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Division 3 Section 3 — The relevant market

United Kingdom

Original text. Later amendments are not shown.

A relevant product market comprises all those products and/or services which are regarded as interchangeable or substitutable by the consumer, by reason of their characteristics, their prices and their intended usef1.

The following factors are normally considered to be relevant to the determination of the relevant product market and should be taken into account in the analysisf2:

  • the own- and cross-price elasticities of demand of the relevant products and/or services,

  • any differences in the end use to which the products are put,

  • differences in price between two products,

  • the cost of switching from one product to another, in the case of two potentially competing products,

  • established or entrenched consumer preferences for one type or category of product,

  • product classifications (classifications maintained by trade associations, etc.).

The relevant geographical market comprises the area in which the entities concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because, in particular, conditions of competition are appreciably different in those areasf3.

Factors relevant to the assessment of the relevant geographical market includef4:

  • the nature and characteristics of the products or services concerned,

  • the existence of barriers to entry,

  • consumer preferences,

  • appreciable differences in market shares or substantial price differences between neighbouring areas,

  • transport costs.

  1. 3.1Division 3.1
  2. 3.2Division 3.2

Annotations

Footnotes

f1

Where appropriate, specify also if the products are readily substitutable; perfect substitutes; less perfect substitutes or partial substitutes.

For any given product (for the purposes of this definition, the term ‘product’ refers to products or services) there is a variety of substitutes. This variety includes all the substitutes which could be envisaged for the product in question, that is to say, all the products which, to a greater or lesser extent, will fulfil the consumer's requirements. The range of substitutes extends from very exact (or perfect) substitutes (products to which consumers would turn immediately, for example, in the event of a very small increase in the price of the product in question) to very inexact (or imperfect) substitutes (products to which consumers would turn only in the event of a very sharp increase in the price of the product in question).

When it defines the relevant market, the Commission considers only products which can be readily substituted for the products in question. Readily substitutable products are those to which consumers would turn in response to a modest but significant increase in the price of the relevant product (e.g. 5 %). This permits the Commission to assess the competitive situation in the context of a relevant market comprising all the products to which consumers of the products in question would readily turn.

However, this does not mean that the Commission fails to take account of the constraints on the competitive behaviour of the entities concerned resulting from the existence of imperfect substitutes [those to which a consumer would not turn in response to a modest but significant increase in the price of the relevant product (e.g. 5 %). These effects are taken into account once the market has been defined and market share quantified.

It is consequently important for the Commission to have information on both products which can be readily substituted for the products in question and less perfect substitutes. [Example of perfect demand-side substitute: electricity produced from coal and that produced from renewable sources].

Partial substitutes are regarded as those products and services which can replace each other only within a certain geographical area, only during part of the year or only for certain uses [Example: in passenger transport, rail, underground, tram and bus would be only partially interchangeable at national level since these forms of transport coexist only within a given geographical area. However, within this area, they could be considered as perfect substitutes.]

f2

This list is not exhaustive: the applicant may refer to other factors.

f3

See the second subparagraph of Article 34(2) of Directive 2014/25/EU.

f4

This list is not exhaustive: the applicant may refer to other factors.