Classsical economic theory suggests the perfect competitory markets provides both the inactive ( allocative efficiency and productive efficiency ) and dynamic efficiency. However the competitory market construction is the word picture of an ideal universe and the existent markets operate far from the competitory 1s.
The stipulations of a competitory market construction is as follows:
big Numberss of persons and houses ;
small or no concentration of market power ;
perfect information ;
free mobility of resources and merchandises ;
no spillover effects in either production or ingestion so that private and societal costs
and benefits are the same[ 1 ].
When any of these premises are violated, there is a possibility of market failure.
There are several grounds for the market failures which lead the markets to run:
The being of asymmetric information and moral jeopardies originating due to those information dissymmetry
The being of public goods
The fact that the market does non be
The fact that the competitory market construction could be hampered.
Therefore the authorities may interfere to the markets in instance there arises failures due to one of the grounds mentioned above. The last failure of the markets are tried to be corrected through competition jurisprudence. Competition jurisprudence can be defined as organic structure of norms that promotes or maintains market by modulating anti competitory behavior by companies.
Even though there were older ordinances that prohibits trusts or monopolisation the Sherman Act of the US is regarded to be the first competition jurisprudence in modern sense. The Section 1 of the Sherman Act prohibits trusts ( or “ trusts ” ) and states that “ Every contract, combination in the signifier of a trust or otherwise, or confederacy, in restraint of trade or commercialism among the several provinces, or with foreign states is herewith declared to be illegal. ” Section 2 of the Act attacks monopoly itself, which states that “ Every individual who shall monopolise or try to monopolise any portion of the trade or conspire with any other individual or individuals to monopolise any portion of the trade or commercialism among the several provinces or with foreign states, shall be deemed guilty of a misdemeanoraˆ¦ ”[ 2 ]
What does a competition jurisprudence prohibits? Typically all competition acts resembles one another and prohibits:
Agreement among houses to find competitory parametric quantities such as monetary value degree, measure of a merchandise, the sum of a discount, etc. as a consequence of which the market mechanism starts to dysfunction and the consumer wekfare is transferred to the manufacturers or houses.
Maltreatment of -one or more firms- to dominant place.
Amalgamation or acquisiton as a consequence of which there occurs a creative activity or strengthening of dominant place and the competition is significantly reduced in the relevant market.
In Turkey, the article 167 of the Constitution clearly charges the State with forestalling monopolisation and cartelization in the markets, which may originate de facto or as a consequence of understandings. As a consequence, in 1994 the Act on the Protection Competition is enacted, and in 1997 the Competition Board in charge of implementing the relevant Act and secondary statute law is formed[ 3 ].
We already mentioned the agencies that a competition authorization can use: the prohibition of anticompetitive understandings, the prohibition of maltreatment of laterality and the amalgamation control government. In order for the last two mechanisms to be expeditiously and right employed, two other constructs need to be defines: relevant market and market power.
Relevant market is made up of two seperate constructs: relevant peoduct market and relevant geographic market. Relavant merchandise market is defined in Communique No. 1997/1 on on the Amalgamations and Acquisitions Which Require the Authorization of the Competition Board, as “ the market consisting the goods or services which are the topic of a amalgamation or an acquisition, and the goods or services which are deemed indistinguishable in the oculus of consumers in footings of their monetary values, intended usage and features is taken into history ; other factors that may impact the market determined shall besides be assessed. ” The relevant geographic market, in return, is defined in the same Communique as “ The geographical markets are countries in which undertakings operate in the supply and demand of their goods and services, in which the conditions of competition are sufficiently homogeneous, and which can easy be distinguished from neighbouring countries, as the conditions of competition are appreciably different from these countries. ”
Main purpose of market definition is to happen the extent to which each merchandise sold by a house is capable to competition or to see the most immediate competitory restraints faced by a house. In other words, with the market definition the intent is to seek to happen what are the challengers of a house or merchandise and where the house acts. Such a definition therefore tells us the merchandises that are close replacements and finds the likely houses within the same market. Market definition requires a consideration of replaceability both on the demand and on the supply side. For illustration, if the monetary value P of a good additions, the goods which demand displacement are the replacements of relevant good. We can utilize it in snaps. This shows us closer goods such as apple juice and grape juice. On the other manus if the monetary value of a good additions, the goods that a steadfast displacement its production easy, such as yogurt and milk.
