Revised European Commission Notice on the definition of the relevant market for the purposes of Union competition law

On 8 February 2024, the Commission adopted its revised Notice on the definition of the relevant market for the purposes of Union competition law. The objective of this Notice, which was the subject of a public consultation at the end of 2022, is to provide guidance on how the Commission applies the concept of the relevant market in its enforcement of competition law, taking into account the significant developments that have occurred since its original Notice of 1997. By publishing the methodology it follows and indicating the main criteria and evidence on which it relies to define relevant markets, the Commission intends to increase the transparency and predictability of its policy and decision-making.

Key elements of the revised Notice

The revised Notice provides guidance on the Commission’s approach to defining relevant markets for the purposes of enforcing EU competition law. Defining the relevant market is an essential intermediate step, both in assessing the existence of an anti-competitive practice, such as an illegal agreement between undertakings or an abuse of a dominant position, and in verifying the impact of a proposed merger.

With the help of concrete illustrations from various sectors, the Notice describes the Commission’s general approach to market definition, the evidence used and the way in which this evidence is gathered and assessed. It also highlights the focus on environmental sustainability, the digitization of the economy and new ways of delivering goods and services.

In particular, the Commission recognises the importance of taking into account competition parameters other than price in defining the market, such as temporal considerations (seasonality, peak/off-peak hours, etc.), the specificities of the facts (sectoral differences, territory, supply chain, etc.) and a product’s durability, image, availability, innovation and quality, and taking account of expected transitions in the structure of a market when a forward-looking approach is required. For example, in the context of an assessment relating to medicinal products, the relevant product market may be widened to include products that are undergoing clinical trials or may be limited to a single specific molecule in view of the imminent entry of a generic version of an originator product.

The Commission also provides specific guidance on market definition in certain specific circumstances, such as multi-sided platforms, products supplied at a zero monetary price or digital ecosystems. The Commission recognises the difficulty of applying the SSNIP test in the case of competition based on parameters other than price (quality or innovation), particularly in the case of zero-price products. This test is applied to check whether the customers of the company in question would turn to substitute products or suppliers located elsewhere in the event of a 5% to 10% price increase. If this is the case, these products or regions should be included in the market definition.

It has to be said that the Commission does not prescribe a universal solution to these issues. For example, where there is a multi-sided platform, the Commission may – depending on the circumstances of the case – either define a single market encompassing the products offered by the platform as a whole or define separate markets for the products offered on each side of the platform. Similarly, where products supplied at zero monetary price are involved, the Commission cannot focus, as it generally does, on reactions to price increases to assess product substitutability, but must consider alternative methods, such as assessing customer behaviour in response to a small but significant and non-transitory decrease of quality.

The Commission also provides detailed methodological guidance on the definition of geographic markets, explaining the factors justifying global, European, national, regional, or local definitions, and in particular the role of imports in defining the geographic market.

Insofar as market definition then enables the Commission to calculate the total size of the market and the market share of each of the players, generally based on the sales of the relevant products in the relevant territory, the revised communication also provides additional guidance in this respect. In particular, the Commission stresses the need to assess market shares in a dynamic and forward-looking manner, rather than in a static manner, especially in the case of markets undergoing structural changes, such as regulatory or technological developments. It also points out that, in addition to sales data, other measurable criteria may provide additional or more useful information for determining market shares, such as the number of contracts awarded, the number of visits to a website, the number of downloads, the number of journeys, the level of R&D expenditure, etc. The relevance of these criteria depends once again on the extent to which they are used and thus on the circumstances of the case.

Conclusion

Twenty-seven years after its initial Notice on market definition, the Commission is modernising this tool in the light of economic developments. By publishing its methodology and placing developments in administrative practice and case law at the heart of its communication, the Commission intends to ensure greater predictability in its competition policy.

Nevertheless, market definition under competition law is a complex and technical exercise, which must be based on the particular facts and circumstances of each case and on current evidence. The position taken by the Commission in its previous decisions does not prejudge the outcome of future cases. Companies and their advisers are therefore invited to devote – on a regular basis – the necessary time and attention to this exercise in order to best assess, in their internal decision-making process, the likelihood that a competition authority will identify competition concerns in their particular case.

The new Notice is available at the following link: C_202401645EN.000101.fmx.xml (europa.eu).