The SSNIP Test Is Gone. Real World Dynamics Are Back.

In remarks delivered at the New York City Bar Association on May 19, 2022, AAG Jonathan Kanter described the underlying principles that will guide the Antitrust Division’s work. Enforcement will focus on “economic liberty” and protecting the competitive process. The antitrust laws “show a profound concern with economic liberty, not merely as an economic concept, but as a concept connected to the freedom of our nation.” “[O]ur job is simply to promote competition and then let the benefits – whether they are measurable or not – flow from the competitive process.” Looking only at price, output, and wealth effects will not suffice. Real world impacts on customers, suppliers, workers, farmers, and other constituencies will be included.

This leads to the question: how will we define the sphere of activities in which an assessment of competitive process can be made? Clearly, the SSNIP test (small but significant and non-transitory increase in price) will not suffice. SSNIP only takes price effects into account and is too myopic.

I suggest the way to do this is to get the facts and assess the dynamics of the industry. Obtain the business planning and strategy documents and correspondence from participants in the activities. Take statements from those with direct knowledge including producers, sellers, suppliers, customers, workers, and sources of finance and technology about what their alternatives are. Where are the bottlenecks in the business? How does human behavior work in the business, whether economically rational or not? How do the participants in the businesses see their competition for price, quality, reliability of supply, technology, capital, and labor? The participants in a business will know who their potential competitors are, and what challenges they need to parry even if those challenges are not currently reflected in price, supply, cost of inputs, wages, or quality.

For antitrust litigators this is not a novel approach. We take sworn testimony seek admissible documents and electronic records. This was the approach taken nearly 60 years ago in Philadelphia National Bank (374 U.S. 321 (1963). See for example note 33, quoting testimony from a banker who stated that did not see certain finance companies as competitors and if he did, he would stop making loans to them. Another witness testified, “As far as I have been able to discover, there isn’t anybody in Philadelphia who will take the trouble to walk across Broad Street to get ½ or 1 per cent more interest. If you ask me why, I will say I do not know. Habit, custom, personal relationships, convenience, doing all your banking under one roof appear to be factors superior to changes in the interest rate level.” Note 34. Another witness stated that the banks were losing accounts from their in-town offices to banks in other neighborhoods, so it was necessary to establish branches. Note 35. In other words, how do things work in reality as seen by those who have direct knowledge?

Facts, documents, and testimony about the real world may be where we are headed in assessing antitrust issues. This approach is not new.