1. what is a proof of market position?

Proof of market position refers to the process of assessing whether an enterprise has a dominant market position or whether there is a problem of excessive market concentration under the framework of competition law or anti-monopoly law. Market dominance refers to the ability of an enterprise to be independent of competitors, customers and consumers in the relevant market. Market concentration refers to the relative size and importance of the various participants in the relevant market.

The purpose of market position certification is to protect fair competition, prevent abuse of market dominance or unfair competition, and safeguard consumer welfare and social efficiency. In the implementation of competition law or antitrust law, the proof of market position usually involves the following situations:

Abuse of market dominance: If a company is deemed to have a dominant market position, it cannot take actions that restrict competition or harm the interests of consumers, such as pricing discrimination, predatory pricing, bundling, and exclusionary transactions.

Operator concentration: If an enterprise intends to merge, acquire or jointly operate with another enterprise, it needs to report to the relevant authorities and accept examination to determine whether the concentration of operators will lead to excessive market concentration in the relevant market, thus eliminating or restricting competition.

Monopoly agreements: if some enterprises have reached some agreements to restrict competition or price manipulation, then these agreements may constitute monopoly agreements, which may be prohibited or punished.

Frequently Asked Questions in Proof of 2. Market Position

Proof of market position is a complex and professional process that involves multiple factors and steps. In practice, there are some common and difficult to solve the problem, as follows:

How do (I) define the relevant market?

The relevant market refers to the sum of products or services that can replace or compete with each other due to the similar functions, uses, prices and other factors of the products or services within a certain geographical area. The definition of the relevant market is the first and most critical step in the demonstration of market position, as it directly affects the subsequent calculation and analysis of market share, market power and other indicators.

The definition of the relevant market is usually based on demand substitution and supply substitution. Demand substitution refers to the consumer's point of view, considering which other products or services consumers will turn to buy when the price of a product or service rises slightly. Supply substitution refers to the consideration of what other products or services the producer will turn to in the event of a small increase in the price of a product or service from the producer's perspective. The results of demand substitution and supply substitution can verify and complement each other to form a complete and reasonable definition of the relevant market.

The definition of the relevant market is not an easy task, as it needs to take into account a variety of factors, such as product or service attributes, functions, uses, quality, price, consumer preferences, geographic area, transportation costs, import and export trade, etc. In practice, the following problems often arise:

Too narrow or too broad definition of the relevant market: If the relevant market definition is too narrow, then it may ignore some really competitive products or services, resulting in market share and market power is overestimated, and then misjudged as having market dominance or there is a problem of excessive market concentration. If the relevant market definition is too broad, it may include some products or services that are not competitive, resulting in underestimation of market share and market power, thus ignoring some real market dominance or excessive market concentration.

Dynamic changes in the definition of the relevant market: If the relevant market is affected by technological innovation, changes in consumption habits, policy adjustments and other factors, it may cause the definition of the relevant market to change over time, thus making the previous market position certificate lose timeliness and accuracy.

Diversified definition of the relevant market: If the relevant market involves multiple products or services, or multiple geographic regions, it may lead to multiple possibilities and selectivities in the definition of the relevant market, which may lead to differences and disputes between different entities in the identification of the relevant market.

How do (II) calculate and compare market shares?

Market share refers to the ratio of an enterprise's sales, sales volume, production capacity and other indicators in the relevant market to the sum of all enterprises in the relevant market. Market share is a common indicator of the relative size and importance of an enterprise in the relevant market, and it is also a preliminary basis for judging whether an enterprise has a dominant market position or whether there is a problem of excessive market concentration.

Calculating and comparing market shares typically requires several steps:

Determine the calculation index: according to the characteristics of different industries and different products or services, select the appropriate calculation index, such as sales volume, sales volume, production capacity, profit, etc. Different calculation indicators may reflect different market shares, so they need to be selected and interpreted on a case-by-case basis.

Determine the calculation time: according to the purpose and demand of the market position certificate, choose the appropriate calculation time, such as annual, quarterly, monthly, etc. Different calculation times may reflect different market shares, so they need to be selected and explained on a case-by-case basis.

Determine the data source: according to the reliability and validity of the market position certificate, select the appropriate data source, such as official statistics, industry associations, third-party organizations, enterprise self-reporting, etc. Different data sources may reflect different market shares, so they need to be selected and verified on a case-by-case basis.

Calculate and compare market share: Based on the indicators, time and data sources identified above, calculate and compare the market share of each enterprise in the relevant market, and analyze the trends and reasons for differences.

