Legal Definitions - product market

In legal contexts, particularly within antitrust and competition law, the term product market refers to the specific set of goods or services that are considered close substitutes for one another by consumers. It defines the competitive arena in which businesses operate, encompassing all products or services that consumers would readily switch to if the price of one increased significantly, or if its quality decreased. Identifying the relevant product market is crucial for determining if a company has significant market power or if a proposed merger would substantially lessen competition.

Here are some examples illustrating the concept of a product market:

• Example 1: Carbonated Soft Drinks

  Imagine a scenario involving popular brands like Coca-Cola, Pepsi, Sprite, and Fanta. From a consumer's perspective, these beverages often serve similar purposes, such as refreshment or a sweet treat. If the price of Coca-Cola were to rise significantly, many consumers would likely consider switching to Pepsi or another brand of carbonated soft drink as a viable alternative. This high degree of substitutability among these specific types of beverages places them within the same product market for carbonated soft drinks. However, bottled water or fruit juice, while also beverages, might be considered outside this specific product market because they often cater to different consumer needs or preferences, making them less direct substitutes for carbonated soft drinks in many purchasing decisions.

• Example 2: Online Video Streaming Services

  Consider services such as Netflix, Hulu, Disney+, and Max. These platforms all offer on-demand access to a library of movies and television shows, competing for subscribers' entertainment budgets. If Netflix were to significantly increase its monthly subscription fee, many users might consider canceling their subscription and opting for Hulu or Disney+ instead, viewing them as viable alternatives that provide a similar content experience. This strong substitutability among these platforms defines them as being within the same product market for online video streaming services. Traditional cable television, while also providing entertainment, might be considered a separate but related market due to different delivery mechanisms, pricing models, and content access paradigms.

• Example 3: Premium Wireless Noise-Canceling Headphones

  This market segment includes high-end products like the Bose QuietComfort series, Sony WH-1000XM series, and Apple AirPods Max. Consumers looking for superior audio quality, advanced noise cancellation, and wireless convenience are likely to compare these specific brands and models. If the price of one brand's premium headphones increased, consumers would likely consider the others as direct alternatives offering a similar high-end experience and feature set. Basic wired earbuds or budget-friendly on-ear headphones would generally not be considered part of this specific "premium wireless noise-canceling headphones" product market, as they cater to different consumer needs, performance expectations, and price sensitivities.