Definition of the Relevant Market

Hila Nevo holds a dual B.A. degree in law and in economics from the University of Haifa, Israel; a Masters degree (Cum Laude) and a Ph.D. from Erasmus University Rotterdam, The Netherlands. Dr. Nevo currently works at the University of Haifa specializing in antitrust as well as in the economic analysis of law.

• CONTENTS List of Tables and Figures Chapter 1. Introduction 1.1. The Increasing Role of Economics in EU Competition Policy 1.2. The Economics of Market Definition 1.3. Structure of the Book Chapter 2. Market Power 2.1. Introduction 2.2. Economic Foundations of Competition Law Analysis 2.2.1. Perfect Competition 2.2.2. Monopoly 2.2.3. Competition in the Real World 2.3. The Assessment of Market Power 2.3.1. The Exercise of Market Power Leads to Lower Output 2.3.2. The Increase in Price Leads to an Increase in Profitability 2.3.3. Market Power is Exercised Relative to the Outcome under Perfect Competition 2.4. Indicators of Market Power 2.4.1. The Persistent Structure-Conduct-Performance Paradigm 2.4.2. Ascendancy of the Structural Analysis Chapter 3. Market Definition 3.1. Introduction 3.2. What Qualifies for an Antitrust Market? The Concept of a Market in Economic and Legal Practice 3.2.1. Antitrust Markets versus Economic and Strategic Markets 3.2.2. The Emergence of the Relevant Market Definition Methodology 3.3. Antitrust Market Delineation in the EC - Theory and Practice 3.3.1. Introduction 3.3.2. The Commission's Notice on the Definition of the Relevant Market 3.3.2.1. A Preliminary Comment on the Legal Status of the Notice 3.3.2.2. Principles of Market Definition - The Notice's Theoretical Framework 3.3.2.3. The Notice's Pitfalls 3.3.3. Potential Difficulties in the Application of the SSNIP Test 3.3.3.1. The Application of the SSNIP Test to Monopolisation Cases: The Cellophane Fallacy 3.3.3.2. Market Definition in High-Technology Markets Chapter 4. Quantitative Techniques 4.1. Introduction 4.2. Shock Analysis 4.2.1. Implementing Shock Analysis 4.2.1.1. Kimberly-Clark/Scott 4.2.1.2. Procter & Gamble/VP Schickedanz 4.3. Similarity of Price Level 4.3.1. Employing Price Differences in Competition Law Analysis 4.4. Price Correlation Analysis 4.4.1. Shortcomings of Price Correlation Analysis 4.4.1.1. Causality 4.4.1.2. Supply Responses of Competing Firms 4.4.1.3. Spurious Correlation 4.4.1.4. Delayed Response 4.4.1.5. Benchmarking 4.4.2. Employing Price Correlations in Competition Law Analysis 4.5. Granger Causality Test and Cointegration Analysis 4.5.1. The Use of Granger Causality and Cointegration Analysis in Competition Law Analysis 4.6. Trade Flows 4.6.1. Elzinga-Hogarty Test 4.6.2. Shortcomings of the Elzinga-Hogarty Test 4.6.2.1. Determination of the LIFO and LOFI Thresholds 4.6.2.2. Interpretation of the Results 4.6.3. Transport Cost Tests 4.6.4. The Use of Shipment Tests in Competition Law Analysis 4.6.4.1. Nestle/Perrier 4.6.4.2. Saint-Gobain/Wacker-Chemie/NOM 4.6.4.3. Barloworld Coatings/Midas Paints 4.7. Demand Analysis 4.7.1. The Choice of Demand Model 4.7.2. The Identification Problem 4.7.3. The Importance of Price Elasticities in Competition Law Analysis 4.7.3.1. Own-Price Elasticity of Demand 4.7.3.2. Critical Elasticity 4.7.3.3. Cross-Price Elasticity of Demand 4.7.3.3.1. Potential Pitfalls in the Application of Cross-Price Elasticity 4.7.3.4. Additional Subtleties in the Application of Demand Elasticities 4.7.3.4.1. The Appropriate Time Interval for Measuring Demand Elasticities 4.7.3.4.2. Problems with Measuring Price-Cost Margins 4.7.3.4.3. Thee Reverse Cellophane Fallacy 4.7.3.4.4. Further Adjustments to the Analysis 4.7.4. The Use of Demand Elasticities in Competition Law Analysis 4.7.4.1. Kimberly-Clark/Scott 4.7.4.2. Procter & Gamble/VP Schickedanz 4.7.4.3. Bumble Bee/Connor Brands 4.8. Critical Loss Analysis 4.8.1. Calculating the Critical Loss 4.8.2. Estimating the Price-Cost Margin 4.8.3. Estimating the Actual Sales Loss 4.8.4. Focusing Critical Loss: Advantages versus Potential Pitfalls 4.8.5. The Use of Critical Loss in Competition Law Analysis 4.8.5.1. FTC v. Tenet Healthcare 4.8.5.2. SunGard/Comdisco 4.8.5.3. Wild Oats/Whole Foods 4.8.5.4. Critical Loss in the EU 4.9. Diversion Ratios 4.9.1. Potential Pitfalls in the Application of Diversion Ratios 4.9.2. The Application of Diversion Ratios in Competition Law Analysis 4.9.2.1. Vail Ski/Ralston Resorts 4.10. Price Concentration Analysis 4.10.1. Analytical Issues of Implementation 4.10.2. Price-Concentration Analysis and Market Definition 4.10.3. Implementing Price Concentrations in Competition Law Analysis 4.10.3.1. Staples/Office Depot 4.10.3.2. Praxair/Liquid Carbonic Corporation 4.11. Bidding Studies 4.11.1. Bidding Studies and Market Power Analysis 4.11.2. The Application of Bidding Studies in Competition Law Analysis 4.11.2.1. Philips/Agilent 4.11.2.2. General Electric/Instrumentarium 4.12. A Simulation Approach to Mergers 4.12.1. Technicalities of Merger Simulation 4.12.2. Implementing Merger Simulation in Competition Law Analysis 4.12.2.1. Volvo/Scania Chapter 5. Cases 5.1. Introduction 5.2. United Brands 5.2.1. Facts and Judgement 5.2.2. Assessment of the Court Decision 5.3. Nestle/Perrier 5.3.1. Facts and Judgement 5.3.1.1. Demand Considerations 5.3.1.2. Supply Considerations 5.3.2. Assessment of the Commission Decision 5.4. Procter & Gamble/VP Schickedanz (II) 5.4.1. Facts and Judgement 5.4.2. Assessment of the Commission Decision 5.5. Kimberly-Clark/Scott 5.5.1. Facts and Judgement 5.5.2. Assessment of the Commission Decision 5.6. Carnival Corporation/P&O Princess 5.6.1. Facts and Judgement 5.6.2. Assessment of the Commission Decision 5.7. Blackstone/Acetex 5.7.1. Facts and Judgement 5.7.2. Assessment of the Commission Decision Chapter 6. Conclusions 6.1. A General Overview 6.2. Is the European Commission's Practice Sufficiently Guided by Sound Economic Theory? 6.3. Do Decisions in Real-Life Cases under European Competition Law Utilise all Relevant Empirical Measures? 6.4. An Outlook into the Future of Market Definition References