News and developments
European Commission updates market definition notice
The Revised Notice provides a much-needed revision to the 1997 version—more than 25 years later.
What is a relevant market?
The starting point for competition analyses carried out by the Commission and national competition authorities, including Malta’s Office for Competition, is the definition of the boundaries within which competition is taking place amongst businesses. These boundaries constitute the relevant market.
The identification of the relevant market is the cornerstone of any analysis under EU competition law—be it merger control, abuse of dominance and coordinated conduct. Products which are deemed to be homogenous or substitutable by consumers, within a specific geographic catchment area, are placed in one ‘market’. If products fall within this ‘market’, such products are taken to compete against each other and to exert competitive constraint on one another.
The relevant market is the metric against which a business’s market share is measured from a product and geographic perspective. The market share is calculated based on the total market size and the business’s share of the market, generally, sales, or purchases, but other indicators may be more relevant.
These concepts were already stated in the 1997 Notice, but the Revised Notice attempts to explain the relevant principles in more practical terms and to adapt the methodology to globalisation, digitalisation and innovation of markets and competition.
The Revised Notice is clear that market definition is a means and not the ends itself. Its purpose is to allow the Commission to identify the parameters within which competition is taking place without prejudging the outcome Commission’s eventual competition analysis.
Key Changes
While the Revised Notice restates generally known principles applicable to the definition of the relevant market, it also codifies a number of changes which reflect recent decisional practice of the Commission.
First, the Revised Notice recognises that, apart from pricing, other non-pricing factors such as the product’s innovation, quality and availability may need to be considered to define the relevant market. The Commission lists the following factors:
Author: Clement Mifsud-Bonnici, Chis Grech
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- Sustainability, resource efficiency, durability
- Value and variety of uses, interoperability
- Image conveyed
- Security and privacy protection
- Lead-time, resilience of supply chains, reliability of supply and transport cost
Author: Clement Mifsud-Bonnici, Chis Grech