
































Microsoft Word - APE-V5N2-p33


Advances in Politics and Economics 
ISSN 2576-1382 (Print) ISSN 2576-1390 (Online) 

Vol. 5, No. 2, 2022 
www.scholink.org/ojs/index.php/ape 

33 
 

Original Paper 

Dilemma and Breakthrough: Review on Substitution Analysis of 

the Definition of Relevant Markets and Platforms—From the 

Perspective of Guideline on Anti-Trust Platform Economy by 

the Anti-Trust Committee of the State Council 

Yijing Xia1* 
1 Southwest Minzu University, Chengdu, China 
* Yijing Xia, Southwest Minzu University, Chengdu, China 

 

Received: April 5, 2022          Accepted: April 25, 2022       Online Published: April 27, 2022 

doi:10.22158/ape.v5n2p33            URL: http://dx.doi.org/10.22158/ape.v5n2p33 
 

Abstract 

The prosperity of platform economy posed new issues for antitrust law enforcement and new challenges 

to the definition of relevant markets in antitrust investigations. Substitution analysis is not only a 

traditional method of relevant market definition, but also the underlying logic throughout the process of 

relevant market definition. It can still be applied to relevant market definition in the context of platform 

economy. Based on the Guideline of Platform Antitrust, this paper starts with the regulations about the 

definition of relevant markets in platform economy. It briefly analyzes the dilemmas of traditional 

methods of defining relevant markets in platform economy. Then, it reviews the limitation and 

rationality of substitution analysis of relevant market definition. 

Keywords 

platform economy, relevant market definition, antitrust 

 

1. Introduction 

With the deep integration of information & communication and digital data technologies, the constantly 

growing platform economy has become a field of innovation in modern economy. In addition to 

optimizing the allocation of resources and accelerating economic transition, it is also reshaping the 

traditional ecology of competition. The various new forms of monopoly are also causing impacts on 

existing competitive legal systems. In the ordinary logic and context of anti-monopoly regulations, 

regardless of competitive behaviors, the definition of relevant markets is the essential step. Due to the 



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unique features of pricing strategies and platforms like dynamic competition, multilateral market 

structures and cross-network externality, it has become significantly difficult to clearly define the scope 

of competitive relations. In this regard, the reasonable definition of relevant markets in platform 

economy becomes the focus and difficulty in the academic and practical domains of antitrust 

jurisdiction (Chen & Guo, 2021). Guideline on Anti-Trust Platform Economy by the Anti-Trust 

Committee of the State Council (hereinafter referred to as Guideline of Platform Antitrust) clearly 

stipulates: substitution analysis is the essential method of commodity market definition in platform 

economy. The primary purpose of substitution analysis is to clarify and assume the scope of 

commodities relevant to the functions provided by monopolists. The expansion and superposition of 

commodity functions, caused by trans-boundary competition of platform operators, have made it more 

difficult to conduct substitution analysis of commodities. In particular, when using substitution analysis, 

it is necessary to consider the dynamic competition and business model of platform economy, and the 

updating of technological applications. The limitation of reasonable justification of substitution 

analysis should be realized as well (Chen, 2021). 

 

2. Relevant Market Definition in Platform Economy According to Guideline of Platform 

Antitrust 

The definition of relevant markets is the logical beginning of the abuse of market-dominant positions. 

All forms of competition take place within a scope of markets. Defining relevant market means the 

defining market scope of competition between operators. According to the Antitrust Law and Guidance 

on Relevant Market Definition by the Antitrust Committee of the State Council, “relevant markets” 

refer to the commodities and regions for operators to compete in terms of specific goods or services. 

