METHODOLOGY FOR MARKET ANALYSIS

– Market analyses and designation of undertakings with significant market power in the Norwegian market for electronic communication services Version 2.0 10 June 2009

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0 6 January 2005 11 June 2009 Amendments Main document finished and published.0 2.   Document updated in light of ESA’s revised Recommendation on relevant markets 5 November 2008 Updates and amended language in several paragraphs. as well as updates of relevant links 2 .Methodology for market analysis Revision history: Version Date 1.

Methodology for market analysis Contents 1 1. In its first Recommendation on relevant markets2 in 2004.lovdata. or whether one or more undertakings have what is called significant market power.no/all/hl-20030704-083. the EFTA Surveillance Authority (ESA) identified 18 markets that could be relevant for special sector-specific competition regulation according to the rules. They are incorporated in the EEA Agreement and became applicable to Norway from 1 November 2004. 3 . The directives were adopted by the EU in 2002 and comprise the EU’s regulatory framework for electronic communications networks and electronic communications services. Hereinafter the document will be referred to as the first or original Recommendation on relevant markets. method selection and criteria for the market analyses that the Norwegian Post and Telecommunications Authority (NPT) is to carry out in accordance with the Norwegian Act on Electronic Communications (Electronic Communications Act)1. The Electronic Communications Act was enacted in 2003 and entered into force on 25 July the same year. The five directives are:      Directive 2002/21/EC on a common regulatory framework for electronic communications networks and services (Framework Directive). These regulations replaced the former Telecommunications Act and Regulations on Public Telecommunications Networks and Public Telecommunications Services and implement five EC directives. Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector (Privacy and Electronic Communications Directive). In that case such undertakings shall have specific obligations imposed on them. Directive 2002/19/EC on access to. and interconnection of. Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services (Universal Service Directive).html EFTA Surveillance Authority Recommendation of 14 July 2004 on relevant product and service markets. limit entry barriers and facilitate sustainable competition to the benefit of end users. The Framework Directive stipulates that markets that are predefined shall be analysed to determine whether they are characterised by effective competition. Directive 2002/20/EC on the authorisation of electronic communications networks and services (Authorisation Directive).1 Introduction Background The purpose of this document is to describe methodology. By the 1 2 The Ecom Act is available [in Norwegian] at http://www. Regulations on electronic communications networks and electronic communications services (Ecom Regulations) were prepared together with the Electronic Communications Act. The regulatory framework shall lay the foundation for the harmonization of regulation in the EU/EEA. electronic communications networks and associated facilities (Access Directive).

2 Legal framework for the market analysis The Electronic Communications Act’s definition of significant market power is as follows. with a view to uncovering whether any undertakings have significant market power. EFTA Surveillance Authority Guidelines 14 July 2004 5 EFTA Surveillance Authority Guidelines 14 July 2004 7 This also includes Explanatory Note (the EU document prepared in conjunction with the corresponding Commission Recommendation of 17 December 2007). Significant market power in one market may result in a provider having significant market power in a closely related market. In November 2008 ESA issued a revised Recommendation on relevant markets.Methodology for market analysis spring of 2007 NPT had carried out the first round of analyses of the 18 markets that ESA had pointed out as relevant for sector-specific regulation in its first Recommendation on relevant markets. The work on market analyses and imposition of obligations may be divided naturally into three phases: Define relevant markets by defining relevant product markets and defining geographic markets. It follows from Norway’s obligations under the EEA Agreement that the designation of undertakings with significant market power is to be carried out in accordance with the guidelines and recommendations prepared by the ESA under the framework directive for electronic communications services: Guidelines on market analysis and the assessment of significant market power (hereinafter “the Guidelines”) 5 ESA’s Recommendation of 5 November 2008 on relevant markets (hereinafter “the Recommendation”)7 3 5 EFTA Surveillance Authority Recommendation of 5 November 2008 on relevant product and service markets. This document describes the guidelines on which NPT will base its assessments in phases 1) and 2). Carry out market analyses of each of the relevant markets. Issue decisions on specific obligations to the undertaking(s) designated as having significant market power. cf. including assessing whether sector-specific regulation should be withdrawn also in Norway from markets removed from the Recommendation. ESA states that the Recommendation should be interpreted in light of the Explanatory Note of the Commission’s Recommendation. Section 3-1: “A provider has significant market power when the provider individually or jointly with others has economic strength in a relevant market affording the provider the power to behave to an appreciable extent independently of competitors.” The term “significant market power” in the Electronic Communications Act is very close to the competition law standard “dominant position” (“dominance”). 1. 4 . NPT has started work on analysing the markets according to the new Recommendation. customers and consumers.3 In the Recommendation the number of relevant markets was reduced to seven.

