Commission adopts guidelines on significant market power in telecoms

On 9 July the Commission adopted guidelines on market analysis and the assessment of significant market power (SMP), as was required by the Directive on a new common regulatory framework for electronic communications.

The guidelines, now in their final version, set out the
principles that national regulatory authorities (NRAs) will use to
define markets and analyse effective competition. The Guidelines
were developed on the basis of existing case law and the
Commission’s practice in the enforcement of EU competition law. The
main criteria for assessing a SMP are:

  • a finding of a dominant position does not preclude some
    competition in the market;
  • the likelihood that companies not currently active on the
    relevant product market may in the medium term decide to enter the
    market following a small but significant price increase;
  • a high market share alone is not sufficient to establish the
    possession of significant market power (dominance), but it is
    unlikely that a firm without a significant share of the relevant
    market would be in a dominant position;
  • both volume sales and value sales provide useful information
    for market measurement;
  • the criteria to be used to measure the market share of
    companies concerned will depend on the characteristics of the
    relevant market;
  • the existence of a dominant position cannot be established on
    the sole basis of large market shares;
  • criteria to measure the power of a company to behave
    independently of its competitors, customers and consumers include:
    overall size of the company, control of infrastructure not easily
    duplicated, economies of scale, barriers to expansion;
  • a dominant position can derive from a combination of criteria,
    which taken separately may not necessarily be enough.

 

Phil Evins,
ECTA Managing Director, stated "ECTA Members
welcome the broad thrust of the Commission's recommendation. It
recognises the importance of effective ex ante regulation in those
markets where competition is yet to take root. Our principal
concern is that the Commission are proposing a review before the
Recommendation will even take effect in July 2003. This will
undermine NRA's efforts at implementation and create un-necessary
uncertainty in the market. Instead, the Commission should conduct a
through review, in consultation with the industry and others, in
2005 once the legislation has had the opportunity to bed down."

 

On 7 March 2002, the European Parliament and the Council of
Ministers adopted the new regulatory framework for electronic
communications. The framework Directive, one of the Directives of
the package, provides for a new definition of companies with
"significant market power" (SMP) by equating SMP in the new
regulatory framework with the concept of "dominance" under Article
82 of the EU Treaty. The framework Directive required the
Commission to adopt Guidelines on market definition and the
assessment of SMP for national regulatory authorities (NRAs) to use
in the application of the new concept of SMP. In March 2001 the
Commission adopted a draft version of the guidelines and then held
a public consultation on them.

 

This new telecommunications legislative package will apply in
national markets from 25 July 2003.

 

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