My co-author, Marc Williamson, just alterted me to this section in the recently-published FTC/DOJ Merger Guidelines Commentary (.pdf):
Industry Usage of the Word â€œMarketâ€? Is Not Controlling
Relevant market definition is, in the antitrust context, a technical exercise involving analysis of customer substitution in response to price increases; the â€œmarketsâ€? resulting from this definition process are specifically designed to analyze market power issues. References to a â€œmarketâ€? in business documents may provide important insights into the identity of firms, products, or regions that key industry participants consider to be sources of rivalry, which in turn may be highly probative evidence upon which to define the â€œrelevant marketâ€? for antitrust purposes. The Agencies are careful, however, not to assume that a â€œmarketâ€? identified for business purposes is the same as a relevant market defined in the context of a merger analysis. When businesses and their customers use the word â€œmarket,â€? they generally are not referring to a product or geographic market in the precise sense used in the Guidelines, although what they term a â€œmarketâ€? may be congruent with a Guidelinesâ€™ market.
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It is unremarkable that â€œmarketsâ€? in common business usage do not always coincide with â€œmarketsâ€? in an antitrust context, inasmuch as the terms are used for different purposes. The description of an â€œantitrust marketâ€? sometimes requires several qualifying words and as such does not reflect common business usage of the word â€œmarket.â€? Antitrust markets are entirely appropriate to the extent that they realistically describe the range of products and geographic areas within which a hypothetical monopolist would raise price significantly and in which a mergerâ€™s likely competitive effects would be felt.
In our article, Hot Docs. vs. Cold Economics, 47 Ariz. L. Rev. 609, we take the agencies (and courts) to task for conflating the different uses of the term. Along the way we write:
To be sure, business documents can be appropriately useful to regulators in certain areas of inquiry. Business documents may be useful in providing data for economic analysis, and business documents also serve to provide a basic picture of the industry under scrutiny.
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In part our criticism is simply that there is a semantic disconnect that is often elided over. The business actor, who happens to use terms identical to those used to describe a legally relevant concept, is, in fact, describing something different. As we previously noted, the word “market” is employed to mean many different things. Likewise, the term “profit” has different meanings in different contexts. It is no more appropriate to ascribe to a word a distinct meaning not intended in the context than it is to ascribe to a word another wordâ€™s meaning.
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In the end, itâ€™s both unremarkable and irrelevant that business people say these things.
Uncanny similarities, no? Of course we disagree that the enforcement agencies are, in fact, careful not to equate the two uses of the term, but as far as I know this is the first time they have seen fit to actually disclaim the practice. Coincidence? I think not.
Nice job, Geoff. Good to see the regulators moving in the right direction. Now, about that shameless self-promotion….