Determination of Relevant Market in the

Indian Jurisdiction
Project submitted to:
Mr. Mohammad Atif Khan
(Faculty of the Competition Law)

Project submitted by:

Rahul Yadav
Semester X, Roll No. 122
Section B
10.05.2019
HIDAYATULLAH NATIONAL LAW UNIVERSITY
RAIPUR, C.G.
 Acknowledgements

I feel highly elated to work on the topic “Determination of the Relevant Market in
the Indian Jurisdiction”, because it has significant importance in the current
scenario.
I express my deepest regard and gratitude for our Faculty of Competition Law

Mr. Mohammad Atif Khan for his consistent supervision, constant inspiration and
invaluable guidance have been of immense help in understanding and carrying out the
importance of the project report.
I would like to thank my family and friends without whose support and
encouragement, this project would not have been a reality.
I take this opportunity to also thank the University and the Vice Chancellor for
providing extensive database resources in the Library and through Internet.

Rahul Yadav
Semester – X
Roll No. - 122

2
 Table of Contents

 1.Introduction…………………………..................................…….......……..4
Research Objectives................................................................................................5
Review of the Literature.........................................................................................6
Research Method and Source of Data.....................................................................7
Research Question...................................................................................................7
Hypothesis...............................................................................................................7
Mode of Citation......................................................................................................7
Scope of Study.........................................................................................................7
 2.Scope of the Term Relevant Market.........................................................8-11
 3.Concept of Relevant Market………………………................................12-14
 4.An Analysis through Case Laws………................................................15-18
 5. SSNIP Test.……..….............................................................................19-20
 6.Conclusion...................................................................................................21
 Bibliography...................................................................................................22

3
 Introduction

If we ask someone to define market in layman’s language then the answer will be that it is a
place where activities of buying and selling takes place. The main objective of this paper is to
determine the relevance of market and its definition under competition law in Indian
perspective.

The Preamble of the Competition Act, 2002 (Act) states that it is aimed at preventing
practices having an 'adverse effect on competition'. Competition does not exist in a vacuum
but in a marketplace. For the purpose of competition law, the 'marketplace' has to be defined
with even more precision, in terms of a 'relevant market', a market where the effect of
competition takes place. The definition of a relevant market is a tool to identify and define
the boundaries of competition between firms. It allows to establish the framework within
which competition policy principles are applied by the Commission. The main purpose of
market definition is to identify in a systematic way competitive constraints that the
undertakings involved face. Market definition makes it possible, inter alia, to calculate
market shares that convey meaningful information regarding market power for the purposes
of assessing dominance ( dominant position(s)). A relevant market is defined according to
both product and geographic factors. In general terms, a relevant product market comprises
all those products and/or services which are regarded as interchangeable or substitutable
(substitutability) by reason of product characteristics, prices and intended use. Products
and/or services that could readily be put on the market by other producers without significant
switching cost or by potential competitors at reasonable cost and within a limited time span
also need to be taken into account. The relevant geographic market comprises the area in
which the undertakings concerned are involved in the supply and demand of products or
services, in which the conditions of competition are sufficiently homogeneous and which can
be distinguished from neighbouring areas, because the conditions of competition are
appreciably different in those areas.

4
 Research Objectives

1. To understand the scope and nature of relevant market.

2. To understand the mechanism established in India with regard to determination of

relevant market.
3. To analyse through case laws the determination and relevance of relevant market.
4. To study the SSNIP test.

Review of the Literature

1. T. Ramappa, Competition Law in India1

This deals with the policy, issues and developments in the competition law.

2. Abir Roy & Jayant Kumar, Competition Law in India2

This book aims at providing a practical insight on the evolving nuances of the Indian

competition law.

3. Richard Whish & David Bailey, Competition Law3

This book explain the purpose of competition policy, introduce the reader to key concepts

and techniques in competition law and provide insights into the numerous different issues

that arise when analysing market behaviour. 

