The International Handbook of Competition – Second Edition

The International Handbook of Competition – Second Edition

Elgar original reference

Edited by Manfred Neumann and Jürgen Weigand

The book aims to further our understanding of how economic reasoning and legal expertise complement each other in defining the fundamental issues and principles in competition policy. In specially commissioned chapters the book provides a scholarly review of economic theory, empirical evidence and standards of legal evaluation with respect to monopolization of markets, exploitation of market power and mergers, among other issues.

Chapter 7: Defining antitrust markets

Rachel Griffith and Lars Nesheim

Subjects: economics and finance, competition policy, industrial economics, law - academic, competition and antitrust law

Extract

The definition of markets has long been a central feature of antitrust investigations. The substantive decision in many cases stands or falls on the precise market definition selected. The recent literature has questioned whether the focus on market definition can sometimes detract from the real question at hand, which is whether a merger or firm behaviour harms consumers. Nonetheless, market definition continues to play an important role because the computation of market shares matters in antitrust cases 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 centred 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”; i.e. enjoys a large market share.

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