Study On The Approaches Of Relevant Market Definition In Network Industry

Network economy is an important pillar of economic development in modern society. The fast-growing network technology has made communications among people more convenient and further promoted the process of globalization. The ever-changing network technology highlights the intense competition in network industries, which may result in monopoly. As a focal part of the Anti-Monopoly Law of the People’s Republic of China (hereinafter referred to as Anti-Monopoly Law), relevant market theory has been widely used and continuously improved by various countries since its birth. Being the key process in judicial practice, the definition of relevant market involves a great number of legal theories, and its judicial practice requires many economic theories and data support. Therefore, the significance and complexity of relevant market theory is self-explanatory.There are many approaches to define relevant market, among which the more common ones include demand substitution analysis、supply substitution analysis and SSNIP (Small but Significant Not-transitory Increase in Price) test. The SSNIP test is universally adopted and plays a substantial role in relevant market definition. When defining relevant market, these approaches, each with particular emphasis, will be used in combination and with mutual complement. Take the definition of relevant product market as an example, demand substitution analysis will be the main approach applied, supplemented with supply substitution analysis, while the SSNIP test has general application in this case. However, it is most certain that none of the three approaches are perfect as neither can the preconditions of demand elasticity theory required by substitution analysis be fully satisfied in practice, nor the base price, among other things, demanded in the SSNIP test be validly determined. Therefore, the approaches for the definition of relevant market are in need of innovation and further improvements.Modern network industry starts relatively late, but is growing quickly. Comparing with traditional industries, network industry appears with such new characteristics as network effect, user stickiness and two-sided markets, which complicates relevant market definition and raises the bar for traditional approaches. With the emerging challenges from network industry and the deficiencies of traditional approaches, relevant market definition has drawn attention from many areas. This problem could be solved from theoretical, legislative and judicial aspects. However, despite the inadequacies in traditional approaches, the general principles of relevant market such as the rule of reason could still be applied, and its role has even become increasingly prominent. The large amount of cases and theories developed from western countries that started earlier in network industry is worth using as reference. Meanwhile, the anti-monopoly enforcement should be strengthened and further enhanced in order to develop a comprehensively improving system which combines theories, institutions and practice.This thesis has four parts. The first part presents the relevant market theory including its content, significance and approaches for its definition. The second part focuses on network industry through an introduction of its concept and essential characteristics, the followed analysis of which demonstrates the challenges for relevant market definition, which is further detailed by Qihoo v Tencent. The third part elaborates the current legislative, law-enforcing and judicial state of relevant market definition in China. The last part concludes that the difficulties facing relevant market definition shall be lessened from theoretical, legislative and judicial aspects.