Methods of Determining Market Definition and Market Power

Abstract:

This report combines theoretical models with examination of actual cases to provide practical principles for determining market delineation and market power:

1. It is necessary to adopt differing methods of determining market delineation and market power when dealing variously with monopoly, combination, concerted action and various forms of vertical restraint of competition.

2. Dispositions regarding monopolistic acts use theories of relevant product markets, regional markets, time factors, and standard determinations of market power for analysis and judgments on market shares, the ability to exclude competition and the ability to maintain price and profits. The “Special Report on Definition of Market Scope and Calculation of Market Shares” from the Fourth Commission Meeting serves as an important reference in this regard.

3. Dispositions regarding acts of combination are centered on the question of market definition. When necessary, assessments are made of the interchangeability of products (or services), the length of business hours, the local commercial environment, the cost of consumer substitutions, and similarities in marketing approaches and operational characteristics.

4. Dispositions regarding concerted action are more concerned with whether the action is anti-competitive in nature rather than with the fine points of theory laid out in Chapter 2 of the Fair Trade Law, that is, the actual effect of the behaviors on the market and determinations of market power and market definition.

5. In terms of market delineation, dispositions regarding actions that limit vertical competition will take into account, in addition to usual standards, the nature of after-sales service markets and distribution markets. In determining market power, the theory of dependence is used to determine whether the respondent has relative market power in the relevant market for the action concerned.

6. Determinations are also made from sources of information including relevant and significant statistical data, the views of interested industry members, and surveys. Thus establishing industry databases, maintaining channels of communication, professional questionnaire design, and creating models for statistical treatment of data are important tasks.

7. Because there have always been limitations in the gathering of case-related data, the focus in individual cases is on choosing the method of data gathering that will yield the most persuasive data in the most cost-efficient manner. Over the long run, there is a need for those in industry and for legal or accounting specialists to acquire greater familiarity with both the conceptual and practical aspects of the law in order to assist in the presentation of market data, and to implement the Fair Trade Law in a manner conducive to both competition and cooperation.

Written by

Chen Hui-ping, Hu Ming-hua, Sun Chi-chun (Legal Department)