If the Guidelines and the Recommendation are amended. Within the parameters of the Electronic Communications Act. will be obliged to analyse. ESA states that the Recommendation should be interpreted in light of the Explanatory Note of the Commission’s Recommendation. In addition to the Guidelines and the Recommendation. but expresses NPT’s understanding of the guidelines to which NPT is obliged to adhere as these are currently framed. 8 Supplement to Official Journal of the European Union No. 10 Post. together with the provisions of the Act. However. Should there prove to be discrepancies between this document and the Guidelines or the Recommendation. the Guidelines or the Recommendation will take precedence. the Post and Telecommunications Authority’s assessments will be motivated by the requirement for general ex ante regulation. will therefore form the legal framework for the market analysis. which describes in general the application of EU competition law under the EEA Agreement.07.10 The European Regulators Group (ERG) and the European Commission cooperate on harmonization of methods and guidelines for market analyses. NPT has taken account of the sonamed EEA Supplement as the basis for the preparation of this document. 7 This also includes Explanatory Note (the EU document prepared in conjunction with the corresponding Commission Recommendation of 17 December 2007). Although NPT’s assessments in accordance with this document will be based mainly on competition law methodology.och telestyrelsens almänna råd om bedömning av vilka företag som har inflytande på den svenska marknaden and Oftel’s (now Ofcom’s) market review guidelines: criteria for the assessment of significant market power. The Competition Authority’s and the Post and Telecommunications Authority’s assessments in accordance with the two sets of rules may therefore differ even within the same or overlapping markets. and will be closely aligned with general competition law. 28. In accordance with the Guidelines a market analysis is to provide the basis for the assessment of relevant markets and of significant market power and the assessment is to accord with competition law methodology. while the competition authorities’ assessments are as a rule ex post in connection with actual cases. This document does not purport to guide the Norwegian Competition Authority’s assessments in accordance with the Competition Act. NPT will update this document. in accordance with Section 3-2 of the Electronic Communications Act and Norway’s obligations under the EEA Agreement.Methodology for market analysis Links to key ESA documents are available on NPT’s website.8 Furthermore. The Guidelines and the Recommendation. 16. NPT has used a working document from the Independent Regulators Group (IRG)9 and referred to corresponding guidelines for market analyses published by the regulatory authorities in Sweden (PTS) and the United Kingdom (Ofcom). This document is not legally binding.1 The Recommendation on relevant markets The Annex to the Recommendation contains a list of the relevant product markets that NPT. 2 Definition of relevant markets 2.1998 9 Independent Regulators Group: Common interpretation of the SMP concept for the new regulatory framework. the Guidelines are not exhaustive and NPT will therefore elaborate on the criteria for the market analysis on certain points. ESA documents have the same legal status for EEA member states as the Commission’s corresponding documents have for EU member states. NPT will take due account of any new guidance documents prepared at EU level. 5 August 2002 5 .

