Review of Industrial Organization 16: 211–218, 2000.
© 2000 Kluwer Academic Publishers. Printed in the Netherlands.
Market Delineation under the Merger Guidelines:
Monopoly Cases and Alternative Approaches
GREGORY J. WERDEN
Antitrust Division, U.S. Department of Justice, Washington, DC 20530, U.S.A.
Abstract. Despite the well-known Cellophane fallacy, the Merger Guidelines’ market-delineation
paradigm, which examines the effects of price increases above the prevailing level, has substantial
utility in many monopoly cases. For monopoly cases in which the Guidelines’ approach is not appro-
priate due to the Cellophane fallacy, no modiﬁcation of that approach appears to solve the problem
is a useful way. More direct methods for assessing monopoly power are likely to be preferable to
structural analysis in many monopoly and merger cases.
Key words: Antitrust, monopoly, relevant market.
JEL Citation Index: L41; monopolization, horizontal anticompetitive practices.
White (2000) reﬂects the mainstream view in arguing that the Merger Guidelines’
approach to market delineation, based on consideration of price increases from
prevailing levels, does not apply to monopoly cases, and he laments the lack of
a market delineation paradigm for such cases. This comment explains that the
Cellophane fallacy does not arise in many monopoly cases and that the Guideli-
nes’ paradigm may be useful even when it does. For monopoly cases in which the
Guidelines’ approach is not appropriate, no modiﬁcation of that approach appears
to be entirely satisfactory, but that fact should not be lamented, because structural
analysis may not be the best way to establish monopoly power. Indeed, struc-
tural analysis may not be the best course in many merger cases, even though the
Cellophane fallacy is not an issue.
I. In Many Monopoly Cases, There is No Cellophane Fallacy
The Merger Guidelines delineate a relevant market for merger analysis by asking
how much a hypothetical monopolist over various groups of products and areas
would raise price above the prevailing level. The Guidelines’ approach to market
delineation is widely accepted as a basis for the structural analysis of mergers. The
Director of Policy Projects, Economic Analysis Group, Antitrust Division, U.S. Department of
Justice (email@example.com). The views expressed herein are not purported to be those of
the U.S. Department of Justice. An expanded version of this paper is available from the author.