European Competition Law provides a wide-ranging review of the European rules relating to competition: restrictive agreements, abuse of a dominant position, impact of intellectual property rights, procedure, merger control, State aid.

European Competition Law

According to the Commission, a relevant product market “comprises all those products that customers regard as interchangeable  or substitutable to the product(s) of the undertaking(s) involved, based  on the products’ characteristics, their prices and their intended use,  taking into consideration the conditions of competition and the  structure of supply and demand on the market” . The degree of  …

Definition of market and elasticity of demand

According to the Commission, a relevant product market “comprises all those products that customers regard as interchangeable  or substitutable to the product(s) of the undertaking(s) involved, based  on the products’ characteristics, their prices and their intended use,  taking into consideration the conditions of competition and the  structure of supply and demand on the market” . The degree of interchangeability or substitutability is assessed in view of the characteristics of the products concerned (performances, price...) as viewed by users . The distribution of office supplies via the contract channel constitutes a separate market insofar as, from the demand-side, business customers express a strong preference to purchase office supplies through contracts and the inability and lack of incentives to switch to other channels .

This descriptive approach is sometimes supplemented by an econometric analysis. Among the existing methods, the EU authorities mainly resort to the quantitative test of cross-elasticity of demand , which consists in calculating the existing ratio between the price variation of a product and the sales of another . Where the price increase of a product results in raising the sales of another, these two goods are substitutable, and the degree of substitutability varies according to the rate of cross-elasticity. According to the Notice on the definition of relevant market, “the question to be answered is whether the parties' customers would switch to readily available substitutes [product market] or to suppliers located elsewhere [geographic market] in respect to a hypothetical small (in the range 5% to 10%) but permanent relative price increase in the products and areas being considered” (SSNIP - small but significant and non transitory increase in price - test) . According to that method, a market may be defined as the smallest set of products and territories for which an undertaking would find it profitable to impose a 5% to 10% price increase, should it be the only undertaking to offer these products .

Therefore, the products belong to different markets if, in case of price increase, a large majority of customers would stop consuming the product in question . Substitutability is further unlikely where the consumers' choice depends on criteria other than price. Therefore, magazines and daily newspapers fall within separate markets insofar as they deal with news according to specific methods and editorial lines and are viewed differently by readers who, in the case of a price increase for a magazine, would normally switch to another magazine rather than a daily newspaper . Likewise, the market for package holidays to long-haul and short-haul destinations must be separate insofar as a very limited convergence in price for the end consumer is not sufficient to regard them as effective substitutes given, in particular, the more exotic image of long-haul destinations . Moreover, the gradual nature of the increase in sales of a new product substituting for an existing product cannot, in itself, suffice to conclude that the existing product exercises a significant competitive constraint over the new one .

In its communication on market definition, the Commission states that when the undertakings concerned add relatively little value to the supply chain (because the raw materials or components purchased represent a high percentage of the total price), the SSNIP test can be applied to the value added rather than the selling price. While the Commission may rely on the principles of the SSNIP test in its assessment of the relevant market, it is not obliged to apply it empirically, as the SSNIP test serves, in most cases, only as a conceptual framework for interpreting the available evidence . Where undertakings are competing on parameters other than price, such as quality or level of innovation, the Commission considers it difficult to apply the SSNIP test, particularly in the context of zero-price products and highly innovative industries. In such cases, it prefers the SSNQD (Small but Significant and non Transitory Decrease of Quality) test, applicable as a conceptual framework for a qualitative assessment of demand substitution .

The Court of Justice has recently made it clear that the Commission is not bound by any test, in particular the SSNIP test, to determine the possible substitutability of the products concerned, and that it retains the right to choose, from among the evidence making it possible to assess the extent to which substitution may take place, those it deems most appropriate in each case .

