Market definition (Fingleton, Ruane, Ryan)
The Treaties expressly demand geographical extent of the market (“trade between MS”). In antitrust we analyse: demand side substitutability, supply side substitutability, temporal aspects (product market definition) AND geographic boundaries (geographic market definition). The narrower the market definition the more likely it is that a firm will be found to be dominant. We can compare characteristics of different products, own-price elasticity of demand, cross-price elasticities, ability of firms to switch production (time necessary to do that and sunk costs).
For geographic market definition transport cost and trade barriers are taken into account. Elzinga-Hogarty test and study of correlations of prices and price movements in different areas have both important drawbacks.
According to the authors it is necessary to distinguish between inputs and final products. The situation differs according to whether output market and input market are national or international (4 combinations). Therefore it is necessary to define the geographic relevant market also for upstream market (where it buys its inputs) and neighbouring markets.
Taxonomy of aids: activity-specific; firm-specific; industry-specific; region/area-specific.
In state aids methodology, greater weight should be given to potential competition. The recipient of aid can also change its geographic market strategy. If a recipient can easily switch its production, spill-over into other markets is possible (even for activity-specific aids). Input and output markets must be defined, even if the recipient is vertically integrated. The potential of widening the geographic market (cf. internal market) must be taken into account. Also we must assess how costs and benefits are distributed = the degree of price competition can be a guide to the distribution between producer surplus and consumer surplus.
Restructuring and Privatisation
The case of new German Länder
The international context
Further documents to look at:
State Aid Action Plan 2005-2009 (SAAP) – quoted in the presentation
Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General block exemption Regulation) (Text with EEA relevance)
State Aid Reform
State Aid Scoreboard, Reports + Studies