The International Handbook of Competition

The International Handbook of Competition

Elgar original reference

Edited by Manfred Neumann and Jürgen Weigand

This indispensable Handbook examines both economic and legal aspects of competition policy and industrial organization. It provides a scholarly review of the state of the art regarding economic theory, empirical evidence and standards of legal evaluation. The book aims primarily at furthering our understanding of the interplay between economic reasoning and legal expertise by concentrating on the fundamental issues and principles underlying competition policy.

Chapter 8: Identifying Antitrust Markets

Paul Geroski and Rachel Griffith

Subjects: economics and finance, competition policy, industrial organisation

Extract

Paul Geroski and Rachel Griffith* 1 Why define markets? The identification of markets is a standard feature of antitrust investigations, and the substantive decision in many cases stands or falls on the precise market definition selected. Market identification is important because the computation of market shares matters in antitrust cases, and this is so for at least two reasons. First, market shares are often used to help establish jurisdiction or, more generally, to sort out priorities for antitrust agencies. Merger regulations usually specify a threshold level of market share which triggers an investigation for mergers above a given size; investigations into various monopolistic abuses are usually centered on the leading firms in a market and, in most cases, the ability of an antitrust agency to initiate an investigation, or impose penalties at the end of it, depends on whether the (alleged) offending firm enjoys a position of market ‘dominance’; that is enjoys a large market share. Second, market shares are sometimes used as an observable measure of market power, meaning that the fact of finding high market shares is sometimes taken to be tantamount to uncovering the existence of market power. Since, in practice, the important step in computing market shares is ascertaining the boundaries of the market, this practice tends to make the determination of market boundaries the substantively important decision in any attempt to identify pockets of market power. The use of market shares to establish jurisdiction is a well established procedure. It...

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