Small but significant and non-transitory increase in price
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| Competition law |
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| Basic concepts |
| Anti-competitive practices |
| Enforcement authorities and organizations |
In competition law, before deciding whether companies have significant market power which would justify government intervention, the test of small but significant and non-transitory increase in price (SSNIP) is used to define the relevant market in a consistent way. It is an alternative to ad hoc determination of the relevant market by arguments about product similarity.
The SSNIP test is crucial in competition law cases accusing abuse of dominance and in approving or blocking mergers. Competition regulating authorities and other actuators of anti-trust law intend to prevent market failure caused by cartel, oligopoly, monopoly, or other forms of market dominance.
In 1982 the U.S. Department of Justice Merger Guidelines introduced the SSNIP test as a new method for defining markets and for measuring market power directly. In the EU it was used for the first time in the Nestlé/Perrier case in 1992 and has been officially recognized by the European Commission in its "Commission's Notice for the Definition of the Relevant Market" in 1997.
The original concept is believed to have been proposed first in 1959 by economist David Morris Adelman of the Aston University. Several other individuals formulated, apparently independently, similar conceptual approaches during the 1970s. The SSNIP approach was implemented by F. M. Scherer in three antitrust cases: in a 1972 Justice Department attempt to enjoin the merger of Associated Brewing Co. and G. W. Heileman Co., in 1975 during hearings on the U.S. government's monopolization case against IBM, and in a 1981 proceeding precipitated by Marathon Oil Company's effort to avert takeover by Mobil Oil Corporation. Scherer also proposed the basic concept underlying SSNIP along with limitations posed by what has come to be known as "the cellophane fallacy" in the second (1980) edition of his industrial organization textbook. Historical retrospectives suggest that early proponents were unaware of other individuals' conceptual proposals.
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