Market power sits at the heart of EU competition law. It determines whether an agreement can appreciably restrict competition under Article 101 TFEU, and whether a firm can be considered dominant under Article 102 TFEU. Yet the concept is often misunderstood – especially the difference between having market power and abusing it.
This post explains what market power is, how the Commission and EU courts assess it, and why it matters for both horizontal and vertical conduct.
What is Market Power?
Market power is the ability of a firm |(or group of firms) to:
- Raise prices,
- Reduce output,
- Deter entry, or
- Behave independently of competitive pressure.
It is not binary. Market power exists on a spectrum, from mild bargaining strength to full-blown dominance.
Why Market Power Matters
Under Article 101 TFEU https://eur-lex.europa.eu/eli/treaty/tfeu_2016/art_101/oj/eng
Market power determines whether:
- An agreement has appreciable effects
- A restriction is object or effect-based
- A vertical restraint (e.g., RPM, exclusivity) is likely to harm competition
- A block exemption applies
Under Article 102 TFEU https://eur-lex.europa.eu/eli/treaty/tfeu_2012/oj/eng
Market power is the gateway to dominance. No dominance -> no abuse.
The Legal Framework
Key sources include:
- United Brands (27/76) – the classic definition of dominance https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:61976CJ0027
- Hoffmann-La Roche (85/76) – dominance as “economic strength” https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62016CJ0179
- AKZO (C-62/86) – the 50% presumption https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A61986CJ0062
- Microsoft (T-201/04) – network effects and technical constraints https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62004TO0201(02)
- Intel (C-413/14 P) – effects-based analysis for rebates https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62014CJ0413
- Google Shopping (T-612/17) – digital market power and self-preferencing https://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX%3A62017TJ0612
The Commission’s Guidance on Article 102 Enforcement Priorities also provides a modern economic framework. https://eur-lex.europa.eu/EN/legal-content/summary/commission-guidance-on-enforcement-priorities-related-to-abusive-exclusionary-conduct-by-dominant-undertakings.html
Market Shares: A Starting Point, Not the End
Market shares are the first indicator, but never the only one.
General thresholds from case law:
- < 40% -> unlikely to be dominant
- 40-50% -> possible dominance depending on other factors
- > 50% -> presumption of dominance (AKZO)
- > 70% -> strong evidence of dominance (Hoffmann-La Roche)
But shares must be interpreted in context:
- How stable are they?
- Are they protected by barriers to entry?
- Do they reflect network effects or data advantages?
Barriers to Entry: The Real Decider
Market power becomes durable when rivals cannot enter or expand.
Key barriers include:
- Economies of scale
- Network effects (platforms, social media, operating systems)
- Switching costs
- Access to data
- IP rights
- Brand loyalty
- Regulatory barriers ( licensing, spectrum allocation)
Case example: Microsoft
Interoperability constraints and network effects made entry extremely difficult, reinforcing dominance.
Countervailing Buyer Power
Even a high market share may not confer market power if customers are strong enough to resist.
Indicators include:
- Large buyers (supermarkets, telecom operators)
- Ability to switch suppliers
- Vertical integration
- Purchasing alliances
Case example: British Airways (T-219/99) https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A61999TJ0219
Even with strong competitors, BA’s control over travel agents reduced countervailing power.
Market Power in Digital Markets
digital markets reshape traditional concepts:
- Zero-price services complicate price-based tests
- Data accumulation creates self-reinforcing advantages
- Multi-sided platforms require assessing interdependent markets
- Gatekeeper positions (search engines, app stores) amplify power
- Algorithmic optimisation can entrench dominance
Recent cases (Google Shopping, Android, Apple App Store) show the Commission focusing on:
- Control over intermediation
- Ability to set rules for rivals
- Access to user data
- Network effects that lock out in users and developers
Collective Market Power
Market power can also be shared
Oligopolistic dominance
Occurs when a small number of firms:
- Monitor each other
- Have aligned incentives
- Can coordinate without explicit agreement
This is central in merger control (e.g., Airtours). https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:61999TJ0342
Joint dominance
Two or more firms hold dominance together (rare but recognised).
How Market Power Shapes Legal Outcomes
Article 101
Market power determines:
- Whether an agreement is likely to restrict competition
- Whether efficiencies can outweigh harm
- Whether block exemptions apply
- Whether vertical restraints are hardcore or context-dependent
Article 102
Market power determines:
- Whether conduct is abusive
- Whether a firm has a special responsibility
- Whether practices like rebates, tying. exclusivity, or self-preferencing are harmful
Conclusion
Market power is the analytical bridge between market definition and legal assessment. It is not about punishing size – it is about understanding whether a firm can behave independently of competitive pressure.
In digital markets, market power increasingly reflects data, ecosystems and platform control, not just market shares. As the law evolves, so too will the tools used to measure it.
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