1
T. RAMAPPA, COMPETITION LAW IN INDIA (3rd ed., 2006).
2
ABIR ROY & JAYANT KUMAR, COMPETITION LAW IN INDIA (2nd ed., 2016).
3
RICHARD WHISH & DAVID BAILEY, COMPETITION LAW (8th ed., 2015).

5
 Research Method and Source of Data

This project report is based on Descriptive Research Methodology.

Secondary and Electronic resources have been largely used to gather information and data
about the topic.

Books and other reference as guided by Faculty have been primarily helpful in giving this
project a firm structure. Websites, dictionaries and articles have also been referred. Footnotes
have been provided wherever needed, either to acknowledge the source or to point to a
particular provision of law.

Research Question
How the relevant market is determined in the competition cases in India?

How SSNIP test is applied to determine relevant market?

How CCI determines the relevant product market and relevant geographic market in Indian

Jurisdiction?

Hypothesis
The event of a suspected infringement of the competition rules, the first element to be
considered is the relevant market. Defining the relevant market means determining the scope
of the competition rules in respect of restrictive practices and abuses of a dominant position
as well as the scope of the merger regulations. The definition of the relevant market is of
essential significance, for the possibilities of competition can only be judged in relation to
those characteristics of the products in question by virtue of which those products are
particularly apt to satisfy an inelastic need and are only to a limited extent interchangeable
with other products.

6
 Chapterisation
The project broadly has been divided into four chapters, and an Introduction and conclusion.

Chapter 1 Scope of term relevant market.

Chapter 2 Concept of Relevant Market.

Chapter 3 An Analysis through Case Law.

Chapter 4 SSNIP test.

Mode of Citation
Bluebook:A Uniform System of Citation (19th ed.)

Scope of the Study

The project Aims to cover the meaning and scope of Relevant Market under Indian
Jurisdiction. The Indian position of relevant product market and relevant geographic market
and certain cases regarding it have also been dealt with, this project does not cover the
position of relevant market in other global competition law regimes.

7
 Chapter-1

Scope of the Term Relevant Market

The starting point in any type of competition analysis is the definition of the "relevant"
market. There are two fundamental dimensions of market definition: (i) the product market,
that is, which products to group together and (ii) the geographic market, that is, which
geographic areas to group together. Market definition takes into account both the demand and
supply considerations. On the demand side, products must be substitutable from the buyer’s
point of view. On the supply side, sellers must be included who produce or could easily
switch production to the relevant product or close substitutes. Market definition generally
includes actual and potential sellers, that is, firms that can rapidly alter their production
processes to supply substitute products if the price so warrants. The rationale for this is that
these firms will tend to dampen or curb the ability of existing firms in the market to raise
price above the competitive level. The location of buyers and sellers will determine whether
the geographic market is local, regional, national or international. If markets are defined too
narrowly in either product or geographic terms, meaningful competition may be excluded
from the analysis. On the other hand, if the product and geographic markets are too broadly
defined, the degree of competition may be overstated. Too broad or too narrow market
definitions lead to understating or overstating market share and concentration measures.4

In competition law the relevant market defines the market in which one or more goods
compete. Therefore, the relevant market defines whether two or more products can be
considered substitute goods and whether they constitute a particular and separate market for
competition analysis. The relevant market combines the product market and the geographic
market. A relevant product market comprises all those products and/or services which are
regarded as interchangeable or substitutable by the consumer by reason of the products'
characteristics, their prices and their intended use whereas, a relevant geographic market

4
Glossary of Industrial Organisation Economics and Competition Law, Directorate for Financial, Fiscal and
Enterprise Affairs, Organisation for Economic Co-operation and Development
(http://www.oecd.org/regreform/sectors/2376087.pdf) Last Accessed 10-05-2019 11:10.

