The Study On Critical Loss Analysis

China’s Anti-monopoly Law was enforced in April2008. In the review process of antitrust cases, the relevant market definition is a very basic work, but it is also a key basis of judgments, because the result of the definition of the legal consequences of a direct impact on the market position of enterprises involved in the identification and decision business activities. If the relevant market is defined too narrowly, it will make some companies market power have been exaggerated, and the possibility of potential monopoly would have been identified; On the contrary, it will cause some companies to abuse its dominant market position.Because of the relevant market definition palys an important role in the antitrust review, study on the method of market definition was more meaningful. In this paper, from the perspective of historical development, judicial practice and economic analysis framework the new methods of the relevant market definition-critical loss analysis has been introduced. The method evolved based on the SSNIP paradigm, the hypothetical monopolist test method. It is the specific application of the hypothetical monopolist test, and it is also a quantitative method for the relevant market definition and the analysis of the competition effects for mergering.This paper is divided into five parts, the first part briefly descrides the research background, purpose, meaning and specific research framework; The second part summerises the theoretical foundation and economics analysis framework of the method; The third part analyses the values of critical loss analysis based on the historical development and judicial practice visits; The fourth part introduces the case of Coca-Cola mergering Huiyuan and analyses the relevant market; The fifth section concluds the study of this paper, and points out the research limitations and future research directions, and proposes some recommendations for market definition in the process of antitrust reviewing.Through the study, based on the problems of the hypothetical monopolist test in practice, the use of critical loss analysis method to define the relevant market has been analyzed. The early application of critical loss analysis method in some antitrust cases, including the District of Columbia District Court, the Federal Trade Commission v. Western Oil company, United States v. Massey Health Service Institutions and Finley Tri-State Health Group, Inner Eastern Bay Hospital. By comparing actual loss and critical loss, the relevant market in those cases was defined. Then the court give the final judgment.The improved critical loss analysis method was applied to the actual case.And this paper gives some comments based on the relevant market definition of Hong Kun, Zhang Xinzhu (2010) the case of Coca-Cola merger Huiyuan, then give some further analysis. The paper also illustrates the improved critical loss analysis method, and relax assumptions of traditional critical loss analysis method based on the original assumptions, and get a new calculation method. First of all, relax the assumptions that the other product prices remain unchanged. After taking into account the price of one enterprise, its competitors will react; Secondly, relaxed residual demand to price changes is the assumption of linearity, sensitivity of the consumer price for a commodity or price reaction is usually inconsistent; Finally, taking into account the complexity of the profit in the real case, that factors such as customer loyalty, corporate reputation, network effects, and the learning curve will have some impact on the profits of the enterprise.