Research On Definition Of Relevant Market In Enforcing Antitrust Law

Although the definition of relevant market is not a basic regime of antitrust law, however, it is a very important and fundamental work in enforcing antitrust law and often makes great impact on the ruling of an antitrust law case. Therefore, those countries and regions in which have effectively enforced the antitrust law lave spend a lot of resource on the further research on definition of relevant market and have got brilliant achievements. Although the legislation and implementation of antitrust law in China is relatively late, so far, we also have made some achievement in this field. In order to achieve target, the author will use a variety of ways to make research on definition of relevant market on the basis of the former achievements.USA is the headstream of modern anti-monopoly law system and always keeps its lead position in the area of research on relevant market definition. So far, research on relevant market definition in USA can overall be divided into two stages, that is 1890 to 1982 and 1982 to today.In the nearly 100 years of the development course between 1980 and 1982, USA courts used a member of methods or theories to define the relevant market in the early stage of judging antitrust cases, including homogeneous product method, demand substitution method, sub market theory, cluster market theory and supply substitution method. There are some imperfections in those methods or theories owe to the impact from the factors such as experience and cognition, however, we can not neglect the value and history contribution of those methods and theories. With the development of USA antitrust enforcement, those critical imperfections in the methods used to define the relevant market in early stage became more and more apparent. To promote the works on defining the relevant market and to reduce the understanding of the differences in a case between antitrust law enforcement agencies and courts as well as the parties, USA DOJ firstly put forward the hypothetical monopolist test which is also called SSNIP test. Although there are also some imperfections in this method, for example, assumption on the base of use, the possibility of enlarging the scope of relevant market and the dependence on the data, however, because there are a lot of important improvements and advantages in this method, it has been widely adopted by many countries and regions since 1982 and became a common method to define relevant market in the world today.Although most of antitrust law enforcement agencies in the world use SSNIP to define relevant market, there are some differences between the dimensions which are selected by them. For example, USA, Canada, Japan and EU choose product dimension and geographic dimension, UK chooses product dimension and geographic dimension as well as time dimension, Australia chooses product dimension, geographic dimension, time dimension and function dimension. Nevertheless, according to the substance of related guidelines or laws issued by them, the main content which was considered by them when defining the relevant market tends to be quite similar. For example, USA, Canada, Japan and EU also often considers the impact of time, UK also will notes the relationship between upstream and downstream of industries, such as after market. This may show that the definition of relevant market is a relatively objective enforcement, in spite of some uncertainty. Base on our investigation and analysis, product, geography and time are the three main dimensions to objectively define a relevant market when using SSNIP test.The relevant product market is the core of relevant market, which is often the start point of any antitrust law enforcement agency when defining the relevant market of a case. While an antitrust law enforcement agency or the court uses SSNIP test to define the relevant market of a case, they should analyze all the factors which could be able to make impact on the substitution in accordance with the order, for example, end use, physical characteristics, consumer preference, price, costs of switching purchase, costs of switching supply and so on.. According to the analysis, they find the products which will be the substitutions to focal product in the case and the degree of the substitution. After finishing the work before, the agency or the court will confirm the hypothetical monopolist whether be able to make more money when it imposes a small but significant and non-transitory increase in price by investigation and simulation analysis. If the answer to this question is 'yes', the test is complete. The product under the hypothetical monopolist's control is (usually) the relevant product market. If not, we assume that the hypothetical monopolist also controls the second closest substitute to the focal product and repeat the process once more. We continue expanding the product group in this way (i.e. by adding the next best substitute) until we have found a group of products for which it is profitable for the hypothetical monopolist to sustain prices 5 to 10 per cent above competitive levels (by adding the next best substitute). If so, the test is complete. The relevant market is (usually) the focal product and its closest substitute. The antitrust law enforcement agency or the court should pay attention to some special conditions when using SSNIP test to define the relevant market, such as primary product and secondary product, differentiated products and its chain, cluster product and the same products sold in different way.After finishing the definition on relevant product market, the next work for antitrust enforcement agencies or the courts are to define relevant geography market. Although there are a lot of factors needed to consider in defining relevant geography market, such as convenience to getting products, costs of transportation, price, characteristics, consumer preference, costs of extending or switching to supply, barriers to market entry etc., however, owing to the impact from barriers of trading and the locus of sovereignty and jurisdiction and so on, the work of defining the relevant geography market is often simply compared to the definition of relevant product market. Generally speaking, the whole territory is the normal geography market. Only in a few conditions, the geography market is a part of the territory of broader than a territory. Therefore, the antitrust enforcement agency or the court may directly define the relevant geography market in the whole territory. When the relevant geography market in a case may be abnormal, they need to consider all the factors using the SSNIP test. For example, when dealing with the case involving network economy, antitrust enforcement agencies or the courts should pay more attention to analyze it.In the definition on relevant market, although time dimension is less important than product dimension and geographic dimension, the antitrust enforcement agencies or courts still should pay enough attention to it because of dynamic of competition, the temporary presence of the dominant market position, costing of stages. The guideline of definition on relevant market issued by China Antitrust Commission particularly emphasis that whiles those factors, such as cycle, lifetime, season, fashion, duration of protection of intellectual property etc., become a part of products, time dimension should be considered in defining the relevant market. According to practice, time dimension is not often considered as product dimension and geographic dimension, which will be independently considered in peak and off peak, seasonal variations, innovation/inter-generational products, planned deregulation etc. When the antitrust enforcement agency or the court try to define the relevant time market for a case, basis on obeying the principles of the longer term and in the foreseeable future, they may reference the theory of product cycle and copy well with the potential conflicts between inspection time during the definition on relevant product market and relevant geographic market and the relevant time market.Although the elastic extension of relevant market has been effectively controlled since SSNIP test was found, there are still some uncertainties existing in the definition on relevant market in the enforcement of antitrust law because the choose of the percentage of price is not certain and the data to reference come from different way and weighting factors are disorder and there are difference between different personal cognition. Those uncertain factors will create a lot of bad impact on the antitrust law enforcement. For example, they may increase the difference between the related parties and the expectation of antitrust law will be lowered. In order to weaken the uncertainty of the definition on relevant market, the antitrust enforcement agencies should take enough methods to improve quantitative analysis and qualitative analysis and should make full use of empirical research to promote the degree of object. Balancing the inter-intra relation between related parties and antitrust enforcement agencies as well as courts is key work of the whole antitrust law enforcement, but we should strengthen the building of the related aspect substantive system and procedure system in both of macro and micro levels to ensure that there are not abuse of the power of antitrust enforcement in defining the relevant market.With the rise of the theory of comparative advantage and the application of new methods as well as the impact from other factors, there are some challenges to the position of definition on relevant market in some cases. However, given the limited scope of market competition and the need of implementation of antitrust law, it is foreseeable that the definition on relevant market is still an important task in antitrust law and will often make great influence as now to a case in the future for a long time.