California Civil Jury Instructions (CACI)
3413. Rule of Reason - "Product Market" Explained
[Name of plaintiff] claims that the product market is [insert claimed product market, e.g., "paper clips"]. [Name of defendant] claims that the product market is [insert claimed product market, e.g., "all paper fasteners"].
To define the product market, you must determine which [products/services] are in the market in which [name of defendant] is claimed to have carried out its restraint of trade.
A product market consists of all [products/services] that can reasonably be used for the same purpose. [Products/services] are not in the same product market if users are not likely to substitute one for the other.
In deciding whether products are reasonable substitutes, you may consider whether a small increase in the price of one product would cause a considerable number of customers of that product to switch to a second product. If so, these two products are likely to be in the same market. If a significant increase in the price of one product does not cause a significant number of consumers to switch to a second product, these products are not likely to be in the same market.
Directions for Use
The word "services" should be substituted for "products" wherever that word appears if the case concerns services instead of products.
In some cases, an example may be helpful to illustrate the principle of "reasonable interchangeability," such as the following. Of course, this example may be modified to best suit the facts of the case.
If the price of a loaf of whole wheat bread increases by 10 or 15 cents, a considerable number of customers may decide to purchase white bread instead. Although these products are somewhat different, they may be reasonably interchangeable for purposes of making toast and sandwiches. They are likely then to be in the same relevant product market. However, the relationship between whole wheat bread and other bread roducts may be different. Thus, customers may not believe hot dog buns as quite so interchangeable. Therefore, a 10, 15, or even 50-cent increase in the price of a loaf of wheat bread is not likely to cause too many customers to buy hot dog buns instead. These two products, then, are not likely to be in the same relevant market.
Sources and Authority
"The United States Supreme Court has declared that the relevant market is determined by considering 'commodities reasonably interchangeable by consumers for the same purposes.' Or, in other words, the relevant market is composed of products that have reasonable interchangeability for the purpose for which they are produced." (Exxon Corp. v. Superior Court (1997) 51 Cal.App.4th 1672, 1682 [60 Cal.Rptr.2d 195], internal citations omitted.)
"In antitrust law, the interchangeability of products is usually considered in the definition of markets; the boundary of a relevant market is defined by a significant degree of product differentiation." (Redwood Theaters, Inc. v. Festival Enterprises, Inc. (1988) 200 Cal.App.3d 687, 705 [248 Cal.Rptr. 189].)
1 Antitrust Laws & Trade Regulation, Ch. 12, The Per Se Rule and the Rule of Reason, § 12.03 (Matthew Bender)
3 Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Business Torts, § 40.168 (Matthew Bender)
49 California Forms of Pleading and Practice, Ch. 565, Unfair Competition (Matthew Bender)
(New September 2003)