Competition: Commission publishes findings of assessment of market definition opinion

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The European Commission has published a staff working paper which summarizes the findings of the assessment of the market definition opinion used in EU competition law.

The objective of the assessment was to contribute to the Commission’s assessment of the functioning of the market definition opinion, in order to decide whether to repeal the opinion, leave it as it is or revise it.

Executive Vice President Margrethe Vestager, in charge of competition policy, said: “We need to analyze the market and the market limits where companies compete. The Market Definition Opinion is very useful in this context. The assessment confirmed that it brings clarity and transparency to stakeholders on how we approach market definition. The basic principles of the Market Definition Communication, based on the case law of EU courts, remain valid today. At the same time, the assessment indicates that the Communication does not fully cover recent developments in market definition practices, including those related to the digitization of the economy. We will now analyze if and how the notice should be revised to resolve the issues we have identified. “

The Commission launched the evaluation of the market definition opinion in March 2020. During the evaluation, the Commission collected evidence to understand the performance of the opinion since its adoption in 1997. The evidence collected include, among others, the contributions of stakeholders brought together in a public consultation that took place between June and October 2020. In addition, the Commission consulted with EU national competition authorities and proactively engaged with experts and representatives of stakeholder groups. Finally, the Commission requested an external evaluation support study, who reviewed relevant practices in other jurisdictions, as well as legal and economic literature, in relation to four specific aspects of market definition: (i) digitization, (ii) innovation, (iii ) the definition of the geographic market and (iv) quantitative techniques.

The conclusions of the evaluation

The assessment showed that the Market Definition Communication remains highly relevant as it brings clarity and transparency to businesses and other stakeholders on the Commission’s approach to market definition – an important first step in the process. Commission assessment in many cases of cartels and mergers.

The results of the assessment indicate that the Market Definition Communication provides correct, comprehensive and clear guidance on key market definition issues and the Commission’s approach in this regard.

At the same time, the assessment also suggests that the Communication does not fully reflect the developments in best practice in market definition that have taken place since 1997, including the latest developments in EU case law. For example, the Commission has refined its approach to market definition based on current market conditions, which are now increasingly digital and interconnected, and the sophistication of the tools available, such as improved processing of data. ‘a large number of documents or refined quantitative techniques. In addition, since the adoption of the Communication, the Commission has also gained more experience in analyzing potentially global markets or at least larger than the European Economic Area.

Based on the assessment, areas where the Market Definition Notice may not be fully up-to-date include: (i) the use and purpose of the SSNIP (Small Significant Non-Transient Price) test in the definition relevant markets; (ii) digital markets, in particular with regard to products or services marketed at zero money price and digital “ecosystems”; (iii) assessment of geographic markets under conditions of globalization and import competition; (iv) quantitative techniques; (v) calculation of market shares; and (vi) non-price competition (including innovation).

The Commission will reflect on the need and how to address the issues identified in the assessment.

Background

Market definition is a tool for identifying the limits of competition between companies. The objective of defining the product and the relevant geographic market is to identify the actual competitors who constrain the business decisions of the companies concerned, such as their pricing decisions. It is with this in mind that the definition of the market makes it possible, among other things, to calculate market shares conveying significant information for the purposes of assessing market power in the context of merger or antitrust proceedings.

Market definitions reflect market realities. Therefore, they differ from sector to sector and may change over time. Geographic market definitions, for example, can range from national or local markets – such as for the retail sale of consumer goods – to global markets, such as for the sale of aircraft components. As market realities change over time, the Commission’s market definitions also change over time.

the Market Definition Notice provides guidance on principles and best practices on how the Commission applies the concept of relevant product and geographic market in its application of EU competition law.

More information

To see the dedicated web page of DG Competition, which contains all the stakeholder contributions submitted as part of the evaluation, summaries of the various consultation activities and the final report of the evaluation support study.


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