Chapter 6 The Inevitable Arbitrariness of Market Definitions and the Unjustifiability of Market-Oriented Antitrust Analyses

The concrete antitrust-law analyses of every country are virtually always market-oriented—i.e., virtually always derive their legal conclusions from data on parameters such as a firm’s market share or the concentration of the market(s) in which it is operating whose definitions assume that markets can be defined non-arbitrarily. Thus, courts, prosecutors, and administrative agencies that are applying treaties that prohibit the abuse of a dominant position or doctrines that assert that the possession of monopoly (or market) power is an element of an actual or alleged antitrust offense (such as engaging in monopolizing conduct) have all assumed that the dominance of any firm or its monopoly or market power should be determined primarily or exclusively by its market share, and courts, prosecutors, and administrative agencies that are seeking to prevent or break up horizontal mergers and acquisitions that manifest their participants’ specific anticompetitive intent or lessen competition have primarily or exclusively based their predictions of the competitive impact of such mergers or acquisitions (1) traditionally on the merger partners’ individual and combined shares of the relevant markets’ sales and the total of the shares of the sales of those markets made by the four or eight firms that had most sales in them and (2) more recently on the post-merger sum of the squares of the market shares of all firms placed within the relevant markets (the post-merger HHIs—Hirschman–Herfindahl Indices—of those markets) and the impact of the merger in question on these HHIs. I hasten to add that the implicit assumption of all such analytic protocols that markets can be defined non-arbitrarily is shared by virtually all industrial-organization economists.