**OPERATIONALIZING THE HYPOTHETICAL MONOPOLIST TEST**

John D. Harkrider

Axinn, Veltrop & Harkrider, LLP

[Introduction]{.underline}

The hypothetical monopolist test is one of the organizing principles of
the Horizontal Merger Guidelines, and it is a test increasingly applied
to define markets, not just in merger cases, but throughout antitrust,
and not just in the U.S., but throughout the world. While it is
certainly true that the hypothetical monopolist test "advanced a new
approach to market definition" whose "importance and brilliance . . .
cannot be overstated,"[^1] it is equally true that the hypothetical
monopolist test is "not flawless."[^2] Indeed, three years after the
1982 Guidelines were published George Stigler commented that, "\[the
Guidelines' market definition test\] has one, wholly decisive defect: it
is completely nonoperational. No method of investigation of data is
presented, and no data . . . are specified that will allow the market to
be determined empirically."[^3] History has proven that Stigler's
concern was overstated, as there clearly is data that will
operationalize the hypothetical monopolist test. Using reliable data is
critically important because without such data, courts frequently resort
to the *Brown Shoe* factors[^4] such as industry recognition or the
product's peculiar characteristics,[^5] without clear discussion of how
these factors relate to the hypothetical monopolist test.

My remarks address how to render the hypothetical monopolist test -- in
Stigler's phrase -- "operational" by using sound empirical methods that
answer the questions posed by the Guidelines' market definition test.

[The Relevant Question]{.underline}

In Section 1.11 of the 1992 Merger Guidelines, the "relevant question"
is posed as

follows:

If, in response to the price increase, the reduction in sales of the
product would be large enough that a hypothetical monopolist would not
find it profitable to impose such an increase in price, then the Agency
will add to the product group the product that is the next-best
substitute for the merging firm\'s product . . . . The price increase
question is then asked for a hypothetical monopolist controlling the
expanded product group. This process will continue until a group of
products is identified such that a hypothetical monopolist over that
group of products would profitably impose at least a \"small but
significant and nontransitory\" increase \["SSNIP"\], including the
price of a product of one of the merging firms.[^6]

The iterative process required by the hypothetical monopolist test
implies two subsidiary questions: first, what volume of lost sales will
make the SSNIP unprofitable; and second, what volume of sales will be
lost as a result of a SSNIP. Much of the economic literature focuses on
the first question -- in fact, that is the question that "critical loss"
attempts to answer. The second question, what volume of sales will be
lost as a result of a SSNIP, is frequently not answered. As a result, a
fact finder -- whether an agency or a court -- may have confidence that
a hypothetical monopolist could not profitably impose a SSNIP if it were
to lose X percent of its sales, but that fact finder may have no
confidence that a hypothetical monopolist would lose more or less than X
percent of its sales.

The purpose of these remarks is to provide some guidance toward
answering the second question -- what volume of sales would the
hypothetical monopolist lose in response to a SSNIP. To that end, we
will discuss four forms of evidence: historical evidence, econometric
evidence, affidavit evidence, and survey evidence.

[Types of Evidence]{.underline}

1.  *Customer reaction to historical price changes.*

The Merger Guidelines expressly authorize the use of historical data,
although they also caution it may produce misleading results.[^7] Past
price changes will often reflect changes in cost affecting the whole
industry rather than market power, and consumers' reactions to such
changes do not illuminate how they would respond to a hypothetical
monopolist. *Cf. United States v. Eastman Kodak Co.*, 63 F.3d 96, 106
(2d Cir. 1995) (fact "that Kodak film sells for different prices in
different parts of the world is insufficient to establish price
discrimination with proof that Kodak's costs are uniform"). Moreover,
price changes typically are of short duration, and thus do not satisfy
the non-transitory requirement of the SSNIP test. *See Gulfstream Park
Racing Assoc. v. Tampa Bay Downs, Inc.*, 2003 U.S. Dist. LEXIS 20225 at
\*50-51 (M.D. Fla. Nov. 7, 2003) (rejecting historical price increase on
the grounds that it lasted "for a transitory period of time, five
years.")[^8] For this reason, the Guidelines themselves caution: "the
picture of competitive conditions that develops from historical evidence
may provide an incomplete answer to the forward-looking inquiry of the
Guidelines."[^9]