8
comprises the area in which the firms concerned are involved in the supply of products or
services and in which the conditions of competition are sufficiently homogeneous.5
Defining the relevant market should be considered an intermediate step in the competitive
assessment of a market. In this context, market definition has two significant benefits. First, it
provides a focus for the competitive assessment. By defining the relevant market so as to
encompass all those products or services which are considered to be effective substitutes for
the products or services at the centre of the investigation, the relevant market focuses the
attention of both the Commission and interested affected parties on the main competitive
constraints which exist between products and between regions. Excluding such competitive
constraints from the analysis will likely result in a flawed competitive assessment. Secondly,
the definition of the relevant market provides an initial screen for the competitive assessment.
Defining the relevant market enables market shares and market concentration to be
calculated. But market shares can provide meaningful information regarding market power
for the purpose of the competitive assessment only if the relevant market is defined in a
systematic way that captures the competitive constraints that the firms under investigation
face, and hence identifies their effective competitors. In consequence, market shares provide
a useful first filter to determine whether a more detailed competitive assessment is required.6

Therefore, the purpose of defining the 'relevant market' is to assess with identifying in a
systematic way the competitive constraints that undertakings face when operating in a
market. This is the case in particular for determining if undertakings are competitors or
potential competitors and when assessing the anti-competitive effects of conduct in a market.
The concept of relevant market implies that there could be an effective competition between
the products which form part of it and this presupposes that there is a sufficient degree of
interchangeability between all the products forming part of the same market insofar as
specific use of such product is concerned.7 It may be argued that even when the relevant
market concept is introduced artificially into a case its use ensures consistency in analysis. In

5
What is a relevant market, Konkurrensverket, Swedish Competition Authority
(http://www.konkurrensverket.se/en/Competition/Aboutthecompetitionrules/what-is-a-
relevant-market/) Last Accessed: 10-05-2019 11:23.
6
Dr. Johannes Paha, The Economics of Competition (Law), Chair for Industrial Organization, Regulation and
Antitrust, Justus-Liebig-University Giessen, April 2013 (http://www.uni-
giessen.de/fbz/fb02/fb/professuren/vwl/goetz/kontakt/mitarbeiter/pahaordner/WPuS%20Begleittext) Last
Accessed 10-05-2019 12:24.
7
Competition Commission of India v. Co-ordination Committee of Artists, Civil Appeal No. 6691 of 2014,
Supreme Court of India – Judgment dated: 7th March 2017, (2017) 5 SCC 17 : AIR 2017 SC 1449.

9
merger cases the concept may assist in the reaching of early decisions that a dominant
position will not result.8
Markets are most commonly defined on the basis of the ‘hypothetical monopoly’ test, also
known as the SSNIP test, which is well established in antitrust practice. The objective of this
exercise is to define the smallest possible markets both in the product and geographic
dimension, whereby a hypothetical monopolist could profitably and permanently raise the
price of the products by 5 to 10 per cent above the competitive level. Loosely, a market
defined by such a methodology is “something worth monopolising”, and therefore high
market shares within such a market might imply the ability to exercise market power. The
relevant market includes all those products which the consumer regards as sufficiently
interchangeable or substitutable to prevent such a price rise. To empirically test whether
identified products impose significant price constraints, economists examine cross-price
elasticities and diversion ratios.9However, the SSNIP test should be used in situations where a
monopolist establishes prices at such a high level that any further increase in those prices
would not be profitable. Otherwise, the SSNIP test would lead to an underestimation of the
monopolist’s market power, because it might suggest that no increase in prices would be
profitable and would therefore lead one to define the market too broadly (this problem is
commonly described as the Cellophane Fallacy).10

