What is SSNIP test used for?

Measurement. The SSNIP test seeks to identify the smallest relevant market within which a hypothetical monopolist or cartel could impose a profitable significant increase in price.

What is Ssnip criterion?

First set out in 1982 US Department of Justice Merger Guidelines. SSNIP test seeks to identify smallest market within which a hypothetical monopolist could impose a Small Significant Non-transitory Increase in Price. Usually defined as a price increase of 5% for at least 12 months.

What is SSNIP test in competition law?

The Test The SSNIP test is a tool in product market definition in which a minimal possible sub-set of products is taken for analysis of finding out relevant product market. It is seen if a theoretical HM, if having an option, will increase the prices of the products in a non-transitory way.

Why is the hypothetical monopolist test useful?

In antitrust law, under the Horizontal Merger Guidelines, the hypothetical monopolist test is used as a framework to determine if a relevant product market is properly defined as a first step before it is determined whether a company has monopoly power in that market violating antitrust law.

How is market antitrust defined?

What Is Market Definition? Market definition is a crucial part of building many antitrust cases. It’s also one way that alleged anticompetitive activity is measured. Market definition seeks to define a relevant market that separates the products and services that compete with each other and those that do not.

How can I apply for Ssnip?

To apply the SSNIP test quantitatively, precise economic data must be available to determine (a) the competitive level of prices which should be used for the test, (b) the profit margin of the hypothetical monopolist and (c)the cross-elasticity of demand and of supply between two products/areas.

What is demand side substitutability?

Demand-side substitution takes place when consumers switch from one product to another in response to a change in the relative prices of the products. When examining the likely responses of consumers, it is the response of the marginal consumer, not the average consumer which is important.

How does the hypothetical monopolist test work?

Hypothetical Monopolist Test: “requires that a hypothetical profit-maximizing firm that was the only present or future producer of the relevant product(s) located in the region would impose at least a SSNIP from at least one location, including at least one location of one of the merging firms.”

What is critical loss analysis?

Critical loss analysis has gained increasing importance in competition law. A critical loss is the loss in sales or output necessary to make a given price increase unprofitable, and thus it determines the amount of substitution needed to expand a provisional relevant market definition.

What is illegal under the Sherman antitrust Act?

The Sherman Act outlaws “every contract, combination, or conspiracy in restraint of trade,” and any “monopolization, attempted monopolization, or conspiracy or combination to monopolize.” Long ago, the Supreme Court decided that the Sherman Act does not prohibit every restraint of trade, only those that are …

What is the hypothetical monopolist test?

Should the SSNIP test be performed with an increase in price?

The U.S. Merger Guidelines do not specify whether the SSNIP test should be performed with an increase in one price, some prices, or all prices in the candidate market.

What is the SSNIP test for monopolies?

The SSNIP test seeks to identify the smallest relevant market within which a hypothetical monopolist or cartel could impose a profitable significant increase in price. The relevant market consists of a “catalogue” of goods and/or services which are considered substitutes by the customer.

Does the SSNIP test apply to two-sided digital platforms?

Because the SSNIP test implies a price increase by a hypothetical monopolist that produces one product, the application of the test to two-sided digital platforms raises the question of which price the hypothetical monopolist should be raising considering that digital platforms usually set two different prices, one on each side of the platform.

What is the critical loss in SSNIP test?

An alternative method for applying the SSNIP test where demand elasticities cannot be estimated, involves estimating the “critical loss.” The critical loss is defined as the maximum sales loss that could be sustained as a result of the price increase without making the price increase unprofitable.