European Commission has adopted revised Market Definition Notice for competition cases
Background
On 8 February 2024 the European Commission (the "Commission") adopted a revised Market Definition Notice (the "Notice"). This is the first revision of the Notice since its adoption in 1997 and it is the culmination of a prolonged review launched in April 2020.
The revised Notice offers expanded and up-to-date guidance on market definition, which is an important intermediate step in the Commission's assessment of competition cases, including cases concerning anti-competitive agreements, abuse of dominant positions, and mergers. The objective of market definition is to define the relevant market in order to identify the actual and potential competitors constraining undertakings' commercial decisions. Accordingly, market definition is a tool used by the Commission to identify and define the boundaries of competition between undertakings.
Why did the Commission adopt a revised Notice?
Significant social and technological developments have taken place since the original Notice was adopted in 1997. With the adoption of the revised Notice the Commission has tried to address these changes, for instance increased digitalisation, new ways of offering goods and services as well as the interconnected nature of commercial exchanges.
In addition, countless decisions in competition cases have been made by both the Commission and the Court of Justice of the European Union during the 20 years since the original Notice was adopted in 1997. Therefore, the revised Notice also includes updates and clarifications which are necessary to bring the Notice in line with developments in the Commission's practice. Finally the Notice also reflects the policy orientations in the Commission's Communication "A competition policy fit for new challenges" published in November 2021.
Insight into the method for definition of the relevant markets enhances the transparency of the Commission's decision-making, which results in a number of benefits. Firstly, the administrative burden of the Commission in competition cases is reduced. Secondly, legal certainty for the parties in a concrete competition case is increased, as it enhances predictability in terms of the Commission's assessments. Also, undertakings will to a greater extent be able to take these factors into account in their internal decision-making when contemplating, for instance, acquiring other undertakings.
Differences from the previous 1997 Notice
The Commission points out, for instance, the following key elements of the revised Notice:
- Increased focus on non-price parameters, including innovation, quality, reliable supply and sustainability, is important to market definition.
- Digital markets, such as multi-sided markets and digital “ecosystems” (e.g., products built around a mobile operating system).
- Innovation-intensive industries, where undertakings compete on innovation.
- Dynamic and forward-looking assessments, especially in markets undergoing structural transitions, such as regulatory or technological changes.
- Factors used when defining a market as global, EEA-wide, national, or local, etc.
- Quantitative techniques used when defining markets, such as the small but significant and non-transitory increase in price (‘SSNIP') test.
- Alternative metrics relevant for the calculation of market shares
- Overview of the various sources of evidence and their probative value for market definition analyses.
Plesner's comments
The world has changed significantly since the original Notice was adopted in 1997. A revised Notice is a positive and necessary adaption of a key element of competition cases, and it will be an essential and enhanced contribution in future cases.
Even if the revised Notice is not binding on the national competition authorities ("NCA") in the European Economic Area ("EEA"), the revised Notice will also be crucial to and serve as a guiding contribution for the NCA's, including the Danish competition authority's, assessments of market definitions. [The legislative material behind the Danish Competition Act refers to the original Notice from 1997 as guiding for the definition of the relevant market.
In recent years (2021 and 2023 respectively) CMA (the Competition and Markets Authority in the UK) and DOJ/FTC (US Department of Justice/Federal Trade Commission) have also re-vised their respective merger guidelines, including adjustments in relation to the market definition.