Competition Authorities in various countries use or adopt different definitions of the product
market. Despite the lack of uniformity, the veneer that runs through the definitions is that the
product market has the characteristic of interchangeability or substitutability of
goods/services by the consumers/purchasers. Put differently, goods/services that purchasers
consider to be substitutes are generally regarded to be in the same product market and those
that the purchasers do not consider to be substitutes are regarded to be in separate product
markets. On the demand side, the relevant product market includes all such substitutes that
the consumer would switch to, if the price of the product relevant to the investigation were to
increase. From the supply side, this would include all producers who could, with their
existing facilities, switch to the production of such substitute goods. There are 3 elements that
8
Fishwick Francis. The Definition of the Relevant Market in the Competition Policy of the European Economic
Community. In: Revue d’économieindustrielle, vol. 63, 1er trimestre 1993. Politique de la concurrence. pp. 174-
192.
9
Defining the Relevant Market in Telecommunications: Review of Selected OECD Countries and Colombia,
Competition Committee, Organisation for Economic Co-operation and Development, 2014.
(https://www.oecd.org/daf/competition/Defining_Relevant_Market_in_Telecommunications_web.pdf).
10
DariaKostecka, Determination of the Relevant Market as a Criterion of Assessment of Concentration Effects in
the Practice of Antitrust Authorities, Wroclaw Review Of Law, Administration & Economics, Vol. 2:2, 129-
138, 2012.

10
pin a product market. They are price increase, reaction of purchasers and smallest size
requirement.11
The criteria to be used in determining the appropriate geographic market are essentially
similar to those used to determine the relevant product market. The geographic market
selected must, therefore, both "correspond to the commercial realities" of the industry and be
economically significant. Thus, although the geographic market in some instances may
encompass the entire Nation, under other circumstances, it may be as small as a single
metropolitan area. The outer boundaries of a product market are determined by the reasonable
interchangeability of use or the cross-elasticity of demand between the product itself and
substitutes for it. However, within this broad market, well defined submarkets may exist
which, in themselves, constitute product markets for antitrust purposes. The boundaries of
such a submarket may be determined by examining such practical indicia as industry or
public recognition of the submarket as a separate economic entity, the product's peculiar
characteristics and uses, unique production facilities, distinct customers, distinct prices,
sensitivity to price changes, and specialized vendors.12

"Definition of relevant market" is an effort to describe the array of firms that currently
produces or potentially will produce products that are sufficiently close substitutes to take
business away from any firm or group of firms that attempts to exercise market power.
Definition of relevant market is a critical analytical tool in antitrust enforcement because the
legality of business conduct almost always de- pends upon the market power of the
participants.13Market definition is not an end in itself but a key step in identifying the
competitive constraints acting on a supplier of a given product or service. Market definition
provides a framework for competition analysis. Therefore, market definition is important in
the process of establishing whether or not particular agreements or conduct fall within the
scope of the competition rules.14

Chapter-2
11
S. Chakravarthy, Relevant Market in Competition Case Analyses, CUTS Institute for Regulation and
Competition (http://www.circ.in/pdf/Relevant_Market-In-Competition-Case-Analyses.pdf) Last Accessed 10-
05-2019 11:25.
12
Mark Jamison, Defining Relevant Markets in Evolving Industries, Public Utility Research Center, University
of Florida, April – 2014.
13
Robert Pitofsky, New Definitions of Relevant Market and the Assault on Antitrust, Columbia Law Review,
Vol. 90, No. 7 (Nov., 1990), pp. 1805-1864.
14
Market Definition: Understanding Competition Law, Office of Fair Trading, United Kingdom, 2004
(https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/284423/oft40
3.pdf) Last Accessed 05-10-2019 15:43.

