COMPETITION • FRENCH LAW • MERGERS
According to the French Merger Guidelines, a relevant market is a market “defined in both product and geographic terms, on which the notified transaction has a direct or indirect impact”. In the context of merger control, the definition of the market has a certain degree of specificity because the analysis is prospective and not retroactive. Moreover, the market dimension may remain undefined when, even on the basis of the narrowest definition, the transaction is not likely to produce anticompetitive effects, for example when the post-merger market share of the new entity is very low in both a general and a segmented market, whether national or European, or when there are no overlaps or vertical links between the parties.
Most commonly, the market definition is based on the observation of applicants’ behavior. To define the market, the supervisory authorities also sometimes use econometric methods, in particular the hypothetical monopolist test (SSNIP test: “Small but Significant Non-transitory Increase of Price”) which consists in verifying the extent to which the customers of this monopolist would turn to substitute products in the event of a slight (5 to 10%) but permanent increase in the prices of its products. If the substitution leads to a decline in sales sufficient to deprive the price increase of its interest, the products and territories concerned are integrated into the relevant market. The operation is renewed until the increase in the prices of the monopolized products becomes profitable.
The assessment of the degree of substitutability of demand is not exclusive, but is sometimes supplemented by that of the supply, particularly in the case of undifferentiated product lines. For two products or services to be substitutable, the conditions of their supply must be equivalent and it must be possible for customers to switch from one to the other. Thus, there is a single market for the collection of oilseeds, protein crops and grains, since grain silos can store all types of grain indiscriminately, even though some products require specific infrastructures that most collector undertakings already have.
Self-consumption which is the production of a good or a service necessary for an undertaking’s own business activity does not form part of the supply on a market. Thus, self-handling does not form part of the free market because it does not involve the meeting of supply and demand, with the signing of an agreement and the payment of a price. It is not, however, excluded from the assessment of the market power of the new entity. The Competition Authority takes into account, firstly, the market shares related to the goods and services actually traded on a market, which are available to customers, and, secondly, integrates in the calculation of the shares, the self-produced goods which, on the downstream markets, compete with the goods and services offered. In view of the volume of self-produced goods consumed by certain undertakings in some cases, the supervisory authorities have adopted a method of assessment based on the theoretical production capacities of producers in order to take better account of their real significance on the market and thus assess their market share.