Courts have similarly cautioned against the use of historical evidence.
*See Gulfstream Park Racing Assoc,* 2003 U.S. Dist. LEXIS 20225 at
\*50-51 ("The Guidelines are applied to hypothetical future situations
and not to historical evidence"). Indeed, what separates the Guidelines'
method of market definition from prior methods, such as Elzinga-Hogarty,
is its hypothetical or forward-looking approach. *See* *California v.
Sutter Health Sys.*, 84 F. Supp. 2d 1057, 1072 (N.D. Cal. 2000)
("Plaintiff\'s E-H test results do not end the Court\'s analysis, in any
event, as the E-H test is only a starting point in analyzing a
geographic market. E-H test results reflect only current market
behavior, and are insufficient to determine where patients could
practically turn for acute inpatient services if faced with a future
anticompetitive price increase.") *United States v. Mercy Health
Servs.*, 902 F. Supp. 968, 978 (N.D. Iowa 1995), *vacated and remanded
as moot by* 107 F.3d 632 (8th Cir. 1997) held "\[t\]he court finds that
the government\'s case rests too heavily on past health care conditions
and makes invalid assumptions as to the reactions of third-party payers
and patients to price changes. The government\'s case also fails to
undergo a dynamic approach to antitrust analysis, choosing instead to
look at the situation as it currently exists within a competitive
market." Similarly, the court in *FTC v. Freeman Hosp.*, 69 F. 3d 260,
268 (8th Cir. 1995), concluded: "In order to meet its burden, the FTC is
required to present evidence addressing the crucial question of where
consumers of acute care inpatient hospital services could practicably
turn for alternative sources of the product should the Hospitals\'
merger be consummated and Joplin Hospital prices become anticompetitive.
The FTC has failed to produce such evidence."[^10]

When considering historical evidence, it is important to distinguish
between evidence that customers switched in response to price changes
and evidence that customers did not switch. If a significant number of
customers switched from product X to product Y in response to small but
significant price changes in X relative to Y, this seems to be evidence
that the two belong in the same relevant market. The criticism that the
price change in X may be cost justified or not sufficiently long in
duration would simply suggest that even more customers would switch from
X if the price increase were not cost justified, imposed by a
monopolist, or of a longer duration. Alternatively, evidence that
customers did not switch from product X to Y in response to a small but
significant price change in X relative to Y may not be evidence that the
two belong in the same relevant market, as customers would be more
likely to switch if the price increase were not cost justified or of
longer duration.

Thus, courts have rejected as evidence of a relevant market the fact
that customers did not switch to alternatives in response to historical
price changes but accepted evidence that customers either have switched
or currently use both the relevant product and other substitutes.
*Compare Gulfstream Park Racing Assoc.*, 2003 U.S. Dist. LEXIS 20225 at
\*50-51 (rejecting evidence that customers did not switch in response to
a price increase) *with* *FTC v. Tenet Healthcare Corp.*, 186 F.3d 1045,
1050 (8th Cir. 1998) ("*Poplar Bluffs"*) (evidence of current dual usage
strongly suggested that a hypothetical monopolist could not profitably
impose a SSNIP).

