European Commission launches public consultation on the Market Definition Notice

On 26 June, the European Commission launched a public consultation on its Market Definition Notice. The public consultation forms an important step in the Commission’s assessment of whether the Market Definition Notice is still ‘fit for purpose’. The Commission invites relevant stakeholders to voice any concerns or comments relating to market definitions by 9 October 2020. 

The revised Notice will, to a significant extent, shape the Commission’s antitrust enforcement and merger control practice in the coming years. Hence, many companies, in particular those operating in dynamic, multifaceted markets, will have a strong interest to make their views known.

What is the Market Definition Notice?

The Market Definition Notice provides guidance to businesses in relation to the assessment of relevant markets for competition law purposes.

Market definition is important in all areas of antitrust enforcement and merger control as it is a key element in the assessment whether companies are actual – or potential – competitors and whether businesses have a strong or dominant market position. It can thus be a determinative factor in the finding that a certain behaviour amounts to an antitrust infringement (such as an abuse of dominance or a cartel) or whether a certain merger should be prohibited. It is therefore crucial that parties have clear guidance.

Markets are defined based on two components - the relevant product and geographic market:

• All products or services that are regarded as substitutable by consumers or suppliers form a ‘product market’.
• The geographic area where conditions of competition for the supply and demand of these products or services are sufficiently homogeneous and distinct from neighbouring areas is considered a ‘geographic market’.

Why is the Market Definition Notice under evaluation?

Since the adoption of the Notice in 1997 business models and consumer behaviour have changed. Many markets operate differently today than they did 23 years ago due to developments such as digitisation, online commerce, a significant increase in global trade and even entirely new business sectors with competition from innovative services and market dynamics which evolve more quickly than in the past. In addition, economic techniques and methods of analysis have become much more sophisticated. 

The current Notice, which is focussed on major activities in the economy of two decades ago, has arguably lost some of its relevance for companies and advisers in assessing the most important issues in major antitrust and merger cases today, including the circumstances in which potential competition will be taken into account and the competitive constraint exerted by digital players on more traditional business models. It is in the light of these developments that the Commission has launched its review.

What does the consultation entail?

The consultation asks the public to provide feedback on the relevance, effectiveness, efficiency, coherence and added value of the Market Definition Notice. 

The questions are accessible following registration to the Commission’s EUSurvey, and can be summarised as follows:

• Relevance – is there still a need for a Notice to provide guidance on the Commission’s approach to market definition?
• Effectiveness – does the analytical framework in the Notice offer correct, comprehensive and clear guidance or should it be amended?
• Efficiency – are the possible costs of following the guidance (such as legal fees or delays) proportionate to the possible benefits (such as transparency, legal certainty, or decreased legal fees)?
• Coherence – are the provisions in the Market Definition Notice internally coherent and coherent with other EU legislation or policies or do they need to be aligned?
• EU added value – is there an added value associated with guidance at EU level? Without a Notice, companies would need to self-assess against evolving case law and the enforcement practice of the Commission and national competition authorities would not benefit from pan-European guidance in making their own assessments.

What are the next steps?

Following the public consultation, the Commission will narrow the focus of its evaluation. We expect that the Commission’s further review will mainly centre around the application of the Market Definition Notice to the digital space (including concepts such as multi-sided markets, zero-price markets, and network effects).

The Commission will continue to carry out research and engage with technical experts, national competition authorities, and other stakeholders. The results of the evaluation will then be published in a staff working document, which is expected in Q2/2021. To the extent the Commission indeed decides to amend the Market Definition Notice, the revision will begin shortly thereafter.