plausible explanation why legality is unknowable outside the context of
a relevant market. It is sometimes suggested that the language of Section 7 justiﬁes this supposed requirement.7 The statute does not support
this reading.8 It is also sometimes suggested that a market context is needed to establish substantiality of injury.9 The illogic of that suggestion
becomes clear, however, upon even a moment’s reﬂection.10 A pound of ﬂour is a pound of ﬂour, whether placed in a small bowl or a large one.
So, too, substantiality of injury is the same however relevant markets are deﬁned.
As merger law is understood and enforced today, market deﬁnition is not a necessary step in analysis. This is nearly a truism given the
primacy of proof of antitrust injury in proving illegality.11 Yet, the lesson still eludes some courts and advocates, resulting in ﬂawed reasoning like
the rejection of claims for no reason other than failure to deﬁne a relevant market.12 Interest in establishing the non-necessity of market deﬁnition
2 U.S. Dept. of JUStice & feDeral traDe comm’n, reqUeSt for information on merger enforcement 5–6 (Jan. 18, 2022) [hereinafter reqUeSt for information].
3 E.g. id. at 3 (asking “should the guidelines make it clearer that the tests for an antitrust market can often be satisﬁed using direct evidence of likely effects . . . or qualitative
evidence about substitution?”).
Jonathan Kanter, moDern competition challengeS reqUire moDern merger gUiDelineS 4–5 (2022).
5 See e.g. Competition and Antitrust Law Enforcement Reform Act, S. 225 117th Cong. §§ 4(b), 9(a), 13 (2021).
6 United States v. E. I. du Pont de Nemours & Co., 353 U.S. 586, 593 (1957).
7 E.g. Brown Shoe Co. v. United States, 370 U.S. 294, 324 (1962) (“The ‘area of effective competition’ must be determined by reference to a product market (the ‘line of
commerce’) and a geographic market (the ‘section of the country’).”).
8 See Herbert Hovenkamp, Markets in Merger Analysis, 50 antitrUSt BUll. 887, 890–93 (2012) (providing a better reading of the statutory language); Louis Kaplow, Replacing
the Structural Presumption § III.B.1 (working paper, Dec 14, 2021) (similar).
9 E.g. Brown Shoe Co., 370 U.S. at 324 (“Substantiality can be determined only in terms of the market affected”).
10 See David Glasner & Sean P. Sullivan, Logic of Market Deﬁnition, 83 antitrUSt l.J. 293, 339–40 (2020).
11 See e.g. United States v. Pabst Brewing Co., 384 U.S. 546, 549–50 (1966) (“Proof of the section of the country where the anticompetitive effect exists is entirely subsidiary
to the crucial question . . . whether a merger may substantially lessen competition anywhere in the United States.”).
12 E.g. City of New York v. Grp. Health Inc., 649 F.3d 151, 155 (2d Cir. 2011) (“To state a claim under § 7 of the Clayton Act, §§ 1 or 2 of the Sherman Act . . . a plaintiff must
allege a plausible relevant market in which competition will be impaired.”).
4CPI Antitrust Chronicle April 2022
is thus encouraging.13 Agency guidance or legislation that clariﬁed that market deﬁnition is not a necessary step in rule of reason analysis could
improve and focus antitrust analysis.
It would be a grave mistake, however, to go too far and imply that market deﬁnition was not a helpful step in analysis. In some cases,
market deﬁnition can become necessary, as when market shares and other structural considerations are used to draw competitive inferences.
And even when it is not necessary, market deﬁnition can still help to clarify and direct analysis. Market deﬁnition can focus attention; it can iden-
tify important actors for understanding challenged conduct; it can contextualize inquiries about future conduct (like the future entry of potential
competitors); and it can provide other beneﬁts besides these.14 In short, while market deﬁnition is not always necessary, it is often useful and
important in analysis, and it should be omitted only when there are good reasons for doing so.
II. MYTH #2 - RELEVANT MARKETS ARE FREESTANDING ENTITIES
How many times have proposed relevant markets been criticized as unrealistic? How many times have markets been described as gerrymandered
— not for failing to ﬁt a recognized test but for being selected, from among valid options, as the choice that best matches the plaintiff’s theory
of the case?15 How many times have plaintiffs marched into court with nothing but casual intuition to justify their deﬁnition of a relevant market?
