The Emancipation of Antitrust from Market-Share-Based Approaches

DOI10.1177/0003603X15625106
Published date01 March 2016
Date01 March 2016
Article
The Emancipation of Antitrust
from Market-Share-Based
Approaches
Daniel Zimmer*
Abstract
The conventional method in determining the market position of undertakings—defining the relevant
market, ascertaining the market shares, ‘‘qualitative’’ analysis—has had to face more and more com-
petition in the past decades. For some issues, there exist more suitable methods of analysis today than
the antiquated market-share approach. In an age in which product differentiation represents the norm,
approaches that base an analysis of competition on market shares can seem more and more to be
behind the times. In its assessment of mergers between manufacturers of differentiated products, the
European Commission has made a remarkably clean break with the outmoded market-share-based
analysis. For such a modernization of competition law application, the general framework of European
law offers better conditions than the American system. The European Commission has a freer choice
of methods than its American counterparts, the antitrust agencies, because the Commission itself—
without invoking a court—is competent to issue decisions, while those addressed can have the
Commission’s prohibition decisions reviewed by a court. Also, the courts of the European Union,
when they have been involved in merger cases, have themselves contributed to modernizing the
decision-making practice.
Keywords
antitrust, market shares, economic tools, market definition, upward pricing pressure, merger
simulation, differentiated products, closeness of competition
I. Introduction
American and European antitrust law have both made remarkable developments in the past few
decades. Researchers have recently become more and more interested in a comparative analysis and
evaluation of these developments and their interdependence. Several books have appeared in recent
years that compare the legal developments of US antitrust law with its European counterpart. Richard
Markovits’s two-volume Economics and the Interpretation and Application of U.S. and E.U. Antitrust
*
Chairman, German Monopolies Commission; and Professor of Law, University of Bonn
Corresponding Author:
Daniel Zimmer, University of Bonn, Bonn 53113, Germany.
Email: zimmer@jura.uni-bonn.de
The Antitrust Bulletin
2016, Vol. 61(1) 133-154
ªThe Author(s) 2016
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DOI: 10.1177/0003603X15625106
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Law
1
contains an extensive critique of the dominant teachings of American and European antitrust law.
The author is particularly critical of ‘‘market-oriented’’ analyses—that is, competition law decisions
based upon a calculation of market shares or market concentration.
2
A work of a different character is
Daniel Gifford and Robert Kudrie’s The Atlantic Divide in Antitrust: An Examination of US and EU
Competition Policy.
3
In only 216 pages, the authors use selected examples to examine reasons for the
different legal development in the USA and in the EU.
At the center of the present article are observations on whether Markovits’s criticism of conven-
tional market-structural points of view is justified. The article also deals with the question—beyond the
arguments in the above-mentioned books—of which institutional system of law enforcement seems
more suited to modernize the practice of application, the U.S. system, where a merger restraining
competition can be prevented only by means of a court-ordered injunction; or the European, in which
the competent competition authority can issue such a decision in its own right. The article begins with a
short sketch of these two legal regimes’ common traits and their differences.
II. Which Divide?
The existing provisions of the Sherman Act and the Clayton Act have been applied in very different
ways in the many decades of their existence. While in the 1950s and 1960s practice was influenced by
the so-called structure-conduct-performance paradigm and as such aimed at an extensive application
of the laws, the Antitrust Revolution sparked by the teachings of the Chicago School of Antitrust
Analysis brought about a much more restrained enforcement of competi tion law provisions. This
moderate attitude in antitrust practice seems to be based among other things on the concern that too
strict an interpretation of the laws in the sense of so-called type-I errors (overenforcement) might well
preclude precisely those business practices that can, if understood better, appear to be efficient and thus
welfare-promoting.
4
In the past decades, the enforcement agencies have moreover begun to base their
practice on modern economic tools of analysis, thereby turning away from some antiquated market-
structural ways of thinking.
5
However, for an actual rejection of market-structure-oriented
approaches—which could in fact constitute a second Antitrust Revolution—in the American institu-
tional system, it is not enough for the authorities to merely adapt their practice. Rather, the competent
courts must be convinced that some of the antiquated measures of assessment and means of analysis
are no longer the state of the art in economic theory.
In the European Union, competition law has in the same period taken a very similar turn, at least in
part, as U.S. antitrust law. Still, the competition provisions in the European Union have a different
1. RICHARD S. MARKOVITS,ECONOMICS AND THE INTERPRETATION AND APPLICATION OF U.S. AND E.U. ANTITRUST LAW,VOL.I:BASIC
CONCEPTS AND ECONOMICS-BASED LEGAL ANALYSES OF OLIGOPOLIST IC AND PREDATORY CONDUCT (hereinafter MARKOVITS I);
RICHARD S. MARKOVITS,ECONOMICS AND THE INTERPRETATION AND APPLICATION OF U.S. AND E.U. ANTITRUST LAW,VOL. II:
ECONOMICS-BASED LEGAL ANALYSES OF MERGERS,VERTICAL PRACTICES,AND JOINT VENTURES (hereinafter MARKOVITS II) (2014).
2. See MARKOVITS I, ch. 6, The Inevitable Arbitrariness of Market Definitions and the Unjustifiability of Market-Oriented
Antitrust Analyses.
3. DANIEL J. GIFFORD &ROBERT T. KUDRIE,THE ATLANTIC DIVIDE IN ANTITRUST:ANEXAMINATION OF US AND EU COMPETITION
POLICY (hereinafter GIFFORD &KURDIE,THE ATLANTIC DIVIDE) (2015).
4. See Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 594 (1986): ‘‘[M]istaken inferences in cases such as
this one are especially costly, because they chill the very conduct the antitrust laws are designed to protect’’ (referring to
Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 764 (1984). See also GIFFORD &KUDRIE,THE ATLANTIC DIVIDE ,at
209: ‘‘[E]venif thinking about the substance of policy were exactly the same on both sides of the ocean, there would be more
US concern about the contagion of type one errors: condemning activity that is in fact innocuous or welfare enhancing’’
(referring to David S. Evans, Why Different Jurisdictions Do Not (and Should Not) Adopt the Same Antitrust Rules, 10 CHI.J.
INT.LAW 1622 (2009).
5. U.S. DEPARTMENT OF JUSTICE AND THE FEDERAL TRADE COMMISSION,HORIZONTAL MERGER GUIDELINES, § 6 (in the context of
unilateral effects analyses) (August 19, 2010).
134 The Antitrust Bulletin 61(1)

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