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Relevant market

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Overview Edit

Proving the existence of monopoly power requires a definition of the relevant market.[1] A relevant market, for antitrust purposes, “can be broadly characterized in terms of the ‘cross-elasticity of demand’ for or ‘reasonable interchangeability’ of a given set of products or services.”[2] A relevant market

encompasses notions of geography as well as product use, quality, and description. The geographic market extends to the “area of effective competition . . . where buyers can turn for alternative sources of supply.” The product market includes the pool of goods or services that enjoy reasonable interchangeability of use and cross-elasticity of demand.[3]

The scope of the market through indirect evidence[4] is a question of fact as to which the plaintiff bears the burden of proof.[5] Competing products are in the same market if they are readily substitutable for one another; a market's outer boundaries are determined by the reasonable interchangeability of use between a product and its substitute, or by their cross-elasticity of demand.[6]

Failure to define the proposed relevant market in these terms may result in dismissal of the complaint.[7]

References Edit

  1. See SmithKline Corp. v. Eli Lilly & Co., 575 F.2d 1056, 1062-63 (3d Cir. 1978).
  2. M.A.P. Oil Co., Inc. v. Texaco, Inc., 691 F.2d 1303, 1306 (9th Cir. 1982) (quoting United States v. E.I. duPont de Nemours & Co., 351 U.S. 377, 395 (1956)).
  3. Tanaka v. Univ. of S. Cal., 252 F.3d 1059, 1063 (9th Cir. 2001).
  4. Because market share and barriers to entry are merely surrogates for determining the existence of monopoly power, see 2A Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 531a (2006), direct proof of monopoly power does not require a definition of the relevant market. See PepsiCo, Inc. v. Coca-Cola Co., 315 F.3d 101, 107-08 (2d Cir. 2002) (stating that “a relevant market definition is not a necessary component of a monopolization claim” where there is direct evidence of monopoly power); Conwood Co., L.P. v. U.S. Tobacco Co., 290 F.3d 768, 783 n.2 (6th Cir. 2002) (noting that monopoly power “may be proven directly by evidence of the control of prices or the exclusion of competition, or it may be inferred from one firm's large percentage share of the relevant market” (internal quotation marks and citation omitted)); Toys “R” Us, Inc. v. Federal Trade Comm'n, 221 F.3d 928, 937 (7th Cir. 2000) (distinguishing between proving monopoly power by direct evidence, and “by proving relevant product and geographic markets and by showing that the defendant's share exceeds whatever threshold is important for the practice in the case”).
  5. Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 436 (3d Cir. 1997); Weiss v. York Hosp., 745 F.2d 786, 825 (3d Cir. 1984).
  6. Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962).
  7. Queen City Pizza, 124 F.3d at 436.

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