How many times have markets been deﬁned in terms of industry classiﬁcations or abstract inquiries divorced from a particular theory of harm?16
All of these arguments fail for the same reason: relevant markets are not things that exist in the world, but merely analytical lenses
through which we think about particular theories of harm.17 The market that is relevant for considering a merger’s ability to encourage anticom-
petitive coordination is not typically the market that is relevant to considering the same merger’s tendency to stiﬂe head-to-head competition
between the merging parties.18 Neither of these markets is the same as the “industry” in which casual speakers might place the ﬁrms or perceive
anything about trends in consolidation.19 The emphatic word in “relevant market” is not market but relevant. The point of market deﬁnition is to
identify a scope of trade that is helpful for assessing a particular theory of harm.
Several reform opportunities ﬂow from this observation. First, since relevant markets cannot be deﬁned in the abstract, market deﬁnition
should not be described or attempted outside the context of a speciﬁc theory of harm. In a merger context, market deﬁnition should not be per-
formed before deciding what concerns need to be evaluated. Market deﬁnition should be both described and conducted within analysis of a speciﬁc
theory of harm: one market deﬁnition process for coordinated effects analysis, another market deﬁnition process for unilateral effects analysis.
Second, because confusion about this subject is prevalent, it would be helpful to clearly and unambiguously refute the idea that all relevant markets
should align with casual ideas about industry boundaries. Third, because there is not some freestanding “correct” market waiting to be discovered,
courts should not approach market deﬁnition as presenting a choice between the plaintiff’s and the defendant’s conﬂicting proposals of market
boundaries. So long as plaintiffs’ proposed markets are consistent with appropriate tests, those are the relevant markets that should guide analysis.
III. MYTH #3 - THERE IS ONE RELEVANT MARKET PER CASE
One question stands out in the Request for Information: “Are the guidelines sufﬁciently clear that the same product or service may be in multiple
relevant antitrust markets depending on the competitive effects being evaluated?”20 The answer is, of course, “No.” Despite their many strengths,
13 E.g. reqUeSt for information, supra note 2, at 5 (“Is it necessary to precisely deﬁne the market in every case?”); Competition and Antitrust Law Enforcement Reform Act, S.
225 117th Cong. § 13 (2021) (“Establishing liability under the antitrust laws does not require the deﬁnition of a relevant market . . . .”).
14 See Sean P. Sullivan, Modular Market Deﬁnition, 55 U.c. DaviS l. rev. 1091, 1117–29 (2021) (discussing various purposes of market deﬁnition); Gregory Werden, Why (Ever)
Deﬁne Markets? An Answer to Professor Kaplow, 78 Antitrust L.J. 729 (2013) (similar).
15 See Glasner & Sullivan, supra note 10, at 299 n.29 (collecting examples of this argument).
16 E.g. SUBcomm. on antitrUSt, commc’n. & aDmin. l. of the comm. on the JUDiciary, inveStigation of competition in Digital marKetS: maJority Staff report anD recommenDationS 12, 15, 17
(2020) (declaring properties of “the market for social networking,” “the U.S. online retail market,” and “the mobile operating system market”).
17 Glasner & Sullivan, supra note 10, at 308–09; Magali Eben, The Antitrust Market Does Not Exist: Pursuit of Objectivity in a Purposive Process, 17 J. comp. l. & econ. 586 (2021).
18 See Sullivan, supra note 14, at 1114–17 (observing the unhelpfulness of HMT markets in unilateral effects analysis).
19 See id. at 1108–09 (observing the unhelpfulness of industry concepts in coordinated effects analysis); see also id. at 1124, 1126–27 (discussing how industry concepts
did respond to Warren-Court era concerns about industrial concentration as it was popularly perceived).
reqUeSt for information, supra note 2, at 5.
