Source: https://www.robinskaplan.com/resources/articles/market-share-calculations-are-a-starting-point
Timestamp: 2019-04-19 11:18:30+00:00

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For collaborations that exceed the 20 percent safety zone, the agencies undertake a fact-intensive rule-of-reason analysis into the competitive harms and benefits of the collaboration. This inquiry focuses on various factors, including market concentration, the nature of the industry, exclusivity restraints, barriers to entry, and the extent of information exchange among competitors. The agencies then weigh anticompetitive concerns against procompetitive benefits to determine whether the collaboration should be permitted.
Market share estimates provide a useful starting point under the Collaboration Guidelines for analyzing a competitor collaboration, but this data often is (and should be) overshadowed by other facts and circumstances particular to the structure and operation of the collaboration under review. This analytical approach draws on agency reviews of competitor collaborations that predate the Collaboration Guidelines, and no material changes in this approach are warranted now.
For collaborations where participating competitors’ combined market shares exceed the 20 percent safety zone, the participant’s market shares are a starting point, but not an end point, for evaluating the competitive effects of the arrangement.8 Even at the initial stages, the agencies also consider overall concentration in relevant markets, taking into account the number and market shares of rivals that are not participants in the collaboration.
Beyond this, the agencies’ inquiry becomes more fact-intensive and less formulaic, focusing on factors particular to the collaboration and markets in question. Among other facts, the agencies will consider the nature of the collaboration (i.e., fully or partially integrated), the type of industry involved, whether the collaboration involves information exchanges or limits on independent decision-making, the exclusivity of the collaboration, and whether barriers exist to entering markets in which the collaboration and its participants operate. If this analysis suggests that the collaboration would result in anticompetitive effects, the agencies weigh those effects against any procompetitive benefits, such as quality improvements or price reductions. If the collaboration appears reasonably likely to produce net procompetitive benefits, the agencies will generally approve the collaboration, so long as restraints that are part of the arrangement are reasonably necessary to achieve its procompetitive goals.
For example, in one of several health care-related joint ventures approved by the agencies in the 1980s and 1990s, the DOJ allowed radiologists in the Chicago area to form a joint venture to collectively negotiate contracts with third-party payers, even though the network had a market share of 25 percent based on the number of participating radiologists.12 The DOJ explained that “market share is only a proxy for market power” and “[t]he real issue is whether [the joint venture] will have sufficient power to effectuate a non-transitory price increase.” In approving the joint venture (and finding that it would not exercise such power), the DOJ cited the presence of other competing radiology networks, the lack of barriers to entry in the industry, and the ability of physicians to refer patients to other providers.13 The DOJ also cited the radiologist network’s procompetitive justifications— namely, that its screening procedures would improve the quality of radiology services in the area. It is likely that the DOJ would have reached the same conclusions under the Collaboration Guidelines.
While the Collaboration Guideline’s 20 percent threshold provides a useful springboard for analyzing competitor collaborations, it is by no means the only factor the agencies consider when contemplating enforcement action. Rather, for collaborations that exceed the 20 percent threshold, the agencies apply a flexible approach that measures the collaboration’s anticompetitive effects and then balances them against procompetitive benefits.
This basic analytical framework is largely consistent with how the agencies evaluated proposed competitor collaborations before the Collaboration Guidelines were issued. The facts and details of the particular collaboration and the markets in which it operates will (and should) continue to drive the agencies’ analysis.
1 Fed. Trade Comm’n & U.S. Dep’t of Justice, Antitrust Guidelines for Collaborations Among Competitors (2000) (Collaboration Guidelines), http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf. . 2 Id. § 4.2, at 26.
3 Id. For purposes of calculating whether a joint venture exceeds the 20 percent threshold, the agencies calculate the market shares of the collaboration and each participant.
4 DOJ Business Review Letter for Delta Airlines, Inc. and Société Air France, 2001 DOJBRL LEXIS 1, 9 (Mar. 6, 2001).
5 DOJ Business Review Letter for the Reliance Network, 2009 DOJBRL LEXIS 1 (Sept. 8, 2009).
7 Collaboration Guidelines, supra note 1, § 4.2, at 26.
8 Id. § 3.33, at 18.
9 DOJ Business Review Letter for Olympus America Inc. and C.R. Bard, Inc., 2000 DOJBRL LEXIS 26 (Sept. 28, 2000).
11 See William E. Cohen & Gary P. Zanfagna, Inside the Competitor Collaboration Guidelines: The Forest Among the Trees, 2000 U. CHI. LEGAL F. 191, 196, 210–13 (2000) (discussing market share considerations and explaining that the Guidelines’ overall approach “has long been endorsed by [prior] case law”).
12 DOJ Business Review Letter for the Chicagoland Radiological Network, 1994 DOJBRL LEXIS 31, 33 (Dec. 8, 1994).
14 General Motors Corp., FTC No. C-3132, 1984 FTC LEXIS 68 (Apr. 11, 1984).
18 FTC v. Warner Commc’ns, Inc., 742 F.2d 1156, 1163–64 (9th Cir. 1984).
20 Yamaha Motor Co. v. FTC, 657 F.2d 971, 974 (8th Cir. 1981).
22 See, e.g., United States v. Franklin Elec. Co., 130 F. Supp. 2d 1025 (W.D. Wis. 2000) (approximately 100% share); United States v. Ivaco, Inc., 704 F. Supp. 1409 (W.D. Mich. 1989) (70% market share).
Originally published in Antitrust, Vol. 30, No. 3, Summer 2016. © 2016 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

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