14 See the Guidelines. and Explanatory Memorandum. The practice of the Norwegian Competition Authority is as a rule to postpone the assessment of supply-side substitution until the assessment of potential competition during the market power assessment. paragraph 39.1.3).1. NPT is to assess the need to define diverging or new national product markets (section 2. The ESA Recommendation on relevant markets (the old Recommendation) is in parentheses. Wholesale terminating segments of leased lines. paragraph 39. section 2. section 2. 6 . Call origination on the public telephone network provided at a fixed location (former market 8) 3. The translation into Norwegian is unofficial and the English version applies in the event of any discrepancies. Wholesale (physical) network infrastructure access (including shared or fully unbundled access) at a fixed location (former market 11) 5. Wholesale broadband access (former market 12) 6. and Explanatory Memorandum.Methodology for market analysis Through the market analysis.2) and carry out the geographic definition of the relevant product markets (section 2. 14 See the Guidelines. Access to the public telephone network at a fixed location for residential and non-residential customers (former markets 1 and 2) 2. The Recommendation sets out the following relevant product markets: Market level Retail Market definition11 1. The practice of the Norwegian Competition Authority is as a rule to postpone the assessment of supply-side substitution until the assessment of potential competition during the market power assessment. irrespective of the technology used to provide leased or dedicated capacity (former market 13) 7. Voice call termination on individual mobile networks (former market 16) The following markets have been removed from the list of relevant markets: Retail market   Publicly available local and/or national telephone services provided at a fixed location for residential customers (former market 3) Publicly available international telephone services provided at a fixed location for residential customers (former market 4) Wholesale 11 The numbering of the markets corresponds to that of the list in the new Recommendation. Call termination on individual public telephone networks provided at a fixed location (former market 9) 4.

2. The practice of the Norwegian Competition Authority is as a rule to postpone the assessment of supply-side substitution until the assessment of potential competition during the market power assessment. paragraph 39.1).1 Definition of the relevant product market A relevant product market comprises products or services (the terms are used as interchangeable in what follows without difference in meaning) that are adequately substitutable for the end user.2 If NPT wishes to define relevant product markets other than those defined in the Recommendation. The minimum set of leased lines (former market 7) Wholesale market      Transit services in the fixed public telephone network (former market 10) Wholesale trunk segments of leased lines (former market 14) Access and call origination on public mobile telephone networks (former market 15) The wholesale national market for international roaming on public mobile networks (former market 17) (1) Broadcasting transmission services. In defining other relevant product markets the starting point will be an assessment of the relevant product’s substitutability on the demand side (section 2. section 2. In this context purchasers in wholesale markets will also be considered end users.2. Substitutability on the supply side exists when. 7 . The starting point for the definition of a relevant product market is an assessment of demand-side substitutability. Substitutability may however also be present on the supply side and may then be relevant in the definition of the relevant market.2).Methodology for market analysis    Publicly available local and/or national telephone services provided at a fixed location for non-residential customers (former market 5) Publicly available international telephone services provided at a fixed location for nonresidential customers (former market 6). 14 See the Guidelines. to deliver broadcast content to end user (former market 18) Criteria for defining other relevant product markets 2. can change their production or distribution in the short term and provide substitutable products without incurring significant supplementary costs or risk. providers of other (non-substitutable) products. as a response to a marginal price change.2. and Explanatory Memorandum.1. Three criteria identified by ESA must also be met for a market to qualify for sector-specific regulation (section 2. the decision shall follow the consultation procedure in accordance with Section 9-3 of the Electronic Communications Act.2. price and area of use.14 Substitutability exists on the demand side when in the users’ perception two or more products in the market are mutually interchangeable or substitutable on the basis of their characteristics.

