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

Market definition and market power

i Market definition

The definition of relevant market under the Act on the Protection of Competition is identical to that of EU law. In practice, the Competition Authority and courts follow the soft law of the EU Commission and EU case law. To determine the relevant market, the Competition Authority uses similar econometric and other markers as are used by the European Commission (e.g., small but significant and non-transitory increase in price, price elasticity and correlation tests); however, it tends to do so on a smaller scale and with a lower degree of expertise.

ii Market power

Market power is defined in Article 10 of the Act on the Protection of Competition, wherein dominant market position occurs where the market power of one or more competitors acting in concert enables them to behave to an appreciable extent independently of its customers and consumers.

Such market power is assessed based on the value of the volume supplied or purchased in the (relevant) goods market (market share) during the period under examination, as well as on other markers, including competitors' economic and financial power, legal and other barriers to market entry, vertical integration, market structure and respective market shares.

Market share in the relevant market is the starting point for assessing market power. Once the market has been defined, the Competition Authority compares statistical data on the relevant competitors and may request internal data from them to assess the market structure and market share of the competitor or competitors in question. However, even where the market share of a competitor is above 75 per cent, the Competition Authority also usually analyses and evaluates other markers in order to provide the grounds for its final decision.

Relative dominance in the food industry

The Act on Significant Market Power was enacted in 2009 and revised in 2017. Any entity engaged in purchasing food products for their subsequent resale and that has significant market power is prohibited from abusing this power.

Significant market power is defined as a position from which the purchaser can unjustifiably extract advantages from suppliers in relation to the purchase of food or in relation to the provision or receipt of services related to the sale and purchase of food. The main criteria for assessing this power are market structure, market-entry barriers and the financial power of the purchaser. Any purchaser acting on behalf of another purchaser is regarded as though they were a single purchaser.

Significant market power can be assumed to exist when the criteria set forth in the Act are met. Any purchaser or purchasing alliance whose annual turnover from the resale of food and the provision of related services in the Czech Republic is higher than approximately US$230 million is regarded as being a purchaser with significant market power.

The initial consequences of this were originally significant, as a purchaser could be considered to be in abuse of significant market power even where the suppliers in question had significantly higher market power (absolute conception). However, the Act was later revised in light of criticism, with significant market power and the abuse of that power now being assessed by the Competition Authority on the basis of the absolute conception of market power, with a corrective mechanism in place to ensure that a purchaser is not considered as having significant market power where the supplier has greater market power.