Evans, David S. --- "Lightening Up on Market Definition" [2012] ELECD 216; in Elhauge, R. Einer (ed), "Research Handbook on the Economics of Antitrust Law" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on the Economics of Antitrust Law

Editor(s): Elhauge, R. Einer

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848440807

Section: Chapter 3

Section Title: Lightening Up on Market Definition

Author(s): Evans, David S.

Number of pages: 37

Extract:

3 Lightening up on market definition
David S. Evans*


I INTRODUCTION

`Market definition' refers to the process of determining the set of products, and locations
from which those products are sold, that are relevant for analysing the antitrust issue at
hand. That set of products and locations defines `the market'. Courts have long treated
market definition as the first step in analysing an antitrust matter.1 Among other things
they rely on the relevant antitrust market to calculate market shares from which they infer
the existence of market power. At least since Alcoa,2 the courts have drawn hard market
boundaries. A product is either in or out of the market. The placement of this fence often
determines the final outcome of the matter.3 As a result, market definition sets up a battle
between the `we-win because it is a narrow market' plaintiffs and the `you-lose because it
is a broad market' defendants.4 Both sides naturally invest significant resources in trying
to persuade the courts where to build the fence.
Many economists have argued that there is seldom a solid market boundary in prac-
tice.5 Products from different vendors are often heterogeneous and compete along a con-
tinuum. Economists have also observed that there is no particular need to define a rigid
boundary. Ultimately antitrust is about ascertaining effects on prices, output, and other
factors that influence consumer welfare. It is possible to address those effects directly
without taking a firm position on a market ...