The definition of the relevant product and geographic market is important for antitrust assessment, and in particular for an exemption. To define a relevant market, the European Commission uses a methodology that is based on the European School of Thought.
The objective of market definition is to identify the boundaries of competition between companies. The European Commission applies specific quantitative analysis methods, such as the hypothetical monopolist test, to find the relevant market.
In order to identify all reasonably available alternative products, this test examines the consumer response to a hypothetical increase in the market price of a company’s product by 5%-10% (the so-called ‘SNIPP test’). If substitution proves to be enough to make the price increase unprofitable because of the resulting loss of sales, additional substitutes and geographic areas will be included in the relevant market. This is done until the set of products and geographic areas is such that a small, permanent increase in relative prices would be profitable.
The European Commission Notice on the definition of relevant market explains how a market is defined.
EE&MC has both extensive experience in market definition and in using modern analytical tools, such as conjoint analysis, to provide market definitions in accordance with the Commission’s Notice.
To learn more about EE&MC’s approach to market definition, click here.