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When products are differentiated, applying the standard critical loss formula to assess whether it is profitable for a hypothetical monopolist to impose a common price increase can lead to delineating an antitrust market that is too broad by setting a critical loss threshold that is too low. This error is particularly likely to occur when the products exhibit very different per-unit profits, own price elasticities, and cross price elasticities. In particular, different per-unit profits are a necessary condition for this error to occur and this difference is more likely to be driven by an asymmetry in prices than by an asymmetry in costs when own price elasticities are moderate in magnitude. In contrast, differences in the quantity sold of each product do not tend to lead to errors in market definition. Given the issues associated with the standard critical loss analysis, critical loss analysis with asymmetric price increases and the gross upward pricing pressure index are practical alternative approaches for conducting market definition analysis when products in a candidate market are differentiated.

To develop a framework for systematically defining the relevant market for intermediate goods that incorporates downstream market conditions.

We combine the well-established “Hicks-Marshall” conditions of derived demand for inputs with “critical loss/critical elasticity of demand” to yield insights into the definition of antitrust markets for intermediate goods and the competitive effects from a merger.

We show that examining “Hicks-Marshall” conditions can provide a more rigorous framework for analyzing relevant markets for intermediate goods. We also show that solely examining demand substitution possibilities for direct customers of an input can lead to an incorrect market definition.

Our framework may be difficult to apply in circumstances when several different downstream products use the input being examined and each of those downstream products has a different elasticity of demand.

We illustrate how reasonable ranges for key parameters relating to the ability of firms to substitute to other inputs and to adjust to downstream market conditions will often be sufficient to define antitrust markets for intermediate goods in practice.

Previous antitrust analysis has not systematically analyzed the impact of downstream market conditions in assessing market definition for intermediate goods. The framework we develop will be useful to future researchers attempting to define relevant markets for intermediate goods and evaluating the competitive effects of a merger.

The regulation of electronic communications has been recently reformed in Europe. One striking feature of the review was to base most of the economic regulation – the so‐called significant market power regime – on antitrust principles. In particular, the regulated markets have to be defined according to competition law methodologies. This paper describes this approach and studies in detail the recently adopted Commission recommendation “on relevant markets susceptible to ex‐ante regulation”. The paper concludes with three policy recommendations. First, as regulation is more flexible and more complex, national regulators should co‐operate among themselves and national courts should only reform regulatory decisions in case of manifest error. Second, as regulation is not any more justified by the “original sin” of the previous monopolists, but by the inefficiency of antitrust to control market power, NRA should be cautious not to overly expand their intervention. Third, as ex ante market definitions are aligned on antirust principles, authorities should make sure that market definition is not a goal in itself but only a means to achieve the policy objectives of the sector‐specific regulation.

The Federal Trade Commission (FTC) has initiated policies and legal challenges that have shaped the evolution of competition in healthcare. This chapter discusses not only discusses the current matters in healthcare competition, but it also gives a history of past issues faced by the FTC and the approaches used to resolve them. These FTC actions range from challenges to hospital mergers to preventing “reverse payments” from patent holders to generic entrants in pharmaceuticals. Ultimately the healthcare industry faces many unique regulatory and competitive aspects that, while challenging, do not require special rules.

This chapter assesses the doctrine of reasonable interchangeability through the lens of the US Department of Justice’s (DOJ’s) successful effort to enjoin the megamerger of two of the largest national insurance companies, Aetna and Humana. The DOJ focused its challenge on the companies’ Medicare Advantage business, arguing that it is a separate product market from original Medicare and the merger would substantially reduce competition in the market for Medicare Advantage in many geographic markets across the country. The case turned on whether there was reasonable interchangeability between original Medicare and Medicare Advantage in the eyes of consumers. The judge relied on both practical indicia of interchangeability, including evidence of how likely Medicare beneficiaries were to switch between Medicare Advantage and Original Medicare, along with econometric evidence. The decision provides a useful roadmap of how a knowledgeable judge reviewing a merger will consider both Brown Shoe factors and econometric evidence in assessing reasonable interchangeability.

This paper generalizes the critical loss concept of Harris and Simons to account for a broader range of possible cost structures. Our analysis presents a specialized market-level equilibrium for a relatively homogeneous good in which the Harris and Simons’ critical loss structure is appropriate for market definition. Then, we broaden the equilibrium and propose a generalized critical loss analysis. Of course, for relatively differentiated goods, market definition analysis would use firm-level modeling and therefore the standard market-level critical loss modeling could be inappropriate.

The objective of this paper is to survey the recent developments in economic theories of buyer power and using the theories as a guide to discuss how antitrust cases involving buyer power can be analysed. An important conclusion that emerges from this survey is that the competition effects of buyer power are quite different depending on whether it is monopsony power against powerless suppliers or countervailing buyer power against large suppliers with market power. A proposed framework of antitrust analysis is presented, and issues related to market definitions and determination of buyer power are discussed.