According to the EU regulatory framework applicable to electronic communications, which follows EU competition law, relevant markets are defined through the intersection of two dimensions: the product market and geographic market.
The objective of the process of defining the product market is to identify all those products or services which are sufficiently interchangeable or substitutable, in terms of their objective characteristics, by virtue of which they are particularly suitable for satisfying the constant needs of consumers, their prices or their intended use 1.
The exercise of defining the relevant product or service market should begin by grouping together products or services that are used by consumers for the same purposes or end use 2, i.e., according to demand.
These products and services will form part of the same relevant market if the behaviour of producers or suppliers of services involved are subject to the same kind of competitive constraints on the supply side, particularly in terms of pricing.
In this context, two main types of competitive constraints are identified (i) demand-side; and (ii) supply-side substitution 3.
These competitive constraints may, in isolation or in conjunction, constitute a basis for defining a particular product market.
In theoretical terms, the degree of substitutability or complementarity between two products can be estimated through the cross-elasticity of demand. However, in practice, such analysis is complex and the available data is scarce, and as such one of the forms used to determine the existence of substitutability (of demand and supply) is the application of the "hypothetical monopolist test" (SSNIP test - Small but significant non-transitory increase in price) 4.
The relevant geographic market comprises an area in which the undertakings concerned are involved in the supply and demand of the relevant products or services, in which area the conditions of competition are similar or sufficiently homogeneous in relation to neighbouring areas 5.
The process of defining the limits of the geographic market uses the same methodology as that used in the definition of the product market, particularly through the use of the hypothetical monopolist test, which enables identification of competitive constraints with respect to substitutability on the demand side and on the supply side.
1 See Guidelines, § 44.
2 See Guidelines, § 44.
3 See Guidelines, § 38. There is also a third source of competitive constraint on the operator's behaviour which is potential competition - this possibility will be considered where relevant.
4 See Guidelines §40-43.
5 See Guidelines § 56.
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