Document ID: ./input/supremecourt_opinions/opinions/17pdf/16-1454_5h26.pdf
Page Number: 15

Cite as:  585 U. S. ____ (2018) 

11 

Opinion of the Court 

Image  Technical  Services,  Inc.,  504  U. S.  451,  466–467 
(1992),  courts  usually  cannot  properly  apply  the  rule  of 
reason  without  an  accurate  definition  of  the  relevant 
market.7  “Without a definition of [the] market there is no 
way  to  measure  [the  defendant’s]  ability  to  lessen  or  de-
stroy  competition.”    Walker  Process  Equipment,  Inc.  v. 
Food  Machinery  &  Chemical  Corp.,  382  U. S.  172,  177 
(1965);  accord,  2  Kalinowski  §24.01[4][a].  Thus,  the  rele-
vant  market  is  defined  as  “the  area  of  effective  competi-
tion.”  Ibid.    Typically  this  is  the  “arena  within  which
significant  substitution  in  consumption  or  production
occurs.”    Areeda  &  Hovenkamp  §5.02;  accord,  2  Kalinow-
ski  §24.02[1];  United  States  v.  Grinnell  Corp.,  384  U. S. 
—————— 

7 The plaintiffs argue that we need not define the relevant market in
this case because they have offered actual evidence of adverse effects on 
competition—namely,  increased  merchant  fees.    See  Brief  for  United 
States  40–41  (citing  FTC  v.  Indiana  Federation  of  Dentists,  476  U. S. 
447  (1986),  and  Catalano,  Inc.  v.  Target  Sales,  Inc.,  446  U. S.  643 
(1980) (per curiam)).  We disagree.  The cases that the plaintiffs cite for
this  proposition  evaluated  whether  horizontal  restraints  had  an  ad-
verse effect on competition.  See Indiana Federation of Dentists, supra,
at 450–451, 459 (agreement between competing dentists not to share X
rays  with  insurance  companies);  Catalano,  supra,  at  644–645,  650 
(agreement among competing wholesalers not to compete on extending 
credit  to  retailers).    Given  that  horizontal  restraints  involve  agree-
ments  between  competitors  not  to  compete  in  some  way,  this  Court 
concluded that it did not need to precisely define the relevant market to 
conclude  that  these  agreements  were  anticompetitive.    See  Indiana 
Federation of Dentists, supra, at 460–461; Catalano, supra, at 648–649. 
But  vertical  restraints  are  different.    See  Arizona  v.  Maricopa  County 
Medical Soc., 457  U. S. 332, 348, n. 18 (1982); Leegin Creative Leather 
Products,  Inc.  v.  PSKS,  Inc.,  551  U. S.  877,  888  (2007).    Vertical  re-
straints  often  pose  no  risk  to  competition  unless  the  entity  imposing
them  has  market  power,  which  cannot  be  evaluated  unless  the  Court 
first defines the relevant market.  See id., at 898 (noting that a vertical
restraint  “may  not  be  a  serious  concern  unless  the  relevant  entity  has
market  power”);  Easterbrook,  Vertical  Arrangements  and  the  Rule  of
Reason, 53 Antitrust L. J. 135, 160 (1984) (“[T]he possibly anticompeti-
tive  manifestations  of  vertical  arrangements  can  occur  only  if  there  is
market power”).