Methodology for market analysis An acknowledged method of analysing substitutability is known as the “hypothetical monopolist test”. all three criteria must be met to warrant ex ante regulation. See paragraph 41 of the Guidelines. Then a hypothetical assessment of the effect of the price increase in the given market is carried out. account should be taken of the actual potential a provider has to change production as well as any regulatory conditions that prevent rapid market entry by competitors in the market. The hypothetic assessment should be supplemented with actual information on behaviour on the supply and demand sides to the extent that such information is available.2 and 2. 58 (2002-2003) to the Odelsting states: “If none of the providers has significant market power then there is assumed to be sustainable competition in the market. 2. The market has characteristics such that it will not sufficiently tend towards sustainable competition. and the total effect of the price increase on the producer’s revenue is assessed. It is consequently not necessary for NPT to review the criteria for these markets before implementing the actual market analysis. Approximately similar methods may therefore also be applied. 8 .15 This test takes as its starting point a marginal (in practice 5-10%) and lasting price rise in the relevant product. the costs of changing and other lock-in mechanisms. the imposition of sector-specific remedies depends on the identification through the market analysis of one (or more) operator(s) with significant market power in the market in question. The preparatory work to the Electronic Communications Act and the Guidelines indicate that NPT should be cautious about introducing ex ante regulation in “emerging markets”. Review and assessment of criteria for markets departing from the predefined ones shall take place before the market analysis. where the use of the method is explained in more detail. This is necessary for assessing whether the relevant market is a market where it is relevant to use sector-specific regulation. On the demand side. i. On the supply side. The method depends on a significant amount of data that will often be difficult to produce. the following criteria shall be met for a product market to qualify for sector-specific ex ante regulation in the electronic communications area:16 1.17 3. 17 Here the Recommendation uses the term “effective competition”.” NPT therefore assumes that the terms will coincide for this purpose. 2. General competition law does not sufficiently address the objectives behind sectorspecific regulation. paragraph 19.2.3 of the Explanatory Memorandum.e. Both the Commission and the ESA have already assessed the criteria for the 7 markets identified by the ESA in the Recommendation. cf. However. allowance should be made inter alia for the end users’ access to information. in which the aim is to find the narrowest market in which a hypothetic monopolist can exercise market power. based on the assumed price level in a theoretical market with perfect competition and assuming that all other prices are unchanged. The criteria are cumulative. and Sections 2.2 Criteria for ex ante regulation In accordance with the Recommendation. where 15 Also known as “SSNIP” (“Small but Significant Non-transitory Increase in Price”). There are high and non-transitory structural or regulatory entry barriers in the relevant product market. which may best be translated into Norwegian as “virksom konkurranse”. 16 See Section 6 of the Recommendation. Page 99 of Proposition no. The time horizon with the use of the criteria should be approximately 1-2 years ahead in time. The Guidelines define this as a market in which operators with significant market power are absent.

are relevant in assessing whether an operator has what is known as a “dominant position” (the term “dominance” is otherwise used in the text in its ordinary sense). 20 If the European Commission/ESA decides that there are transnational markets.2 above. it is not possible to tell in advance what weight the individual criteria will have in an actual assessment and the weight of different criteria will vary between the markets. 19 See paragraphs 56-61 of the Guidelines. known as “first mover advantages”. A conclusion that an operator has significant market power may be based on a combination of different 18 See page 99 of Proposition No.18 2. 58 (2002-2003) to the Odelsting.21 In assessing whether an undertaking has significant market power. In assessing substitutability on the demand side preferences and geographic purchase patterns should be taken into account if such information is available.1 General . With this as the basis the markets can be defined regionally within the national frontiers. The enumeration of criteria in the Guidelines is not exhaustive and. 21 See paragraph 79 of the Guidelines. definition of the geographic market is carried out. Whether or not a more detailed definition of the geographic market has to be carried out will depend on an assessment of the substitutability of the relevant products and services on the supply and demand sides.19 As a general rule the outer geographic limits of the relevant product market will comprise the extent of the network and the jurisdiction of the legal regulation of the market. the regulatory authorities involved should cooperate on the market analysis of this market in accordance with detailed guidelines that the European Commission/ESA will prepare. marginal but significant price increase as described in section 2. However. nationally or transnationally.20 3 Assessment of significant market power 3. all the relevant criteria must be taken into account.assessment of significant market power The criteria that the Guidelines set up as relevant in the assessment of whether an undertaking has significant market power coincide with the criteria that.Methodology for market analysis significant market power may result from the leading operator having the benefit of being quick to introduce new services or new technology. NPT has identified more possible criteria that may be relevant. paragraph 33 of the Guidelines and paragraph 8 of the Recommendation. in accordance with EEA competition law. 9 . The relevant geographic market is the area in which the relevant products and services are provided on sufficiently similar or homogeneous competitive terms. market concentration and the presence of lasting entry barriers (market access) will however be key criteria in every assessment. with a lasting. NPT can only define regional or national markets. even though the outcome of NPT’s assessment in accordance with the Electronic Communications Act and assessments in accordance with general competition law will not necessarily coincide. from a starting point in general competition law. The term significant market power will therefore be close to the competition law term dominance. Market share.3 Definition of relevant geographic markets Once the relevant product markets are determined.

