Market Definition Before Foreign Antitrust Authorities
| Pages | 503-539 |
503
CHAPTER XIII
MARKET DEFINITION BEFORE
FOREIGN ANTITRUST AUTHORITIES
A. Introduction
Antitrust agencies throughout the world frequently exchange ideas,
experiences, and approaches, which has led to substantial similarities in
the way that they define product and geographic markets. In particular,
the International Competition Network enables antitrust agencies
throughout the world to share ideas and best practices concerning market
definition, among other topics.1 By way of example, this chapter reviews
how antitrust authorities in the European Union (EU),2 Canada, and
Japan define product and geographic markets.
B. Market Definition Under EU Competition Law
1.
Introduction
The EC Treaty3 embodies two core objectives: the enhancement of
competition and the creation of a single market among the EU member
states. EU competition law must be understood in the context of these
twin objectives. The key conc ept of “effective competition” was
originally framed in terms of freedom of action—it was understood to
1. ICN MERGER WORKING GRP., MERGER GUIDELINES WORKBOOK (2006),
availa ble at
www.internationalcompetitionnetwork.org/uploads/library/doc321.pdf;
ICN MERGER WORKING GRP., PROJECT ON MERGER GUIDELINES (2004),
availa ble at
www.internationalcompetitionnetwork.org/uploads/library/doc488.pdf.
2. The EU is a union of 27 independent states, founded to enhance political,
economic, and social co operation. The EU was formerly known as the
European Community (EC) or the European Economic Community
(EEC).
3. Treaty of Nice Amending the Treaty on European Union, the Treaties
Establishing the European Communities and Certain Related Acts, Oct. 3,
2001, 2001 O.J. (C 80) 1.
504 Market Definition in Antitrust
preserve “the freedom and right of initiative of the individual economic
operator,” foster “the spirit of enterprise,” and create “an environment
within which European industry can grow and develop in the most
efficient manner and at the same time take account of social goals.” 4
Later, it came to encompass market integration and promotion of
competition as well. Thus, in implementing competition policy, the
European Commission (Commission) considers the ongoing process of
European market integration.
EU competition law seeks to prevent practices that impede effective
competition. Competition is not an end in itself, but rather the means to
a superior goal, such as efficiency or consumer welfare. As one former
Commissioner for Competition Policy explained, consumer welfare is at
the core of the concept of effective competition in the EU: “Whether we
are tackling abusive actions by dominant companies, breaking up cartels,
vetting mergers, or assessing [s]tate aid—the potential harm to
consumers is always at the heart of what we do. We are applying this
‘consumer welfare standard’ throughout our work, through a better use
of economic analysis.”5 For this reason, demand substitutability plays a
central role in defining relevant markets in the EU.
The Commission uses the concept of the relevant market to evaluate
the competitive effects of companies’ practices. The European Night
Services6 case highlights the importance of rigorous product market
analysis. In that case, the European Court of First Instance (CFI)
annulled the underlying Commission decision because it was unable to
make any findings as to whether the alleged restrictions had an
appreciable effect on competition “in the absence” of analysis of the
relevant market.7
4. COMM’N OF THE EUROPEAN COMMUNITIES, FIFTEENTH REPORT ON
COMPETITION POLICY 11 (1986), a vailable at
http://bookshop.europa.eu/eubookshop/bookmarks.action?target=EUB:N
OTICE:CB4585430:EN:HTML&request_locale=EN (follow “English
(en): Part_ 1” hyperlink).
5. Neelie Kroes, European Comm’r for Competition Policy, Making
Consumers’ Right To Damages A Reality: The Case For Collective
Redress Mechanisms in Antitrust Claims at Conference on Collective
Redress for European Consumers (Nov. 9, 2007); see a lso Neelie Kroes,
European Comm’r for Competition Policy, Co mpetition Policy and
Consumers at the General Assembly of BEUC (Nov. 16, 2006).
7. Id. ¶ 93.
Market Definition Before Foreign Antitrust Authorities 505
Although the CFI emphasized the importance of defining the
relevant market, it provided little guidance on how the Commission and
the national antitrust authorities should conduct the relevant market
analysis. In 1997, to address the growing need for consistent and
uniform criteria for defining the relevant market throughout the EU, the
Commission issued the Notice on the Definition of the Relevant Market
for the Purposes of Community Competition Law (Notice on Market
Definition).8 The Notice on Market Definition explains how markets
should be defined for the purposes of EU competition law in light of its
interpretation of existing Commission, European Court of Justice (ECJ),
and CFI precedent.9
Market definition serves as a starting point from which to identify
competitive constraints on the behavior of the firms (or “undertakings”)10
under consideration. As stated in the Notice on Market Definition:
Market definition is a to ol to identify and define the boundaries of
competition between firms. It serves to establish the framework within
which competition policy is applied by the Commission. The main
purpose of market definition is to identify in a systematic way the
competitive co nstraints that the undertakings involved face. The
objective of defining a market in both its product and geographic
dimension is to identify those actual competitors of the undertakings
involved that are capable of c onstraining those undertakings’ behaviour
and of preventing them from behaving independently of effective
competitive pressure.11
8. Commission Notice on the Definition of Relevant Market for the
Purposes of Community Competition Law, 1997 O.J. (C 372) 5,
availa ble at http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31997Y1209(01):
EN:HTML (footnotes omitted) [hereinafter Notice on Market Definition].
9. The Commission’s interpretation of the relevant market is without
prejudice to the interpretation that may be given by the EU courts. See
Notice on Market Definition, supra note 8, ¶ 6.
10. In the context of competition law, “the concept of an undertaking
encompasses every entity engaged in an economic activity, regardless of
the le gal status of the entity and the way in which it is financed.” See
Case C-244/94, Fédération Française des Sociétés d’Assurances v.
Ministére de l’Agriculture et de la Pêche, 1995 E.C.R. I-4013, ¶ 14; Case
11. Notice on Market Definition, supra note 8, ¶ 2.
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