As per the Competition Act of 2002 (the Act), the “relevant market” is defined cumulatively on the basis of the relevant geographical market (RGM) and relevant product market (RPM). Hence, we must look at these two concepts distinctively. As per Section 2(s), the relevant geographic market is a geographical territory in which competition conditions in a relevant market of a product are sufficiently the same for all participants in such a market and therefore this territory can be separated from other territories.

The RGM is affected by factors like consumption and shipment patterns, transportation costs, perishability and existence of barriers to the shipment of products between adjoining geographic areas. For example, in view of the high transportation costs in cement, the RGM may be the region close to the manufacturing facility.

The RPM comprises all those products and/or services that are regarded as interchangeable or substitutable by the consumer, primarily by reason of the products’ characteristics, their prices and their intended use. The market for cars, for example, may consist of separate RPMs for small cars, mid-size cars, luxury cars etc. as these are not substitutable for each other on a small change in price, i.e. by application of the SSNIP test.

The Competition Commission of India (CCI), while determining the RGM takes into account factors enlisted under Section 19(6), including regulatory trade barriers, local specification requirements, national procurement policies, adequate distribution facilities, transport costs, language, consumer preferences, need for secure or regular supplies or rapid after-sales service and switching costs. In the case of RPM, the CCI considers the Section 19(7) factors, such as physical characteristics or end-use of goods, price of goods or service, consumer preferences, exclusion of in-house production, existence of specialized producers and the classification of industrial products.

In simple terms, RPM refers to all products or services which are regarded as interchangeable by the consumer or the supplier by reason of the products’ characteristics, their prices and intended use, that is what competes with what whereas relevant geographical market refers to the specific geographical area or territory in which competition takes place and conditions are sufficiently the same for all people in the market or where the competition takes place. It is notable that the Act originally only considered demand-side substitutability, but the 2023 Amendment included supply-side substitutability as well to afford a more holistic assessment of competitive forces.

Arguments and approaches on market definition are driven by the entity’s interests. For example, in merger control, parties tend to attempt to define the market narrowly when they intend to show no overlaps between the acquirer and the target. However, where overlaps are apparent, parties may then push for defining a broader relevant market, such as by using the SSNIP test, to show that both parties to the combination are minor players in the market. This supports the claim that the combination would not cause any adverse appreciable effects on competition in the market. Competition authorities, on the other hand, scrutinize the relevant market as defined by parties to broaden the narrowly defined market in case of overlap and narrow the definition in case parties claim a minor share in the market.