MARKET DEFINITION: AN ANALYTICAL OVERVIEW

Throughout the history of US antitrust litigation, the outcome of more cases has surely turned on market definition than on any other substantive issue. Market definition is often the most critical step in evaluating market power and determining whether business conduct has or likely will have anticompetitive effects. This survey addresses the reasons for undertaking market definition in antitrust analysis and methods of doing so. It discusses how the process of market definition should be conducted, with attention to the practical difficulties of doing so. Among other things, it explains why markets should be defined based solely with reference to demand substitution, leaving supply substitution considerations for other steps of competitive effects analysis, and identifies five types of evidence as to buyer substitution. The article also discusses the appropriate scope of markets (including supermarkets) and explains why four approaches sometimes employed for market definition (price correlations, shipment flows, critical loss analysis, and cluster markets) should be avoided. In addition, it analyzes how market definition differs depending on whether the alleged harm is prospective or retrospective and depending upon whether the anticompetitive theory involves collusion or exclusion.