Other than stipulating the purposes and principles of antitrust in platform economy, Guideline of 

Platform Antitrust also explains the methods of definition of relevant commodity markets and regional 

markets, and places emphasis on the necessity and importance of adhering to individual case analysis, 

as well as the role of relevant market definition in various cases. In spite of the challenges in platform 

economy posed by network externality, unique business operation, pricing strategies and high market 

concentration (SSNIP test could not be applied in some specific cases), substitution analysis is still a 

basic method. Other methods, such as SSNDQ and SSNIC, have been put forward on this basis as well 

in recent years (Han, 2021). Compared with the previous version of Antitrust Guidelines on Platform 

Economics (Exposure Draft), Guidelines of Platform Antitrust deleted statements concerning “relevant 

markets without being defined”, which reveals the prudential regulation of antitrust supervision sectors. 

To some extent, it also prevents the risk of uncertain application of the “direct evidence act” in practice 

(Chen & Guo, 2021).  

 

 

 



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3. Dilemmas: Traditional Methods of Defining Relevant Markets in Platform Economy and 

Causes of Failure 

When it comes to defining relevant markets, factors like commodity, region and time should be taken 

into consideration. For Internet platforms, defining relevant commodity markets is the key. Confirming 

the substitution of goods is the most important element in defining relevant markets. Substitution 

analysis is one of the conventional ways of market definition, including the analysis of demand 

substitution and supply substitution. To be more specific, demand substitution is the primary method, 

and supply substitution is the secondary and complementary method. In addition, different from 

traditional economy, the homogeneity of goods in platform economy is constantly enhanced along with 

the expansion and superposition of commodity functions. If substitution of commodities is identified 

according to offline standards, it is likely to excessively expand the scope of relevant markets. 

Traditional demand and supply substitution methods and the assumed trustbuster testing method pay 

more attention to the functions and prices of goods in unitary markets. With the impact of new features 

on the Internet platform, traditional methods of relevant markets revealed obvious defects and 

weaknesses. Influenced by bilateral/multilateral markets, there are two causes for the failure of 

traditional methods to define relevant markets: 

Firstly, different users groups are involved in bilateral/multilateral markets. Moreover, different 

markets are interdependent and complementary, i.e., the services are interdependent and 

complementary promoting trades among bilateral/multilateral users. Besides, positive cross feedback 

effects may magnify the impact on unilateral users. The conducts of any platform about the users of one 

side can have an influence on the demand on the other side. Charge increases on users of Side A not 

only lead to the reduction in user demand of this side, but also less appeal to the platform users of Side 

B. Cross-side feedback mechanism gives rise to significant declines in total revenues of platforms 

(Tang Yaojia & Tang Chunhui, 2021). One change in market value can cause another change in price 

changes. The changes in supply and demand in another market can have reverse impacts on this market, 

thus causing the results of price tests to deviate from original anticipation (Zhang, 2017). In contrast, 

the traditional market definition is to assume the premise of no connection existing between markets 

and mutual independence between operators’ markets, so as to analyze the behaviors of operators in 

individual markets. 

Secondly, in general, if price is equal to marginal cost, it is feasible to maximize profit. Due to the 

Influence of bilateral/multilateral markets on price and cost structures, reasonable enterprises focus on 

overall benefit maximization rather than the profit maximization of the platform market at both ends, 

which is different from unilateral market analysis structures. Furthermore, in antitrust regulation, 

measuring the market power of trading platforms means more than just the price mark-up of users on 

one side while ignoring the network externality of the other side and between the two sides. It is 

imperative to measure the total price markups of users on both sides (Zhang, 2017). 

 



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4. Deconstruction: Methods of Relevant Commodity Market Definition Oriented by 

Demand-Substitution Analysis 

4.1 Commodity Definition  

Commodity definition plays an important part in relevant market definition. Identifying the functions 

that affect the replacement selection of consumers is the key to confirming essential commodities. 

Primary functions of users’ commodities should be determined by essential demands. “Primary 

functions” refer to certain functions or sets of functions that can satisfy the basic needs or purposes of 

consumers when using the commodities. Identifying “primary functions” aims to judge the sources of 

restrictions in relevant commodity competition. If commodities have the same primary functions, it 

means both of them may satisfy consumers’ demands, i.e. replaceable. However, platform commodities 

tend to be complex. For this reason, it is likely to face challenges due to the fuzziness of identifying 

basic commodities (Chen, 2021). In multilateral market analysis, it is necessary to focus on the demand 

substitution of commodities and services, and comprehensively adopt substitution analysis and 

quantitative analysis (Huang, 2019). 

