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Competition law
Basic concepts
Anti-competitive practices
Laws and doctrines

United States

Europe

  • European Community
    competition law
  • Irish Competition Law
  • Competition Act 1998 (U. Competition law history refers to attempts by governments to regulate Competitive markets for goods and services leading up to the modern competition or Antitrust The term "monopolization" refers to an offense under Section 2 of the American Sherman Antitrust Act, passed in 1890 In Economics and Business ethics, a coercive monopoly is a business concern that prohibits competitors from entering the field with the natural result being that Natural monopoly is a term used in Economics to refer to two different things In Economics and especially in the theory of Competition, barriers to entry are obstacles in the path of a firm which wants to enter a given Market In Economics, market power is the ability of a firm to alter the Market price of a good or service In Competition law, before deciding whether companies have significant Market power which would justify government intervention the test of Small but Significant and Non-transitory Merger control refers to the procedure of reviewing Mergers and acquisitions under Antitrust / competition law Anti-competitive practices are Business or Government practices that prevent and/or reduce Competition in a Market (see Restraint of trade Collusion is an agreement usually secretive which occurs between two or more persons to deceive mislead or defraud others of their legal rights or to obtain an objective forbidden A cartel is a formal (explicit agreement among firms Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve Price fixing is an agreement between business competitors to sell the same product or service at the same price Product bundling is a Marketing strategy that involves offering several products for sale as one combined product Tying is the practice of making the sale of one good (the tying good to the De facto or De jure customer conditional on the purchase of a second distinctive Refusal to deal is one of several Anti-competitive practices forbidden in countries which have Free market economies In Competition law, a group boycott is a type of Secondary boycott in which two or more competitors in a Relevant market refuse to conduct business Exclusive dealing refers to when a retailer or wholesaler is ‘tied’ to purchase from a supplier on the understanding that no other distributor will be appointed or receive supplies Bid rigging is an illegal agreement between two or more competitors Dividing territories (also Market division) is an agreement by two companies to stay out of each other's way and reduce competition in the agreed-upon territories Conscious parallelism is a term used in Competition law to describe Price-fixing between competitors in an Oligopoly that occurs without an actual spoken Predatory pricing (also known as destroyer pricing) is the practice of a firm selling a product at very low price with the intent of driving competitors out of the Market In United States patent law, patent misuse is an Affirmative defense used in patent litigation when a Defendant has been accused to have Copyright misuse is an equitable defense against Copyright infringement in the United States based on the unreasonable conduct of United States antitrust law is the body of Laws that prohibits anti-competitive behavior (monopoly and Unfair business practices. The Sherman Antitrust Act ( Sherman Act, July 2, 1890, ch 647,) was the first United States Federal statute to limit Cartels and The Clayton Antitrust Act of 1914 ( October 15[[ 914]] ch 323, codified at,) was enacted in the United States to add further substance to the U The Robinson-Patman Act of 1936 (or Anti-Justice League Discrimination Act,) is a United States federal law that prohibits what were considered at the time of passage The Federal Trade Commission Act of 1914 (15 USC §§ 41-58 as amended) established the Federal Trade Commission (FTC a Bipartisan body of five members The Merger guidelines are a set of internal rules promulgated by the Antitrust Division of the United States Department of Justice (USDOJ in conjunction with the The essential facilities doctrine (sometimes also referred to as the essential facility doctrine) is a Legal doctrine which describes a particular type of claim of The Noerr-Pennington doctrine is a doctrine of United States Antitrust law set forth by the United States Supreme Court in a pair of cases which The rule of reason is a doctrine developed by the United States Supreme Court in its interpretation of the Sherman Antitrust Act. European Community competition law is one of the areas of authority of the European Union. Irish Competition Law is the Irish body of legal rules designed to ensure fairness and freedom in the Marketplace. The Competition Act 1998 is the current major source of competition policy in the UK along with Enterprise Act 2002. K. )

Australia
Enforcement authorities and organizations
edit box

In competition law the Relevant market defines the market in which one or more goods compete. The Trade Practices Act 1974 is an act of the Parliament of Australia. The International Competition Network is an informal virtual network that seeks to facilitate cooperation between Competition law authorities globally A competition regulator is a Government agency, typically a statutory authority, sometimes called an economic regulator, which regulates and enforces Therefore, the Relevant market defines whether two or more products can be considered substitute goods and whether they constitute a particular and separate market for competition analysis. In Economics, one kind of good (or service is said to be a substitute good for another kind insofar as the two kinds of goods can be consumed or used in place of Sao Paulo Stock Exchangejpg|thumb| Virtual market arena where buyer and seller are not present and trade via intemediates and electronical information

The relevant market combines the product market and the geographic market, defined as follows[1]:

  1. A relevant product market comprises all those products and/or services which are regarded as interchangeable or substitutable by the consumer by reason of the products' characteristics, their prices and their intended use;
  2. A relevant geographic market comprises the area in which the firms concerned are involved in the supply of products or services and in which the conditions of competition are sufficiently homogeneous.

