Page 60 - Azerbaijan State University of Economics

STUDYING OF SPECIAL PRACTICAL ISSUES OF ABUSE OF DOMINANCE

abuse has occurred and that prices are currently above competitive levels, but

the investigator should be aware of this possibility.
This point is illustrated by the U.S. cellophane case, which involved

allegations that the du Pont de Nemours & Company had monopolized the

supply of cellophane in the United States in violation of the Sherman

Antitrust Act. The U.S. Supreme Court defined the relevant market as
consisting of a broad range of flexible wrappings, including waxed paper and
other materials, as well as cellophane. The Court found that these products

were perceived as reasonably interchangeable by consumers. Some
commentators, however, say that the Court was wrong in defining the market

so broadly. In particular, it failed to recognize that consumer willingness to

switch to alternative products at a monopoly price is fully consistent with the
exercise of market power by a monopolistic firm. As a result it failed to

appreciate the extent of market power exercised by the du Pont Company.

More generally in abuse cases, defining the relevant product and
geographic markets should take into account the impact of alleged

exclusionary practices, which typically sit at the heart of the case. An
example: contrast the relevant market useful for assessing a merger of banks

offering Visa and MasterCard services with the relevant market necessary for
analyzing alleged exclusionary conduct by Visa and MasterCard toward a

new low-priced card entrant. The first case would include new card issuers

who would enter the industry if the price of credit card services rose
significantly. But such potential entrants would be excluded in the second

case because firms that would enter only at a higher price are not relevant to
assessing the feasibility of entry by a low-price firm [see Salop 1993].

In some cases it may be preferable to look for direct evidence of
exploitation of market power (for example, abnormally high prices or profits)

rather than focus on market definition. Alternatively, one may look for historical

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