Calculating and comparing market shares is also not an easy task, because it needs to take into account a variety of factors, such as market structure, product differences, price elasticity, competitive strategies, etc. In practice, the following problems often arise:

Overly simple or overly complex market share calculations: If the market share calculation is too simple, it may overlook some important factors that affect market share, resulting in distorted or misleading market share. If the market share calculation method is too complex, it may increase the uncertainty or incomprehensibility of market share, resulting in a lack of persuasion or operability of market share.

Lack of comparability or consistency of market share data: If market share data comes from different indicators, time or data sources, it may lead to a lack of comparability or consistency between market share data, resulting in the loss of meaning or bias in market share analysis.

Lack of dynamic or sensitive market share analysis: If the market share analysis only focuses on static data at a certain point or interval, it may ignore the dynamic characteristics of market share changes over time or environmental changes, resulting in the loss of timeliness or adaptability of market share analysis.

How do (III) assess market forces and barriers to entry?

Market power is the ability of a firm to influence decisions such as price or output in the relevant market. Barriers to entry are factors that prevent new entrants from entering the relevant market or restrict the expansion of existing participants. Market power and entry barriers are important indicators to measure whether an enterprise has a dominant market position or whether there is a problem of excessive market concentration, and they are also supplements and amendments to market share analysis.

Assessing market power and barriers to entry typically requires several steps:

Determine the evaluation method: according to the characteristics of different industries and different products or services, select the appropriate evaluation method, such as price-cost gap method, residual demand curve method, critical elasticity method, Herfindahl-Hirschman index method, etc. Different assessment methods may reflect different market forces and barriers to entry, and therefore need to be selected and interpreted on a case-by-case basis.

Determine the evaluation criteria: according to the purpose and needs of the market position certificate, select the appropriate evaluation criteria, such as the absolute or relative value of market power, the level or strength of barriers to entry. Different evaluation criteria may reflect different market positions, so they need to be selected and interpreted on a case-by-case basis.

Determine the data source: according to the reliability and validity of the market position certificate, select the appropriate data source, such as official statistics, industry associations, third-party organizations, enterprise self-reporting, etc. Different data sources may reflect different market forces and barriers to entry, so they need to be selected and verified on a case-by-case basis.

Evaluate and compare market forces and barriers to entry: Based on the methods, standards and data sources identified above, evaluate and compare the market forces and barriers to entry of individual firms in the relevant markets, and analyze their trends and reasons for differences.

Assessing market forces and barriers to entry is also not an easy task, as it takes into account a variety of factors, such as demand elasticity, supply elasticity, product differentiation, price discrimination, economies of scale, network effects, patents, government regulation, etc. In practice, the following problems often arise:

Over-subjective or over-objective methods of assessing market forces and barriers to entry: If market forces and barriers to entry are assessed over-subjective, they may be subject to bias or misunderstanding that can lead to overestimation or underestimation of market forces and barriers to entry. If market forces and barriers to entry are assessed too objectively, factors that are difficult to quantify or observe may be overlooked, leading to underestimation or overestimation of market forces and barriers to entry.

Lack of comparability or consistency of market power and entry barrier data: If market power and entry barrier data come from different methods, standards or data sources, this may lead to a lack of comparability or consistency between market power and entry barrier data, which may lead to a loss of meaning or bias in market power and entry barrier analysis.

Lack of dynamic or sensitive analysis of market forces and barriers to entry: if the analysis of market forces and barriers to entry only focuses on static data at a certain point in time or within a certain range, it may ignore the dynamic characteristics of market forces and barriers to entry that change with time or environment, thus causing the analysis of market forces and barriers to entry to lose its timeliness or adaptability.

Solutions in 3. Market Proof

In view of the common problems in the above market position certificate, this paper puts forward the following solutions:

(I) use of economic methods

Economic method refers to the use of economic principles, models, assumptions and other tools to carry out quantitative or qualitative analysis of the relevant market, market share, market power, entry barriers and other factors involved in the market position certificate, in order to improve the scientific and objective nature of the market position certificate. Economic methods can help us:

More accurate definition of the relevant market: By using demand substitution testing, supply substitution testing, cross-elasticity testing, etc., competitive relationships in the relevant market can be identified more effectively, thus avoiding overly narrow or overly broad definitions of the relevant market. At the same time, through the use of dynamic analysis, diversification analysis and other methods, can be more flexible to respond to the changes and diversity of the relevant market, so as to avoid outdated or inconsistent relevant market definitions.

More reasonable calculation and comparison of market share: Through the use of price-cost gap method, residual demand curve method, critical elasticity method and other methods, can more fully reflect the relative position and influence of an enterprise in the relevant market, so as to avoid too simple or too complex market share calculation method. At the same time, by using the Herfindahl-Hirschman index method, Lorenz curve method, Gini coefficient method and other methods, we can more intuitively show the competition situation and concentration in the relevant market, so as to avoid the lack of comparability or consistency of market share data.

