Emmanuel Combe published on September 23, 2021 a column in L’Opinion on the relevant market.
Mergers and acquisitions: did you say “relevant market”?
A relevant market is defined by starting from the substitutability of demand: all products that are substitutable for customers belong to the same market. The question is how consumers will react if one of the merging firms raises its prices after the merger: will they remain loyal to the merging firms or will they go elsewhere? If consumers shift their consumption elsewhere, then the market includes products other than those of the merging firms.
Defining a relevant market is always a difficult exercise and appearances can sometimes be misleading. For example, two products that are quite similar in their functionalities do not necessarily belong to the same relevant markets if they do not have the same uses: for example, a luxury car is not on the same market as a utility car. The broad notion of “car market” does not make much sense from a competitive point of view: a customer does not choose between buying a Porsche or a Kangoo. It is therefore necessary to delimit as many relevant markets as there are specific needs to be satisfied in the automobile sector. Symmetrically, two physically different products may nevertheless belong to the same relevant market: for example, a high-speed train is different from an airplane; however, over a distance such as Paris/London, it is likely that the train and the airplane are on the same market: they are fairly substitutable because they satisfy the same need, that of moving quickly between two capitals, for a fairly equivalent total travel time.