Page 59 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE

important in establishing market power and, therefore, anticompetitive

effects of some business practices.
In most abuse cases definition of the relevant market is likely to be

based on functional characteristics of the product and on consumer behavior.

These may include physical characteristics of the product, uses to which the
product is suited, and evidence about buyers’ willingness to switch from one

product to another as relative prices change. Other factors, such as switching
costs and parallel price movements that indicate substitutability, also may be

relevant. Similarly, defining the relevant geographic market is likely to be
based on factors, such as transportation costs and perishability, that limit the

ease with which products can be moved over long distances.

Markets in antitrust (especially merger) cases are sometimes defined
using the “prospective price increase” or the “hypothetical monopolist”

approach. This asks whether consumers, faced with a price increase, could

easily switch to an alternative product or another supplier. If the answer is yes,
then the alternative product and source of supply is included in the relevant

market for the case.
The underlying principle - the focus on consumer responses to price

increases-can also be useful in defining markets in abuse of dominance cases.
The application of these principles, however, is different. That is, abuse or

monopoly cases typically relate to a lessening of competition that has already

occurred rather than what may occur as a result of a proposed merger. In abuse
cases it is likely that prices will already have been raised above competitive

levels. And any further increase will probably result in massive substitution by
consumers. Such evidence of substitutability is, however, entirely consistent

with the exercise of market power in a properly defined market in an abuse of
dominance case. Of course, at the investigation stage it is not certain that an

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