Where there are pricing anomalies caused by past anticompetitive
activity or government regulation, the facts may speak for themselves
and it is possible to apply the hypothetical monopolist test with a high
degree of confidence. In an extreme case, if the firms selling the
products in the proposed market have in the past engaged in cartel
activity, there would be no reason to doubt that the market is properly
defined.[^11] An interesting concurring opinion in *E.W. French & Sons
v. General Portland*, 885 F.2d 1392, 1402 (9th Cir. 1989), discussed at
length the significance of past cartel activity for proving a relevant
market. Following a trial in which the court incorrectly charged the
jury on the legal significance of finding a conspiracy to eliminate a
competitor who did not join a cartel, the defendant argued that the
incorrect charge was harmless error because there was not proof of a
relevant market or anticompetitive effect. Plaintiff argued that the
cartel itself conclusively established a relevant antitrust market. In
his concurrence, Judge Farris agreed:

> As a purely logical matter, French is unquestionably correct. A
> price-fixing conspiracy confined to manufacturers of concrete would
> not have been able to succeed if concrete were not a distinct product
> market: when the cartel attempted to raise prices, customers would
> simply switch to sand, brick, gravel or some other construction
> material. . . . . Every price-fixing conspiracy thus identifies
> directly, in a real world context, a group of firm which is insulated
> from outside competitive pressures. That is precisely what
> conventional market definition evidence attempts to identify
> artificially, by the collection and interpretation of economic data
> regarding the relationship between various demand curves, by common
> sense assumptions about the interchangeability of similar products,
> and the like.

*Id*. at 1402.

*United States v. Archer-Daniels-Midland Co.*, 866 F.2d 242 (8th Cir.
1988), presented a somewhat analogous situation. The issue was whether
government had correctly defined a market for high fructose corn
sweetener ("HFCS"), the closest substitute for sugar in carbonated
sodas. Government price supports for sugar set a floor for its price
that was 10 percent above the price of HFCS, and, as a result of its
cost advantage, HFCS had gradually replaced sugar in soft drinks. The
Eighth Circuit observed that the price floor for sugar provided a direct
answer to the hypothetical monopolist question: "As long as an effective
price support program is in existence, a monopolist of HFCS will be able
to raise the price of HFCS to just below the supported price of sugar
before being constrained by the competitive forces of sugar. In other
words, the \[hypothetical\] HFCS monopolist is able to exercise excess
market power." *Id*. at 246.

Finally, *FTC v.* *Staples,* 970 F. Supp. 1066 (D.D.C. 1997), could be
viewed as using a variation on a natural experiment. *Staples* is
sometimes discussed as a case that skipped the market definition step
altogether by asking directly whether a merger from three to two or two
to one office superstores would lessen competition.[^12] But, *Staples*
can also be described as testing whether there is a relevant market for
office superstore competition for the sale of consumable office supplies
in geographic markets where such competition exists. As a rule,
cross-market comparisons are likely to engender controversy because it
is difficult to control for all of the factors that affect pricing in
different markets. For instance, three office superstore geographic
markets are likely to be more densely populated with larger economies of
scale and more intense retail competition of all types. Still, FTC's
various price studies -- which on the whole the Court found persuasive
-- tended to show that a hypothetical office superstore monopolist could
impose a SSNIP on the sale of consumable office supplies, because where
there was an actual office superstore monopolist that is precisely what
it did. If, as in *Staples*, the empirical problems of cross-market
comparison can be solved to the satisfaction of the trier-of-fact, such
studies provide a method of applying the Guidelines' test to many retail
and other markets.

2.  *Econometric Evidence*

Econometrics uses historical evidence in a controlled and scientific
manner to answer the hypothetical monopolist test. As Judge Easterbrook
in *Menasha Corp. v. News America*, 354 F.3d 661, 2004 U.S. App. LEXIS
241, at \*9 (7th Cir. 2004) (criticizing the plaintiff for failing to
introduce "econometric evidence of any kind" in defining the relevant
market) recently recognized, econometric evidence can provide highly
reliable evidence of whether a sufficient number of customers will
switch to defeat a SSNIP.

