Deceptive evidence : the experience of product market definition for the purpose of competition law enforcement

Could identical goods sold by the same company on the same territory and at the same time be attributed to different product markets? In our paper we take a closer look at the case of the wrought-steel wheel industry, which became the subject of an antitrust investigation initiated by the FAS Russia in 2020. During a shortage, one of the largest wrought-steel wheel producers sold small batches of wheels to minor buyers at relatively high prices compared to the industry average. FAS Russia assumed this price difference to be evidence for abuse of market power. In contrast to FAS Russia's conclusions, we suggest that wrought-steel wheels sold to major and minor buyers constitute at least two separate markets. To test this hypothesis, we define a relevant product market employing a price correlation analysis. To conduct robustness check we also provide a stationarity test on the log price ratio and a cointegration test which fall within the results of correlation analysis. As consumers actually did engage in side transactions, the revealed price difference is not related to price discrimination. We explain this price difference using the new institutional economics, assuming that goods sold to a large buyer do possess special transaction characteristics which do not meet the characteristics of the batches consumed by minor buyers. Another explanation is differences in bargaining power between large and minor buyers. Our result shows that there can be identified at least two wrought-steel wheel product markets: one with Russian Railways as the main buyer and the second one with smaller undertakings.