Defining a ‘Market’ Creates Headaches for Antitrust Plaintiffs

Plaintiffs who sue under federal antitrust laws must define a “relevant market” for their allegations, a threshold issue that has become a stumbling block for high-stakes litigation in recent years.

The latest example came Feb. 3, when a federal jury found for US Soccer and MLS in a case claiming they colluded to exclude an upstart league from the top tiers of men’s professional soccer in the US and Canada.

Plaintiffs have to prove that a specific market exists, how that market is controlled by the defendant, and how they were harmed—which the jury said the North American Soccer League didn’t do, meaning jurors didn’t even reach other questions in the case.

That is a reminder of the pitfalls of defining a market and how defendants can easily knock down that definition, said Christine Bartholomew, a law professor at University at Buffalo School of Law who focuses on antitrust law.

“There’s no magic, fully agreed upon single way to define a market,” she said. “It is a very unpredictable, very outcome-determinative component of any antitrust case.”

Cases involving bedding companies Tempur Sealy and Mattress Firm, pharma giant Bayer AG, and health-care group purchaser Vizient have turned on the same threshold issue.

‘They Are in the Business’

The Federal Trade Commission on Jan. 31 lost a bid to block Tempur Sealy International Inc. from closing its $5 billion acquisition of Mattress Firm after a judge said the market it targeted—premium mattresses priced at $2,000 or more—was arbitrary.

“Plaintiffs have an uphill battle to prove a market if the defendants really fight tooth and nail—because they are in the business,” said Eleanor Tyler, a Bloomberg Law antitrust analyst. “It’s hard to make the fact finder believe you over them.”

Vizient was accused of monopolizing markets, including the one for selling disposable medical supplies to its member hospitals. But a federal judge in October said the plaintiff’s market was insufficient because it didn’t encompass all reasonably interchangeable substitutes—essentially what the consumer would buy instead if there were a price increase.

A relevant market doesn’t have to include all potential substitutes—just ones that would be close enough to constrain pricing if a monopolist “were to try to push prices above a competitive level,” said David Cross, a partner in Goodwin Procter LLP’s antitrust and competition practice.

When antitrust cases go to trial, jurors can bring common sense to bear and conclude that there wasn’t a relevant market, he said.

A jury last year also found for Bayer in a case where a competitor claimed the company restrained trade in the flea and tick treatment industry. The jury found that the plaintiff, veterinary drug company Tevra Brands LLC, failed to prove that the relevant antitrust market was topical imidacloprid flea and tick products for cats and dogs in the US.

Soccer Stars

In the soccer case, jurors simply weren’t convinced that there were standalone markets for the Division I designation for men’s professional soccer leagues in the US and Canada and for team membership in a Division I men’s professional soccer league in both countries, said Marc Edelman, an antitrust law professor at Baruch College’s Zicklin School of Business.

“There is anecdotal evidence of a meaningful number of professional soccer players that move back and forth between US leagues and foreign leagues and weigh competitive offers between US leagues and foreign leagues,” he said. “That creates an argument that the market is broader than the United States.”

The NASL attempted to define a market small enough to show that US Soccer had sufficient market power, but that didn’t “reflect actual market realities,” said Dodi Allocca, antitrust attorney in Clifford Chance’s Washington office.

“Real facts have to support your market definition, and it just seems like the plaintiffs were cherry-picking their market a little bit too much to fit their theory,” she said.

Slicing a market too thinly is risky.

“The problem you see in a lot of these cases is you have plaintiffs who gerrymander markets because it’s the only way they can establish or at least plead market power, which is really what’s at stake,” Cross said.

In the US Soccer case, jurors likely knew about international soccer stars like Lionel Messi, who plays for Inter Miami, indicating the presence of a worldwide professional men’s soccer market, Allocca said.

Rule of Reason Test

Plaintiffs that bring sports antitrust suits like the US Soccer case are judged under the rigorous “rule of reason” test as opposed to the “per se” test, in which conduct is considered on its face illegal.

That’s because defendant sports leagues, such as Major League Soccer, are considered joint ventures among many businesses—the teams—whose collective conduct should be judged under the rule of reason, Edelman said.

Rule of reason cases present a lot of uncertainty for plaintiffs, who have to hire the right expert to bolster their market definition and create an economic model to support it, University at Buffalo’s Bartholomew said.

Defendants can easily chip away at that definition, claiming the plaintiffs failed to include a key input.

Vizient, for example, argued in its summary judgment motion that plaintiff Endure Industries Inc.'s proposed market definitions failed because they didn’t capture all areas of competition for the products at issue.

Whether a market is properly defined can become a battle of experts on opposing legal teams, Bartholomew said.

“Two economists can look at the very same thing and conclude different things,” she said.