There are many types of econometric analysis that can be used to answer
the hypothetical monopolist test. One type is the sort used in
*Staples*, which, in effect allowed for a controlled natural experiment.
This type of analysis requires information on pricing, number of
competitors, and factors that may influence the price of goods at
retail. A second type of analysis directly estimates market
elasticities. To be done properly, this type of analysis requires
time-series consumer level information on price and quantity.

While there is general agreement that in appropriate circumstances
econometric estimation of elasticities can provide perhaps the best
evidence on market definition, there are significant issues with respect
to its use. One issue involves the availability of data -- it is quite
unusual for private parties to have access to price and quantity
information from all market participants. This is, of course, less of an
issue for the government, but it does raise important issues about
transparency, as the government may be unable to share this data with
the merging parties. A second issue involves the quality of the data --
retail scanner data frequently does not give sufficient information on
coupons or other discounts. A third issue involves the appropriateness
of the data -- retail scanner data, for example, may not be the
appropriate type of data with which to analyze mergers between
manufacturers.

Courts have frequently used very high standards in evaluating
econometric evidence. *See, e.g., FTC v. Swedish Match*, 131 F. Supp. 2d
at 161 (rejecting econometric estimation of demand because the model was
not robust and because the results were significant only at an 85
percent level of certainty). That being said, econometric evidence has
been used by courts in market definition both expressly, *Kraft Gen.
Foods, Inc.*, 926 F. Supp. at 333 (crediting plaintiff's econometric
estimation of cross-elasticities as evidence of a ready-to-eat cereal
market), and implicitly, *Staples*, 970 F. Supp. at 1077 (expressing
some doubt at econometric evidence but crediting it because it was
consistent with other evidence).

3.  *Customer interviews and affidavits.*

If you want to know what somebody would do in a hypothetical situation,
one solution is to ask him. This may explain the practical appeal of the
Guidelines' 5 to 10 percent price increase formulation of the
SSNIP/hypothetical monopoly test; it gives lawyers and economists a
concrete question to ask customers in interviews and depositions. It
also has led to the frequent use of customer affidavits in recent merger
litigation.[^13]

There are significant issues with respect to the use of customer
affidavits and Areeda and Turner go so far as to suggest that customer
affidavits are the "least reliable" evidence of whether customers would
switch in response to a SSNIP.[^14] Despite this criticism, the
government and litigants in merger cases frequently use affidavits. A
review of cases involving the use of affidavits reveal two frequent
errors: (i) affidavits frequently ignore the presence of switching
costs, and (ii) affidavits frequently do not cover a representative
sample of customers.

As to the first question, if customers would not switch between the
products being grouped together for the purpose of applying the
hypothetical monopolist test, it is not meaningful to ask whether they
would switch to a product outside the proposed market following a SSNIP.
For example, *United States v.* *Engelhard Corp.*, 126 F.3d 1302 (11th
Cir. 1997), involved a merger between Engelhard and Floridan, two
sellers of Gellant Quality Attapulgite ("GQA"). The DOJ argued that the
fact that *current* GQA customers would not switch in response to a
SSNIP in GQA was evidence that there existed a relevant market for GQA.
The Eleventh Circuit rejected the DOJ's argument, in part, because
Engelhard's GQA customers would *not* switch to Floridan GQA in response
to a 5-10% increase in the price of Engelhard's GQA.[^15]

The Guidelines acknowledge a variation of this point when they speak of
adjusting the size of a SSNIP to account for situations, such as a
tariff or commission, where the relevant product constitutes a small
percentage of the overall cost of the good or service. *See* Horizontal
Merger Guidelines at **§** 1.1 ("the price for which an increase will be
postulated will be whatever is considered to be the price of the product
at the stage of the industry being examined") & n.11. *But see NaBanco
v. VISA USA*, 779 F.2d 592 (11th Cir. 1986) (finding a lack of market
power with respect to the fees for credit card charges because credit
cards compete with other means of payment). Other solutions may include
making some allowance for switching costs before applying the SSNIP, or
making the SNIPP inquiry with respect to just new customers or customers
who otherwise are not locked-in by an initially investment in one firm's
product or service.

