Relevant Market

• Author: Ronan P. Harty
• Pages: 603-667

603

CHAPTER 6

RELEVANT MARKET

A. Introduction

Relevant market definition can be a critical issu e in an antitrust case. In

many instances, the definition of the relevant market may determine the outcome of

the case.

In principle, the objective in defining the relevant market is to structure the inquiry

into the particular antitrust question at issue by drawing a boundary around those

products or services that competitively constrain each other (or would in a competitive

environment) to some substantial degree, and separating those products from others

that are not competitive alternatives. Market definition is significant because many

antitrust cases turn on whether the defendant (or a group of defendants) possesses, or

is likely to obtain, market power or monopoly power. As the Ninth Circuit explained,

“[a] ‘market’ is any grouping of sales whose sellers, if unified by a monopolist or a

hypothetical cartel, would have market power in dealing with any group of buyers.”1

The relevant market concept is intuitively appealing because it can help courts and

parties assess the competitive effects of a particular restraint or business combination

on a defined area of commerce. It facilitates the identification of affected products and

market players, which in turn allows for a calculation of measures of market

concentration. In short, it can provide a useful framework for evaluating potential

harms to competition.

A relevant market is generally thought of as having two components that reflect

different dimensions of competition: (1) the relevant product market, which identifies

the products or services that compete with each other; and (2) the relevant geogra phic

market, which identifies the geographic area within which competition in the relevant

product market takes place.2

Although the precise role that market definition plays in antitrust analysis varies

somewhat depending on the statutory context, market definition plays a significant role

1. Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421, 1434 (9th Cir. 1995) (quoting PHILLIP E.

AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ¶ 518.1b (Wolters Kluwer 1993 Supp.)).

Several other courts have cited the Areeda and Hovenkamp definition of a relevant market (from

various editions of their treatise). See, e.g., AD/SAT v. Associated Press, 181 F.3d 216, 228 (2d Cir.

1999); Levine v. Central Fla. Med. Affiliates, 72 F.3d 1538, 1552 (11th Cir. 1996); H.J., Inc. v. ITT,

867 F.2d 1531, 1537 (8th Cir. 1989).

2. See, e.g., United States v. Marine Bancorp., 418 U.S. 602, 618 (1974); Brown Shoe Co. v. United

States, 370 U.S. 294, 324 (1962); Newcal Indus. v. IKON Office Sol., 513 F.3d 1038, 1045 (9th Cir.

2008); Eichorn v. AT&T, 248 F.3d 131, 147 (3d Cir. 2001); Bathke v. Casey’s Gen. Stores, 64 F.3d

340, 345 (8th Cir. 1995); Los Angeles Mem’l Coliseum Comm’n v. NFL, 726 F.2d 1381, 1392 (9th

Cir. 1984).

604 ANTITRUST LAW DEVELOPMENTS (NINTH)

in cases brought under the Sherman Act, the Clayton Act, the Robinson-Patman Act,

and the Federal Trade Commission Act (FTC Act). The standards for determining the

relevant product and geographic markets are substantially similar under these statutes,

and courts and the Federal Trade Commission (FTC) routinely rely on cases decided

under one statute when deciding cases under another statute.3

Under Section 1 of the Sherman Act,4 courts traditionally have analyzed restraints

under standards ranging from per se illegality to full rule of reason. Because the per se

standard declares certain types of agreements illegal as a matter of law, without inquiry

into actual market consequences,5 market definition generally is not required in per se

cases.6 On the other hand, applying the rule of reason typically requires a detailed

examination of a restraint’s actual competitive impact in a properly defined relevant

market.7

Under Section 2 of the Sherman Act,8 defining the relevant market is essential to

proving monopolization or attempted monopolization.9 “Without a definition of that

3. While courts have largely relied on Clayton Act precedent in defining markets under that Act, they

also have recognized the relevance of cases decided under the Sherman Act. See, e.g., United

States v. Engelhard Corp., 126 F.3d 1302, 1305 (11th Cir. 1997) (Clayton Act case citing Times-

Picayune Publ’g Co. v. United States, 345 U.S. 594 (1953), a Sherman Act case, as authority for

determining relevant market). But cf. United States v. Mrs. Smith’s Pie Co., 440 F. Supp. 220, 230

(E.D. Pa. 1976) (“Although Sherman Act cases certainly are relevant and are entitled to some weight

in defining a ‘line of commerce’ under the Clayton Act, we believe that cases decided under the

Clayton Act, are stronger precedents, since the tests may differ somewhat under each act.”).

