The Dead Hand of Cellophane and the Federal Google and Facebook Antitrust Cases: Market Delineation Will Be Crucial

Date01 March 2022
Published date01 March 2022
DOI10.1177/0003603X211067709
https://doi.org/10.1177/0003603X211067709
The Antitrust Bulletin
2022, Vol. 67(1) 113 –129
© The Author(s) 2022
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DOI: 10.1177/0003603X211067709
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Article
The Dead Hand of Cellophane and
the Federal Google and Facebook
Antitrust Cases: Market Delineation
Will Be Crucial
Lawrence J. White*
Abstract
The U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) monopolization cases
against Google and Facebook, respectively, represent the most important federal nonmerger antitrust
initiatives since (at least) the 1990s. As in any monopolization case, market delineation will be a
central feature of both cases—as it was in the du Pont Cellophane case of sixty-five years ago. Without
a delineated market, how can one determine whether a company has engaged in monopolization?
Unfortunately, there is currently no accepted market delineation paradigm that can help the courts
address this issue for monopolization cases. And this void generally cannot be filled by the market
delineation paradigm that is embedded in the DOJ-FTC “Horizontal Merger Guidelines”: although this
paradigm has had almost forty years of usage and is now well established and well accepted for merger
analysis, this paradigm generally has no applicability for market delineation in monopolization cases. This
article expands on this argument and shows the potential difficulties that are likely to arise in this area
of market delineation and the consequent problems for both cases. This article also points the way
toward a paradigm that offers a sensible approach to dealing with these difficulties.
Keywords
antitrust, monopolization, market delineation, cellophane, U.S. Department of Justice, Federal Trade
Commission, Google, Facebook
I. Introduction
The federal government’s antitrust cases against Google (by the U.S. Department of Justice’s [DOJ]
Antitrust Division) and Facebook (by the Federal Trade Commission [FTC]) represent the most impor-
tant monopolization cases that have been brought by the federal enforcement agencies in decades.1
*Stern School of Business, New York University, New York, NY, USA
Corresponding Author:
Lawrence J. White, Stern School of Business, New York University, New York, NY 10012-1126, USA.
Email: Lwhite@stern.nyu.edu
1067709ABXXXX10.1177/0003603X211067709The Antitrust BulletinWhite
research-article2022
1. The U.S. Department of Justice (DOJ) case was joined by the Attorneys General of a number of individual U.S. states. In
addition, collections of states have filed their own antitrust suits against the two companies. This article will focus on the
two federal suits. The DOJ suit—U.S v. Google LLC—was initially filed on October 20, 2020, in the U.S. District Court
for the District of Columbia and is being heard by Judge Amit P. Mehta; it is Case No. 1:20-cv-03010-APM. The Federal
Trade Commission (FTC) suit—FTC v. Facebook, Inc.—was initially filed on December 9, 2020, also in the D.C. District
Court and is being heard by Judge James E. Boasberg; it is Case No. 1:20-cv-03590-JEB. In October 2021, Facebook, Inc.,
changed its name to Meta Platforms, Inc. But, as of mid January 2022, Facebook, Inc., has remained the named defendant
in this case, and the remainder of this article will refer to the defendant as “Facebook”.
114 The Antitrust Bulletin 67(1)
Both cases were initiated in the waning days of the Trump Administration, but both have been embraced
and pursued by the Biden Administration appointees. For the DOJ, one has to reach back to the mid-
1990s and the DOJ’s prosecution of Microsoft for a case of equal importance. For the FTC, one has to
reach back even farther: to the late 1970s and the FTC’s “shared monopoly” pursuit of the breakfast
cereal industry.
As is true for all such monopolization cases, each enforcement agency will have the burden of delin-
eating one or more relevant markets and demonstrating that the defendant firm has exercised (and/or
enhanced) substantial market power within that relevant market.2 Unfortunately for the agencies, the
problem of delineating a relevant market in a monopolization case has been unresolved since it first
became prominent in a famous antitrust case of the 1950s: the du Pont Cellophane3 case. Cellophane
is likely to haunt the agencies—and the other plaintiffs in the other cases. And despite success in the
area of merger analysis, the market delineation paradigm that the DOJ developed in 1982—specifically
for the antitrust analysis of mergers—has little applicability in the monopolization area and will pro-
vide little help for the agencies.
In the absence of a method for delineating relevant markets in a monopolization context, however,
the government plaintiffs’ burdens of convincingly demonstrating monopolization in each case are
likely to be quite difficult to sustain.
As a response to these difficulties, this article offers an outline of a paradigm that properly addresses
the delineation issues in a monopolization case and that avoids the pitfalls to which Cellophane leads.
II. Delineating the Relevant Market in a Monopolization Case:
The Problem
A. The “Cellophane Fallacy”
The dilemma of the delineation of the market in a monopolization case is illustrated by a classic 1950s
antitrust case: U.S. v. E.I. du Pont de Nemours & Co., 351 U.S. 377 (1956). The DOJ initially brought this
monopolization case against du Pont in 1947. The DOJ argued that the relevant market was cellophane
and that du Pont had a relatively high market share—around 76 percent—of the cellophane market and
had taken a number of exclusionary (monopolization) actions so as to maintain that high market share.
Du Pont, in its defense, claimed that the relevant market was “all flexible wrapping materials,”
which included aluminum foil, glassine, Pliofilm, polyethylene, cellulose acetate, waxed paper, sul-
phite paper, vegetable parchment, and kraft paper. In that market, du Pont had only a modest market
share—around 20 percent—and thus (du Pont argued) the company could not have been engaging in
monopolization.
The initial decision by Judge Paul Leahy in federal district court—U.S. v. E.I. du Pont de Nemours
& Co., 118 F. Supp. 41 (1953)—was in du Pont’s favor. The DOJ appealed directly to the U.S. Supreme
Court,4 which granted certiorari. After hearing the case (in October 1955), the Supreme Court (by a 4-3
decision) ruled (in June 1956) also in favor of du Pont.
2. This article will focus on the market delineation issues in these cases and will generally not address the specific actions that
the agencies allege to be anticompetitive. However, to provide some initial context: The DOJ argues that Google’s annual
payments of billions of dollars to Apple (especially) and to other computer and smartphone manufacturers and to cellphone
service providers—so as to obtain default installation of its search engine on their devices—are exclusionary and thereby
raise rivals’ costs and raise the barriers to entry for other search engines. The FTC argues that Facebook’s exclusionary
actions were its acquisition of Instagram in 2012 and of WhatsApp in 2014 and the restrictive language that Facebook has
had in its contracts with app developers that want their apps to be available to Facebook users.
3. U.S. v. E.I. du Pont de Nemours & Co., 351 U.S. 377 (1956).
4. At that time it was possible (under the Expediting Act of 1903, 32 Stat. 823, 15 U.S.C. § 28) for the parties to a DOJ-
initiated antitrust case to bypass the appellate courts and to appeal the case directly to the Supreme Court. (This provision
was repealed by the Tunney Act of 1974, Pub. L. 93-528, 88 Stat. 1708, 15 U.S.C. § 16.)

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