COMPETITION • EUROPEAN LAW • RESTRICTIVE AGREEMENTS
According to the Commission the geographic market “comprises the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighboring areas because the conditions of competition are appreciably different in those areas”. To define the relevant geographic market, the European authorities rely on various objective criteria.
The geographic market must be limited to the zone that presents homogeneous and similar conditions of competition, particularly with respect to demand, pricing provisions and the cost of transporting products. Thus, the geographic market for cement is limited to a radius of 100 to 200 km around the production plant. Similarly, the difference in marketing dates from one Member State to another makes it possible to identify a national market for collectibles. However, a division may be made within a homogeneous area if the practice in question has an effect on a smaller territory. The markets for the marketing of passenger cars or for the carrying out of construction works are thus limited to the Member State concerned. The specificity and homogeneity of the product in the various countries of the EEA, which only a few suppliers are capable of distributing in large quantities and at short notice for the whole of that territory, confers a European character on the market for yarn for the automotive industry.
The boundaries of a geographic market are sometimes directly related to the nature of the product or service. The existence of a single worldwide standard for each type of product can make it possible to identify a global market. Conversely, differences in standard and optional equipment are likely to limit the geographic market to the national territory.
The level of the transportation costs in relation to the price of the product is generally a key factor in determining the market. Low transport costs may give a market a worldwide dimension, whereas the large share of transport costs in the price as is the case of industrial crystallized sugar in Great Britain or of cement, leads to the definition of a national or regional market.
The size of the market may vary under the impact of regulatory barriers. For example, administrative or supply policies that set drug prices or impose quotas on the sugar market give the markets concerned a national dimension.
Generally, the market retained will be either national or European in scope. For example, the additional transportation costs generated to cross the English Channel, the standard mark-up required to cover the cost of shipping to Northern Ireland, and the lack of refining and production facilities in this region limit the geographic market for industrial and retail white crystallized sugar to the United Kingdom. The Notice of 9 December 1997 concerning the definition of the relevant market for the purposes of European competition law does not identify a minimum area below which a territory cannot constitute a relevant geographic market. A narrower delineation than the national market is therefore possible, in particular because regulatory and budgetary powers are exercised at the local level in most Member States. More rarely, the competition authorities have opted for a market with a global dimension. This is the case for seamless steel drill pipes because of the low transport costs in relation to price, the existence of a single global standard for each type of product and the importance of trade between Europe and the rest of the world.
