1. The definition of market scope is fundamental to the enforcement of the Fair Trade Act, and has an enormous bearing on the rights and interests of enterprises. How does the Fair Trade Commission explicitly define market scope?
The term "relevant market" used in the Article 5 of the Act means a geographic area or a coverage wherein enterprises compete in respect of particular goods or services." The term “market” stated in the Fair Trade Act by no means refers only to an aggregation of products or services with similar characteristics. On the contrary, it refers to the range created by the competition among businesses offering products or services and the sources of limitation resulted from such competition include demand substitution and supply substitution. Therefore, these two aspects are usually inspected in market definition. However, the focus is on demand substitution whereas supply substitution is taken into account depending on the characteristics of the product or service.
The term "compete" in this provision refers to acts by which enterprises vie for trading opportunities in the market through relatively favorable conditions of price, quantity, quality, service, and so forth. Viewed from this perspective, the definition of a market should include the entire extent of a geographic area or coverage that is reachable through competition, including the full special and temporal scope of all relevant markets and potential trading areas of all potential suppliers and demanders of the goods and services concerned. Given the rapid transportation facilities and ease of goods distribution in Taiwan, the area as a whole is typically considered a single market in itself. Service industries tend to be more local by their nature and therefore their market scope must be considered in light of actual circumstances. In defining the temporal duration of a market, consideration is given to using annual data rather than quarterly data, to rule out the effects of temporary fluctuations.
In economic theory, determination of relevant markets is often based on an evaluation of the cross elasticity of a particular product, including the elasticities of demand and supply of the product. However, since there is no definite standard of reasonable elasticity, and since elasticity often varies with price fluctuations, seasonal changes, and regional differences, in practice it is necessary to take objective facts into account and to examine industry-specific statistical data and solicit input from experts and scholars in determining the elasticity
Relevant article(s) of law: Fair Trade Act, Article 5