11
 Concept of Relevant Market in India

Relevant market has been defined in different statutes all over the world like the Act, UK
laws, European laws and anti-trust laws of US; however it is neither possible nor justifiable to
limit the scope of ‘relevant market’ to few theoretical definitions. Even the adjudicating
forums find it difficult to restrict the ambit of the said concept and each dispute results in a
new and unique interpretation. So the whole scrutiny boils down to determination as to what
is the relevant market in a particular set of facts. Only then the remaining issues can be
settled.
Definition of the relevant market as enshrined in Section 2(r) of the Competition Act 2002 ,
cannot be exhaustive as the term owes its origin to the concept of Economics and thus is
bound to be dynamic depending on the unique set of facts for each case. Section 2(r) of
Competition Act 2002 reads as:
"relevant market" means the market which may be determined by the Commission with
reference to the relevant product market or the relevant geographic market or with reference
to both the markets;
It is manifest from the above definition that the task of determining the “relevant market” is
left with the Commission and the terms like ‘relevant product market’ and the ‘relevant
geographic market’ involves understanding of the legal concepts, concepts of Economics and
also involves analysis of volumes of data/statistics before arriving unto a conclusion.
Relevant market in common parlance refers to the market where competition takes place. A
relevant market can further be divided into ‘relevant product market’ and ‘relevant
geographic market’.
To put in simple words, a relevant product market basically refers to two kinds of
substitutability of the product/service – one is the ‘demand side substitution’ which stipulates
a situation where the market player is not benefited by a slight increase in price because the
consumer has the option of substituting the use of such product/service and the second is the
‘supply side substitution’ when other market players increase supply of such product/service
canceling the effect of any increase in price.15
Section 2(t) of the Competition Act 2002 defines the ‘relevant product market’ as follows:

Smeeksha
15
Bhola, Determination of Relevant Market: ‘easier said than done’
https://www.lexology.com/library/detail.aspx?g=18a8d892-d582-46ae-93fc-d890dff4b721 ( last updated on
Oct.12, 2018)

12
"relevant product market" means a market comprising all those products or services which
are regarded as interchangeable  or  substitutable  by  the  consumer, by reason of
characteristics of the products or services, their prices and intended use;
Relevant Geographic market being the other facet of relevant market basically involves two
elements viz. homogenous condition of competition and distinct condition of competition.
Section 2(s) of the Competition Act 2002 defines the relevant geographic market as:
"relevant geographic market" means a market comprising the area in which the conditions of
competition for supply of goods or provision of services or demand of goods or services
are  distinctly homogenous  and can be distinguished from the conditions prevailing in the
neighbouring areas”.

Certain factors to determine Relevant Product and Relevant Geographic Market

Section 19 (6) of the Competition Act, 2002 provides for the factors which shall be
considered by the CCI while determining the relevant geographic market:
(a) regulatory trade barriers;
(b) local specification requirements;
(c) national procurement policies;
(d) adequate distribution facilities;
(e) transport costs;
(f) language;
(g) consumer preferences;
(h) need for secure or regular supplies or rapid after-sales services.

Section 19 (7) of the Competition Act, 2002 provides for the factors which shall be
considered by the CCI while determining the relevant product market:
(a) physical characteristics or end-use of goods;
(b) price of goods or service
(c) consumer preferences;
(d) exclusion of in-house production;
(e) existence of specialised producers;
(f) classification of industrial products

13
 Chapter-3

An Analysis through Case Laws

14
1. Competition Commission of India v.  Co-ordination Committee of Artists and the
Technicians of W.B. Film and Television and Ors

a. In its first substantive decision on the merits of a case falling under the Act, while dealing
with an matter falling under Section 3(3) of the Act, the Supreme Court of India
in Competition Commission of India v. Co-ordination Committee of Artists and the
Technicians of W.B. Film and Television and Ors16 highlighted the meaning of relevant
market without expressly holding that there is a requirement of defining a relevant market in
a Section 3 case. The Supreme Court at para 31 held:

"Market definition is a tool to identify and define the boundaries of competition between
firms. It serves to establish the framework within which competition policy is applied by the
Commission. The main purpose of market definition is to identify in a systematic way the
competitive constraints that the undertakings involved face. The objective of defining a
market in both its product and geographic dimension is to identify those actual competitors
of the undertakings involved that are capable of constraining those undertakings behavior
and of preventing them from behaving independently of effective competitive pressure.
Therefore, the purpose of defining the 'relevant market' is to assess with identifying in a
systematic way the competitive constraints that undertakings face when operating in a
market."

b. The Supreme Court has also now clarified through this case that the delineation of the
relevant market is not a mandatory pre-condition for determination of violations of Section 3,
particularly where the agreement/conduct of the parties falls under the statutory presumptions
set out in Section 3.

