94 Harv. L. Rev. 937 (1980-1981)
Market Power in Antitrust Cases

handle is hein.journals/hlr94 and id is 955 raw text is: MARCH 1981

William M. Landes and Richard A. Posner*
With many antitrust prohibitions, the existence of a violation
depends upon whether the defendant possesses sufficient market
power. In this Article, Professors Landes and Posner present an
economic analysis of market power that provides the necessary
foundation for application to particular cases and for formulation
of antitrust policy. They use their approach to illuminate the per-
plexing issues of product and geographical market definition, the
measurement of market power arising from mergers and within
regulated industries, and the quantification of damages in mono-
polization and price-fixing cases. Finally, they argue that, despite
the novelty of their formulation, it is compatible with the dominant
judicial approach to these issues.
T HE term market power refers to the ability of a firm
(or a group of firms, acting jointly) to raise price above
the competitive level without losing so many sales so rapidly
that the price increase is unprofitable and must be rescinded.
Market power is a key concept in antitrust law. A finding of
monopolization in violation of section 2 of the Sherman Act1
requires an initial determination that the defendant has mo-
nopoly power - a high degree of market power. A lesser but
still significant market power requirement is imposed in at-
tempted-monopolization cases under section 2. Section 7 of
the Clayton Act2 also requires proof of market power; in fact,
the main purpose of section 7 is to limit mergers that increase
market power. There is increasing authority that proof of
market power is also required in Rule of Reason cases under
section i of the Sherman Act.3 Issues of market power arise
even in cases involving per se rules of illegality. Proof of some
market power (though perhaps little) is required in a tie-in
* The authors are Clifton R. Musser Professor of Economics and Lee and Brena
Freeman Professor of Law, respectively, at the University of Chicago Law School.
The helpful suggestions of Gabrielle Brenner, Dennis Carlton, Frank Easterbrook,
Nathaniel Gregory, George Stigler, Lester Telser, Donald Turner, and especially
Andrew Rosenfield are gratefully acknowledged. Some of the formal analysis in this
paper is based on a consulting report prepared for Lexecon Inc.
t 15 U.S.C.  2 (1976).
2 Id.  i8.
3 See note 35 infra.



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