Similarly, courts have followed Clayton Act cases as precedents when defining the relevant

market in Sherman Act cases. See, e.g., United States v. Grinnell Corp., 384 U.S. 563, 572-73 (1966)

(finding “no reason to differentiate between ‘line’ of commerce in the context of the Clayton Act

and ‘part’ of commerce for purposes of the Sherman Act.”); Image Tech. Servs. v. Eastman Kodak

Co., 125 F.3d 1195, 1204 n.3 (9th Cir. 1997) (“The Supreme Court has held that its precedent relating

to the ‘line of commerce’ under § 7 of the Clayton Act applies to market definition under the ‘part

of commerce’ language in the Sherman Act.”).

4. 15 U.S.C. § 1.

5. See Chapter 1.B.3.a. for a discussion of Section 1 of the Sherman Act.

6. See, e.g., FTC v. Superior Court Trial Lawyers Ass’n, 493 U.S. 411, 432-36 (1990); Northern Pac.

Ry. v. United States, 356 U.S. 1, 5 (1958); In re Insurance Brokerage Antitrust Litig., 618 F.3d 300,

316 (3d Cir. 2010); Big Bear Lodging Ass’n v. Snow Summit, Inc., 182 F.3d 1096, 1104-05 (9th

Cir. 1999). In the context of tying arrangements, however, the Supreme Court has held that the per

se rule is inapplicable absent proof of market power, which in turn tends to require definition of a

relevant market. Illinois Tool Works v. Independent Ink, 547 U.S. 28, 46 (2006). Similarly, some

cases involving allegations of collective refusal to deal have considered defendants’ market power,

thus requiring relevant market definition. See, e.g., Northwest Wholesale Stationers v. Pacific

Stationery & Printing, 472 U.S. 284, 295-97 (1985) (finding that collective refusal to deal properly

judged under rule of reason rather than per se rule in part because defendants lacked market power).

7. See, e.g., Leegin Creative Leather Prods. v. PSKS, Inc., 551 U.S. 877, 885-86 (2007); Copperweld

Corp. v. Independent Tube Corp., 467 U.S. 752, 768 (1984); United States v. Arnold, Schwinn &

Co., 388 U.S. 365, 380 -82 (1967), overruled on other grounds, Continental T.V. v. GTE Sylvania

Inc., 433 U.S. 36 (1977); Times-Picayune, 345 U.S. at 615-16; Tanaka v. University of S. Cal., 252

F.3d 1059, 1063 (9th Cir. 2001); see also Worldwide Basketball & Sport Tours v. NCAA, 388 F.3d

955, 961 (6th Cir. 2004) (finding that “quick look” analysis is not sufficient where the product

market is neither obvious nor undisputed).

8. 15 U.S.C. § 2.

9. See, e.g., Heerwagen v. Clear Channel Commc’ns, 435 F.3d 219, 229 (2d Cir. 2006) (“[A] plaintiff

claiming monopolization is obligated to establish the relevant market because the power to control

prices or exclude competition only makes sense w ith reference to a particular market.”), overruled

on other grounds, Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc., 5 46 F.3d

196, 201 (2d Cir. 2008). See also Chapter 2.B.1.

RELEVANT MARKET 605

market,” the U.S. Supreme Court has observed, “there is no way to measure [a

defendant’s] ability to lessen or destroy competition.”10

Section 3 of the Clayton Act governs certain tying and exclusive dealing

agreements “where the effect . . . may be to substantially lessen competition or tend to

create a monopoly in any line of commerce.”11 Market definition is often critical in

tying cases because tying is only unlawful if a firm has market power in the tying

product.12 Market definition is also relevant in ascertaining whether competitive effects

are likely, and is useful, for example, in assessing the degree of predicted market

foreclosure.13

The Supreme Court has also held that “[d]etermination of a relevant pro duct and

geographic market is a ‘necessary predicate’” to a claim under Section 7 of the Clayton