5CPI Antitrust Chronicle April 2022
the 2010 Horizontal Merger Guidelines do not adequately discredit the common misperception that market deﬁnition is a discrete step in analysis
that produces one relevant market per case.21
A simple example illustrates the problem with that thinking. Suppose that a horizontal merger is being evaluated for two separate
competitive concerns. First, the elimination of a previously ﬁerce competitor could embolden coordination among a group of ﬁve remaining
ﬁrms. Second, the elimination of head-to-head competition with the acquired company could result in unilateral harm for a subset of consum-
ers. Suppose, also, that the Hypothetical Monopolist Test would validate as relevant markets either the broad group of ﬁve ﬁrms or the narrow
group of just the merging ﬁrms (an implication of a substantial unilateral effect, at least in a differentiated-product space).22 Which of these is
the “right” choice of relevant market? The answer is “both” and “neither.” The broad market is the appropriate choice for assessing coordination
concerns; the narrow market is the appropriate choice for assessing unilateral effect concerns. Neither is appropriate for assessing the other
concern.23 Unless one or the other of these two theories of harm is dropped, careful analysis of the merger requires two separate instances of
Agency guidance could helpfully clarify that it is appropriate to deﬁne different relevant markets for different theories of harm. The
Agencies would have a solid foundation for this position not only in logic but in law. The Supreme Court adopted just such an approach in Brown
IV. MYTH #4 - THERE IS ONLY ONE TEST FOR DEFINING RELEVANT MARKETS
Sticking with the same Request for Information question addressed in Myth #3, two related misconceptions about tests for deﬁning markets are
also implicated by this question. The ﬁrst is the false belief that there is just one test for deﬁning markets. In some respects, the 2010 Horizontal
Merger Guidelines appear to adopt this position.25 AAG Kanter’s remarks also seem to adopt the error in the claim that “the static formalism of
market deﬁnition may not always be the most reliable tool for assessing the potential harms of mergers.”26 The second is the false belief that
every test for deﬁning markets is the same.27 Modest examples of this error include anachronistic reinterpretation of old tests, like the Request for
Information’s suggestion that Brown Shoe’s practical indicia test is focused on “qualitative evidence about substitution.”28 More vivid examples
emerge when language about practical indicia is mashed together with soundbites about cross-elasticity of demand and extracted portions of
the HMT in constructing a sort of Frankenstein’s monster of a test for deﬁning relevant markets.29
Inherent in the idea that the same product or service may be in multiple relevant markets depending on the competitive effects being
evaluated is the idea that different tests are needed to deﬁne helpful relevant markets for different theories of harm. By its terms, the HMT is a test
for deﬁning markets relevant to coordination concerns.30 It also deﬁnes appropriate relevant markets for assessing output suppression theories
of unilateral effects.31 The HMT does not typically deﬁne relevant markets that are helpful for evaluating differentiated-product unilateral effects
21 See Glasner & Sullivan, supra note 10, at 331 (“Despite drawing a sharp distinction between the analysis of unilateral and coordinated effects, the 2010 Horizontal Merger
Guidelines can be read to imply that the same relevant market should be used to assess both of these different theories of harm.”); see also id. at 326–30 (describing the “single
22 Sullivan, supra note 14, at 1116.
23 See Glasner & Sullivan, supra note 10, at 333 (working through a similar thought experiment).
24 Brown Shoe Co. v. United States, 370 U.S. 294, 325–28 (1962) (deﬁning the relevant market for analysis of the vertical aspects of the merger); id. at 336–39 (separately
deﬁning the relevant market for analysis of the horizontal aspects of the merger).
25 Compare U.S. Dep’t of JUStice & feD. traDe comm’n, horizontal merger gUiDelineS § 4 (Aug. 19, 2010) (presenting the Agencies’ approach to market deﬁnition in merger cases),
with id. § 6.1 paras. 6–7 (describing unilateral effects analysis as not requiring market deﬁnition).
Kanter, supra note 4, at 4.
27 See Sullivan, supra note 14, at 1096–97 (labeling this thinking the “hammer analogy” of market deﬁnition).
28 Compare reqUeSt for information, supra note 2, at 3; with Glasner & Sullivan, supra note 10, at 302 (noting that Brown Shoe’s discussion and test of market deﬁnition was
“never meant to ﬁt the focus of modern antitrust analysis”); Sullivan, supra note 14, at 1105 (“Only a few of the practical indicia have any plausible connection to antitrust’s
current focus on market power and constraints on that power.”).
29 E.g. United States v. Aetna Inc., 240 F. Supp. 3d 1, 20–21 (D.D.C. 2017) (presenting multiple different tests for deﬁning markets as though they were interchangeable).