Affidavits also must cover an adequate sample of customers. The Eleventh
Circuit's decision in *Englehard* is instructive. GQA had a wide variety
of different users. The government offered witnesses who testified that
they would not switch away from GQA in response to a 5 to 10 percent
price increase. But, the government did not classify its witnesses by
type of user or present evidence concerning the number of each type of
user. As a result, the Eleventh Circuit held that the government failed
to prove a relevant market: "it is possible for only a few customers who
switch to alternatives to make the price increase unprofitable, thereby
protecting a larger number of customers who would have acquiesced in
higher GQA prices. To evaluate such possibilities, the Government should
have ascertained the size of the GQA market in each of its end-use
applications . . . . No matter how many customers in each end-use
industry the government may have interviewed, those results cannot be
predictive of the entire market if those customers are not
representative of the market." *Englehard*, 126 F.3d at 1306.

*Sungard Data Sys.*, 172 F. Supp. 2d at 183, applied similar analysis to
much the same result. In light of the "the striking heterogeneity" of
the customers, the Court found that

> \[t\]he government has failed . . . to show whether \[the group of
> captive customers\] is substantial enough that a hypothetical
> monopolist would find it profitable to impose such an increase in
> price. The sampling of customer statements before the Court is
> minuscule when compared with the entire universe of defendants' shared
> hotsite customers. Although the government has submitted approximately
> 50 statements from customers stating that they either would not or
> could not switch from shared hotsites, there are more than 7,500
> customers that currently use defendants' shared hotsites. Without more
> information, the Court simply cannot determine whether these 50
> declarations are representative of the shared hotsite client base.

*Id*. at 191-92.[^16] The Court indicated it may have afforded the
customer affidavits more weight if the government were able to show they
represented an adequate distribution of customers. "Instead of
fine-tuning its presentation to account for significant differences
among defendants' customers, the government lumped all customers
together." *Id*. at 192

Thus, small samples drawn from a large number of customers are not
likely to be convincing unless they reflect a representative sample.
But, even large numbers of affidavits, however, are not sufficient if
they are all from one class of customers, which does not consist of
customers whose response will determine whether a SSNIP will be
profitable. *FTC v. Cardinal Health*, 12 F. Supp. 2d 34, 48-49 (D.D.C.
1998), sustained the FTC's narrow market definition for the wholesale
distribution of prescription drugs against the parties' claims that
other methods of distribution, most prominently self-supplied
warehousing and distribution, should also be included in the market. The
merging parties presented significant evidence that chain pharmacies
would turn to self-supply if prices increased. However, the court was
persuaded by the FTC showing that other classes of customers, "namely
hospitals and independent pharmacies -- would have no reasonable
substitutes." *Id*. at 47. Significantly, the Court found that
"\[d\]ispensers who self-warehouse are overwhelmingly limited to a small
segment of retail chain pharmacies. Thus, this Court finds that the
majority of Defendants' customers cannot replicate the wholesalers'
services themselves nor obtain them from any other source or supplier."
*Id*. at 48-49. Where the plaintiff is able to show that defendant's
affidavits are drawn from a class of customers with uniquely elastic
demand, they will not defeat other evidence tending to show that a
hypothetical monopolist could increase price to other customers.

