Consequences of market definition under competition analysis - the luxury fashion market

Abstract

In the application of the European competition policy and rules, it is clear that each market and case give raise to specific and individual competition concerns. This thesis has dealt with Article 82 and the Merger Regulation under the EC competition rules. Those instruments have been assessed in relation to an example industry, the luxury fashion industry. The application of Article 82 and the Merger Regulation to this industry has brought to light how important and decisive it is for the assessment under those rules to properly identify the boundaries and the characteristics of the relevant market. First of all, it is shown how the use of the general principles of defining a relevant market in competition cases may result in a more narrowly defined market of luxury fashion products than would be the first impression. Applying those principles to luxury fashion products leads to a distinct and separate market for the products in relation to other luxury goods as well as ordinary, non-luxury fashion products. The importance of defining a relevant market becomes clear when the competition rules are to be applied to the market in question. A properly defined market is fundamental when appraising which factors are significant in the competition analysis. It is first when a relevant market has been defined that the competitive situation with regard to the characteristics of the market in question may be assessed. Regarding the luxury fashion market, principles and methods used by the Commission in previous cases concerning branded markets are of relevance. The competitive situation in the luxury fashion market should be appraised with regard to those factors which the Commission has found relevant to other branded markets as well as the characteristics of the luxury fashion industry. It is however not possible in this thesis to take a final decision on the degree of dominance and workable competition in the luxury fashion market. Apparent is though how the fashion market has gone through radical changes in structure and how the market situation is to a certain extent dependent on or dictated by a few powerful companies. My view is that there is in fact a degree of market power in the luxury fashion market, which may indicate the need to more thoroughly examine the situation and conditions of this market. The reason why no acquisition in the luxury fashion industry has been fully assessed is because, without having defined a relevant market, the size of the acquired fashion houses and designers has by the Commission been assumed insignificant. Nevertheless, my believe is that, despite the size of the fashion houses and designers, the acquisitions may have affected, or that at least future acquisitions may affect, the structure and the competitive conditions of the luxury fashion market. If too much emphasize is placed on dominance, there may be a risk that the actual situation and concerns in the market will not be visible. In order to shed light on this problem, an alternative way of viewing mergers and acquisitions is presented, i.e. regarding an operation from its possibilities of substantially lessening the competition in a market. This may be seen as a more forward-looking way of analysing operations. It is possible that an assessment of the acquisitions in the luxury fashion market from a broader point of view than merely out of a dominance perspective, would more accurately describe the actual and potential market situation. Such an assessment may allow for a clearer identification of actual problems and concerns in the market and therefore capture a more diversified range of competitive problems. In fact, the result may be a competition analysis that to a further extent complies with the objectives of the competition policy in protecting fair and effective competition. My point is not that the Commission erred in not fully assessing the notified concentrations. Yet, in some circumstances the competition analysis, in this case under Article 82 and the Merger Regulation, may not always describe the entire competitive situation in a market. When appraising market power and dominance in a market it is vital to investigate into what actually constitute competitive advantages for the market players. Especially in a market such as the luxury fashion market, a market in change both by structural means and by altered business strategies like the greater focus on branding, advertising and marketing&semic decisive must be to examine which factors in practise generate power to behave to the detriment of customers and competitors. In the end, the assessment of Article 82 and the Merger Regulation shows that initially a competition analysis of market power is dependent on how the relevant market is defined. In order to properly outline the characteristics and thereafter the situation in a market, a precise definition of the market is vital. A workable competition in a market is dependent on the interaction of several, different and market specific factors, each of relevance to how that market functions. My believe is that those characteristics and factors should have a more decisive role when analysing a market and that this may lead to a more accurate result than when focusing on dominance. In relation to the luxury fashion industry, the consequences of identifying a relevant market may be that this industry is to be considered of interest for competition authorities to assess whether the market situation in fact meets the objectives of the EC competition policy.

• author: Melin, Hanne
• supervisor: Katarina Olsson
• organization: Department of Law
• year: 2002
• type: H3 - Professional qualifications (4 Years - )
• subject: Law and Political Science
• keywords: Konkurrensrätt
• language: English
• id: 1560165
• date added to LUP: 2010-03-08 15:55:26
• date last changed: 2010-03-08 15:55:26