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The role of market definition in a globalised economy

Have competition authorities kept up with globalisation? Geographic market definition is one of the most pressing issues.


Giulio Federico

Head of Unit – Mergers, DG COMP – Chief Economist Team, European Commission,


Please see below for video recording and event materials.

Amelia Fletcher and Bruce Lyons present recent work on Geographic Market Definition (GMD) in EC Merger Control. They did 10 case studies to assess whether the European Commission uses the right methodology in its geographical market definition, in particular whether a wider supply-side analysis should be used, and whether the Commission appropriately incorporates the constraints from outside the geographic market in the competitive analysis. The last question stems from the concern of being too narrow, given globalization.

Market definition is key when determining market shares, which is the most powerful statistic in merger analysis as it is considered an indication of whether a firm has market power. The authors find that the Commission’s GMDs are generally well-evidenced, with some repetition between the market definition and competitive assessment sections. However, the Commission should clarify that GMD is not an end in itself, that it is useful for assessing competition but should not unduly affect outcomes; what really matters is the competitive assessment. Moreover, the Commission should be clear that it will not use supply side substitution (including by imports) for GMD. The analysis of supply side arguments should be clarified and developed in the competitive assessment. While GMD is done quite well it would benefit from more clarity in its purpose.

One of the main findings of a similar 2009 study, by prof. Roeller for the European Roundtable of Industrialists, was that supply side substitution and potential entry are hardly applied in the market definition, even though the guidelines open at least some room for that compared to those in the US. This may have caused problems in industries with rather strong supply side substitution but downstream national markets when serving customers.

When it comes to local competition, a lot of expertise is with national competition authorities and the EC could benefit from that. In cases with price discrimination one may want to center the assessment on where the consumers are, rather than the merging parties’ location. This is also what the EC has done particularly in industrial cases where the customers buy inputs. There is still much to learn on how to use geography and distance, how to cluster around customers and how to deal with heterogeneity in member states.

One of the takeaways from the report is that we need more clarity regarding the relationship between GMD, supply side substitutability and competitive assessment as well as what should be mentioned where. Moreover, it is difficult to determine how to incorporate competitive constraints from outside the market in the analysis. In past cases, the EC has used historical data to incorporate swing-capacity and imports in the analysis.

An example of a case in which GMD played a decisive role is the T-Mobile ATT merger which was blocked 5 years ago.

Perhaps an underestimated aspect of GMD is its dynamic aspect. A national market today may be different in the near future, for which industrialists may already be competing. There is a notion in the GMD Guidelines to take into account EU Market integration when defining markets, which may call for the Commission to take a more forward-looking perspective. Moreover, companies like Google and Amazon consider each other to be their core competitors. It would be good to somehow find a balance between taking into consideration this dimension of competition and the current more narrow definition that is needed to protect consumers.

Due to internet competition we will probably get used to cases with the higher market shares that get cleared, which will help the presumption among non-economists that higher market shares are a bad thing.

Event summary by Nuria Boot, Research Assistant

Video recording



Presentation | Amelia Fletcher and Bruce Lyons

Geographic Market Definition in European Commission Merger Control  | Report by Amelia Fletcher and Bruce Lyons