2. Shri Vinod Kumar Gupta, Chartered Accountant Vs. WhatsApp Inc.17

The informant, Vinod Kumar Gupta, alleged that WhatsApp held a dominant position in the
relevant market for ‘free messaging apps available for various smartphones globally’. It was
further alleged that WhatsApp was abusing its dominant position in the said relevant market

16
Competition Commission of India v. Co-ordination Committee of Artists and the Technicians of W.B. Film
and Television and Ors , (2017) 5 SCC 17.
17
Shri Vinod Kumar Gupta, Chartered Accountant Vs. WhatsApp Inc., Case No. 99/2016.

15
by indulging in predatory pricing and by mandating users to share their information with
Facebook, its parent company.

Given the allegations concerned abuse of dominance, the CCI started its analysis by
determining the appropriate relevant market. In this regard, the CCI differed with the relevant
market determined by the informant.

The CCI noted that instant communication apps cannot be compared with “the traditional
electronic communication services such as text messaging, voice calls etc.” provided by
telecom service providers (TSPs). The key factors taken into account by CCI to justify that
instant communication apps constitute a separate relevant product market as compared to
“traditional modes of communication” are as follows:

 Unlike traditional modes of communication, instant communication apps are internet

based and provide additional functionalities to users (for example, the ability to see
when their contacts are online or when they last accessed the app).

 Instant communication apps can be used through smartphones only, unlike traditional
electronic communication services that can be used through any mobile phone.

 There is a difference in pricing conditions between instant communciation apps and

traditional modes of communication.

 Traditional text messaging can be exchanged between anyone even if users do not use
the mobile service of the same service provider.

Additionally, although the CCI determined the relevant geographic market to be ‘India’,
observations indicated that it was aware of the global nature of the digital economy, such as:

 The functionality provided by consumer communication apps through smartphones is

intrinsically cross-border.

 The geographic scope for either demand or supply of consumer communication apps
is not limited to any area in particular.

 Developers distribute similar products to all of their customers regardless of their

geographic location.

16
  Functionality of consumer communication apps through smartphones “does not differ
depending on the region or country concerned, either in terms of price, functionality
or operating system”.

Having noted the above, the CCI added that competitive conditions, regulatory architecture
and players may vary in different countries/regions. Since conditions for competition are
homogenous in India, it noted that the geographic area of India may be treated as the relevant
geographic market.

Accordingly, the CCI determined that the relevant product market to be ‘the market for
instant messaging services using consumer communication apps through smartphones’.

3. Belaire Owners' Association Vs. DLF Limited, HUDA & Ors.18 and M/s Silarpuri

Colonizers P Ltd vs Emaar Mgf Land Ltd 19

In the famous Belaire case DG concluded that since the cost of each flat was above 1.5 Crore
the relevant market was the ‘high- end residential market’ in Gurgaon. It further argued ‘a 
customer  wanting a flat in Gurgaon would not look at Noida or another city; and that a
small change in price – say 5 % - will not make buyers in Belaire shift to lower priced flats
under development in Gurgaon. This way both the relevant geographic market and relevant
product market seemed to be determined successfully.

In the case of Emaar MGF, even though the flats were priced at over Rs. 2 Crore the relevant
market was ascertained to be the ‘residential accomodation’ in Gurgaon. In its very own
order, the CCI remarked ‘Since the apartments in the case comes to about Rs. 95 lakh…. the
relevant market will be high-end residential apartments’.

