Friday, January 23, 2009
Posted by D. Daniel Sokol
Monopoly Power: Use, Proof, and Relationship to Anticompetitive Effects in Section 2 Cases is the new work by Thomas J. Klotz of the FTC.
ABSTRACT: This paper reviews relevant case law, scholarship, and presentations at the Federal Trade Commission/Department of Justice Hearings on Section 2 of the Sherman Act to examine the definition of monopoly power, evidence that demonstrates the existence of monopoly power, and conclusions that can be drawn from particular types of evidence. Section II considers the legal and economic definitions of monopoly power and the relationship between monopoly power and market power. Section III examines categories of evidence that courts have used to determine whether a firm possesses monopoly power, including market definition and market share, profitability, and direct evidence of the exercise of monopoly power. The discussion identifies the limitations of these types of evidence. Given those limitations, Sections IV and V present a framework for assessing whether a firm possesses monopoly power based on market share and the presence of anticompetitive effects. Section IV discusses the ability to draw conclusions based on a firm’s market share; it suggests a rebuttable presumption that a firm with less than a 50% share of a properly defined relevant market lacks monopoly power. Section V discusses the inferences that may be supported by a demonstration of actual or likely anticompetitive effects and a causal link between the challenged conduct and anticompetitive harm; it urges recognition of the potential of such evidence to establish the presence of monopoly power. Finally, Section VI summarizes the conclusions.