In some instances, a few customers may be able to speak to the overall
demand elasticity of an industry. In *Swedish Match*, 131 F. Supp. 2d at
162, the FTC may have avoided the sampling problem when it used
affidavits of loose leaf chewing tobacco distributors as a proxy for the
views of a broad spectrum of customers. Likewise, the insurance
companies and other payors in *Poplar Bluffs* who submitted affidavits
saying they could not shift patient demand to other hospitals spoke to
the question of overall demand. But, although they appear to have been
some of the only evidence in that litigation directly addressing the
hypothetical monopolist question as opposed to current market
conditions, the court afforded them little weight. 186 F.2d at 1054
(calling the insurers' affidavits "suspect" and relying on other
evidence tending to show that they could resist a price increase). If
the number of customer who say they can switch exceeds the critical
loss, there can be no concern whether the sample of affidavits is
representative. For example, if, absent an allegation of price
discrimination, the critical loss is only eight percent, and customers
representing 10 percent of sales swear they would respond to a SNIPP by
switching to products outside the market, the proposed market is not
correctly defined.

Frequently, the merging parties and the government will get
contradictory affidavits from the same customers. In this regard, the
government's subpoena power can be used to test the conviction of a
defendant's affiant. Defendants, thus, may not want to get affidavits
unless the customer's view is strongly held and the defendant has an
understanding of the antitrust basis for the customer's position. From a
government perspective, customers may simply be complaining about
changes or disruptions in the market that will cause the customer
inconvenience. Such concerns do not necessarily speak to an overall
lessening of competition. It is not fatal to defendants, however, if the
government flips a pro-merger customer. If the customer's equivocation
obscures the issue, the government may fail to carry its burden of
proof. *Cf. Sungard*, 172 F. Supp. at 183, 189.

*4. Surveys.*

A frequent criticism of customer affidavits is that they are form
affidavits, which simply give yes/no responses to a series of questions,
including whether customers would switch in response to a SSNIP. While
it is clear that the government is unlikely to give form affidavits much
weight, it appears that courts frequently give these affidavits at least
some weight.

If the goal of a client is simply to obtain as many affidavits as
possible, without taking the time to create detailed customer specific
affidavits, it may be advisable to conduct a survey instead. Indeed, if
conducted properly by an expert trained in acceptable survey
methodology, surveys should carry more weight than even an allegedly
representative sample of affidavits. For example, surveys may have more
methods to control leading questions, selection bias, and randomness.
Surveys may also make it easier to organize customers by key competitive
traits reflecting the probable elasticity of their demand.

Although some cases have used surveys in defining the relevant market,
*see e.g.,*\
*Kraft Gen. Foods*, 926 F. Supp. at 327 ("Only about one-third of all
adults responding in a 1991 survey said they would not eat all types of
cereals"), few cases have involved directly asking customers whether
they would switch to alternatives in response to a SSNIP. One case in
which a survey was used was *Tenet Health*, 17 F. Supp. 2d 937, 945,
where the district court gave the defendant's survey no weight because
of a number of technical and substantive failings.[^17] Although this
decision was later reversed on appeal, the Eighth Circuit did not
discuss the survey evidence.

Because surveys could be one of few methods of addressing the
hypothetical monopolist question without resorting to incomplete and
fragmentary evidence that does not address overall demand
characteristics, litigants should be able to devise methods to overcome
any technical criticisms that can be levied against them.

[Conclusion]{.underline}

For the hypothetical monopolist test to serve as something more than an
instructive theoretical paradigm, litigants, agencies, and courts should
look to empirical evidence that can directly answer the question: how
many customers will switch in response to a SSNIP. While historical
evidence, affidavits, and survey evidence can all be subject to
criticism, there can be little question that they are better than mere
conjecture on what is a critical question on market definition.

[^1]: David Scheffman, Malcolm Coate, & Louis Silvia, *20 Years of
    Merger Guidelines Enforcement at the FTC: An Economic Perspective*
    6-7, at http://www.usdoj.gov/atr/hmerger/12881.htm (last visited
    Feb. 5, 2004).

[^2]: ***Id*. at 6.**

[^3]: George Stigler & Robert Sherwin, *The Extent of the Market*, 28
    [J. L. & Econ.]{.smallcaps} 555, 582 (1985).

