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How to determine if an undertaking holds dominance?
It has been understood that a dominant undertaking has a high level of economic strength, which enables it to fix prices above short-run marginal cost and, in the long run, above average total cost[1]. These undertakings act independently of almost every other agent in the market, for they have little to none competitive constraints.[2] There are two methods to determine if an undertaking holds this kind of market power, “direct” and “indirect”:
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Most competition authorities around the world, thus, use the “indirect” method, which involves a structural approach, in assessing dominance. After defining the relevant market, they identify the competitors, and market shares are assigned to the market participants[4]. The size of a firm’s market shares, both in absolute terms and relative to those of its competitors, can be used in order to understand the degree of market power and existing competition in the market.[5]
The indirect method
It has been understood that where a company has small market shares, it is unlikely it has substantial market power. Likewise, very large market shares can be evidence of the existence of a dominant position.[6]
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