More in-depth assessment of market forces and barriers to entry: By using game theory, information economics, behavioral economics and other methods, a more detailed analysis of an enterprise's competitive strategy and behavioral motives in the relevant market can be analyzed, so as to avoid too subjective or too objective market forces and barriers to entry assessment methods. At the same time, through the use of economies of scale, network effects, patent rights, government regulation and other methods, we can more systematically examine the competitive advantages and disadvantages of an enterprise in the relevant market, so as to avoid the lack of dynamic or sensitive market forces and barriers to entry analysis.

(II) uses multi-dimensional analysis

Multi-dimensional analysis refers to not only focusing on a single factor or indicator, but also considering multiple aspects and levels of information and evidence in order to improve the comprehensiveness and balance of market position certification. Multidimensional analysis can help us:

Collecting data more widely: In the market position proof, data is very important support and basis. By adopting multi-dimensional analysis, we can collect data from different channels and angles, such as official statistics, industry associations, third-party organizations, corporate self-reporting, consumer surveys, etc. This can increase the quantity and quality of the data, thereby improving the reliability and validity of the data.

More comprehensive analysis of data: In the market position proof, data is a very complex and variable form of expression. By using multi-dimensional analysis, we can analyze data from different perspectives and methods, such as historical analysis, horizontal analysis, vertical analysis, comparative analysis, causal analysis, etc. This can increase the meaning and value of the data, thereby improving the persuasiveness and operability of the data.

More fair evaluation of data: in the market position certification, data is a very sensitive and controversial basis for judgment. By using multi-dimensional analysis, we can evaluate the data from different positions and purposes, such as positive evaluation, negative evaluation, neutral evaluation, objective evaluation, subjective evaluation, etc. This can increase the diversity and balance of the data, thereby improving the fairness and rationality of the data.

(III) considering dynamic factors

Dynamic factors are internal or external factors that affect changes in the relevant market, market share, market power, barriers to entry, etc., such as technological innovation, consumption habits, policy adjustments, etc., in the proof of market position. Considering dynamic factors can help us:

Update data in a more timely manner: Due to the existence of dynamic factors, the data involved in the market position certificate may change over time or the environment, thus making the previous data lose timeliness and accuracy. By considering dynamic factors, we can update the data in a more timely manner to reflect the latest market conditions and competitive conditions, thereby improving the real-time and adaptability of the data.

More flexible adjustment of methods: due to dynamic factors, the methods involved in the market position certificate may change with the situation or demand, thus making the previous methods less applicable and effective. By considering dynamic factors, we can adjust the method more flexibly to adapt to different market characteristics and competitive characteristics, thereby improving the sensitivity and innovation of the method.

Deeper understanding of the problem: Due to the existence of dynamic factors, the issues involved in the market position certificate may change with changes or developments, thus making the previous issues lose importance and urgency. By considering the dynamic factors, we can understand the problem more deeply, so as to grasp the essence and trend of the problem, so as to improve the attention and solution of the problem.

Case Analysis of 4. Shangpu Consulting Company

Champu Consulting is a company specializing in competition or anti-monopoly law consulting services, providing its clients with market position certification and other related services. The following are some of the specific cases provided by Champ Consulting for its clients:

Abuse of Market Dominance by a Telecom Operator in (I)

A telecom operator has a high market share in China's mobile communications service market and has taken some actions that restrict competition or harm the interests of consumers, such as pricing discrimination, predatory pricing, and bundling. Champ Consulting was commissioned by one of its competitors to provide the following services:

Define the relevant market: Shangpu Consulting uses demand substitution testing and supply substitution testing to subdivide China's mobile communications service market into voice call service market, SMS service market, data traffic service market, etc., and determine the geographical scope of each sub-market.

Calculate and compare the market share: Shangpu Consulting Company calculated and compared the market share of a telecom operator in each sub-market by using the two indicators of sales and the number of users, and found that its market share in the voice call service market and short message service market reached 60% and 55% respectively, far higher than other competitors, while its market share in the data traffic service market was 40%, still in the lead.

Evaluate and compare market power and barriers to entry: Champu Consulting uses the price-cost gap method and the Herfindahl-Hirschman index method to evaluate and compare the market power and barriers to entry of a telecom operator in various sub-markets, and finds that its price-cost gap in the voice service market and SMS service market is 30% and 25%, respectively, which is much higher than the industry average, the price-cost gap in the data traffic service market is 15%, which is still higher than the industry average. At the same time, Champu Consulting also found that the Herfindahl-Hirschman index of 3600, 3025 and 1600 for a telecom operator in each submarket exceeded the threshold (2000), which is generally considered to be a problem of excessive market concentration.

