Market Mayhem: Guidelines' Market Definitions Over the Years

Abstract

This paper tracks how the various Merger Guidelines prepared by the federal antitrust agencies have addressed the critical issue of market definition. It addresses the many achievements as well as the analytical errors that have appeared from time to time. Following the first Guidelines in 1968, the next several iterations – 1982, 1984, 1992/1997, and 2010 – focused on market power under the hypothetical monopolist test as framing the rule of reasonable interchangeability identified by the courts. And while market definition is never even close to precise, the HMT provided valuable consistency in methodology for those many years. All that seemed to end in 2023.

Market definition is often a dispositive issue. Defining a relevant product and geographic market is an essential element of any claim that a merger or acquisition is illegal under section 7 of the Clayton Act. It is also essential to establish monopoly power under section 2 of the Sherman Act. And it is critical also in assessing a claim of market power in a rule of reason case under
section 1 of the Sherman Act. The 2023 Guidelines do not reject market definition (for the most part) but they part company with case law over the past 45 years in the appropriate methodology. They relegate the HMT to the last of four methodologies to prove the relevant market. They reject the “smallest market principle” and purport to authorize multiple markets, including “submarkets,” in a single case, mostly independent of the HMT. The fundamental objective is to allow the agencies significantly greater freedom to bring cases than the legal precedents allow.

Much remains to be seen. Assuming that the Trump agencies follow the 2023 (Biden) version, what will the courts do? Will they go back to 1960s era case law, or follow the cases from the prior five decades? So far, it seems to be the latter.