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Relevant market

Relevant market is a market of a relevant product which is evaluated in connection with a relevant geographic market.

Definition of the relevant market involves the description of the context in which certain economically harmful conduct could take place. The process, therefore, of defining a market and a relevant market, is of the first moment, meaning thereby that any assessment of the conduct of a market player can only follow and not precede the definition. The process begins by assuming provisionally that certain anti-competitive conduct exists in the market. It then proceeds to define through a series of questions, the boundaries of the smallest market in which such conduct could be sustained. After the contours of the smallest market are defined and drawn, the actual conduct in question is subjected to an analysis, to determine if it has or could have an anticompetitive effect.

Relevant market refers to the line of commerce in which competition has been restrained and to the geographic area involved, defined to include all reasonably substitutable products or services, and all nearby competitors, to which consumers could turn in the near term if the restraint or abuse raised prices by a notinsignificant amount.

In simple terms, relevant market identifies the particular product/service or class of products produced or services rendered by an enterprise in a given geographic area. Identification also includes identification of enterprises that compete to supply those products or services.

The relevant market combines the relevant product market and the relevant geographic market.

A relevant market has therefore two fundamental dimensions, product and geographic. The product market describes the good or service. The geographic market describes the locations of the producers or sellers of the product or service. Relevant market is defined by consumer or purchaser preferences and actions. For instance, if purchasers consider two goods to be close substitutes or readily interchangeable, those two goods are considered to be in the same relevant market. As an illustration, butter and margarine can be considered to be in the same relevant market. In contrast, even if producers/sellers consider two goods to be very similar on the ground that they are manufactured on the same machines, the goods may not be in the same relevant market.

Summary

The determination of relevant market by the Competition Authority has to be done, having due regard to the relevant product market and the relevant geographic market. In practice, defining a relevant market is sometimes only approximate. It is often difficult to predict the reactions of purchasers and consumers to a price increase. It is here that investigation becomes critical to the determination of the relevant market. Good investigation would involve identifying the important economic agents and posing questions appropriate to their operations and germane to the case on hand.

This page was last modified on 20 November 2020 at 05:58.

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