30 See Sullivan, supra note 14, at 1107–11, 1130–33.
31 Id. at 1136–37.
6CPI Antitrust Chronicle April 2022
theories.32 This is not because market deﬁnition is unhelpful in evaluating these theories. It simply reﬂects the need for a different test of market
deﬁnition in that context.33 Perhaps something similar applies to AAG Kanter’s concern that “potential harms of mergers” are going unaddressed
by current market deﬁnition practices.34 If so, the implication is not that market deﬁnition is unhelpful, but that new tests of market deﬁnition are
needed to address these potential harms.
To correct deep-rooted confusion on this point, Agency guidance should acknowledge that different tests of market deﬁnition serve
different purposes. Agency guidance should clarify that it is appropriate to deﬁne different relevant markets for different theories of harm and that
it is appropriate to use different tests to deﬁne relevant markets for different theories of harm. Objections to the complexity of this approach do
not withstand scrutiny. Nobody criticizes a doctor for using different medical tests to look for signs of different illnesses. Nobody should criticize
the Agencies for using different market deﬁnition tests to look for signs of different competitive concerns.
V. MYTH #5 - MARKET DEFINITION IS NEEDLESSLY OVERCOMPLICATED
Another myth is the idea that complexity in market deﬁnition could be mitigated by simply changing the rules of market deﬁnition. This idea might
motivate the Request for Information question that asks: “Do the guidelines imply that precision is necessary or possible in deﬁning relevant
markets?”35 Qualitative reasoning is acceptable and usually necessary in market deﬁnition. There is also room to streamline the process — for
example, by addressing Myths #3 and #4. But much of market deﬁnition’s complexity is derivative of complexity in the underlying theory of
harm being evaluated. To simplify market deﬁnition, while leaving the underlying theory of harm unchanged, would be to mutilate the connection
between relevant markets and the purposes they are meant to serve.
As a concrete example, suppose a merger is being investigated for its potential to lead to anticompetitive coordination. Relevant markets
deﬁned by the HMT are useful for this investigation. The test articulated by the HMT could be restated (not simpliﬁed) as this: a relevant market
is a group of competitors with the joint market power to successfully undertake anticompetitive actions if they were able to perfectly coordinate
their conduct.36 True, this is a complicated inquiry, but the payoff is a market with special relevance to the coordination concern. By construction,
participants in the HMT market are a group of competitors with the potential to engage in anticompetitive coordination.37 By construction, market
structure in an HMT market provides relevant information for assessing coordination prospects and incentives.38 By construction, historic infor-
mation about the behavior of participants in this market is relevant to assessing coordination concerns.39
Now suppose that, instead of using the HMT, we had deﬁned the relevant market using some convenient test like intuition, industry
recognition, or a similarly simplistic rule of decision. Effort would be saved, but the resulting market would no longer serve the functions that the
HMT market had served. Nothing would guarantee that participants in this new market would be potential colluders. Nothing would relate market
structure in this new market to the risk of coordinated conduct. And nothing in the history of this new market would be of obvious relevance to
coordination concerns. The market would be just as likely to miss coordination by being too broad (gathering too much competition to reveal
important patterns) as too narrow (failing to capture enough competition to see important patterns).
In short, when appropriately conducted, the complexity of market deﬁnition reﬂects the complexity of the underlying theory of harm.
Attempting to suppress the complexity of market deﬁnition by deﬁning casually intuitive or arbitrary markets with no connection to the under-
lying theory of harm will only confuse investigations and frustrate enforcement efforts. To state the obvious, the Agencies should not pursue
32 Id. at 1111–17.
34 See supra note 26 and accompanying text.
reqUeSt for information, supra note 2, at 5.
36 Sullivan, supra note 14, at 1110 (“At base, the HMT deﬁned a market as a group of competitors who could, at least under ideal circumstances, collude to jointly raise their
37 Id. at 1111.
38 Id. at 1123–24.
39 Id. at 1125–26.
7CPI Antitrust Chronicle April 2022
VI. MYTH #6 – DIRECT EVIDENCE OF MARKET POWER OBVIATES MARKET DEFINITION
Imprecise thinking and language can lead discussions of direct evidence down dangerous paths. The Request for Information toes this line in
asking whether the guidelines should “make it clearer that the tests for an antitrust market can often be satisﬁed using direct evidence of likely
effects.”40 Individual remarks by Chair Khan ask an apparently similar, but importantly different, question: “Are there certain markets where the
guidelines should provide a framework to assess direct evidence of market power?”41
Direct evidence can be very valuable in antitrust analysis, but there is a tendency to overstate the frequency with which this happens.
