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Defining Relevant Market to Assess Antritrust Principle

Law No. 5 Year 1999 had eight years in implementation. Law titled 'Prohibition of Monopoly Practices and the Unfair Business Competition' has given its enforcement authority to agencies called Commission for Supervisory of Business Competition (KPPU) to carry its mandate. In other countries such as the United States, KPPU similar to US Fair Trade Commission (US FTC). In Japan there are also similar institutions, namely Japan Fair Trade Commission (JFTC). Although its name has slightly different context with KPPU (fair trade vs competition supervision), but these institutions have more or less similar tasks.

In accordance with the mandate of the Law, KPPU conduct competition law enforcement to create fairness in business competition. The question is, why competition has to be supervised? Economy grown so fast. Every business actor facing tighter competition. Therefore, business strategy are needed to ensure company able to survive from competition. However, in antitrust principle, there are no rules allow every strategy to be applied. Similar with a game, there are no cheat strategy and tactics allowed. Law No. 5 Year 1999 accomodate with a logical framework to avoid unfair competition.

Before kppu deal with unfair business practices, there are important competition assessment. How does it conducted? There is simple breakdown concept as follows. For instance, if Company A compete with company B, between its each product which are substitutable for each other. There is no guarantee no other products associated with this competition, for instance, the product C? For example, if when we have lunch at a cafetaria, and then choose to drink, whether bottled tea products between A and B. There is no guarantee only two distinct product in this kind of competition. It is possible product C which not take into account, affect this competition. Therefore, there some importance for a clear measure of how the coverage definiton concerned so the Law can take into account.

Let us answer the main question regarding what the market is? From several literature i have ever read we can conclude that economic market consist a set of products, a set of buyers, and a set of sellers, and geographic region, in which the buyers and sellers interact to determine prices for each product. The geographic extent of market is determined by arbitrage and transportation cost. Article 1 No. 10 Law No. 5/1999 mentioned Relevant Market is a market related to coverage or marketing area of business actor for its same, similar, or substitution of certain goods and/or services. Competition Law and Policy take into account the importance of potential violation or conduct which has maintaining effect of market power itself.

There are two dimension of definition of market relevant which are geographical and product dimension. The substitutable goods are the same relevant market if there are change of demand after increase of the price its rival product. For more brief explanation see this page.
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