Therefore, the definition of relevant market is of rather importance as the analysis of laterality within the market requires a right definiton of the relevant market.
How, so the market is defined? The quantitative techniques used for specifying the relevant markets are as follows:
monetary value correlativity trial,
shipment trial ( Elzinga-Hogarthy trial )
conjectural monopolizer trial ( Small but Significant Nontransitory Increase in Prices – SSNIP ) .
The monetary value correlativity trial can be defined as an analysis analysis designed to mensurate the sensitiveness of the monetary value of one merchandise to the monetary value of an alleged replacement. The purpose of the analysis is to mensurate the grade of competitory force per unit area bing between one merchandise and other types of merchandises. The step which quantifies the overall dependance of two time-series of monetary values and thereby the grade of replaceability between two merchandises is called the correlativity coefficient. By definition, the positive correlativity coefficient lies between 0 and +1: the higher the grade of correlativity is for two merchandises ( that is to state, the closer the correlativity coefficient is to +1 ) , the more likely is the being of a combined merchandise market including both of them[ 4 ].
The trial was besides by Turkish Competition Authority used in specifying the relevant market for illustration in CadburySchweppes/Intergum amalgamation instance[ 5 ]. The weak correlativity between monetary values of different types of masticating gums was considered as supportive grounds to the qualitative appraisal about the relevant market definition. As a consequence, it was decided that the merchandise types like “ masticating gum with sugar ” , “ sugar-free mastication gum ” and “ masticating gum with sweetening ” are in different relevant merchandise markets.
The shipment trial, or Elzinga-Hogarty Test, is used to specify boundaries of the relevant merchandise market and employed in several ready to blend concrete market probes. In this trial it is tried to be figured out whether the important proportion of the production is consumed locally and whether a important proportion of ingestion is provided locally. The trial analyzes beginning and finish forms for the ingestion and cargo of merchandises and helps to place relevant competitiors of unifying parties test provinces that a certain part can represent a distinguishable geographic market if a important proportion of the ingestion in that part is provided locally and a important proportion of the production in that part is consumed locally. The ‘little in from exterior ‘ ( LIFO ) standard provinces that the per centum of ingestion non produced locally should non transcend 10 % . The ‘little out from inside ‘ ( LOFI ) standard provinces that the per centum of production non consumed locally should non transcend 10 % . If one of these standards is non met, it is concluded that the relevant part is capable to effectual competitory restraints from providers outside the part. The market should so be defined more loosely until both standards are met[ 6 ].
SSNIP Test began to be used since mid 1980 ‘s when the term was defined in the US Horizontal Merger Guidelines. The trial can be defined in a manner that if it is profitable for a conjectural monopolizer to increase the monetary value ( s ) of the merchandise ( s ) in this narrowly defined campaigner market by 5 % , and if he does non confront important competitory restraints from merchandises outside and the campaigner market is hence the relevant market. However, the addition in monetary value ( s ) is non profitable because consumers would replace to merchandises outside the campaigner market, the market definition must be extended to include the closest of these replacements[ 7 ].
The TCA used this trial merely in one instance ( Oyak Cimento-Lafarge instance[ 8 ])
Laterality is another term that is used about in all antimonopoly probes in maltreatment of laterality and amalgamation instances.
Dominant place refers to the power of one or more projects in a peculiar market to find economic parametric quantities such as monetary value, supply and the sum of production and distribution, by moving independently of their rivals and clients[ 9 ]. To cocclude that a house is dominant in a specific market needs some standards to be fulfilled. The most of import standards is market portion, the higher the market portion the more possibility to reason that a house has dominance in the market. Besides the other factors demands to be checked to happen out laterality is as follows:
Economies of Scale/Scope and Network Effectss
Control of Essential Assetss
Previous Findingss of Laterality
The compettion jurisprudence cen be ragardedd as a organic structure of public jurisprudence taking to rectify the market failures originating out from the patterns of the houses. Two out of three basiz tools used by any competition authorization ( the prohibition of maltreatment of laterality and the prohibition of amalgamation taking to creative activity or strenghtening of laterality as a consequence the competition is significantly impeded ) beeds market definition and market power. The basiz techniques used for the definition of the market are monetary value correlativity, cargo and SSNIP trials. As for the analysis of market power, there are severral factors needed to be checked, and the most of import one is market portion. Besides, the Lerner index is besides used for the assesment the market power of the house[ 10 ].