LAW & ECONOMICS: MARKET DEFINITION TOOLS - EC COMMISSION PRACTICE - EMPIRICAL EVIDENCE - SSNIP TEST

Market definition in recent EC merger investigations: The role of empirical analysis

Over the past few years, the Commission has increasingly used sophisticated tools for market definition purposes, and the use of empirical evidence is now common practice for market definition. Market definition is based on the SSNIP test that examines whether a hypothetical monopolist would profitably and permanently increase prices by 5-10% in a given candidate market. There are two types of empirical analyses (critical loss analysis and pricing analysis) that have by now become standard parts of the Commission’s “toolkit” for defining markets. The aim of this article is to provide an overview of these empirical tests and to illustrate how they were used by the Commission in a number of recent EC merger cases.

1. Over the past few years, the Commission has increasingly used sophisticated tools for market definition purposes, and the use of empirical evidence is now common practice for market definition. Quantitative evidence can often provide important insights to the SSNIP test that examines whether a hypothetical monopolist would profitably and permanently increase prices by 5-10% in a given candidate market. This is because it can directly assess the reactions of customers and competing suppliers to the price increase. In particular, it aims to evaluate whether customers would switch a sufficient amount of their purchases from the hypothetical monopolist in a candidate market to competing products of suppliers outside the candidate market and whether these suppliers would be able to and

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Authors

  • DG COMP (Brussels)
  • KPMG (London)

Quotation

Andrea Amelio, Daniel Donath, Market definition in recent EC merger investigations: The role of empirical analysis, September 2009, Concurrences N° 3-2009, Art. N° 27214, www.concurrences.com

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