Critical Elasticity Analysis In Relative Market Definition In Antitrust Law

Accompany with economic globalization, merger has become an important strategy for enterprises to expand their business and establish market power, especially for transnational corporations. Merger directly leads to bigger enterprises and less competitors in the relevant market. On the one hand, bigger enterprises may enhance research and development, bring scale effect and reduce production cost. Social welfare gets increased in this way. On the other hand, few competitors may enhance the market power of the new firm, create oligopoly or monopoly, which will harm competition. With the current economic conditions, it is really a challenge for antitrust law to judge the scale effect and illicit competition of a merger. Relevant market definition is the critical link and fundamental position of merger reviews in antitrust law. As the size of relevant market can directly influence the result of the judicial decision of a merger, it has become the key point for estimating the market power and merger effect in antitrust law.By referring to domestic and overseas research, this paper states theoretical and practical methods of market delineation. SSNIP is the staple method to define relevant market, including critical elasticity analysis and critical loss analysis. This paper distinguishes these two methods by their advantages and disadvantages and applicability, especially focuses on critical elasticity analysis in different hypotheses and demand curves. There are four steps to define relevant market when using critical elasticity analysis:select initial product, rank next-best substitute, set demand system and get the result of market delineation. Among these four steps, ranking next-best substitute is the key points and difficult points. This paper makes a systematic study on primary methods and common steps of estimating the next-best substitute to make sure the result of market delineation is exactly right.Based on the above theoretical research, this paper adopts the critical elasticity analysis to define the relevant market of the merger case "Coca-Cola-Huiyuan". We use SEDS model with a one-period lag as the demand system. In this way, we can focus on short-run elasticity and long-run elasticity, then balance scale effect and competition effect in the long run. The results show that carbonated drink and fruit juice are in different relevant markets.At last, we summarize the whole paper and provide reference for future antitrust legislation.