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EUROPEAN COMMISSION DG Competition - page 13 / 113





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question. For dominance to exist the undertaking(s) concerned must not be subject to effective competitive constraints. In other words, it thus must have substantial market power.

Market Power 24. Market power is the power to influence market prices, output, innovation, the variety or quality of goods and services, or other parameters of competition on the market for a significant period of time. In this paper, the expression “increase prices” is often used as shorthand for the various ways these parameters of competition can be influenced to the harm of consumers. An undertaking that is capable of substantially increasing prices above the competitive level for a significant period of time holds substantial market power and possesses the requisite ability to act to an appreciable extent independently of competitors, customers and consumers. Unlike undertakings in a market characterised by effective competition, a dominant undertaking not subject to effective competitive constraints is able to price above the competitive level. It can do so by reducing its own output or by causing rivals to reduce their output. The foreclosure of competitors may therefore allow the dominant company to further raise price or keep prices high.

Seller and Buyer market power 25. Both suppliers and buyers can have market power. However, for clarity, market power will usually refer here to a supplier’s market power. Where a buyer’s market power is the issue, the term ‘buyer power’ is employed.

Lack of Competitive Constraints 26. Higher than normal profits may be an indication of a lack of competitive constraints on an undertaking. More in general, the way in which a firm acts in a market may in itself be indicative of substantial market power, for instance where an undertaking increases its price while benefiting from falling costs. However, an undertaking's economic strength cannot be measured by its profitability at any specific point in time; even short-run losses are not incompatible with a dominant position.26

Not required that Domco has eliminated all opportunity for competition on the market


See Case 27/76 United Brands, cited in footnote 5, paragraph 126, and Case 322/81, NV Nederlandsche Banden Industrie Michelin v Commission (Michelin I) [1983] ECR 3461, paragraph 59.

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