Such interpretation of ‘Relevant Market’ in these two cases led to utter confusion giving rise
to a moot question; if price of apartments is taken into consideration in determining the
‘Relevant market’, then how can CCI in one case determine relevant market to be ‘residential
accommodation, for flats priced over 2 crores’while in other case relevant market was
determined to be ‘High end residential apartments for flats priced around 95 lakhs’?

These are the few perplexities that CCI had faced as it suffers badly from the absence of
scientific economic analysis. As such, it had to rely heavily on scanty information available
in the public domain thus leading to such contradictions.
18
Belaire Owners' Association Vs. DLF Limited, HUDA & Ors., Case No. 19/2010.
19
M/s Silarpuri Colonizers P Ltd vs Emaar Mgf Land Ltd, Case No. 20 /2012.

17
4. Sanjay Kumar Gupta Vs DLF Ltd20

Relevant market under section 4 ( Abuse of Dominance ) is different from the Market under
section 3 ( Anti-competitive Agreements ) of the Act. Market is a wider term where large
number of goods and services are transacted whereas relevant market is the market which has
to be determined by the Commission with reference to the relevant product market or the
relevant geographic market or with reference to both the markets. Relevant product market
means a market comprising all those products or services which are regarded as
interchangeable or substitutable by the consumer, by reason of the characteristics of the
products or services, their prices and intended use - thus, the relevant market means a market
comprising the area in which the conditions of competition for provision of services or the
services are distinctly homogenous and can be distinguished from the conditions prevailing in
the neighbouring areas. Further, the factors for determining the "relevant geographical
market." are several (section 19 (6) and even one factor is sufficient to determine a relevant
geographical market. However, CCI consider four factors, e.g., local specification
requirements; transportation costs; consumer preferences and need for secure or regular or
rapid after- sales services in order to determine the geographical market in the present case.

5. Ajay Devgn Films vs Yash Raj Films Pvt. Ltd. & Ors 21

To determine the abuse of dominance under section 4 of the Competition Act, 2002 it was
necessary to determine the relevant market. It was held that temporal market cannot be
considered as a market. The market cannot be restricted to any particular period like Eid or
Diwali,which are temporal periods and the market has to be considered a market available
throughout the year.

Chapter-4

20
Sanjay Kumar Gupta Vs DLF Ltd, Case No. 31/2012.
21
Ajay Devgn Films vs Yash Raj Films Pvt. Ltd. & Ors., Case No. 66 / 2012.

18
 SSNIP Test

The Small but Significant Non-transitory Increase in Price Test was designed to define the
relevant market by concepts of product, geographical area and time. This test, also called the
“hypothetical monopolistic test” is the subject of many researches both economical and legal
as it deals with economic concepts as well as with legally aspects.
It was included in the 1982 US merger guidelines and Adelman expressed the core idea in
1959.22 It was then a new method for defining markets and for measuring directly market
power .Ten years later this test was used for the first time in EU in the Nestle /Perrier case
23
and has been officially recognized by the European Commission on its “Commission’s
Notice for the Definition of Relevant Market” in 1997.
The goal of SSNIP test is to identify the smallest relevant market within which hypothetical
monopolist or cartel could impose a profitable significant increase in price. The governmental
procedure of applying the test involves talking to people who make buying decisions. The
question asked is whether such a monopolist or cartel could profit from a price increase of
5% for at least one year with the assumption that the terms of sale of all other products are
held constant”. 24
If sufficient numbers of buyers are likely to switch to alternative products and the lost sales
would make such price increase unprofitable, then the hypothetical market should not be
considered a relevant market for the basis of litigation or regulation. Another, larger basket of
products is proposed for a hypothetical monopolist to control and the SSNIP test is performed
on that relevant market.
Application of the SSNIP Test
 Start with smallest possible market and ask if 5% price increase profitable
 If not, then firm does not have sufficient market power to raise price.
 Next closest substitute is added to the relevant market and test repeated.
 Process continues until the point is reached where a hypothetical monopolist could
profitably impose a 5% price increase.
 Market then defined.

