Market definition is central to the application of EU competition law: in merger control, horizontal and vertical agreements, as well as abuse of dominance probes, market definition is a key first step in determining the relevant competitive landscape and dynamics. The European Commission (the Commission) has laid down guidelines on market definition in a Notice of 9 December 1997 (the Notice).

In June, the Commission launched a public consultation to obtain views on: 

  • whether its Notice remains relevant, effective, efficient, coherent and provides added value; and 
  • what (if any) amendments need to be made to the Notice

For more on the consultation, see our previous post.

Freshfields’ global antitrust group has submitted a response to the consultation in which we underline the continued relevance of the Notice as an important mean to ensure legal certainty for businesses and a consistent and coherent application of the competition rules across the EU. At the same time, we suggest the Commission update the Notice to encompass relevant learnings and (market) developments over the last 23 years, including the emergence of digital markets.

We set out more detail below.

A Notice on market definition is still relevant and useful

Markets have very distinct characteristics, meaning market delineation must be performed on a case-by-case basis.

In order to nevertheless ensure consistency of approach and provide legal certainty, it is helpful that businesses, national competition authorities and advisors have access to  guidance on how to approach this assessment. The Notice has been effective at providing such practically useful guidance on the Commission’s approach to market definition and therefore remains an important tool.

The Notice should be amended to account for significant developments since 1997

While the (legal) principles that guide market definition have remained substantially unchanged, we find that there is significant added value in revising the Notice to reflect:

  • the Commission’s experience in making market definition assessments since the adoption of the Notice;
  • the evolution and refinement of economic methods;
  • additional guidance from the EU Courts; and
  • changes to the way in which many markets operate as a result of innovation and changing consumer behaviour.

Any revision of the Notice should be flexible enough to anticipate further changes in the economic landscape and should ensure that the Notice withstands the test of time.

The Notice should account for increased digitalisation

We focused our observations on the possible need to revise the Notice to account for the increased digitalisation of the economy which, understandably, has not been reflected in the text of the current Notice. We invited the Commission to revise the Notice to reflect characteristics and concepts born from this important trend, including:

  • two- or multi-sided (digital) platforms – clearer guidance is needed as to how the interactions between different sides of multi-sided platforms will be taken into account and what characteristics of multi-sided platforms and principles will be followed in order to define a ‘single-market approach’ or ‘multi-markets approach’;
  • zero-price products  businesses and practitioners would benefit from additional guidance from the Commission on how to define markets in the presence of zero-price products and services, given that the traditional SSNIP-test cannot easily be applied in such a scenario;
  • multi-homing – we invited the Commission to provide guidance on the key factors necessary to establish when products used in a multi-homing setting fall within the same relevant market; and
  • rapid innovation – we would welcome an indication that the Commission is able to adapt the application of the principles in the Notice flexibly to consider dynamic changes to the structure of a relevant markets (both in terms of products and geographic reach), including by taking account of the parties’ predictions on how the markets will likely evolve. The Commission should furthermore consider whether and if so, how the impact of competition exerted by complementary and non-substitute services/products should be included in the definition of the relevant market.

Guidance at EU level provides added value

We highlighted that it is essential to have an EU framework on market definition in order to ensure legal certainty for businesses and a consistent and coherent application of the competition rules across the EU.

Read our full submission to the Commission (PDF).