while fluctuating or sinking market share may indicate the opposite.2. High market concentration may indicate that there are operators with significant market power in the market.2 The criteria in the Guidelines 3. inter alia. Different concentration indices are used to measure market concentration.1 Market share and market concentration The provider’s market share in the relevant market will form the starting point for the assessment. However. each on its own.2 Overall size of the undertaking If an undertaking. the benefits of economies of scale and scope (see also section 3. Market concentration expresses the ratio of market share between the largest providers in a market. A stable high market share over time will be a factor that indicates significant market power. 10 . In the assessment of market share it can be useful to look at shares based on different measuring criteria. As a rule. is significantly larger than the competitors. or the group of which the undertaking forms part. 25 3. In accordance with the Guidelines market share should be above 40% before this factor indicates significant market power. this may comprise a competitive advantage through. providers with low market share (less than 25%) are not considered to have significant market power. in accordance with the Act. For ease of reference the criteria are described in the sequence in which they are mentioned in the Guidelines. for sector-specific ex ante regulation. procurement.2. In the event that NPT’s market analysis does not find operators with significant market power in a market.2. 24 Paragraph 76 of the Guidelines 25 Examples of generally used concentration indices are HHI (Herfindahl-Hirschman Index) and concentration ratio figures. the market will not qualify. A similar structure is used in IRG’s Working Document as well as by PTS and OFCOM. financial 22 23 See paragraph 80 of the Guidelines. this is without prejudice to the competition authorities’ assessments in accordance with the Competition Act. market share will be less indicative of significant market power.23 Even though all of the criteria mentioned should be assessed in each market analysis. and be an important factor. but must be seen in context with the other criteria and relevant conditions in the market. for example volume and turnover. 24 In the event of high market share (over 50%) it would be exceptional for the provider not to be considered to have significant market power. Developments in market share over time are of importance to the assessment. 3. Below is a short description of the criteria that NPT considers relevant to the market analyses. but the choice of measuring criterion may vary from market to market.Methodology for market analysis criteria which. In emerging markets. the individual analysis will not necessarily follow the structure in this document.22 If the market analysis does not provide grounds to designate providers with significant market power. market share alone is not enough to decide whether the operator has significant market power. is not necessarily enough to provide significant market power.8).

