Distribution, Competition, and Antitrust / Intellectual Property (IP) Law

Is the iPad a Personal Computer?

Horace Dediu has an in-depth look at the PC industry entitled “The rise and fall of personal computing.” You can read the whole thing here.  Here are some of his conclusions:

“If iOS and Android are added as potential substitutions for personal computing, the share of PCs suddenly collapses to less than 50%. It also suggests much more collapse to come.

I will concede that this last view is extremist. It does not reflect a competition that exists in real life. However, I put this data together to show a historic pattern. Sometimes extremism is a better point of view than conservatism.”

Horace’s data analysis is quite interesting.  I don’t know for certain whether there are any problems in the way he has gathered and presented the data.  Nor do I know whether or not an iPad is in the same market as a PC.  But the data raise an interesting and relatively frequent question in competition law cases: how does one determine when two products are in the same relevant market?

Sherman Act Section 2 claims require a plaintiff to establish a relevant market.  See, e.g., Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993) (attempted monopolization claims).  “Without a definition of [the] market, there is no way to measure [a defendant’s] ability to lessen or destroy competition.”  Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965).

“The outer boundaries of a product market are determined by the reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it.”  Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962).  The cross-elasticity of demand is an economic variable that measures the change in the quantity demanded by consumers of one product relative to the change in price of another.  A high cross-elasticity indicates that two products are close substitutes for each other and may be in the same market.

This, then, is the essential (but not the only) question in determining whether the iPad is in the same market as PCs — at least for antitrust law purposes: do iPads and PCs have a relatively high cross-elasticity of demand?  In other words, if PC prices increase, will consumers substitute away from PCs and buy iPads instead?  Also relevant is the inverse question: if iPad prices go up, will consumers buy more PCs?

I don’t know the answers to these questions, but the answers could be very important in any future case where PC market share is at issue.  You may have your own opinions, based on ancedotal impressions and data.

 

 

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  1. [...] David Golden has an interesting article in Law360 this week entitled “Interchangeability in the Tablet Product Market.”  (The full article may be behind a paywall.) I had some earlier, preliminary thoughts here. [...]

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