4.2 Demand Substitution  

Demand substitution analysis is the basic method for antitrust law enforcement agencies to define 

relevant markets, which is highly intuitive and operable. Demand substitution analysis starts from the 

perspective of consumers. When prices, functions, quality and supply status of commodities change, 

the substitution of different commodities is determined by the difficulty of converting the demand side. 

As for price factors, theories of the Harvard structurist school proposed the model of cross elasticity of 

demand. The economic definition of cross elasticity of demand refers to the ratio of relative variations 

caused by commodity prices and commodity demand volumes. Substitutional relations, complementary 

relations or irrelevancy between commodities can be determined by arithmetical operation of the cross 

elasticity of demand and price (Lai & Zhong, 2022). Consumers are likely to choose other commodities 

due to price changes. Such a correlation is the cross-elasticity of demand. For functions, commodity 

functions have a direct influence on the realization of consumer demands and selections of substitute 

goods. If commodities have similar or identical functions, they are considered to be replaceable and 

highly competitive. If commodities have so different functions as to fail to meet the same purposes of 

usage, they are not quite likely to have substitution. It’s worth noting that customers’ actual demands 

cannot be ignored when analyzing the substitution of commodity functions. Special attention should be 

given to the primary commodity functions that satisfy consumers’ basic demands. If commodity 

functions are differentiated without considering consumers’ basic demands, the scope of relevant 

market definition may be excessively extensive (Chen, 2020). 

4.3 Supply Substitution Analysis 

Demand substitution analysis starts from the consumers’ perspective, while the supply substitution 

analysis focuses on the operators’ perspectives. Supply substitution analysis is conducted based upon 

factors like operator’s input to transform production facilities, the risks and the time to enter target 



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markets, so as to define relevant markets according to the degree of substitution among different 

commodities from operators’ perspectives. If changes occur in relative commodity prices and demands, 

it is less difficult for operators to switch to other productions and utilize production equipment and 

resources in producing substitute goods. In this regard, the degree of supply substitution is higher, 

which means they perhaps belong to the same market. Some researchers pointed out supply substitution 

analysis needs to consider the logic of demand substitution. According to supplier’s “demand”, it can 

be understood as the substitution perspective on “willingness or motivation to conduct commercial 

activities”, so as to discuss two factors: the difficulty of production switch and market access (Chen, 

2021).  

Guidelines of Platform Antitrust also stipulate supply substitution analysis. When it comes to 

substitution judgment, attributes and applications of commodities can not be ignored. Cross-price 

elasticity of commodities should be considered as well. But practical situations indicate that demand 

substitution analysis is used more frequently than supply substitution.  

 

5. Breakthrough: Review the Limitation and Rationality of Defining Relevant Markets Based on 

Substitution Analysis 

5.1 Limitation and Rationality of Substitution Analysis in Platform Economy 

Substitution analysis is the essential and primary method of defining relevant markets. It has become a 

new normal in Internet platform economy, cross-platform competition and mixed operation. Due to 

digital data and network information technology, marginal costs of platforms providing new goods are 

quite low. Substitution analysis expands the scope of relevant commodity markets. Commodities with 

complex functions make it hard to conduct substitution analysis. Meanwhile, due to the influence of 

multilateral market business model and network effect, it is difficult to identify the amount of relevant 

commodity markets. Hence, Guidelines of Platform Antitrust responded, “Relevant commodity markets 

can be defined according to the multilateral commodities involved in platforms. mutual relations and 

impacts among relevant commodity markets should be considered. If the cross-platform network 

effects can enable platform operators to implement adequate restraints on competition, relevant 

commodity markets can be defined according to overall platforms.” In addition, the priority of 

consideration is: according to different network effects of various platforms and specific traits of 

individual cases, identify effective competition restraints of platform markets. Lastly, based on 

consumers’ demand substitution, define the amount of relevant commodity markets (Chen & Guo, 

2021).  

