Antitrust market definition: rationale, challenges and opportunities in South African competition policy

Market definition is the first step in competition investigations in South Africa and in other jurisdictions. Recent debates in Europe involving the so-called “economics-based” movement and advances in econometric tools and industrial organization theory have led economists to question the traditional practice of delineating exact market boundaries. Critics argue that the practice of delineating rigid market boundaries does not enable a proper analysis of competitive effects or even of market power, while others note the problem of studying substitutability for differentiated products. This paper has two goals. Firstly, I use the recently concluded Primedia/Kaya FM case to illustrate important aspects of market definition overlooked by critics. Secondly, I develop a simple theoretical model to analyze the implication of judgment and uncertainty for the Tribunal or courts’ assessment of the relevant market. Beyond being a first screen for detecting antitrust problems, market definition should involve an elaborate analysis of competitive constraints. An analysis of competitive constraints assists practitioners in studying the competitive effects of allegedly anti-competitive practices and further dismantles a strictly structuralist approach to competition policy still evident in South African investigations.