The Role of Market Power in Statutory Antitrust Offenses

The economic concept of market power plays a significant role in the
analysis of potentially anticompetitive conduct under the antitrust laws.
Courts have tailored the analysis of market power to fit the differing
demands of various antitrust statutes. This Chapter explores the
fundamental role that market power plays under each of the primary
federal antitrust laws.
A. Market Power Under Section 1 of the Sherman Act
Sherman Act Section 1 provides that “[e]very contract, combination
in the form of trust or otherwise, or conspiracy, in restraint of trade or
commerce among the several States . . . is declared to be illegal.”1
However, because every agreement restrains trade to some degree, the
Supreme Court has interpreted Section 1 to reach only concerted activity
between separate entities that unreasonably restrains competition.2 As
explained more fully below, the analysis of market power in Section 1
cases is often integral to the court’s assessment of whether a defendant’s
conduct unreasonably restrains trade by, for example, raising prices,
restricting output, or impairing consumer choice.3 However, the role of
market power varies significantly between per se and rule of reason
1. 15 U.S.C. § 1.
2. In Standard Oil Co. v. United States, 221 U.S. 1, 58-60 (1911), the Court
concluded that it was not Congress’ intention to prohibit contracts that
impose insignificant restraints of trade, but only those that
“unreasonably” restrain competition.
3. See, e.g., United States v. Visa U.S.A., Inc., 344 F.3d 229, 238 (2d Cir.
2003) (holding that a plaintiff “must demonstrate that the defendant
conspirators have ‘market power’ in a particular market for goods or
services”); Sullivan v. NFL, 34 F.3d 1091, 1096-97 (1st Cir. 1994)
(“Anticompetitive effects . . . are usually measured by a reduction in
output and an increase in prices in the relevant market.”).
14 Market Power Handbook
The Role of Market Power in Per Se Cases
The per se rule applies to those practices that are “so plainly
anticompetitive” that they are deemed illegal without analysis of market
power and market effects.4 The most commonly recognized of these per
se offenses are horizontal price fixing, 5 bid rigging, 6 and horizontal
market allocation.7 Although these per se offenses under Sherman Act
Section 1 do not require proof of market power,8 they are nonetheless
strongly influenced by the concept. Both anticompetitive effects and
procompetitive justifications are defined and identified by reference to
actual or expected price and output effects.9 In this way, the economic
4. See Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 692
(1978). In Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49-51,
58-59 (1977), the Supreme Court made it clear that the per se rule is a
“demanding standard” and that any departure from the rule of reason
must be based on “demonstrable economic effect rather than . . . upon
formalistic line drawing.” However, historically, courts have found per se
violations even for conduct that may benefit consumers. For example,
maximum price restraints may limit the prices consumers pay, yet were at
one time viewed as per se illegal. See, e.g., Albrecht v. Herald Co., 390
U.S. 145 (1968) (finding vertical maximum price fixing per se illegal).
Courts have moved away from this in more recent cases. See, e.g., Leegin
Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007) (holding
all vertical price restraints are judged by the rule of reason and
overturning the former per se treatment from Dr. Miles Med. Co. v. John
D. Park & Sons Co., 220 U.S. 373 (1911)); State Oil Co. v. Khan, 522
U.S. 3, 10 (1997) (finding “most antitrust claims are analyzed under a
rule of ‘reason’” and overturning the holding from Albrecht v. Herald Co.,
390 U.S. 145 (1968), that maximum resale price maintenance was per se
5. See, e.g., United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223
6. See, e.g., United States v. Heffernan, 43 F.3d 1144, 1145-46 (7th Cir.
1994); United States v. Reicher, 983 F.2d 168, 170 (10th Cir. 1992);
United States v. Koppers Co., 652 F.2d 290, 294 (2d Cir. 1981); United
States v. Bensinger Co., 430 F.2d 584, 589 (8th Cir. 1970).
7. See, e.g., Palmer v. BRG of Ga., Inc., 498 U.S. 46, 49-50 (1990).
8. See NCAA v. Bd. of Regents, 468 U.S. 85, 109-10 (1984).
9. See NCAA, 468 U.S. at 114-15 (finding that many more games would be
televised in a free market than under the NCAA plan); Jefferson Parish
Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 31 (1984) (finding “no evidence
that the price, the quality, or the supply or demand . . . has been adversely

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