Defining Geographic Markets Across National Borders : OECD Background Paper

Geographic market definition is an important and challenging exercise that defies cursory analysis. This paper describes the process with an emphasis on markets that may extend beyond national borders. It also discusses how geographic market definition fits relative to competitive assessment, and the tendency of some authorities to leave definition open in cases where no competition concerns are present.The range of evidence that must be considered when assessing the geographic scope of markets is wide. Significant price differences across countries may point to heterogeneity in competitive conditions, and therefore a narrower market definition, but pricing analysis can generate misleading results. Import flows and their responsiveness to a SSNIP should also be considered, but this process can be speculative and is viewed skeptically by some competition authorities. In light of the complexities and criticisms inherent in the use of pricing and import data, competition authorities and practitioners should carefully consider ancillary evidence as well. While they may not be determinative on their own, product characteristics, transport costs, regulatory and trade barriers, consumer preferences and market dynamics play an important role in shaping the geographic scope of a market.New challenges may emerge in future market definition exercises. In particular, there are variations in the treatment of foreign competition in merger assessment guidelines across jurisdictions. Although it appears that these variations have not led to substantially different decisions across jurisdictions, they may create uncertainty. Competition authorities should remain vigilant to the fact that an overly expansive (or unnecessary) geographic market definition could impact future merger cases, and could undermine the efficacy of remedies. This risk is particularly pronounced given current market trends, which could indicate an increase in global market definitions (or at least claims of global markets from notifying parties). As a result, authorities should use caution, take in all the available evidence and, whenever possible, cooperate with each other in the definition of international geographic markets