Volume 100 -- Issue 6 Georgetown Law Journal

Response: Markets in IP and Antitrust

The purpose of market definition in antitrust law is to identify a grouping of sales such that a single firm who controlled them could maintain prices for a significant time at above the competitive level. The goal is not to delineate market boundaries for their own sake, but rather to identify situations in which firms can profitably maintain prices that are significantly above costs. The ability to do this is called market “power.” Thus, we sometimes say that a market is the grouping of sales controlled by a hypothetical monopolist or collusive group. Further, a relevant antitrust market consists of firms that are not merely rivals, but also that are sufficiently close rivals that the competition of the others is able to hold each firm’s prices relatively close to its costs. That is to say, mere substitution is not sufficient; it must be substitution at a price close to cost. Having delineated a relevant market, antitrust decision makers next examine single-firm market share data or information about the number and size-distribution of firms in order to assess how a particular action might harm competition. Alternatively, sometimes we assess market power by observing price–costs relationships and consumer behavior directly, without engaging in market definition. In many cases, however, antitrust case law requiring a showing of market power also requires a market definition, even if technical economic methodologies do not.

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