Market Definition
CUTS Training Workshop on
Competition Policy and Law
Implementqation for Lao PDR
Vientiane
7 March 2006
Deunden Nikomborirak
Thailand Development Research Institute
Outline of Presentation
1. Why do we need to define
markets?
2. Definition of the “relevant market”
3. Market dimensions
4. Supply and Demand
considerations
1. Why do we need to identify
the relevant market?
to determine market dominance
to screen mergers
To assess impact of trade
practices on the competitive
process in the market
2. Definition
“Products that can be
substituted for one another are
considered to be in the same
relevant market”
How are markets identified?
The US - Small but sustainable
non-transitory increase in price
(SSNIP) Test
EC – qualitative analysis
SSNIP Test
(US Mergers Guideline)
“ Market power refers to the ability
to increase price marginally (5%)
for an extended period of time
without a decline in profit”
Problem with SSNIP Test
Benchmark price must be
“competitive price” rather than
“prevailing Price” - Cellophane
Fallacy.
Need to find “competitive price”
from markets where effective
competition exists – i.e., markets
from other geographical locations
EC Definition of the Market in the
“United Brand” case
Market power refers to the ability to
(1) restrict competition in the market
(2) make business decisions
regardless of competitors or
consumers
If there is a substitute for the product
in the relevant market, a supplier will
not have market power
3. Market Dimensions
product market
Geographic market
 Market structure
Time Dimension
Examples
Does the relevant market for banana include
oranges, peaches, watermelon, etc.?
Do imported bananas included in the relevant
market ?
Is there vertical integration between the
producer and wholesaler of bananas?
How long does it take for imported banana to
become available in supermarkets?
4. Supply and Demand
consideration
Demand
product
Supply
geography
product
geography
domestic
imported
Factors determining Substitutability
demand
Supply
Price difference
Utilization
Convenience/acc
essibility
Switching cost
Past consumer
behaviour
Perishability
State rules and
regulation (license,
quota, etc)
Cost of producing
substitute products
(switching)
Past supply
response to price
changes
Time required for
substitute products
Supply and Demand must be
considered simultaneously
Pencil case (only supply)
United Brand case (only
demand)