Contents

Definition and use

The notion of relevant market is used in order to identify the products and undertakings which are directly competing in a business. Therefore, the relevant market is the market where the competition takes place. The enforcement of the provisions of Competition law would be not possible without referring to the market where competition takes place. The extent to which firms are able to increase their prices above normal competition levels depends on the possibility for consumers to buy substitute goods and the ability for other firms to supply those products. Consumers refers to individuals or households that use goods and services generated within the economy. In Economics, one kind of good (or service is said to be a substitute good for another kind insofar as the two kinds of goods can be consumed or used in place of Supply and demand is an Economic model describing effects on price and quantity in a Market. The fewer the substitute products and/or the more difficult it is for other firms to begin to supply those products, the less elastic the demand curve is and the more probable is to find higher prices. In Economics and business studies the price elasticity of demand (PED is a measure of the sensitivity of quantity demanded to changes in price Price in Economics and Business is the result of an exchange and from that trade we assign a numerical Monetary value to a good, For all these reasons it is necessary to define the relevant markets for the different cases which fall under the Law[2].

The Relevant market contains all those substitute products and regions which provide a significant competitive constraint on the products and regions of interest. An interesting guiding principle provided by Bishop and Darcey (1995) states that a relevant market is something worth monopolising, in the sense that the relevant market includes all the substitute products and therefore control of that market would allow the monopoliser to profitably increase the prices of the products to the monopoly level. This can only be possible if the products in this "market" are not subject to significant competitive constraints by products outside that market[3].

A relevant market comprises a product or group of products and the geographic area in which these products are produced and/or traded. Therefore, the relevant market has two components: the product market and the geographic market[4].

Product market

The relevant product market is determined according to three criteria:

  1. Demand-side substitution.
  2. Supply-side substitution.
  3. Potential competition.

Demand-side substitution

Demand-side substitution takes place when consumers switch from one product to another in response to a change in the relative prices of the products. If consumers are in a position to switch to available substitute products or to begin sourcing their requirements from suppliers located in other areas, then it is unlikely that price increases will be profitable. Therefore, it is necessary to progressively include in the Relevant market the products to which consumers would most likely switch in response to a relative price rise, repeating the exercise at each stage until a collection of products is reached that is worth monopolising.

When examining the likely responses of consumers, it is the response of the marginal consumer, not the average consumer which is important. Therefore, a small but significant number of consumers (generally 5 to 10 percent) switching to another product when there is a price increase is considered a sufficient condition for both goods to be defined as forming part of the same relevant market. Therefore, the existence of a group of consumers who would never switch in response to a relative price increase is not by itself sufficient to conclude that the relevant market should be defined narrowly.

Determining both the likely extent of demand-side substitution, and the level of substitution which would imply that monopolisation was not worthwhile, requires an assessment of the price-elasticity of demand. In Economics and business studies the price elasticity of demand (PED is a measure of the sensitivity of quantity demanded to changes in price This is generally done using the SSNIP-test[5]. In Competition law, before deciding whether companies have significant Market power which would justify government intervention the test of Small but Significant and Non-transitory

Supply-side substitution

Sometimes consumers may be unable to react to a price increase, nevertheless, producers may be able to do so by for example, increasing their supply to satisfy the demand of these consumers. If other producers respond to an increase in the relative price of the products supplied by the single supplier by switching production facilities to producing the monopolised collection of products, the increased level of supply may render any attempted price increase unprofitable. In this case, those producers with the ability for supply-side substitution should be included in the Relevant market[6].

Geographic market

The geographic market is an area in which the conditions of competition applying to the product concerned are the same for all traders[7]. The same factors used in delineating relevant product markets should be used to define the relevant geographic market.

The elements to be taken into consideration when defining the relevant geographic market include the nature and characteristics of the concerned products, the existence of entry barriers, consumer preferences, differences among the market shares of undertakings in the neighboring geographic areas, as well as significant differences between suppliers’ prices and transport costs level[8]. In Economics and especially in the theory of Competition, barriers to entry are obstacles in the path of a firm which wants to enter a given Market

An interesting aspect to which competition authorities look at are transport costs, given that high transport costs may explain why trade between two regions is economically infeasible[9].

See also

References

  1. ^ Definition provided by the European Commission[1]
  2. ^ Bishop and Walker (1999). The European Commission (formally the Commission of the European Communities) is the executive branch of the European Union.
  3. ^ Bishop and Walker (1999).
  4. ^ Guidelines on relevant market definition with a view to determining the significant market share. Taken from www. globalcompetitionforum. org [2].
  5. ^ Bishop and Walker (1999).
  6. ^ Bishop and Walker (1999).
  7. ^ Bellamy and Child (1993).
  8. ^ Guidelines on relevant market definition with a view to determining the significant market share. Taken from www. globalcompetitionforum. org [3].
  9. ^ Bishop and Walker (1999).

Bibliography

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