[^4]: *See* *Brown Shoe Co. v. United States*, 370 U.S. 294 (1962)
    (markets may "be determined by examining such practical indicia as
    industry or public recognition of the submarket as a separate
    economic entity, the product\'s peculiar characteristics and uses,
    unique production facilities, distinct customers, distinct prices,
    sensitivity to price changes, and specialized vendors").

[^5]: *See, e.g.,* *Olin Corp. v. FTC*, 986 F.2d 1295, 1298-1305 (9th
    Cir. 1993) (which includes an extensive discussion of both *Brown
    Shoe* factors and the Merger Guidelines), *United States v. Sungard
    Data Sys.*, 172 F. Supp. 2d 172, 189 (D.D.C. 2001) ("Thus, the
    *Brown Shoe* factors -- especially industry recognition and the
    peculiar characteristics and uses of the product -- support a
    finding that internal hotsites fall within the same product market
    as shared hotsite services."); *FTC v. Swedish Match N. Am., Inc*.,
    131 F. Supp. 2d 151, 163-66 (using Merger Guidelines as a tool to
    answer *Brown Shoe'*s cross-elasticity question, but then going to
    extensively discuss other factors such as industry recognition);
    *FTC v. Staples, Inc.*, 970 F. Supp. 1066, 1075 (D.D.C. 1997) ("The
    Commission discussed several of the *Brown Shoe* 'practical indicia'
    in its case, such as industry recognition, and the special
    characteristics of superstores which make them different from other
    sellers of office supplies, including distinct formats, customers,
    and prices."); *New York v. Kraft Gen. Foods*, 926 F. Supp. 321, 359
    (S.D.N.Y. 1995) (citing practical indicia as a factor but not
    relying upon them); *Bon-Ton Stores v. May Depot Stores*, 881 F.
    Supp. 860, 872 (W.D.N.Y. 1994) ("That this evidence supports a
    finding of a traditional department store submarket is made even
    more apparent when one considers the factors set forth in *Brown
    Shoe*."); *and* *FTC v. Owens-Illinois, Inc.*, 681 F. Supp. 27, 35
    (D.D.C. 1988) *vacated by* 850 F. 2d 694 (D.C. Cir. 1988) (citing
    *Brown Shoe*\'s practical indicia, but then attempting to implement
    the hypothetical monopolist test).

[^6]: Department of Justice & Federal Trade Commission, Horizontal
    Merger Guidelines, *reprinted in* 4 Trade. Reg. Rep. ¶ 13,104, at §
    1.11 (1992).

[^7]: "In considering the likely reaction of buyers to a price increase,
    the Agency will take into account all relevant evidence, including,
    but not limited to, the following: . . .

    evidence that buyers have shifted or have considered shifting
    purchases between different geographic locations in response to
    relative changes in price or other competitive variables." ***Id.***

[^8]: Although the Guidelines do not define a non-transitory period of
    time, one would certainly think that 5 years would be sufficient.

[^9]: Horizontal Merger Guidelines, 4 Trade Reg. Rep. ¶ 13,104, at § 0.

[^10]: *See also Delaware Health Care, Inc. v. MCD Holding Co.*, 957 F.
    Supp 535, 542 (D. Del. 1997) ("Defendants argue that the
    \[Elzinga-Hogarty\] test is insufficient as a tool of market
    definition. They note critics have opined that the usefulness of the
    \[Elzinga Hogarty\] test is limited to determining when a market is
    *not* correctly defined . . . . \[T\]he antitrust law treatise with
    which Dr. Solow is associated indicates reliance solely on
    historical tests like the \[Elzinga Hogarty\] test 'can misstate the
    size of the market.'") (quoting [Phillip E. Areeda & Herbet
    Hovenkamp 2A Antitrust Law]{.smallcaps} ¶ 550 (1995)); *Bathke v.
    Casey's Gen. Stores, Inc*. 64 F.3d 340, 346 (9th Cir. 1995) ("using
    discovery to obtain the addresses of a seller's customers seldom
    provides us with useful information about geographic market. What we
    really need to know is the extent to which people from the immediate
    area can readily turn to alternative sellers.") (quoting [Herbert
    Hovenkamp Federal Antitrust Policy]{.smallcaps} ¶ 3.6d (1994).)

