The definition of the relevant product and geographic market is important 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 sectors in which competition takes place. The European Commission applies specific quantitative analysis methods such as the hypothetical monopolist test. 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%. 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 Notice of the European Commission to define the relevant market provides full information on this. EE&MC has both extensive experiences in market definition and modern analytical tools such as conjoint analysis, to provide market definitions in accordance with the Commission´s Notice.
- Application of econometric methods for the definition of the relevant marketAnnouncement of the EU Commission for defining the relevant market