French Competition Law provides a comprehensive review of the French rules relating to competition: restrictive agreements, commercial negotiation, abuses of a dominant position, procedure and merger control.

French Competition Law

Market definition is mostly based on observing the behavior of the demand side . When defining the market the supervisory authorities sometimes resort to econometric methods in particular the SSNIP (Small but Significant Non-transitory Increase of Price) test, which consists in assessing to what extent customers of an undertaking would turn to substitute products in case of a slight but long-lasti …

Definition of market and elasticity of demand

In the context of merger control, the definition of the market is to a certain degree specific, as a prospective non-retroactive analysis is used. Furthermore, the dimension of the market can remain undefined where, even on the basis of the narrowest interpretation, the operation is not likely to produce anticompetitive effects e.g. when the market share of the new post-merger entity is very small both on a general market and on a segmented market, whether national or European , or where there are no overlaps of activity between the parties or vertical links . 

On the relativity of the market definition see Competition Authority decision No 13-DCC-28 of 4 March 2013, LawLex201300000744JBJ.

See Minister of the Economy, letter of 9 August 2002, LawLex200300000707JBJ.

Market relativity

Market definition is mostly based on observing the behavior of the demand side . When defining the market the supervisory authorities sometimes resort to econometric methods in particular the SSNIP (Small but Significant Non-transitory Increase of Price) test, which consists in assessing to what extent customers of an undertaking would turn to substitute products in case of a slight but long-lasting price increase (5-10%) of its products . If the substitution behavior causes enough of a drop in sales that the benefit of the price increase is cancelled out, the products and geographical territories involved are included in the delimitation of the relevant market . This operation is renewed until the price increase on the undertaking's products becomes profitable . 

Minister of the Economy, letter of 24 November 2001, LawLex200200002121JBJ; Competition Council opinion No 98-A-09 of 9 July 1998, LawLex200200001963JBJ; see Competition Authority decision No19-DCC-65 of 14 April 2019, LawLex201900000638JBJ, on the retail market for toys now including online sales and in-store sales based on SSNIP test results; No 19-DCC-112 of 13 June 2019, LawLex201900001062JBJ, remembering that copper plumbing tubes are distinguished from plumbing tubes made up of other materials, in particular plastic and compounds, even if the latter exert a certain competitive pressure - which varies according to their use and the country concerned within of the European Union - which is however not strong enough today to offset possible increases in the price of copper tubes; No 19-DCC-113 of 13 June 2019, LawLex201900001058JBJ: the collection of contaminated soil must be distinguished from the collection of other types of waste, since in the event of a slight but permanent increase in the prices of the service for collecting contaminated soil, the applicants could not turn to other services than those offered by polluted soil collectors, since only the latter are able to allow producers and owners of contimated land to dispose of their soil.

Minister of the Economy, letter of 11 February 2004, LawLex200400001505JBJ. See Competition Authority decision No 19-DCC-65 of 14 April 2019, LawLex201900000638JBJ, on the toy retail distribution market which now includes online sales and in-store sales given the results of the SSNIP test.

This method may however lead to assessment errors if the hypothetical monopolist is a real one that charges prices above a competitive level, because it leads to products being included in the market that shouldn't be (the "Cellophane fallacy" phenomenon, from the name of the famous American case in which this type of error was first criticized).

An evaluation of substitution on the demand side is sometimes completed by one of substitution on the supply side, especially where product lines are undistinguished . In order for two products to be considered substitutable, their supply conditions must be equivalent and the transfer of clients from one to the other must be possible . Sales of online and in-store toys now belong to the same market insofar as, from the supply side, traditional retailers have adapted their internal pricing and sales strategy by developing their own sites for online sales, going from a “multichannel” approach where online sales were complementary to in-store sales, to an “omnichannel” approach bringing together the two distribution channels to form one in the eyes of the consumer, and, as operators specialized in online sales have at the same time improved the services offered to customers to match the criteria for sale in-store sales . There is also a single market for the collecting of oilseeds, protein crops and cereals, insofar as silos can stock all types of seeds, even though some products require specific infrastructures that in fact the majority of collection undertakings already possess . Similarly, despite different uses, yeasts and flavored sugars belong to the baking aids market since their packaging is similar, operators active in the manufacture of yeasts are also in that of flavored sugars and all the products are sold to the same clients who display them on the same shelves in-store . On the other hand, any substitutability from the supply side, between bakery aids and cake/dessert mixes may be excluded since the former are not produced on the same production lines as the latter at the preparation level or at  the packaging stage . Similarly, the online classified real estate ads market does not include seasonal rentals that require know-how regarding the management of availability and features or services to enhance users' confidence (reservations, online payment with secured deposits, verified add and advertisers) and typically involves specific advertisers and specialist portals .