Case T-296/18 Polskie Linie Lotnicze “LOT” S.A, Judgment of 20 October 2021, not available in English: if the examination of the markets for passenger air transport services defined by city pairs between a point of origin and a point of destination ("O & D" markets), which makes it possible to identify, among passenger transport services, those which the consumer considers to be interchangeable or substitutable, is justified when the undertakings concerned by a merger are airlines still in operation, it is not the case when one of them, given the cessation of its activities, has withdrawn from all the O & D markets in which it was present, so that its activities and those of the notifying party no longer overlap on any of these markets. See also Case T-240/18 Polskie Linie Lotnicze “LOT” S.A. Judgment of 20 October 2021, LawLex202500006725JBJ.

Case T-342/99 Airtours v Commission [2002] ECR II-2585, LawLex200500004265JBJ: The Commission assesses the substitutability from the point of view of the overall demand and not in view of the behavior of “customers at the margin”.

Case T-321/05 AstraZeneca v Commission, LawLex201000001311JBJ, abuse of dominance.

Commission Notice No C/2024/1645 of 8 February 2024, pt 31.

Commission Notice No C/2024/1645 of 8 February 2024, pt 30.

Case C-581/22 P Thyssenkrupp AG, Judgment of 4 October 2024, LawLex202400007566JBJ, stating that since the definition of the relevant market does not require the Commission to follow a rigid hierarchical order of the various sources of information or types of evidence, but only to make an overall assessment, it cannot be obliged to apply the SSNIP test ("Small but Significant Non-transitory Increase in Prices") to assess supply-side substitutability on the relevant markets.

Commission Decision M.7555 of 10 February 2016, Staples/Office Depot, LawLex201700000650JBJ. According to this decision, international contracts of office supplies constitute a separate product market from non-international contracts of office supplies considering the trend for certain customers to move toward international contracts, the advantages to customers provided by international contracts and the customers' potential and actual switching behavior. 

By definition, the test cannot be carried out where the reviewed market is an emerging market: Commission Decision JV.37 of 21 March 2000, B Sky B/Kirch Pay TV, LawLex200800000564JBJ.

Commission Decision M.1065 of 16 February 1998, Nestlé/San Pellegrino, LawLex200400003180JBJ: the bottled water market is in itself a relevant market due to the reactivity of demand when prices are increased; M.3796 of 19 July 2006, Omya/Huber PCC, LawLex200700001721JBJ: the various qualities of milled calcium carbonate are considered to be interchangeable from a customer's perspective even if they have different physical characteristics where in case of small 5% to 10% price increase, demand switches from a product to another.

See Commission Notice No C/2024/1645 of 8 February 2024, at pt 29 et seq.; Case T-370/17 KPN BV, Judgment of 23 May 2019, LawLex201900000687JBJ: for products to be considered demand-side substitutes it is not necessary that they be offered at the same price, as the only decisive factor is the likely responses of consumers following a relative price increase.

Commission Decision M.1806 of 26 July 2000, AstraZeneca/Novartis, LawLex200500004487JBJ. If the SSNIP is profitable, this means that the demand is not elastic and that a separate market has been identified. Otherwise, the market needs to be expanded by adding other products and/or geographic areas. Generally, a cross-elasticity rate between 0 and 1 means that the products in question are not substitutable between them, See Commission Decision M.2187 of 9 October 2001, CVC/Lenzing, LawLex200400002653JBJ.

Commission Decision M.4842 of 31 October 2007, Danone/Numico, LawLex200800000303JBJ: even in case of 5% to 10% increase in the price of toddler milk, it is rather unlikely that users of that milk would switch to cow milk where there is already a 100% difference between the prices of those products, which shows that consumers of toddler milk are not price sensitive; M.2187 of 9 October 2001, CVC/Lenzing, LawLex200400002653JBJ: viscose staple fiber markets must be separate from the other fiber markets insofar as customers cannot replace them even in the case of significant and permanent price increase.

Commission Decision M.3420 of 16 June 2004, GIMD/Socpresse (not avaiblable in English).

Commission Decision M.1524 of 22 September 1999, Airtours/First Choice, LawLex200400002633JBJ.

European Competition Law

325. Definition of market and elasticity of demand

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325. Definition of market and elasticity of demand

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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