Abhay Competiton Law LLM
Abhay Competiton Law LLM
Abhay Competiton Law LLM
Market Shares
Courts Typically Have Required a Dominant Market Share to Infer Monopoly Power
In determining whether a competitor possesses monopoly power in a relevant market, courts
typically begin by looking at the firm's market share. Although the courts "have not yet
identified a precise level at which monopoly power will be inferred," they have demanded a
dominant market share. Discussions of the requisite market share for monopoly power
commonly begin with Judge Hand's statement in United States v. Aluminum Co. of
America that a market share of ninety percent "is enough to constitute a monopoly; it is
doubtful whether sixty or sixty-four percent would be enough; and certainly thirty-three per
cent is not." The Supreme Court quickly endorsed Judge Hand's approach in American
Tobacco Co. v. United States.
Following Alcoa and American Tobacco, courts typically have required a dominant market
share before inferring the existence of monopoly power. The Fifth Circuit observed that
"monopolization is rarely found when the defendant's share of the relevant market is below
70%." Similarly, the Tenth Circuit noted that to establish "monopoly power, lower courts
generally require a minimum market share of between 70% and 80%." Likewise, the Third
Circuit stated that "a share significantly larger than 55% has been required to establish prima
facie market power" and held that a market share between seventy-five percent and eighty
percent of sales is "more than adequate to establish a prima facie case of power."
It is also important to consider the share levels that have been held insufficient to allow courts
to conclude that a defendant possesses monopoly power. The Eleventh Circuit held that a
"market share at or less than 50% is inadequate as a matter of law to constitute monopoly
power." The Seventh Circuit observed that "fifty percent is below any accepted benchmark
for inferring monopoly power from market share." A treatise agrees, contending that "it
would be rare indeed to find that a firm with half of a market could individually control price
over any significant period."
Some courts have stated that it is possible for a defendant to possess monopoly power with a
market share of less than fifty percent. These courts provide for the possibility of establishing
monopoly power through non-market-share evidence, such as direct evidence of an ability
profitably to raise price or exclude competitors. The Department is not aware, however, of
any court that has found that a defendant possessed monopoly power when its market share
was less than fifty percent. Thus, as a practical matter, a market share of greater than fifty
percent has been necessary for courts to find the existence of monopoly power.
VI. CONCLUSION
Monopoly power entails both greater and more durable power over price than mere market
power and serves as an important screen for section 2 cases. As a practical matter, a market
share of greater than fifty percent has been necessary for courts to find the existence of
monopoly power. If a firm has maintained a market share in excess of two-thirds for a
significant period and the firm's market share is unlikely to be eroded in the near future, the
Department believes that such facts ordinarily should establish a rebuttable presumption that
the firm possesses monopoly power. The Department is not likely to forgo defining the
relevant market or calculating market shares in section 2 monopolization and attempt cases,
but will use direct evidence of anticompetitive effects when warranted and will not rely
exclusively on market shares in concluding that a firm possesses monopoly power.
REFERENCES:
1. See generally 2B Phillip E. Areeda et al., Antitrust Law ¶ 403b, at 8 & n.2 (3d ed. 2007);
Richard A. Posner, Antitrust Law 932 (2d ed. 2001).
4. See Chapter 1, Part I(A); see also Grinnell, 384 U.S. at 57071 (requiring improper
conduct--as opposed to superior skill, foresight, or industry--as an element of a section 2
violation).
5. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 775 (1984).
6. See Sherman Act Section 2 Joint Hearing: Monopoly Power Session Hr'g Tr. 1314, Mar. 7,
2007 [hereinafter Mar. 7 Hr'g Tr.] (Nelson) ("[I]f you have a differentiated product and thus
have a downward-sloping demand curve for your product, you might have some degree of
ability to raise prices above costs and you might in that sense have market power . . . .").
7. See, e.g., Sherman Act Section 2 Joint Hearing: Conduct as Related to Competition Hr'g
Tr. 55, May 8, 2007 [hereinafter May 8 Hr'g Tr.] (Sidak) ("I don't think that the downward-
sloping demand curve itself is a cause for antitrust intervention."); Dennis W.
Carlton, Market Definition: Use and Abuse, Competition Pol'y Int'l, Spring 2007, at 3, 7.
8. NCAA v. Bd. of Regents of the Univ. of Okla., 468 U.S. 85, 109 n.38 (1984); see
also Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 27 n.46 (1984) ("As an economic
matter, market power exists whenever prices can be raised above levels that would be
charged in a competitive market."); cf. Dennis W. Carlton & Jeffrey M. Perloff, Modern
Industrial Organization 642 (4th ed. 2005) (noting that a firm has market power "if it is
profitably able to charge a price above that which would prevail under competition");
William M. Landes & Richard A. Posner, Market Power in Antitrust Cases, 94 Harv. L. Rev.
937, 939 (1981) ("A simple economic meaning of the term 'market power' is the ability to set
price above marginal cost."). The demand curve faced by the perfectly competitive firm is a
horizontal line--the market price: the firm can sell as much as it wants at the market price, but
it can sell nothing at a price even slightly higher. Consequently, the perfectly competitive
firm maximizes its profits by producing up to the point at which its marginal cost equals the
market price.
9. United States v. E. I. du Pont de Nemours & Co. (Cellophane), 351 U.S. 377, 391 (1956).
10. Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 481 (1992).