According to the news from Chinese Government website, the Anti-monopoly Commission under the State Council published the Guidelines on Definition of Relevant Market on July 7, 2009.
The Anti-monopoly Commission under the State Council Guidelines on Definition of Relevant Market (hereafter referred to as the Guidelines) provide guidance to define the relevant market. There are four chapters in the Guidelines, which include 11 articles respectively involving the purpose and basis of the Guidelines, functions of definition of the relevant market, meaning of the relevant market, substitution analysis, demand substitution, supply substitution, summary of the method of definition of the relevant market, main factors to be considered in definition of the relevant commodities market, main factors to be considered in definition of the relevant territory market, basic ways of the hypothetical monopolist test and several actual issues of the hypothetical monopolist test.
The relevant market is an important concept under the Anti-Monopoly Law. It refers to the commodity scope or territorial scope within which the business operators compete against each other during a certain period of time for specific commodities or services. In enforcing the Anti-Monopoly Law, there are generally needs to define the relevant markets of commodity or the relevant market of territory.
According to the Guidelines, the factors of intellectual property rights should be fully considered in defining the relevant market. The Guidelines provide that when the production cycle, lifetime, seasonal nature, fashion nature or the duration of protection of intellectual property rights have already constituted the considerable features of commodities, the nature of time should be considered in determining the relevant market.
In the enforcement of the Anti-Monopoly Law in respect of technical trade and license agreement involving intellectual property rights, there may be also a need to define the relevant technical market and consider the influence of the factors such as intellectual property rights and innovation.
Regarding a process of defining the relevant market, the Guidelines provide that the process of defining the relevant market is not exclusive. According to the actual situations, different ways can be used. In determining the relevant market, the analysis of demand substitution may be made on the basis of the factors such as the features, uses and prices of commodities, if necessary, the analysis of supply substitution may be conducted. If the scope of the competitive market of business operators is not clear or is not easy to determine it, the relevant market may be defined in the light of the hypothetical monopolist test.
In general, the hypothetical monopolist test first defines the relevant commodities market. First all, considering the goods (target goods) provided by a business operator and concerned in the examination of anti-monopoly, supposing the business operator is the monopolist (the hypothetical monopolist) who takes profit maximization as a goal for operation, the issues to be analyzed are whether the hypothetical monopolist can continually (generally, one year) and slightly (generally, 5%-10%) raise the price of the target goods as the other sales conditions remain unchanged. The increasing of the target goods may cause demanders to turn to buy other goods having a close substitutive relationship, thus leading to a decline in sales volume of the hypothetical monopolist. If it is profitable, even though the sale volume of the hypothetical monopolist decreases after the price of the target goods increases, the target goods constitute the relevant commodities market.
If the increasing of the price leads demanders to buy the other goods having a close substitutive relationship and makes the act that the hypothetical monopolist increases the price unprofitable, the substitutive goods need to be added into the relevant commodities market, the substitutive goods and the target goods form a collection of commodities. If the price of the collection of the commodities increases and makes the hypothetical monopolist profitable, the collection of the commodities constitutes the relevant commodities market.
As the collection of the commodities becomes larger and larger, the nature of substitution of the commodities inside and outside the collection becomes less and less, finally, a collection of commodities brings about, if the hypothetical monopolist can achieve profits through increasing the price, thus the relevant market may be defined.