Limitations of the SSNIP Test

22
It was included in the 1982 US merger guidelines and Adelman expressed the core idea in 1959.
23
Nestle/Perrier vs Commission, Case IV/M.190, 1992.
24
Niminet Liviana, The SSNIP Test, ftp://ftp.repec.org/opt/ReDIF/RePEc/bac/pdf/2008/20081312.pdf.

19
If the HM is already charging monopoly profits, there is no further scope of any price rise. It
would mean that the SSNIP may lead to a very wide market. This is known as “cellophane
fallacy”. Thus, SNIIP test fails in case of a firm already possessing market power. This is
known after the Du Pont case.25

Conclusion

25
U.S. v. EI du Pont de Nemour and Co., 351 US 377 (1956).

20
The determination of ‘relevant market’ by the Competition Authority has to be done, having
due regard to the ‘relevant product market’ and the ‘relevant geographic market’. In practice,
defining a relevant market is sometimes only approximate. It is often difficult to predict the
reactions of purchasers/consumers to a price increase. It is here that investigation becomes
critical to the determination of the relevant market. Good investigation would involve
identifying the important economic agents and posing questions appropriate to their
operations and germane to the case on hand. A possible road map has been set in this paper,
but there is no short cut for determining the relevant market.

It cannot be disputed that competition jurisprudence of our country is in its infancy. It is also
a well settled fact that determination of relevant market is dependent upon set of
data/statistics. CCI being the watchdog had been entrusted with this job which in no way can
be said to be an easy task. Law being dynamic is bound to witness contradictions. But,
instead of being complacent and criticizing CCI every now and then, better way needs to be
chalked out.

Determining more than one relevant market for each case and then examining dominance in
each relevant market may be given a try. The most vital factor in such determination is the
data relied and thus, the data collection and analysis needs a prime consideration by all
involved in this process. It must be appreciated that the concept of relevant market is a
cornerstone of the competition law and thus must not be misinterpreted to have a restricted
reach only to the infrastructure sector. Some or the other day its tentacles will certainly take
even other sectors in its grip. It invites the sector representatives and experts to do more
research and try to come out with more concrete documents related to the said purpose. Even
though it will not be binding, it will certainly have some persuasive value. Last but not the
least, competition advocacy initiatives must lead all the relevant measures.

Bibliography

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Cases

Ajay Devgn Films vs Yash Raj Films Pvt. Ltd. & Ors., Case No. 66 / 2012.......................................14

Belaire Owners' Association Vs. DLF Limited, HUDA & Ors., Case No. 19/2010............................13

Competition Commission of India v. Co-ordination Committee of Artists and the Technicians of W.B.
Film and Television and Ors , (2017) 5 SCC 17..............................................................................11

M/s Silarpuri Colonizers P Ltd vs Emaar Mgf Land Ltd, Case No. 20 /2012......................................13

Nestle/Perrier vs Commission, Case IV/M.190, 1992..........................................................................15

Sanjay Kumar Gupta Vs DLF Ltd, Case No. 31/2012.........................................................................14

U.S. v. EI du Pont de Nemour and Co., 351 US 377 (1956)................................................................16

Vinod Kumar Gupta, Chartered Accountant Vs. WhatsApp Inc., Case No. 99/2016..........................11

Treatises

T. RAMAPPA, COMPETITION LAW IN INDIA (3rd ed., 2006).....................................................................6

Website

Niminet Liviana, The SSNIP Test, ftp://ftp.repec.org/opt/ReDIF/RePEc/bac/pdf/2008/20081312.pdf.

.........................................................................................................................................................15

Smeeksha Bhola, Determination of Relevant Market: ‘easier said than done’

https://www.lexology.com/library/detail.aspx?g=18a8d892-d582-46ae-93fc-d890dff4b721 ( last
updated on Oct.12, 2018)...................................................................................................................9

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