§2.1.1 Demand substitution

25. As set out in paragraph 23, the main approach used by the Commission to define the relevant product market is that of assessing the substitutability of products from the perspective of the customer (demand substitution). Situations of sufficiently strong demand substitution arise when customers would switch easily from the products of the undertaking(s) involved to readily available alternative products. The Commission includes those products in the same relevant product market as they constitute effective and immediate competitive constraints. 26. The Commission determines the range of products that customers of the undertaking(s) involved regard as effective and immediate substitutes, as well as the degree of substitutability with the products of the undertaking(s) involved by examining a variety of evidence. Such evidence includes, depending on the requirements and particularities of each case, indicators for the reasons why customers would or would not substitute one product with another, such as customer preferences relating to product characteristics, prices, functionalities, intended use, barriers to switching and switching costs. It also includes direct indicators of substitution, such as evidence of past or hypothetical substitution. Further details on the evidence that the Commission relies on when assessing demand substitution are set out in Section 3.2. 27. The main question to be answered when examining that evidence is to what extent and to what readily available substitute products (if any) the customers of the undertaking(s) involved would switch in response to a deterioration in the conditions of supply of the products of the undertaking(s) involved relative to other products (52). For operational and practical purposes, this assessment usually focuses on reactions to price increases, but it can also consider changes in other competitive parameters, such as in the quality of the product or its level of innovation, as set out in paragraph 15. 28. Conceptually, this approach means that, starting from a candidate market which initially contains the product(s) or types of products of the undertaking(s) involved that is/are the focus of the competitive assessment, readily available substitute products (if any) are added to the candidate market until the products identified constitute a relevant product market. 29. The theoretical criterion often used to determine whether the candidate market constitutes a relevant product market is whether a hypothetical monopolist in the candidate market could exercise market power. This question can be assessed by asking whether a hypothetical monopolist in the candidate market would find it profitable to implement a small but significant non-transitory increase in price (the ‘SSNIP test’) (53). 30. When undertakings compete on parameters other than price, such as quality or the level of innovation, the application of the SSNIP test is difficult, in particular in the context of zero monetary price products (54) and highly innovative industries. Further difficulties arise depending on the theory of harm applied in the investigation. When the assessment focuses on the change in market power of the undertaking(s) involved, such as for the analysis of whether a horizontal merger would lead to non-coordinated effects, the SSNIP test can generally be applied at the prevailing market price. However, this may not be the case where the focus is on the assessment of the existing market power of the undertaking(s) involved, such as when defining markets for the purpose of assessing the existence of dominance under Article 102 TFEU (55). Moreover, practical constraints can make it difficult to apply the SSNIP test empirically when defining the relevant product market in real-life cases. For example, it may not be possible to gather reliable information on the amount of losses a hypothetical monopolist would incur when implementing a SSNIP. 31. Therefore, while the Commission may rely on the principles of the SSNIP test in its assessment of the relevant market, there is no obligation on the Commission to apply the SSNIP test empirically, and other types of evidence are equally valid to inform the market definition, as further described in Section 3 (56). In fact, in most cases the SSNIP test serves only as a conceptual framework for the interpretation of available evidence.

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Source: EUR-Lex (Cellar) · retrieved 2026-09-07