Assessing Market Power

Antitrust law is principally concerned with conduct that poses a
sufficient threat to competition and consumer welfare. Absent some
material degree of market power, firms cannot adversely affect the
competitive process.1 Thus, before unilateral conduct, concerted action,
or a proposed merger can be condemned under antitrust law, the relevant
firms must be shown to possess sufficient market power such that their
conduct might harm, lessen or destroy competition.2
A. Market Power, Monopoly Power, and Market Definition
The standard for defining market power may differ depending on the
violation alleged. For cases alleging unlawful agreements under Section 1
of the Sherman Act, other than those to which the per se rule applies, the
market power requirement is generally defined as “the ability to raise
prices above those that would be charged in a competitive market.”3 A
similar standard applies in determining under Section 7 of the Clayton Act
whether a merger will “create, enhance, or entrench market power or to
facilitate its exercise.”4
2. See, e.g., Walker Process Equip. v. Food Mach. & Chem., 382 U.S. 172,
177 (1965).
3. NCAA v. Board of Regents, 468 U.S. 85, 109 n.38 (1984); accord
Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 27 n.46 (1984)
(“market power exists whenever prices can be raised above the levels that
would be charged in a competitive market”). Section 1 cases, which
involve conduct, such a s price fixing, conde mned under per se stand ards
“are so plainly anticompetitive that no elaborate study of the industry is
needed to establish their illegality.” Nat’l Soc’y of Prof’l Eng’rs v. United
States, 435 U.S. 679, 692 (1978).
GUIDELINES § 0.1 (2010) [hereinafter 2010 HORIZONTAL MERGER
GUIDELINES] (“A merger enhances market power if it is likely to encourage
one or more firms to raise price, re duce output, diminis h innovation, or
otherwise harm customers as a result of diminished competitive constraints
158 Pharmaceutical Industry Antitrust Handbook
To establish unlawful monopolization under Section 2 of the Sherman
Act, proof of “monopoly power” is required, which is “something greater
than market power under § 1.”5 A traditional formulation of the enhanced
requirement for Section 2 defines monopoly power as “the power to
control prices or exclude competition.”6 Put another way, monopoly
power can be viewed as “the power to charge a price higher than the
competitive price without inducing so rapid and great an expansion of
output from competing firms as to make the supracompetitive price
The analysis of monopoly power and market definition is also context-
sensitive. As the First Circuit noted in U.S. Healthcare v. Healthsource,8
“the nature of the claim can affect the proper market definition,” and
“rational treatment is assisted by remembering to ask, in defining the
market, why we are doing so: that is, what is the antitrust question in this
case that market definition aims to answer?”9
The prescription drug industry has special characteristics that play an
important role in the analysis of market power. The interplay between
federal regulation, a unique patent protection scheme, the competitive
dynamics between prescription and generic drugs and the control over
purchasing decisions exercised by physicians and third-party payors
complicates the analysis of market power for these products. The
following discussion focuses on two broad categories in which the
or incentives. In eval uating how a merger will likely change a fir m’s
behavior, the Agencie s focus primarily on how the merger affects conduct
that would be most profitable for the firm.”).
5. It’s My Party v. Live Nation, 88 F. Supp. 475, 499 (D. Md. 2015); see also
Reazin v. Blue Cross & Blue Shield of Kan., 899 F.2d 951, 966 (10th Cir.
1990) (defining monopoly power as “substantial market power”);
Deauville Corp. v. Federated Dep’t Stores, 756 F.2d 1183, 1192 n.6 (5th
Cir 1985) (defining monopoly power as an “extreme degree of market
6. United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391 (1956).
7. In re Lorazepam & Clorazepate Antitrust Litigation, 467 F. Supp. 2d 74,
86 (D.D.C. 2006) (“A firm is generally considered to have monopoly
power if it can profitably raise prices substantially above the competitive
level for a non-transitory period of time.”); Harrison Aire, Inc. v. Aerostar
Int’l, 423 F.3d 374, 380 (3d Cir. 2005) (citation omitted); United States v.
Microsoft, 253 F.3d 34, 51 (D.C. Cir. 2001) (en banc) (per curiam) (“[A]
firm is a monopolist if it can profitably raise prices s ubstantially above the
competitive level.”).
8. 986 F.2d 589 (1st Cir. 1993).
9. Id. at 598.

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