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Market definition, Landes-Posner assessment of foreign competition


Antitrust and Trade Regulation | International Law | Law and Economics


Market definition is generally regarded as a key step in antitrust analysis. Market definition has two components. Product market definition seeks to include all products that are meaningful substitutes. Geographic market definition seeks to incorporate all relevant sources of the product in question. This paper is concerned with geographic market definition and, in particular, how geographic markets are defined in situations where competition may, at least to some extent, transcend national boundaries.

The subject of the paper may be of some current interest for two reasons. First, the perception is widespread that, over the past twenty or so years, competition in many products and services has become increasingly international in scope and that this trend will continue. Second, the way in which foreign competition is taken into account in performing the antitrust analysis can have a dramatic impact on the legal or policy conclusions that are reached in a particular instance. The legality of a proposed merger, for example, may turn entirely on how competition from foreign sellers is treated.

For antitrust purposes, when we say that competition has become more international in scope, we mean primarily that the range of possible suppliers for many goods and services to U.S. consumers increasingly includes sellers who do not produce or are not primarily headquartered in the United States or that an increasing portion of sales by American-based firms are to customers abroad. Many aspects of antitrust are potentially affected by these changes. Some of the more complex issues involve "jurisdictional considerations" and these will not be discussed here. As we will see, however, the subject of market definition exposes almost all of the substantive (as opposed to jurisdictional) considerations that come into play when we take account of the international aspect of certain markets.

The paper has three main parts. The first focuses on the role market definition plays in antitrust analysis and, in particular, the link between market definition and market power. The second explores the particular issues that are raised with respect to market definition when there is an international aspect to competition. The final section addresses some of the empirical questions raised by the largely theoretical analysis of the first two parts of the paper.

Publication Citation

Published in: Chicago-Kent Law Review, vol. 64, no. 3 (1988).