Fair Trade Law Q&A - Market Definition and Market Share Calculation

A1:

The term "relevant market" used in the Article 5 of the Law means a geographic area or a coverage wherein enterprises compete in respect of particular goods or services." The term "market" stated in the Fair Trade Law by no means refers only to an aggregation of products or services with similar characteristics. On the contrary, it refers to the range created by the competition among businesses offering products or services and the sources of limitation resulted from such competition include demand substitution and supply substitution. Therefore, these two aspects are usually inspected in market definition. However, the focus is on demand substitution whereas supply substitution is taken into account depending on the characteristics of the product or service. The term "compete" in this provision refers to acts by which enterprises vie for trading opportunities in the market through relatively favorable conditions of price, quantity, quality, service, and so forth. Viewed from this perspective, the definition of a market should include the entire extent of a geographic area or coverage that is reachable through competition, including the full special and temporal scope of all relevant markets and potential trading areas of all potential suppliers and demanders of the goods and services concerned. Given the rapid transportation facilities and ease of goods distribution in Chinese Taipei, the area as a whole is typically considered a single market in itself. Service industries tend to be more local by their nature and therefore their market scope must be considered in light of actual circumstances.

In defining the temporal duration of a market, consideration is given to using annual data rather than quarterly data, to rule out the effects of temporary fluctuations.

In economic theory, determination of relevant markets is often based on an evaluation of the cross elasticity of a particular product, including the elasticities of demand and supply of the product. However, since there is no definite standard of reasonable elasticity, and since elasticity often varies with price fluctuations, seasonal changes, and regional differences, in practice it is necessary to take objective facts into account and to examine industry-specific statistical data and solicit input from experts and scholars in determining the elasticity.

Relevant article(s) of law: Fair Trade Law, Article 5

A2:

Market share refers to the percentage of the total amount of goods sold or services provided in a particular market accounted for by a certain enterprise. To perform market share measurement, the relevant market has to be defined first to confirm the suppliers in the relevant market, decide a certain period of time (normally one year) and adopt the appropriate metric (such as amount, production, productivity, inventory, etc.) to figure out the scale of business of suppliers or the market. In the end, the ratio of the sales or value of sales (exports excluded) of each supplier during the certain period of time in the relevant market to the total sales of all the suppliers in the relevant market is calculated. The outcome is the market share or percentage of the market. In other words, market share may be determined by calculating an enterprise's sales volume, monetary sales value, and other similar variables (exports shall be excluded from the calculation) as a percentage of the total sales volume and so forth, of all suppliers in a particular market.The following factors, at least, must be considered in calculating the market share occupied by a particular enterprise:

1. Scope of the relevant market: determination of closely substitutable goods and services and of the geographic area and the duration of the market.
2. International trade factors: export and import data.
3. Market share measurement variables: in addition to sales volume and monetary sales value, other variables that may be taken into account for supplementary reference in determining market share include production volume, production value, production capacity, number of employees, operating revenue, and capitalization.

Relevant article(s) of law: Enforcement Rules of Fair Trade Law, Article 4

A3:

Market share"refers to the percentage of the total amount of goods sold or services provided in a particular market accounted for by a certain enterprise. Market share may be determined by calculating an enterprise's sales volume, monetary sales value, and other similar variables (exports shall be excluded from the calculation) as a percentage of the total sales volume and so forth, of all suppliers in a particular market. The sales volume mention above can be divided into two parts-domestic and imported. Therefore, import should be included when calculating market share. According to Article 4(1) of the Enforcement Rules of Fair Trade Law of 2015,"Production, sales, inventory, and import/export value (volume) data for the enterprise and the relevant market shall be taken into account when calculating the market share of an enterprise."

Relevant article(s) of law: Enforcement Rules of Fair Trade Law, Article 4