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1. Introduction
Article 102 prohibits the “abuse by one or more undertakings of a dominant position”. Hence, Article 102 applies only where the undertaking has a “dominant position”. This section introduces the relevancy of market shares to assess “dominant position.”
2.Analysis
2.1 Findings of dominance
The dominant position is assessed in two steps: i) defining the relevant market by SSNIP test, ii) assessing the position of the undertaking under investigation within the relevant market.
In the second step, market shares provide valuable information about the structure of the market and of the relative importance of the various undertakings active on the market.
However, according to the Commission, market share is only a useful indication. The Commission interprets market shares in the light of relevant market conditions, and in particular of the dynamics of the market and of the extent to which products are differentiated. In other word, market shares themselves do not determine whether a firm has a dominant position. As the court in United Brand pointed out, “in general a dominant position derives from a combination of several factors which, taken separately, are not necessarily determinative”.
According to the Commission, in order to assess the dominant position, following three factors will take into account.
1) the position of the undertaking and its competitor
2) expansion and entry
3)countervailing buyer power
2.2 Relevance of market shares
Having said above, however, the Court have required high market shares to infer monopoly power. The Court of Justice in Hoffmann-La Roche said “although the importance of the market shares may vary from one market to another the view may legitimately be taken that very large market shares are in themselves, and save exceptional circumstances, evidence of the existence of a dominant position. An undertaking which has very large market share and holds it for sometime…is by virtue of that share in a position of strength”.According to the Case law of ECJ, the following conclusion regarding relevancy between market shares and dominant position are led.
1) Dominance where an undertaking has a market share of 50 per cent or more.
Ever since AKZO, it is believed that EU case law adopts rebuttable presumption of dominance at 50 per cent market share.
2) Dominance where an undertaking has market shares in the range of 40% to 50 %
In United Brands vs. Commission,the Court said market shares above 40 per cent may be relevant to find dominance. However in the case of 40%- 50%, the conclusions depend on i) changes of market share in the long term, ii) the strength and number of the competitors, iii) the market shares of second place.
3) Dominance where an undertakings has market share in the range of 30%-40%
In the case of undertakings has market shares in the range of 30% to 40%, it is necessary to proof the disparity in the market shares or significant market entry barriers. However, according to the Commission’s experience, “dominance is not likely if the undertaking’s market share is below 40% in the relevant market.”
3. Conclusion.
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I. What does the indirect method for estimating market power consist of?
There are two methods to determine if an undertaking holds dominance, “direct” and “indirect”:
“The ‘direct’ method involves estimating the market power by using econometric methods, particularly the residual demand curve (the demand curve facing a single firm). This requires data which is often not available and even if it is the estimation of market power in this way may prove problematic, but it has considerable support amongst economists.”[1]
Most competition authorities around the world 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.[2] 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.[3]
It has been understood that where a company has small market shares, it is unlikely for it to have substantial market power. Likewise, very large market shares can be evidence of the existence of a dominant position.[4]
II. Are market shares enough?
Market shares may be useful to determine whether a company holds market power, but they should not be analysed solely. It is important to assess other market characteristics, such as the position of potential competitors and of buyers, and the relative size and strength of current competitors.[5] Altogether, it is important to consider all competitive conditions within the market, to evaluate whether buyers have options to purchase from alternative sources.[6]
Entry barriers are to be especially assessed. They can be an important determinant of the extent and persistence of market power,[7] as they enable a firm already in the market to earn monopoly profits without attracting other firms (i.e. potential competitors) to enter that market.[8]
Competitive constraints acting on undertakings may limit their ability to engage in unilateral or coordinated anticompetitive conducts. These constraints may be exerted either from the supply side (e.g. actual or potential competition) or from the demand side (e.g. buyer bargaining power). These constraints may be able to protect the market, deterring or defeating an attempt by the dominant undertaking to profitably increase prices.
[1] Jones A, and Sufrin B, “EU Competition Law” (6th ed., Oxford University Press, 2016), p. 55, para. 2.
[2] OECD, Competition Committee, “Market Definition”, DAF/COMP(2012)13/REV1, JT03326638 (2012), para. 21.
[3] Niels G, Jenkins H, and Kavanagh J, “Economics for competition lawyers” (2nd ed., Oxford University Press, 2016), p. 99, para. 3.18.
Jones A, and Sufrin B, “EU Competition Law” (6th ed., Oxford University Press, 2016), p. 55, para. 3.
[4] Case 85/76 Hoffman – La Roche & Co AG v Commission [1979] para. 41.
Case C-62/86 AKSO Chemie BV v Commission, [1991].
[5] Niels G, Jenkins H, and Kavanagh J, “Economics for competition lawyers” (2nd ed., Oxford University Press, 2016), p. 104, para. 3.31.
[6] OECD, Competition Committee, “Market Definition”, DAF/COMP(2012)13/REV1, JT03326638 (2012), para. 20.
[7] Niels G, Jenkins H, and Kavanagh J, “Economics for competition lawyers” (2nd ed., Oxford University Press, 2016), p. 99, para. 3.41.
[8] Jones A, and Sufrin B, “EU Competition Law” (6th ed., Oxford University Press, 2016), p. 56, para. 1.
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Responsible: Freie Universität Berlin, by its President. |
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