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

Market definition and market power

i Market definition

Neither the legislator nor the SCA have adopted guidelines on how to define the relevant market. In its decisions and judgments, the SCA and the courts regularly refer to EU case law and the Commission's notice on the definition of the relevant market.

The purpose of the market definition in abuse cases is to assess whether the undertaking in question has the possibility to prevent effective competition from being maintained on the market by giving it the power to behave to an appreciable extent independently of its competitors.

The small but significant and non-transitory increase in price (SSNIP) test has been accepted by the courts as an established method for defining the relevant market. A SSNIP test may, however, be misleading in cases regarding abuse of dominance if the test is based on a price that is already above the competitive level (the 'cellophane fallacy'), or if the market is characterised by strong network effects. In practice, the assessment is based on a number of circumstances, including not only quantitative evidence of substitution, but also qualitative aspects such as the qualities of the products and their intended use. Market definitions in previous cases may provide guidance, but are not precedential.

ii Market power

The term 'dominant position' is interpreted the same way as it is in Article 102 TFEU. As regards a definition of the term, the preparatory works to the previous Competition Act (preparatory works) refer to the judgment of the CJEU in United Brands, in which a dominant position was defined as:

a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition from being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers.

The term 'dominant position' includes both single and collective dominance.

The assessment of dominance is based on a number of circumstances that are not individually decisive. A company's market shares are a natural starting point for the analysis. Market shares above certain thresholds may lead to presumptions of dominance.

Despite the existence of market share presumptions, the assessment of dominance is usually based on a full assessment of all the relevant facts in the case, including, in particular:

  1. barriers to entry and expansion;
  2. advantages (financial, technological, regulatory, historical, etc.);
  3. vertical integration;
  4. presence in neighbouring markets;
  5. whether the company is an unavoidable trading partner; and
  6. whether customers have counterweighing buyer power.

In two recent cases regarding abuse of a dominant position, the PMC has refrained from relying on a market share presumption, despite high market shares.

The courts have also referred to the European Commission's guidance paper on exclusionary abuses for further guidance on the term 'dominant position'.