Opinion ID: 775962
Heading Depth: 4
Heading Rank: 1

Heading: Whether Plaintiff's Alleged Market Is Over-Inclusive

Text: 21 The district court held that the proposed product market was over- inclusive because the plaintiff failed to explain how it is that accountants, lawyers, chemical engineers and other MPT employees in the oil and petrochemical industry are interchangeable with one another when the jobs they perform are so different. Id. Defendants offer the same argument on this appeal. Indeed, plaintiff does not attempt to argue that such varying professionals are interchangeable. Plaintiff instead urges that the district court looked through the wrong end of the telescope, failing to consider that [t]his case involves the exercise of oligopsony power, that is, buying power. We agree with plaintiff that the interchangeability of these employees is not part of defining the relevant market. 22 The traditional horizontal conspiracy case involves an agreement among sellers with the purpose of raising prices to supracompetitive levels. The Sherman Act, however, also applies to abuse of market power on the buyer side - often taking the form of monopsony or oligopsony. See Roger D. Blair & Jeffrey L. Harrison, Antitrust Policy and Monopsony, 76 Cornell L. Rev. 297, 297-301, 308 (1991). Plaintiff is correct to point out that a horizontal conspiracy among buyers to stifle competition is as unlawful as one among sellers. See Mandeville Island Farms, Inc. v. Am. Crystal Sugar Co., 334 U.S. 219, 235 (1948) (It is clear that the agreement is the sort of combination condemned by the [Sherman] Act, even though the price-fixing was by purchasers, and the persons specially injured... are sellers, not customers or consumers.) (footnotes omitted); Nat'l Macaroni Mfrs. Ass'n v. FTC, 345 F.2d 421, 426-27 (7th Cir. 1965) (applying the per se rule against horizontal price fixing to an agreement by pasta producers to standardize the amount of durum wheat they used in an effort to depress the price of durum wheat). There is thus no reason to doubt that a Gypsum data exchange claim - a close cousin of traditional price fixing - can be brought against a group of buyers. See Alabama Power Co. v. Fed. Power Comm'n, 511 F.2d 383, 389 n.10 (D.C. Cir. 1974) (Although the anticompetitive effects of information are usually discussed with reference to a market characterized by oligopoly on the supply side alone, concentration may occur among purchasing firms as well; circulation of transaction data may allow a few buyers to gain at the expense of many sellers.). 23 The fact that this case involves a buyer-side conspiracy affects how the market is defined. Normally, the market is composed of products that have reasonable interchangeability for the purposes for which they are produced - price, use and qualities considered. AD/SAT v. Associated Press, 181 F.3d 216, 227 (2d Cir. 1999). In economists' terms, two products or services are reasonably interchangeable where there is sufficient cross-elasticity of demand. Cross-elasticity of demand exists if consumers would respond to a slight increase in the price of one product by switching to another product. Id.; see also IIA Phillip E. Areeda et al., Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 562a (1995). Thus, the inquiry is whether a hypothetical cartel would be substantially constrain[ed] from increasing prices by the ability of customers to switch to other producers. AD/SAT, 181 F.3d at 228. 24 There is a danger in applying these factors mechanically in the context of monopsony or oligopsony. These factors are reversed in the context of a buyer-side conspiracy. Blair & Harrison, supra, at 324; see also IIA Areeda et al., supra, ¶ 574, at 302 n.12 (explaining that the equation for measuring market power in monopsony is a `mirror image' of the relationships that create market power in a seller). In such a case, the market is not the market of competing sellers but of competing buyers. This market is comprised of buyers who are seen by sellers as being reasonably good substitutes. Blair & Harrison, supra, at 324. A greater availability of substitute buyers indicates a smaller quantum of market power on the part of the buyers in question. See id.; see also IIA Areeda et al., supra, ¶ 574, at 302 n.12 (explaining that when elasticity is high in the monopsony context, a given price decrease engenders a relatively large increase in purchases by the fringe firms). 25 The district court's analysis reflects a failure to reverse all of the factors involved in light of the buyer-side nature of the alleged activity. Using Areeda's language, the district court's equation is not a complete mirror image of the traditional seller-side market analysis. IIA Areeda et al., supra, ¶ 574, at 302 n.12. Plaintiff is right to urge that [t]he proper focus is... the commonality and interchangeability of the buyers, not the commonality or interchangeability of the sellers. The question is not the interchangeability of, for example, lawyers with engineers. At issue is the interchangeability, from the perspective of an MPT employee, of a job opportunity in the oil industry with, for example, one in the pharmaceutical industry. 5 26