Newsletter
Amendments to Taiwan Fair Trade Commission’s Guidelines Regarding the Definition of Relevant Markets
The Taiwan Fair Trade Commission (“TFTC”) promulgated the amended Guidelines Regarding the Definition of Relevant Markets (“Guidelines”) on November 22, 2023. The TFTC stated its enforcement positions and policy directions on market definitions relating to multi-sided platforms in the digital economy in the “White Paper on Competition Policy in the Digital Economy” published in December 2022. Therefore, it took into account the legislative trends of international competition law and considered the practical operation situation to review and revise the Guidelines. The key points of these amendments are as follows.
1. Inclusion of Definitions Relating to Platform Economy
The booming platform economy has led to the emergence of a multi-sided market structure and cross-side network effects among customer groups, which has affected how the relevant markets are defined. Consequently, the TFTC has defined “multi-sided market” and “indirect network effect” in the Guidelines (Section 2 of the Guidelines, as amended).
2. Inclusion of Consideration Factors for Defining Relevant Product Markets and Geographic Markets
To address the digital economy’s impact on the consideration factors for defining relevant product markets and geographic markets, the TFTC has included more consideration factors such as operation models of platform operators, transactional relationships or indirect network effects among customer groups, language and local culture of the region in which the product is offered, pricing structure, impact on transactional behavior, compatibility or complementarities formed by the technologies, product specifications or standards, and implications of relevant laws and regulations or administrative rules on market competition (Sections 4 and 5 of the Guidelines, as amended).
3. Inclusion of the Mandatory Consideration of Indirect Network Effects in the “Hypothetical Monopolist Test”
Participants in the digital economy may adopt asymmetric pricing structures after factoring in indirect network effects, resulting in some products being priced at zero dollars. The TFTC has therefore amended provisions on the hypothetical monopolist test, a method of analyzing market definition, to include the mandatory consideration of indirect network effects, as well as optional consideration factors such as quality or cost instead of price changes when conducting the analyses (Section 9 of the Guidelines, as amended).
In the “White Paper on Competition Policy in the Digital Economy” published in December 2022, the TFTC pointed out that market definition is a process used by the TFTC to define the scope of competition between businesses when enforcing the law.. The process allows the TFTC to understand the competitive constraints posed by the conduct of the enterprises under investigation and, based on the definition, estimate their market share and market power deriving from there. Considering the emergence of the digital economy, the TFTC’s amendment of the Guidelines is commendable. Nevertheless, stakeholders still need to observe how the TFTC defines the relevant markets under the amended Guidelines in future cases.
If you have any comments or questions on the amendments to the Guidelines, please do not hesitate to contact us.