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Market definition - Theory and case study

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  1. The Massmart Holdings Limited and Moresport Limited merger.
    1. Definition of the relevant market.
    2. The evidence and the merits of the parties' arguments.
    3. The views of the competition commission and the competition tribunal of the relevant market.
    4. The reasons why the merger would lead to substantial lessening or prevention of competition.
  2. The definition of a market.
    1. The relevant product market.
    2. Definition of the relevant market.
  3. Bibliography.

The market is referred as the group of organizations or consumers that have an interest in certain product either from supply or demand side of it. ?The definition of the relevant market is an important initial step in establishing whether a particular firm qualifies as dominant? (Neuhoff: 2006:P 108) Thus the main aim of relevant market definition when firms wants to merge is to have a merger control by trying to identify and prevent to have transactions that will create market power or dominance. The relevant market definition is regarded as a tool that assists in identifying and defining the parameters of competition between firms. ?The objective of defining a market in both its product and geographic dimension is to identify those actual competitors of the undertakings involved that are capable of constraining their behavior and preventing them from behaving independently of an effective competitive pressure?.

[...] According to the market shares nationally for general sports equipment and outdoor equipment if the acquisition was to be approved it, would result in the merger dominating the markets and lessening competition, the merged company would dominate the market and eventually control prices. It was also indicated in the report that post merger share of the merged entity in the equipment markets when calculated for both parties , it would be even though in the report there was a mention of barriers to entry for these items are low the high market share was still categorizing the merger as dominant Geographical Market The market for both companies is classified as national, and if the merger is allowed to go through will lessen the competition as the merging parties follow a national pricing policy, and it was mentioned that the managers in chain stores at different towns or provinces have no control on setting prices. [...]

[...] The opposition will still have to import certain ingredients from their ?mother-companies? abroad which will favor the manufacturer in South Africa who do not have those expenses Geographic market definition If the merged firm should raise its prices, it won't lose too much of its business, because as the hypothetical monopolist, people will still feel the for the product. Other suppliers will not enter into the market at such a high rate to make the increased price unprofitable, because of the dominant position of the merged firm as a monopolist. [...]

[...] According to engineering news (2006) the companies argued that the barriers to entry in the market were low, but the tribunal said that that type of entry was not likely to constrain the merged companies' market power The reasons why the merger would lead to substantial lessening or prevention of competition Economic theory predicts that in perfectly competitive markets prices are set by the market forces, and individual firms are price takers. Ironically, there is no price competition in these markets and market participants compete on the basis of non-price factors such as service delivery' (Niehoff et al 2006: 36). [...]

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