3.2. such a practice will strengthen the dominant undertaking’s market power in the closely related market. The opportunities to exercise market power on the demand side will have particular significance in markets where a provider has de facto monopoly. 3.4 Technological advantages or superiority A technological or knowledge-based lead may comprise entry barriers for new operators and competitive advantage in relation to existing competitors.8 Economies of scale and scope Economies of scale are present when an increase in production is accompanied by falling unit costs (average costs). may create customer loyalty and make it more difficult for competitors to enter the market.5 Countervailing buying power The presence of customers with negotiating power (known as “countervailing buying power”) will limit a provider’s opportunity to behave independently of the market. for example infrastructure or administrative systems. for example in termination of traffic within its own network. as opposed to if the products are more homogeneous.2.2. 3. 3. 3. Economies of scope are reductions in production costs per unit through more than one service being produced using common means of production. 11 .2. Strong brands may have a similar effect. distribution and marketing.6). These advantages may appear outside the relevant market being analysed. or heterogeneous products. High transaction costs and entry barriers will weaken market power on the demand side.3 Entry barriers related to control of infrastructure Undertakings that have control of infrastructure not easily duplicated can represent an entry barrier for competitors.7 Product differentiation/bundling of products A high degree of product diversification. An undertaking that is dominant in one market can exploit this position to “bundle” or link together services and products in this market with services and products in closely related markets. Because the competitors do not have the same opportunity to provide the services in combination.6 Financial resources Access to financial resources will be essential to an undertaking’s ability to compete in a market and differences in this access may comprise entry barriers or competitive advantage. The negotiating power may be a result of the customer’s size or that the customer has something to offer. 3.2.2. for example increased market access to other markets. but nevertheless have significance.Methodology for market analysis strength and access to capital (see also section 3. Cost savings through utilisation of one telecommunications network in the production of different telecommunications services to the end users is a typical example of common production gains. because the costs of research and development are sunk costs and it takes a certain amount of time before the results can be exploited in the market.2. where there is a greater degree of competition. This is characteristic of production based on technology with relatively high fixed costs and low variable costs.

3.12 Barriers to expansion There is no clear distinction between entry barriers and growth barriers.2. This criterion must be assessed in close context with market access and the presence of entry barriers.14.13 Degree of innovation in the market In a market with a high degree of innovation the opportunity to exploit a dominant market position will be restricted compared to in a “mature” market with little innovation. 12 .11 Potential competition The phrase potential competition describes the opportunity for new operators to enter the relevant market. 3. this may be a sign that the undertaking has significant market power.2. because through innovation new operators can provide new products or achieve cost savings that counterbalance the dominant operator’s competitive advantage. or behave in a competition-restricting way towards existing competitors. even if the number of existing operators in the market seen in isolation indicates that significant market power is present. A vertically integrated undertaking.9 Vertical integration A vertically integrated undertaking is characterized by having several production levels that are usually controlled by different undertakings.10 Distribution and sales network A comprehensive distribution and sales network may work as an entry barrier for new operators and as a competitive advantage for established operators.Methodology for market analysis Economies of scale and scope may work both as an entry barrier to new operators and as a competitive advantage in a market with several competitors. 26 See paragraph 12 of the Guidelines.2.2. If the entry barriers are significant. 3.14 Market access – entry barriers in general A new operator’s access to a market is decided by several factors that may be described as entry barriers. in that a price increase will not result in loss of market share.2. 3. If potential competition is present. Potential competition may have particular significance in innovation-driven markets. and in this way strengthen its market power in the relevant market. through its position in markets for input factors (“upstream markets”) or in the retail markets (“downstream markets”) can keep competitors out. Many of the conditions that restrict opportunity to enter a market may also amount to restrictions to growth. If an undertaking is in a position to use exclusivity agreements or other practices that restrict new operators’ access to distribution of their products in the market. access to the market will be restricted (weak potential competition) and the market power of established operators will be strengthened. it will discipline price setting and reduce the opportunity for monopoly pricing. see section 3. 3.2. this will strengthen the dominant undertaking’s influence over the market conditions in the subject market.26 3.2. If competitors’ opportunities to grow in a market are restricted. particularly in markets where there are large costs associated with building up a distribution network.

