Document Type

Article

Publication Date

12-2014

Abstract

Antitrust law has traditionally required proof of market power in most cases and has analyzed market power through a market definition/market share lens. In recent years, this indirect or structural approach to proving market power has come under attack as misguided in practice and intellectually incoherent. If market definition collapses in the courts and antitrust agencies, as it seems poised to do, this will rupture antitrust analysis and create urgent pressures for an alternative approach to proving market power through direct evidence. None of the leading theoretic approaches—such as the Lerner Index or a search for supracompetitive profits—provides a robust solution. Further, one of the core premises in modern antitrust analysis—that the presence of high entry barriers is necessary to market power—is deeply flawed. Counterintuitively, the higher the entry barriers, the less likely it is that (1) the accused firm engaged in anticompetitive conduct and (2) the market would have been more competitive but for the alleged conduct. A robust approach to market power would require a tight nexus between the challenged conduct and a plausible competitive counterfactual. This Article articulates first principles of market power, diagnoses sources of confusion in the current caselaw, and scrutinizes the recognized methods of proving market power without reliance on market definition and market shares.

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