The relevant market fallacy is one of the most common analysis errors in antitrust policy. One of the first legal questions in antitrust proceedings is the definition of the relevant market that a company is monopolizing. The problem with this is that if defined narrowly enough, any market is a monopoly. Prosecutors have an incentive to define the defendants’ relevant markets as narrowly as possible, in order to make them appear more dominant than they are in real life. Over at National Review, Alex Reinauer and I find the relevant market fallacy in the Federal Trade Commission’s (FTC) ban on Facebook parent Meta’s acquisition of virtual reality (VR) software company Within Unlimited:
The key product of the deal is Supernatural, Within Unlimited’s VR workout app. The FTC argues that the deal would give Meta illegal market power in the “virtual reality dedicated fitness app market.” Now that’s a tight market!
Most fitness isn’t VR or app based. Home fitness equipment is a $4 billion industry. Amazon just announced that it will start selling the popular exercise bike platform Peloton, which offers subscriptions to live classes and other video products alongside its bikes. VR fitness apps also compete with free neighborhood jogs, free workout videos on YouTube, gym memberships, and local athletic leagues.
Read the whole thing here. CEI analysts have addressed other relevant market error cases in other cases involving Amazon, Facebook, Google and the UK Competition and Markets Authority. See also Wayne Crews and my article The Case against Antitrust Law.