2.4.2. The Relevant Geographic Market

The next important step in delineating the relevant market is to take the geographic dimension into account. Factually, the different dimensions are ascertained sequentially: first the product and then the geographic dimensions. The EU is no exception here. This is why we now turn to the geographic dimension. The general concept was already described in section 2.1 above. In a summary fashion the geographic market can be described as that area in which “the conditions of competition applying to the product concerned are the same for all traders” (Bellamy/Child 1993, 614). In the current practice of the Commission, the delineation of relevant geographic markets is dominated by four factors:

(1) Regional differences
In delineating the relevant geographic market, the European Commission often cites regional differences as a basis for a narrow delineation. Differences in national procurement, the existence of cross-border import duties, the need to access distribution and marketing infrastructure, and differences in languages are all cited as reasons why competitors from abroad can be disregarded. It can thus be claimed that in these cases, the Commission deemed regional differences as so important that it chose to delineate markets as national in scope.

The Commission considers differences in market shares as an important indicator for separate geographic markets (MERCEDES-BENZ/KÄSSBOHRER; VOLVO/ SCANIA). Remember that a market is defined as a set of products worth monopolising. The assumption that different market shares indicate different markets thus needs to be connected to this definition of relevant markets. But there does not seem to be a straightforward linkage. Moreover, there is no linkage between the similarity of market shares and the substitutability in demand or supply.

(2) Prices
If two regions are in the same relevant market, then the prices charged in one region should affect the prices charged in the other region. However, this is not the same as saying that prices in both regions must be precisely identical. The geographic extent of the relevant market should reflect similarity of price movements rather than the similarity of price levels. In VOLVO/SCANIA, however, differences in the prices for heavy trucks indicated different geographic markets, according to the Commission. Since prices differed from member-state to member-state, the Commission assumed that the markets for heavy trucks had to be delineated on the Member-State level.

(3) Consumer Preferences
According to the Commission, different consumer habits are another important indicator for the assumption that one is dealing with different geographic markets. Different consumer habits are interpreted as an important barrier to entry, which could inhibit interpenetration of markets. These could be based on different tastes, e.g., concerning beer or different user habits, e.g., concerning female hygiene products. Additionally, language and culture differences are taken as an indicator for different geographic markets (RTL/VERONICA/ENDEMOL; NORDIC SATELLITE DISTRIBUTION; BERTELSMANN/KIRCH/PREMIERE).

(4) Transport Costs
High transport costs can be an important cause for little trade between regions. According to the Commission, high transport costs are thus a reason for assuming different geographic markets. Firms are regularly asked concerning the maximum difference that distribution of their products seems worthwhile. The answers received serve to delineate the relevant geographic market. They played an important role in a number of cases, e.g., in CROWN CORK & SEAL/METALBOX and SCA/METSÄ TISSUE. But the Commission should recognise that differences in transport costs – transport cost disadvantages if you will – do not always justify the delineation of different markets. This can be the case if these disadvantages can be compensated by other advantages like economies of scale, which could be the result of higher output.