2. FROM MARKET DEFINITION TO ASSESSING DOMINANCE 2.1. The Standard Approach

The overwhelming importance of the structure-conduct-performance paradigm for the development of competition policy was pointed out in chapter II. According to that paradigm, the structure of a market determines the outcome to be expected. In order to be able to assess the likely consequences of a merger, one thus needs procedures to identify the current structure of a market as well as to predict the structure most likely to emerge after a merger has taken place. Simply put, the decisionmaking process of competition authorities can be said to consist of two steps: (1) the first step consists of identifying the relevant market, i.e., of identifying that market whose structure is to be analysed; (2) the second step consists of predicting the structure of the market after a merger has taken place and evaluating the consequences of that structure for the performance to be expected. If a merger is expected to significantly impede effective competition, and, in particular, lead to the creation or strengthening of a dominant position, it will be prohibited.

We now turn to present the procedures used to carry out the first step, namely to delineate the relevant market. Before being able to calculate market shares or concentration ratios, one obviously needs an evaluation as to what products compete with each other, i.e., what products belong to the same relevant market and what products can be safely ignored, i.e., belong to a different market. The concrete delineation of the relevant market is crucial for assessing dominance: the broader the delineation, the lower the resulting market shares, and the lower the chance that a competition authority will judge a merger to create (or strengthen) a dominant position. Most textbooks mention that the relevant market consists of three dimensions, namely product, geography and time. Time, however, has seldom played a role in the delineation of the relevant market as carried out by competition authorities. In a world characterised by a very dynamic business environment, this could be a shortcoming. The issue will thus be taken up in section 2.3 below.