Act,14 because of Section 7’s directive that a substantial lessening of competition be

shown “in any line of commerce in any section of the country.”15

Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, uses

similar language, prohibiting certain types of price discrimination where the likely

effect “may be substantially to lessen competition or tend to create a monopoly in any

line of commerce.”16 Determining whether discriminatory prices have these adverse

competitive effects ordinarily requires a definition of the relevant market.17

Finally, the antitrust component of Section 5 of the FTC Act prohibits “unfair

methods of competition.”18 Although the FTC does not enforce the Sherman Act or the

Clayton Act directly, practices that violate Sections 1 and 2 of the Sherman Act and

10. Walker Process Equip. v. Food Mach. & Chem., 382 U.S. 172, 177 (1965); accord Spectrum

Sports v. McQuillan, 506 U.S. 447, 456 (1993); Heer wagen, 435 F.3d at 227-29; United States v.

Microsoft Corp., 253 F.3d 34, 81 (D.C. Cir. 2001).

11. 15 U.S.C. § 14. See also Chapter 1.D.2.1.a-b.

12. See, e.g., Illinois Tool Works v. Indep. Ink, 547 U.S. 28, 46 (2006).

13. See, e.g., Tampa Elec. Co. v. Nashville Coal Co., 365 U.S.320, 327-28 (1961); United States v. E.I.

du Pont de Nemours & Co., 353 U.S. 586, 593 (1957); Standard Oil Co. of Cal. v. United States,

337 U.S. 293, 299 n.5 (1949); Stop & Shop Supermarket Co. v. Blue Cross & Blue Shield of R.I.,

373 F.3d 57, 67-69 (1st Cir. 2004).

14. United States v. Marine Bancorp., 418 U.S. 602, 618 (1974) (quoting du P ont, 353 U.S. at 593);

accord United States v. Connecticut Nat’l Bank, 418 U.S. 656, 660 (1974); FTC v. H.J. Heinz Co.,

246 F.3d 708, 715 (D.C. Cir. 2001); FTC v. Tenet Health Care Corp., 186 F.3d 1045, 1051-52 (8th

Cir. 1998); United States v. Engelhard Corp., 126 F.3d 1302, 1307-08 (11th Cir. 1997); FTC v.

Freeman Hosp., 69 F.3d 260, 268 n.11 (8th Cir. 1995); F. & M. Schaefer Corp. v. C. Schmidt &

Sons, 597 F.2d 814, 817 (2d Cir. 1979) (per curiam); Coca-Cola Bottling Co., 118 F.T.C. 452, 574

(1994); Adventist Health Sys., 117 F.T.C. 224, 287 (1994).

15. Brown Shoe Co. v. United States, 370 U.S. 294, 324 (1962); see du Pont, 353 U.S. at 593; see also

Lucas Auto. Eng’g v. Bridgestone/Firestone, Inc., 275 F.3d 762, 766 (9th Cir. 2001) (“In a § 7 case,

the relevant market must be defined in order to evaluate the competitive consequences of an alleged

restraint of trade.”); Engelha rd Cor p., 126 F.3d at 1305 (dismissing § 7 claims because

“[e]stablishing the relevant product market is an essential element in the Government’s case”); New

York v. Deutsche Telekom AG, 439 F. Supp. 3d 179, 200 (S.D.N.Y. 2020) (“The goal in defining

the relevant market is to identify the market participants . . . that restrain an individual firm’s ability

to raise prices or restrict output.”) (quoting Geneva Pharms. Tech. Corp. v. Barr Lab’ys, 386 F.3d

485, 496 (2d Cir. 2004)); United States v. Oracle Corp., 331 F. Supp. 2d 1098, 1148 (N.D. Cal.

2004) (finding that plaintiff’s failure to establish relevant market precluded presumption of merger’s

illegality); FTC v. Arch Coal, Inc., 329 F. Supp. 2d 109, 119 (D.D.C. 2004) (“The definition of the

relevant market is necessary to identify that area of trade within which a defendant allegedly has

acquired or will acquire an illegal monopolistic or oligopolistic position.”).

16. 15 U.S.C. § 13(a); see also Chapter 5.

17. See Bailey v. Allgas, Inc., 284 F.3d 1237, 1246 (11th Cir. 2002); Bathke v. Casey’s Gen. Stores, 64

F.3d 340, 344-45 (8th Cir. 1995).

18. 15 U.S.C. § 45.