[^11]: The same conclusion may be warranted if a similar market in
    another jurisdiction had been subject to cartel activity. Other
    instances where prices are not competitive due to regulation may be
    similarly instructive.

[^12]: **Jonathan B. Baker, *Econometric Analysis in* FTC v. Staples,
    Address before the American Bar Association's Antitrust Section
    Economics Committee (July 18, 1997), *available at***
    http://www.ftc.gov/speeches/other/stspch.htm (last visited Feb. 5,
    2004).

[^13]: While it may be the best available evidence of how customers
    would respond to a SSNIP, customer views have not always carried the
    day. C*ompare FTC v. Butterworth Health Corp.*, 946 F. Supp. 1285,
    1292-93 (W.D. Mich. 1996), *aff'd by* 121 F.3d 708 (6th Cir. 1997)
    ("The most persuasive of these are the views of consumers.") *and
    Bathke v. Casey\'s Gen. Stores, Inc.*, 64 F.3d 340, 346-47 (8th Cir.
    1995) (most important dynamic evidence is that indicating where
    consumers could practicably turn for alternative services to avoid
    doing business with the antitrust defendant) *with Sutter Health
    Sys.*, 84 F. Supp. 2d at 1080 ("As stated by the court in *Freeman
    Hosp*., 'while such non-empirical data may have some probative value
    as a starting point to evaluate this market, such data will not
    carry the \[plaintiff\'s\] burden. Informal, off-the-cuff remarks
    and anecdotal evidence concerning the marketplace are no substitute
    for solid economic evidence.'") (quoting *Freeman Hosp*. 911 F.
    Supp. at 1220).

[^14]: [Philip]{.smallcaps} E. [Areeda & Donald Turner]{.smallcaps}
    [Antitrust Law]{.smallcaps} (1980) ¶538b, at 239 ("Though not
    irrelevant, such statements are often unreliable.").

[^15]: Areeda criticizes *Englehard* on the grounds that the fact that
    GQA was such as small and insubstantial part of the end products
    ultimately purchased by consumers was a reason why it would be
    easier to exercise monopoly power. Id[.]{.smallcaps} at 2A ¶564.

[^16]: *See also* *Owens-Illinois,* 681 F. Supp. at 37 ("analysis serves
    to confirm the conclusion that those few end use segments proven to
    be inelastic are not significant enough, in and of themselves, to
    constitute a relevant product market and are not representative of
    the glass container market as a whole") (eleven inelastic end-uses
    of glass containers accounted for only about 25 percent of all glass
    container usage); *United States v. Gillette Co.*, 828 F. Supp. 78,
    83 (D.D.C. 1993) ("since this limited subset of fountain pen
    devotees does not encompass the entire universe of consumers . . . a
    larger market must be defined. The record indicates that there is a
    much larger subset of fountain pen consumers who will substitute
    other modes of writing for fountain pens; for these customers,
    fountain pens therefore are in direct competition with these other
    modes."); *Virginia Vermiculite Ltd. v. W.R. Grace & Co*., 108 F.
    Supp. 2d 549, 587 (W.D. Va. 2000) ("The defense experts conducted a
    basic cross-elasticity analysis of these substitutes, and concluded
    that even if these substitutes do not cover all of the potential
    end-uses for vermiculite, 'The existence of a variety of substitutes
    in a variety of applications indicates that even a hypothetical
    monopolist supplier of vermiculite would be unable to profitably
    increase price.'").

[^17]: One significant defect was that the defendant asked whether
    customers would switch in response to a \$200 price increase when,
    according to the district court, a SSNIP would have imposed only a
    \$40 price increase