Minister of the Economy, letter of 5 May 1995, LawLex200300001989JBJ; 28 October 1999, LawLex200200001950JBJ; Competition Council opinion No 94-A-16 of 10 May 1994, LawLex200200002036JBJ.

 See e.g. Minister of the Economy, letter of 22 March 1996, LawLex200200002047JBJ, finding no potential alternative solutions in the medium term taking into account the time necessary for the design and testing before the industrial manufacture of the product in question; 17 May 2002, LawLex200300002078JBJ, Distinguishing between dry pasta, couscous and rice from the supply side because of differences in raw materials and units of manufacture of the products; Competition Authority decision No 09-DCC-42 of 16 September 2009, LawLex200900003228JBJ, no substitutability for live poultry due to differences in the chains of slaughter from one species to another; No 19-DCC-113 of 13 June 2019, LawLex201900001058JBJ, finding that the disposal of polluted soil must be distinguished from the collection of other types of waste, since, from the point of view of supply, it requires specific material, technical and human resources and is subject to certain authorizations, in particular the authorization to transport dangerous or non-dangerous products and the authorization of collector's sites under the regulations for Classified Facilities for the Protection of the Environment [ICPE].

See Competition Authority decision No 19-DCC-65 of 14 April 2019, LawLex201900000638JBJ.

Competition Authority decision No 12-DCC-49 of 12 April 2012, LawLex201200000819JBJ.

Competition Authority decision No 19-DCC-15 of 20 January 2019, LawLex201900000290JBJ.

Competition Authority decision No 18-DCC-18 of 1 February 2018, LawLex201800000450JBJ.

Definition of market and elasticity of supply

Own-consumption, which is where an undertaking produces a good or provides a service necessary to its activity, is not part of the supply on a market . Self-assistance does not belong to the free market as there is no meeting of supply and demand with an agreement concluded and payment of a price . It is not however excluded from the assessment of the new entity's market power . The competition authorities first take into account the market shares related to the goods and services actually exchanged on a market, which are available for customers and then integrate into the calculation of the shares, self-produced goods which, on downstream markets, compete with the other goods and services offered . In respect of the high volume of goods for own-consumption produced by some undertakings, the control authorities have adopted a method of assessment based on the theoretical production capacity of producers in order to better ascertain their actual impact on the market and thus assess their market share .

Competition Council opinion No 00-A-17 of 4 July 2000, LawLex200200002100JBJ, for sale and rental services; Also see decision No 94-A-16 of 10 May 1994, LawLex200200002036JBJ.

Competition Council opinion No 05-A-13 of 24 June 2005, LawLex200600000723JBJ.

Competition Council opinion No 06-A-13 of 13 July 2006, LawLex200600001864JBJ, considering that in the context of vertical mergers, own-consumption must be taken into consideration.

Competition Council opinion No 08-A-08 of 14 May 2008, LawLex200800001133JBJ.

Minister of the Economy, letter of 14 May, LawLex200800001144JBJ.

Definition of market and own-consumption

The general principles governing the definition of the relevant market are applicable to the rules on merger control.

In its guidelines, the Competition Authority emphasizes that the two-sided character of certain markets should be taken into consideration either for the definition of the market or when analyzing the effect of the operation concerned and efficiencies . The review of a two-sided market can be carried out by defining a single market with its two inseparable sides or by analyzing the two separate sides as two connected markets. A two-sided market, which brings together two sets of agents with potential gains to interact with each other, exists when a platform, or an intermediary, enables or facilitates transactions by reducing their costs, and this activity generates cross-network effects (or indirect externalities), where the benefit or utility that an agent in one set derives from the other depends on the number of agents in the other group . At the market definition stage, the concept of the two-sided market justifies taking into account in the media sector interactions with the advertising market. In effect, without a readership a commercial advertising market would not exist and with the small ads there would be no readership . This is also the case for the mobile telephony market where there are interactions between, on the one hand, call termination rates and the intensity of competition on subsidies for devices and on the other hand, the cost of mobile subscriptions and the cost of calls .

Competition Authority decision No 18-DCC-18 of 1 February 2018, LawLex201800000450JBJ: the online real estate classified ad market thus comprises an upstream side, which connects advertisers and portals, and a downstream side, which connects portals and internet users, with the two sides of the market producing cross-network effects since the number of classified ads can increase the audience of a portal, and, in return, a portal with a large audience can attract a higher number of ads.

Competition Council decision No 03-A-03 of 20 March 2003, LawLex200300003570JBJ.

Competition Council opinion No 07-A-05 of 19 July 2007, LawLex200700000017JBA.

French Competition Law

548. Definition of market and elasticity of demand

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548. Definition of market and elasticity of demand

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