Executive Summary Ssnip-tests: Profit Increases per Segment (in Percentage)*

1 This study has been commissioned by the Directorate General of Competition of the European Commission. Any views expressed in it are those of the author: they do not necessarily reflect the views of the Directorate General of Competition or the European Commission. Purpose of the study The new competition rules applicable to distribution of passenger cars in the EU contain a number of innovations and, notably, the application of a distinct regime depending on the market shares held by the companies concerned 2. Whether different restraints of competition are covered by the rules may depend on the market shares held by the manufacturer or supplier and, thus, on how markets in the passenger car sector are defined. Yet the Regulation, which applies to all motor vehicles and servicing alike, does not define the various product and geographic markets that are relevant for its application (" relevant markets "). Nor do previous Commission decisions of application of EC competition rules set out precedent in respect of the passenger car sector. The approach the Commission follows to define the relevant market for the purposes of EC competition law is set out in its 1997 notice on this subject (" the Notice ") 3. This study provides a definition of the relevant markets concerning passenger cars, following the criteria and approach set out in the Notice. Methodology In line with the Notice, the study focuses the analysis on competitive constraints arising from demand substitution between different categories of cars and geographic areas within the EU. The definition of the relevant geographic market is based on evidence on international price differentials and trade barriers as documented in previously published studies or Reports, including from the Commission. The definition of the relevant product market is based on an econometric analysis of the demand for new cars, using a database for five EU countries over 1970-1999. The 4 Passenger cars are classified into different segments over that period following common classifications, verified to be consistent with objective characteristics (e.g. price, horsepower, width) and taking into account the model range of each brand. Six segments are distinguished: subcompact, compact, intermediate, standard/luxury, sports and minivans. Although the terminology differs, these segments more or less replicate classifications available in the market and used, notably, by the Commission in its car price report 4 , according to the following table of equivalence: Table. Classification of segments, different sources Segment …