In merger cases, direct evidence of prospective mergers is unavailable. Merger simulations and other economic models offer qualitative
predictions, not “direct” evidence of competitive effects.42 Consummated mergers may allow for empirical proof of a merger’s effects, though
establishing causality can be challenging.43 Direct evidence of market power is generally not the same as direct evidence of likely effects.
Where the worry is that a merger will increase market power, for example, proof of current market power does little to advance analysis.
The error in thinking otherwise could be seen as a reverse Cellophane fallacy: proof of existing market power does not prove ability to gain
In short, direct evidence is often informative for market deﬁnition but not often dispositive of it. Proof of past competition can be an
important factor in market deﬁnition, but mere proof of past competition is rarely enough.
VII. MYTH #7 – MARKET CONCENTRATION HAS MEANING INDEPENDENT OF HOW THE MAR-
KET IS DEFINED
Concerns about concentration motivate the current push for policy reform. The executive order that encouraged the Agencies to review the
merger guidelines suggested that they do so “[t]o address the consolidation of industry in many markets across the economy.”45 Referencing
the executive order, but changing its language, AAG Kanter asserts a connection between “concentrated market structures” and harm to trading
partners, possibly related to coordination or exclusion.46 The various ideas reﬂected in even these two statements reﬂect a background tendency
to treat concentration as though it has signiﬁcance independent of how the market is deﬁned.
Assuming, for sake of argument, that consolidation means concentration, and that industry means market, it is not true that
concentration has the same meaning in every market. Forty years ago, Landes and Posner illustrated this point by showing how the same
market share could have different competitive implications as the size of the market and elasticity of demand varied.47 The economic
signiﬁcance of market concentration also depends on the way that a relevant market is deﬁned. HMT markets are deﬁned in such a way
that greater concentration says something about the prospects of coordination. The process of deﬁning the HMT market is what gives
concentration this meaning.48 In a market deﬁned by NAICS code, for example, concentration is not an economically defensible predictor
of coordinated effects.
The Agencies have much to gain by leaning into the insight that market concentration gets its meaning from market deﬁnition. One im-
plication of this insight is that market concentration thresholds should be applied contextually. High concentration in an HMT market supports an
40 reqUeSt for information, supra note 2, at 3.
feD. traDe comm’n, remarKS of chair lina m. Khan regarDing the reqUeSt for information on merger enforcement 3 (Jan. 18, 2022); see also id. (“What types of indicia of market
power should the guidelines consider?”).
42 See Sullivan, supra note 14, at 1116–17, 1127–28.
43 See 5 philip e. areeDa & herBert hovenKamp, antitrUSt law ¶ 1205 at 310–11 (4th ed. 2014) (noting difﬁculty of proving causality of post-merger price increases).
44 Cf. Luke M. Froeb & Gregory J. Werden, The Reverse Cellophane Fallacy in Market Delineation, 7 rev. inDUS. org. 241 (1992) (describing a different but related reverse
45 Exec. Order No. 14,036, 86 Fed. Reg. 36,987 § 5(c) (July 14, 2021).
Kanter, supra note 4, at 2.
47 See William M. Landes & Richard A. Posner, Market Power in Antitrust Cases, 94 harv. l. rev. 937, 954–55 (1981).
48 Sullivan, supra note 14, at 1123 (“[M]arket deﬁnition really is where this translation [of market features into economic signiﬁcance] takes place.”).
inference that a merger could have coordinated effects. Low concentration suggests it could not. But what low concentration in that HMT market
does not do is suggest that the merger is unlikely to have other effects: it could well risk unilateral effects or other harms. The Agencies would
both strengthen and clarify merger enforcement by building this reasoning into their use of market concentration thresholds. At a minimum, the
triggering of a safe harbor provision in one relevant market should not preclude continued investigation of competitive harms that would arise in
other relevant markets.49
49 Id. at 1145–47 (making this point in greater detail).
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