Although platform economy has multiple impacts on market definition, the accurate grasp of consumer 

demands and constant competition is the core for operators in the field of platform economy. Hence, 

identifying the direct and effective competition among operators still focuses on the substitution of 

consumer demands. To make the results of relevant markets more accurate and conform to practical 

market conditions, demand substitution analysis needs to conduct further verification of the rationality, 



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i.e., based on consumers’ practical status in platform economy, appropriately detail the influential 

factors of substitution analysis. 

5.2 Perfection of Substitution Analysis in Platform Economy 

5.2.1 Increase Factors of Substitution  

Increasing factors of substitution is conducive to reducing the error terms in relevant market definition, 

enhancing the accuracy and predictability of conclusions.  

Take the number of users for instance. Platform benefits stem from massive users, and network 

externality will magnify the scope. Hence, user control is the core for platforms. The number of users 

in platform economy is the factor that needs urgent consideration. Notification on Application of 

Competition Rules of Access Agreements in Telecommunications Sector, released by the EU, pointed 

out: the importance of access economy is decided by the coverage of connected networks. What can be 

predicted is: due to network effects, even if for the advertising platforms of search engines, doubts and 

questions still exist concerning the substitution between search engines with massive users and those 

with minor users. network effect is actually incorporated in the consideration of the number of users, 

thus enhancing the accuracy of substitution analysis (Zhang, 2017).  

5.2.2 The Assistance of Data Analysis Tool 

In the massive information amount of platform economy, data analysis tool can play a subsidiarity role 

in identifying consumer switch during different periods and variables of commodities when it comes to 

demand substitution analysis. Moreover, economic models and certain facts can be utilized in the 

process of analysis and judgment. For example, some free/odd pricing commodities are charging more 

to the user side, i.e. original free/odd pricing commodities are offered to VIP users. In other cases, the 

quality of free/odd pricing service is lowered only to guarantee the experience of users who paid fees. 

On this basis, analyzing the situation of user and commodity switch will undoubtedly and vividly 

demonstrate the practical situation of demand substitution in relevant markets (Chen, 2021). 

To sum up, although relevant market definition according to substitution analysis has some limitations, 

the corresponding impacts can be counteracted to some extent. Substitution analysis still has great and 

practical significance to relevant market definition, especially resolving the issues about relevant 

market definition in platform economy. 

 

References 

Chen, B., & Guo, G. K. (2021, March). How to Do a Good Job in Platform Anti-monopoly Definition. 

Price Regulation and Antitrust in China, 15-17.  

Chen, B. (2021, February). Review of the Method for Defining the Relevant Market in the Field of 

Platform Economy—Interpretation Based on Article 4 of the Anti-monopoly Guidelines of the 

Anti-Monopoly Commission of the State Council in the Field of Platform Economy. Research on 

the Rule of Law, 89-101.  

Chen, B. (2020, March). Response of the Competition Law on the Solidification of the Internet Market. 



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Jianghan Forum, 122-130.  

Han, W. (2021, February). Brief Review of the Official Draft of the Anti-monopoly Guidelines for 

Platform Economy. Research on Competition Policy, 29-40.  

Huang, Y. Q. (2019, January). Construction and Application of Method for Defining the Relevant Market 

in Multilateral Platforms. Research on Competition Policy, 90-102.  

Lai, S. X., & Zhong, M. C. (2022, February). My Humble Opinion on the Relevant Market Definition for 

Digital Platforms. Price Regulation and Antitrust in China, 17-21.  

Tang, Y J., & Tang, C. H. (2021, February). Definition of the Relevant Market in Digital Platform 

Anti-monopoly Definition. Research on Financial and Economic Issues, 33-41.  

Zhang, C. Y. (2017, February). Reconstruction of the Method for Defining the Relevant Market in 

Platforms. Journal of Capital Normal University (Social Sciences Edition), 41-51.  

 


