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Market power is the most important determinant of liability in competition law cases throughout the world. Yet fundamental questions on the relevance of market power are underanalyzed, if examined at all: When and why should we inquire into market power? How much should we require? Should market power be viewed as one thing, regardless of the practice under scrutiny and independent of the pertinent anticompetitive and procompetitive explanations for its use? Does each component of market power have the same probative force? Or even influence optimal liability determinations in the same direction? This Article’s ground-up investigation of market power finds that the answers often differ from what is generally believed and sometimes are surprising — notably, higher levels of certain market power measures or particular market power components sometimes disfavor liability. This gulf between conventional wisdom and correct understanding suggests the need to redirect research agendas, agency guidance, and competition law doctrine.
* Finn M.W. Caspersen and Household International Professor of Law and Economics, Harvard Law School, and Research Associate, National Bureau of Economic Research. I am grateful to Tim Bresnahan, Kai Uwe Kuhn, Douglas Melamed, Steven Shavell, Matthew Stephenson, Abe Wickelgren, and participants at Harvard University, Stanford University, the Federal Trade Commission, the Hal White Antitrust Conference, the Searle Center Conference on Antitrust Economics and Competition Policy, the European Association for Research in Industrial Economics Annual Conference, the Institute for Advanced Study in Toulouse, the Heath Memorial Lecture, and the American Law and Economics Association Annual Meeting for helpful discussions and comments; Samuel Callahan, Won Chai, Sumeet Dang, Gabrielle Hodgson, Carys Johnson, Carsten Koenig, Jodie Liu, Andrea Lowe, Will Milliken, Andrew Paik, John Rady, Ravi Ramchandani, Dorothy Shapiro, and Nick Warther for research assistance; and Harvard Law School’s John M. Olin Center for Law, Economics, and Business for financial support. My thinking on this subject has evolved while conducting research on this project; much presented here departs from views expressed in my prior writing. Disclaimer: I occasionally consult on antitrust cases, and my spouse is in the legal department of a financial services firm.