An extract from The Dominance and Monopolies Review - 7th edition

Market definition and market power

In terms of market definition, the CPC follows its methodology on assessment of the market position, and defines the product and geographical market by analysing the interchangeability on the supply and demand sides. In bTV v. Nova, the main tool used for this purpose was questionnaires addressed to clients of the investigated undertaking. The CPC also acknowledges the small but significant non-transitory increase in prices test, and in BACCO v. Electricity Distribution Networks Operators, the division of two services into separate markets was justified by the difference in the price (in addition to other factors).

Language-related markets (such as media) are traditionally considered as national. In the energy sector, market definition often follows the scope of the licence. Useful guidance may also be found in the market analysis, which the CPC issued following its sector inquiries. However, the market definition accepted by the CPC in one case is not legally binding in subsequent cases dealing with the same service or product.

Article 20 of the CPA lists the factors considered by the CPC in the assessment of whether a company holds a dominant position as follows:

  1. market share;
  2. financial resources; and
  3. the ability to access the market, technologic development and commercial relations with other undertakings.

A company is dominant if, owing to any or all of these factors, it is independent from its competitors, suppliers and clients and therefore able to impede competition in the market.

Market share is a primary indicator, even though there is no statutory threshold for dominance. According to the CPC's practice, such finding is unlikely if the market share is below 40 per cent. Market shares are assessed in the light of the particulars of the relevant market. For this purpose, the CPC explores the market structure and the degree and effectiveness of competitive pressure exercised on the undertaking by its competitors, suppliers and clients. The importance of the market share is higher in markets with significant barriers to entry. However, in bTV v. Nova, even a market share of above 60 per cent was not considered as enough evidence for dominance in an oligopolistic market with high entry barriers because of the strong competitive pressure exerted between the two main market players. On the contrary, in Techem, Techem was found dominant in the individual measurement and allocation of heating energy market even with a market share of less than 50 per cent because of its market share combined with vertical integration, economies of scope and the incompatibility of its installed measurement devices with competitors. In Swissport v. Sofia Airport, the court disagreed with the CPC that Sofia Airport was not dominant in the market of ground-handling services, considering its high market share (above 50 per cent) and the ability to cross-subsidise the ground-handling operations from other sources of revenues owing to its monopoly position of an airport operator.

The CPA explicitly states that the dominant position may be occupied by more than one undertaking; however, the concept of 'joint' or 'collective' dominance has not yet been developed in practice.

The majority of cases of established abuses of dominance concern companies in a monopolistic or almost monopolistic position owing to exclusive licences for providing certain services in a given area (e.g., in the energy sector) or operating essential facilities (such as the majority of utilities, including ownership of a bus station) or natural monopolies (e.g., collective management organisations). This trend can be explained by the difficulties encountered in proving a dominant position in a market where some competition still exists, which can only be overcome by a high-profile economic analysis.

For the purpose of establishing a stronger bargaining position, the CPC explores the structure of the relevant market and the particular commercial relationship:

  1. the degree of dependency between the parties thereto;
  2. the nature and the difference in scale of their business; and
  3. the existence of alternative trading partners, sources of supply, distribution channels and clients.

The concept of relative market power is relatively new and is particularly important for companies operating in oligopolistic markets with few strong competitors, where none is individually dominant, but each can exert some market power towards clients or suppliers. Therefore, the prohibition of abuse of stronger bargaining position is more relevant for vertical relationships than for horizontal relationships.

In A1, the CPC found the leading mobile telecommunications operator in Bulgaria (one of three) to be in a stronger position than Handy Bulgaria, an independent distributor of its services. In Cable Operators v. bTV and Nova, Nova and bTV were both found to be in stronger positions towards four regional cable operators distributing their TV channels. However, in Piero 97, such position was rejected for bTV towards its client and major advertising agency, Piero 97. In another case, the company operating the Kaufland chain of hypermarkets was found relatively dominant towards one of its suppliers.