European Commission invites feedback on Market Definition Notice
While the basic principles of the Opinion “stay healthy“, the Commission proposed several important revisions to the opinion of “adapt it to the evolution of the practice of the Commission, to the case law of the courts of the EU as well as to the new realities of the market.” Overall, therefore, the update aims to codify the Commission’s existing practice and recent judgments of the Court, rather than bringing about a profound change in the way the Commission will assess future cases. Nonetheless, this is a very important development that will spark heated debate within the competition law bar in Brussels and beyond.
The updated notice includes a litany of proposed developments, but the most important categories relate to digital markets and global trade, and have featured prominently in a slew of major cases in recent years.
First, with regard to digital markets, in the 25 years since the Opinion was first published, the proliferation of e-commerce has led to significant challenges for product market definition purposes, including with respect to zero-cost services and “multi-sided” services. platforms. The updated opinion reflects how the Commission has developed its practice in these respects, particularly in the following way:
- The opinion highlights the importance of two issues that have been particularly important in this area: (1) forward-looking assessments and the role of potential competition, which frequently generate debate in rapidly changing markets; and (2) non-price competition, particularly in innovation and product quality.
- The opinion acknowledges the difficulty of using the “SSNIP” test (which assesses the propensity of customers to switch companies in response to a small but significant and non-transitory price increase) for zero-priced services. He notes that the Commission can use a wider range of evidence, including a new “SSNDQ” test (which assesses customer behavior in response to a small but significant and non-transitory drop in quality), which has been confirmed by the General Court of the European Union in its recent judgment android judgement. (Google v CommissionCase T‑604/18, paragraphs 174-181.)
- The Communication sets out the Commission’s approach to market definition with regard to multi-sided platforms. This aims, where appropriate, to take into account the indirect interactions between the different facets of the platform, allowing the assessment of each facet of the platform in isolation or a holistic assessment of the products offered by the platform as a whole.
Second, with regard to global trade, an increasing number of competition cases have focused on the extent to which importers constrain EU companies. Despite protests from many merging companies in Europe, the Commission has shown resilience in distinguishing between EU and ex-EU players for the purpose of defining geographic markets in many sectors. The updated advisory continues this trend: “the mere existence or possibility of imports in a given geographical area does not necessarily lead to widening the scope of the geographical market to the area of origin of the imports”. This does not mean that the Commission will disregard the presence of the imports concerned, but it regularly distinguishes between the nature of the constraint imposed between EU and ex-EU producers.
As indicated, many of these proposals in the draft communication reflect the current practice of the Council. Nevertheless, the update is an important moment in the evolution of EU competition law, and we anticipate a lively debate in the months to come. Companies wishing to comment on the Commission’s proposals can do so by clicking here; and we are more than happy to discuss any aspect of the review that interests you.
The deadline for public comment is January 13, 2023. We will continue to follow developments with great interest and provide further updates.