N In Economic Competition exists the so called concept of “Relevant Market”, which, prior its study and determination, it becomes the cornerstone in the resolution of cases of monopolistic practices; accomplishing such determination it is not always an easy task though.
In Mexico, articles 11, 12, 13, 17 and 18 of the Federal Law of Economic Competition (LFCE) make reference to the “relevant market”, which it is linked to relative monopolistic practices and mergers. In both cases, such relevant market ought to be revised by the Federal Competition Commission as part of its investigations, which is a mandate expressly inserted in the LFCE, whereas in the United States and in the European Union such concept is an additional element of study that is not expressly included in the Law.
But the question is: what did the legislator mean when it integrated to the LFCE the concept of “relevant market? On these grounds, and taking into account that the LFCE does not provide a meaning of such concept, same ought to be implied. Reference shall be made below to certain aspects that intend to bring clarity to the concept.
The concept of relevant market is comprised by two words that hold their very own meaning. The word “market” is defined in the dictionary with several meanings; however, we consider three of them more akin to our target, as follows.
1. The course of commercial activity by which the exchange of commodities is affected.
2. A geographic area of demand for commodities or services.
3. The area of economic activity in which buyers and sellers come together and the forces of supply and demand affect prices.
 From these three different meanings we obtain the ideas of: affection of commodities; geographic area; and the economic activity carried out by buyers and sellers.
In turn, the word “relevant” means:
1. Having significant and demonstrable bearing on the matter at hand.
Therefore, “relevant” implies a traceable, significant, logical connection.
Consequently, as an attempt of fixing the nature of the relevant market we may state it as:
Geographic area in which economic agents perform a group of operations of purchase and sale, which significantly affect a commodities sector.
Now, in order to complete this attempt of definition it should not be overlooked the fact that same should also contain the idea of time, due to the fact that those operations are necessarily developed within a time dimension. Hence, the suggested definition may be concluded as follows:
Relevant market is the geographic area in which economic agents perform a group of operations of purchase and sale, which significantly affect a commodities sector within a time dimension.
Due to the foregoing, it is considered that this definition is just an approach to the idea of “Relevant Market”, which might result not enough yet, inasmuch as, among the concepts of Economic Competition, the understanding of the scope of “Relevant Market” results of higher complexity.
 Actually, it is not obtaining the meaning of relevant market which results the difficult part here since we have modestly proposed one herein, but more over its determination; for such purpose, article 12 of the LFCE states the criteria that has to be considered when practices that jeopardize the process of competition arise.
The criteria to be followed pursuant article 12 of the LFCE is as follows:
a) The possibilities of substitution of the product or service in study for others, either of national or foreign origin, considering up to which level the consumers may reach substitutes and the time for such substitution;
b) The distribution costs of such product; of its raw materials, complements and substitutes in other regions and abroad, taking into consideration freight, insurance, tariffs, and other no-customs restrictions, restrictions imposed by the economic agents and the time required to supply the market from those regions;
c) The costs and the probabilities that the consumers have to come to other markets; and
d) The legal restrictions either Federal, local or international that limit the access of consumers to alternative supply sources.
Thus, the relevant market shall be determined based on the competition that may exist among certain products, therefore, the products that compete among each other belong to the same market and, in turn, the products that do not compete among them shall belong to different markets. In other words, the relevant markets shall not superimpose, due to the fact that each product has its own relevant market and, consequently, within it there will be found all those products that compete among each other in a higher or lower level, directly or indirectly; when the products compete among each other it should be understood as they are substitutes.
 For instance, if we revise the automotive sector we will notice that there is a large variety of products that form part of a great market, but within such market there are segments that will constitute individual relevant markets; there will be relevant markets of compact cars, of family vans, of two seats sport cars, of pick-ups, of SUV’s1 and, therefore, it will only compete the products belonging to the same sector or relevant market, i.e. an SUV will not be considered a competitor of a two seats sport car, but of another SUV of the same or of a different brand name that will compete directly or indirectly, depending on the particular analyzed case, since within such relevant market of the SUV’s there will be vehicles of four or six pistons, which may or may not be competitors of one another.
This is precisely what the Federal Competition Commission obtains from the analysis of relevant markets; the Commission will seek, based on the criteria of the aforementioned article of the LFCE, the level of substitution among products or services as well as the legal restrictions and barriers that limit their access in order to find its final determination.
This document does not intend to solve any particular problem; it is only a personal opinion of the author with respect to the commented topic; should you have any comment or query, please contact Daniel Maldonado: dmaldonado@lexcorp.com.mx. 2
Mexico, January 2007.
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1 Sport-Utility Vehicle.
2 Cosulted sources:
1. DÍEZ ESTELLA, FERNANDO, Algunas consideraciones en torno a la Comunicación sobre definición de mercado relevante de la Comisión Europea y las Mergers Guidelines del Departamento de Justicia de EEUU, Universidad Antonio de Lebrija, Anuario de la Competencia 2001, Fundación ICO-Marcial Pons, págs. 321 a 349.
2. GONZÁLEZ DE COSSÍO, FRANCISCO, Competencia Económica. Aspectos Jurídicos y Económicos, Ed. Porrúa, 1ª edición, México, 2005.
3. PÉREZ MOTTA, EDUARDO, FTC-DOJ Hearings, Section 2 of the Sherman Act and single-firm dominant behavior, www.usdoj.gov/atr/public/hearings/single_firm/docs/218672.htm.
4. TEN KATE, ADRIAAN y GUNNAR, NIELS, La delimitación del mercado relevante: el enfoque del monopolista hipotético, Gaceta de Competencia Económica, Comisión Federal de Competencia, Año 2, Número 5, Septiembre-Diciembre 1999.
5. Merriam Webster Dictionary, http://www.webster.com/ .
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