Importing the Merger Guidelines Market Test in Section 2 Cases: Potential Benefits and Limitations

• Author: David G. Mangum,Duncan J. Cameron,Mark A. Glick
• Published date: 01 March 1997
• Date: 01 March 1997
• DOI: 10.1177/0003603X9704200110
• Subject Matter: Domestic Antitrust

The Antitrust Bulletin/Spring J997

Importing the Merger Guidelines

market

test in section 2cases:

potential benefits and limitations

BY MARK A. GLICK,* DUNCAN J. CAMERON**

and DAVID G. MANGUM***

121

One essential element of any monopolization claim under section

2

of

the Sherman Act is monopoly power in a relevant antitrust

market.I

The

definition

of

the relevant market in Sherman

Act

section 2cases is often

of

signal importance in determining the

outcome

of

the controversy. As in merger cases, the purpose

of

*Professor of Economics, University

of

Utah, Salt Lake City, Utah.

** Vice President, Capital Economics, Los Angeles, California.

*** Chair of Antitrust Practice Group, Parsons Behle &Latimer, Salt

Lake City, Utah.

AUTHORS' NOTE: We wish to thank Rudolph Perit;

and

John Flynn

for

their comments on earlier drafts.

See United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1960)

("The offense of monopoly under §2 of the Sherman Act has two ele-

ments: (1) the possession of monopoly power in the relevant market and

(2) the willful acquisition or maintenance of that power as distinguished

from growth or development as a consequence of a superior product,

business acumen, or historic accident").

©1997 by Federal Legal PUblications. Inc.

122

The antitrust bulletin

the market definition exercise in a section 2 case is to identify all

of

the important restraints on the ability of the defendant to exer-

cise market power. A definition of the market that is too broad

will lead to an underestimation of the size and power of the defen-

dant. Amarket defined too narrowly will usually have the oppo-

site effect.

For more than half a century, the Supreme Court has grappled

with relevant market issues, producing asomewhat disjointed and

often confusing body of case law attempting to define useful eco-

nomic criteria. Faced with similar problems, in 1982, the Depart-

ment

of

Justice, Antitrust Division, issued significantly revised

Merger

Guidelines

"describing

the

analytical

foundations

of

merger enforcement and providing guidance enabling the business

community to avoid antitrust problems when planning mergers."

Among other innovations, the 1982 Merger Guidelines introduced

asystematic method for defining economically relevant markets,

i.e., markets that

could

be

subject

to a meaningful exercise

of

market

power.

The

Merger

Guidelines

were further revised in

1984 and 1992,

and

the

1992

Merger

Guidelines

were

jointly

issued with the Federal Trade Commission.>

Since its creation, the Guidelines' market definition test has

been utilized by several courts in merger cases.' A LEXIS search

of all federal cases, however, reveals no cases in which the market

test in the Guidelines was applied in a monopolization setting.

This apparent reluctance is somewhat surprising given the courts'

difficulty

developing

apractical market definition test

of

their

own, and the

comparative

rigor of the

Guidelines'

method. No

doctrinal justification supports the courts' reluctance. As early as

1966, the

Supreme

Court

observed

that

there is

"no

reason to

See U.S. Department of Justice and Federal Trade Commission,

1992 Horizontal Merger Guidelines, 57 Fed. Reg. 41522-01 [hereinafter

Guidelines].

See, e.g., Consolidated Gold Fields, PLC v. Anglo Am. Corp., 698

F. Supp. 467, 501 (S.D.N.Y. 1988); United States v. Rice Growers Ass'n,

1986-2 Trade Cas. (CCH)

11

67,288 (E.D. Cal. 1986); Bon-Ton Stores,

Inc. v. May Department Stores Co., 1994-2 Trade Cas. (CCH)

11

70,800

(W.D.N.Y. Nov. 30, 1994).