Market definition and analysis
Market definition and analysis

The following Competition practice note provides comprehensive and up to date legal information covering:

  • Market definition and analysis
  • Aims of market definition
  • Principles of market definition
  • The SSNIP test
  • Problems with the SSNIP test
  • Relevant evidence
  • Chains of substitution
  • Worked example
  • Aftermarkets
  • Worked example
  • More...

Market definition is the starting point for most competition law assessments and plays a central and often critical role. In the case of mergers, for example, mergers can raise competition concerns if they increase the ability of firms to exercise market power.

To assess whether a merger leads to an increase in market power requires several steps. The usual approach is to first define the relevant market within which competition takes place. This market definition provides a framework to assess competition. We can then assess the effect of the merger on competition in that market by looking at the extent to which the merging firms will face competitive constraints.

Aims of market definition

The objectives of defining the relevant market may be summarised as follows:

  1. enabling market shares to be calculated. Provided the market has been correctly defined, market shares can be used to assess whether a more detailed analysis is required. Where the shares are small it is often unnecessary to proceed with a more detailed analysis of the other factors influencing competition. Many cases are routinely dismissed on this basis under EU and UK competition law

  2. providing a clear framework for considering the evidence. Irrelevant arguments and evidence can quickly be dismissed from consideration, and

  3. enabling the competition authorities and the parties to focus their detailed attention in the second stage of the analysis

Related documents:

Popular documents