Supply-Side Factors Identify Market Participants, Not Markets: Global Antitrust Institute Comment on the EC's Draft Notice on Defining Relevant Markets for EU Competition Law

ABSTRACT:

The European Commission's recent draft Notice describes the use of supply-side substitution factors in defining relevant markets for the application of competition law. Expanding a defined market to include goods not substitutable on the demand side, based on the competitive strength of a broad swath of swing producers, would necessarily expand the set of relevant consumers to include groups who may have different purchasing options and vulnerability to harm. The Note states the EC will do so only if the consumer groups face a homogeneous competitive environment—a very restrictive condition. If this condition is not met, the EC will nonetheless take account of the competitive strength of swing producers in its competitive assessment, but according to principles left unstated. The procedure described in the Notice is problematic, or at best unclear. This comment by the Global Antitrust Institute recommends that the EC treat swing producers as participants in a relevant market if they can profitably swing production into the market quickly and without significant sunk costs, but that such supply-side factors should not be applied to the definition of a relevant market itself. Insofar as market definition (and identification of market participants) serves to "facilitate and structure" the EC's competitive assessment, ignoring swing producers as market participants would incorrectly evaluate their competitive strengths as zero, while at the same time falsely inflating the competitive strengths of the undertaking(s) and other current producers, with the potential of overstating the case for competitive harm.