Market definition is sometime seen as about drawing boundaries, however, it should be properly understood as part of understanding the nature of competitive rivalry. It is a tool for aiding the competitive assessment by identifying those substitute products or services which provide an effective constraint on the competitive behavior of the products or services being offered in the market by the parties under investigation. It should not be undertaken in a vacuum unmoored from the theory of harm to competition . In this paper we explore where effective competitive constraints overlap with the need to take into account bargaining power on the part of buyers. This can also be framed as countervailing power. However, following Inderst (2007), it makes sense to distinguish between buyer power –the ability of buyers to obtain advantageous terms of trade from their suppliers – and countervailing power -the presence of strong buyers mitigating or even fully averting adverse consequences for consumer surplus or total welfare that would otherwise arise from a horizontal merger of suppliers. In the two merger cases we examine here, it is the existing bargaining power which underlies the identification of competitive constraints. The mergers were judged to have anti-competitive consequences because they lessened the bargaining power on the part of buyers, rather than their effects being mitigated by countervailing power. The cases are also interesting as they illustrate the different outcomes in the presence of both concentrated sellers and buyers and the types of fact ors which change these outcomes . In this sense,there is a link with abuse of dominance cases where firms may need to engage in potentially exclusionary conduct to exercise their market power. At the heart of understanding the bargaining power of buyers is their alternative options, the credibility of their threat to resort to these options , and the costs they impose on the seller as a result. These options are described as outside options as they are alternatives that would not normally be viewed as good substitutes. compcom.co.za/assets/Uploads/events/Fourth-Competition-Law-Conferece/Session-4B/Bargaining-power-market-definition-240810.pdf
Posted on: Fri, 12 Jul 2013 22:28:54 +0000
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