Provide evidence and suggestions: based on the above analysis results, Shangpu Consulting Company provided sufficient evidence and suggestions for its clients to support its complaint to the relevant departments that a telecom operator abused its dominant market position, and demanded that it stop restricting competition or harming the interests of consumers, and make corresponding compensation or punishment.

The case of concentration of operators of an automobile manufacturer in (II).

An automaker plans to merge with another automaker to expand its size and influence in the Chinese passenger car market. Champ Consulting was commissioned to provide the following services:

Define the relevant market: Shangpu Consulting uses demand substitution testing and supply substitution testing to subdivide China's passenger car market into sedan market, SUV market, MPV market, etc., and determine the geographical scope of each sub-market.

Calculate and compare market share: Shangpu Consulting Company calculated and compared the market share of a certain automobile manufacturer and its merged object in each sub-market using two indicators of sales volume and production capacity, and found that its combined market share in the car market, SUV market and MPV market was 15%, 20% and 10% respectively, which were lower than other competitors.

Evaluate and compare the market power and entry barrier: using the critical elasticity method and the Herfindahl-Hirschman index method, the Shangpu consulting company respectively evaluates and compares the market power and entry barrier of an automobile manufacturer and its combined objects in various sub-markets, and finds that the critical elasticity in the car market, SUV market and MPV market is 4.5, 3.5 and 5.0 respectively, which are higher than the average level of the industry, the changes in the Herfindahl-Hirschman index in each submarket were 150, 200 and 100, respectively, all below the threshold (400) at which excessive market concentration is generally considered to exist.

Provide evidence and suggestions: Based on the above analysis results, Shangpu Consulting Company provided sufficient evidence and suggestions for its client to support its declaration to the relevant authorities and pass the examination of the concentration of business operators, and showed that its merger will not lead to excessive market concentration in the relevant market, thereby eliminating or restricting competition.

(III) a software developer monopoly agreement case.

A software developer has reached an agreement with another software developer that there will be no price competition in the Chinese office software market and that customers and regions will be allocated to each other. Champ Consulting was commissioned by one of its competitors to provide the following services:

Define the relevant market: using demand substitution testing and supply substitution testing, Shangpu Consulting subdivided the Chinese office software market into word processing software market, spreadsheet software market, presentation software market, etc., and determined the geographical scope of each sub-market.

Calculation and comparison of market share: Shangpu Consulting Company calculated and compared the market share of a software developer and its agreement object in various sub-markets using two indicators of sales volume and number of users, and found that its combined market share in the word processing software market, spreadsheet software market and demonstration software market was 70%, 65% and 60% respectively, far higher than other competitors.

Assessing and comparing market power and barriers to entry: using the price-cost gap method and the Herfindahl-Hirschman index method, Champu Consulting assessed and compared the market power and barriers to entry of a software developer and its agreement object in each submarket, respectively, it is found that the price-cost gap in the word processing software market, spreadsheet software market and demonstration software market is 40%, 35% and 30% respectively, which are far higher than the industry average, while the changes of Herfindahl-Hirschman index in each sub-market are 4900, 4225 and 3600 respectively, which exceed the threshold (400) that is generally considered to have excessive market concentration.

Provide evidence and suggestions: Based on the above analysis results, Shangpu Consulting Company provided sufficient evidence and suggestions for its entrusting party to support its complaint to relevant departments that a software developer and its agreement object constituted a monopoly agreement, and required it to stop restricting Competition or price manipulation, and make corresponding compensation or punishment.

5. Conclusion

This paper analyzes the proof of market position from the following aspects:

What is Market Position Proof?

Frequently Asked Questions in Proof of Market Position

Solutions in Proof of Market Position

A Case Study of Champ Consulting

Through the analysis of this paper, we can draw the following conclusions:

The purpose and significance of the market position certificate: the purpose of the market position certificate is to protect fair competition, prevent abuse of market dominance or unfair competition, and safeguard consumer welfare and social efficiency. Proof of market position has important value for enterprises, consumers and governments, such as improving the competitiveness and innovation of enterprises, increasing consumer choice and satisfaction, and promoting government supervision and law enforcement.

Difficulties and Challenges of Proof of Market Position: Proof of market position is a complex and professional process involving multiple factors and steps. Proof of market position faces several difficulties and challenges, such as the acquisition and processing of data, the selection and application of methods, the formulation and implementation of standards, and the collection and evaluation of evidence.

The development and trend of market position proof: market position proof is a dynamic and changing process, which is affected by technological innovation, consumption habits, policy adjustment and other factors. The market position certificate shows the following developments and trends, such as the application and innovation of economic methods, the adoption and improvement of multi-dimensional analysis, and the consideration and reflection of dynamic factors.