environment and safety.3. strategic and regulatory. The list below is not exhaustive. efficiency gains or innovation. However.1 Excessive pricing and profitability An operator’s opportunity to price at a significantly higher level than the underlying costs would indicate (monopoly pricing). In the event of an increase in demand in the market the dominant operator can increase production without major investment and thus prevent new operators entering or winning market share. 13 . economies of scale and large sunk costs. or may arise because the end users have greater 27 The Recommendation operates with two groups of entry barriers: structural and regulatory. 3. this may thus indicate significant market power.3 Switching costs and lock-in effects Restrictions or costs connected to the end users changing provider increase the opportunity for a dominant provider to behave independently of the market.3. 27 Several of the criteria discussed above may be characterised as structural entry barriers. inter alia technological leads. 3. technical or financial nature.Methodology for market analysis Entry barriers may be divided broadly into three groups: structural. Such restrictions may be of a practical. resource restrictions or restrictions in regard to health. Regulatory entry barriers will often be of an absolute nature. If a dominant operator in a market has high profitability compared to dominant operators in comparable markets.2 Utilisation of excess capacity If dominant operators in a market have significant excess production capacity this may comprise a strategic entry or growth barrier. for example the benefits of scale.3 Other relevant criteria The list of criteria in the Guidelines is not exhaustive. for example official permissions. or to increase prices without a corresponding loss of sales revenues is an indicator of significant market power. To the degree the relevant market is already subject to regulation. There are several other criteria that in the view of NPT may be relevant in assessing significant market power. Strategic entry barriers exist where existing operators in the market arrange matters or probably will arrange matters through competition-restricting pricing (for example bargain pricing or cross-subsidising) or some other competition-restricting behaviour in order to keep new operators out of the market. allowance must be made for high profitability being the result of factors other than monopoly pricing. Regulatory entry barriers exist when market access is restricted by regulatory conditions. common production gains and well-developed sales and distribution networks. 28 These and other criteria are discussed in table 3 of Oftel’s market review and Chapter 4 of IRG’s Common interpretation of the SMP concept. paragraphs 911.28 3. In assessing significant market power a combined assessment of market access and the presence of lasting entry barriers significant to the relevant market should be carried out. 3. Correspondingly low profitability is not necessarily an argument against an operator having significant market power.3. cf. the assessment must make allowance for this.

restricts the opportunities for effective end user choice and may contribute to strengthening an already dominant operator’s power in the market.3. It will normally only be relevant to assess leverage of significant market power if the competition-related problems in the closely related market cannot be 29 30 See Chapter 3 of Oftel’s (now Ofcom’s) market review guidelines. Such leverage of significant market power may occur vertically. which comes from Article 14 (3) of the Framework Directive stems from an actual decision by the European Court of Justice (ECJ).30 The relevant markets must be associated in such a way that the operator can exploit its market power in one market to achieve an advantageous position in the closely related market. 3. this could support an assessment that an operator has significant market power. they must have access to information that makes it possible to carry out a comparison of the offerings in the market. the operator must also have a significant presence in the closely related market. quality and price as end users in comparable markets in other countries. 14 . Use of complicated price structures. such an indication will not in itself be sufficient to designate operators with significant market power and caution must be exercised against placing too much weight on such indicators. The indicators mentioned may also be useful in the assessment of what measures should be used most effectively to promote competition in the relevant market. the degree of price competition and the development of prices over time. In addition to significant market power in one market. quality and price. Several such indicators may be pertinent:29  whether over time the end users in the relevant national product market enjoy the same choice.Methodology for market analysis confidence in existing and well-established operators rather than new operators and will not take the risk of switching. or horizontally between different product markets. 3. Case C-333/94 P. for example price control or obligations regarding non-discrimination. The regulation. However.    If there are indications of a failure in competition.4 The end users’ access to information For the end users to make an effective choice between the providers in a market (in switching or initial purchase). the degree of competition on quality and differentiation of products and the extent to which the consumers are satisfied with the service choices. 3. in the case known as the Tetra Pak II Case. bonus and discount arrangements etc. Appropriate account must also be taken of the existence of any regulation that affects the result.4 Indicators for competition The assessment of significant market power may be supplemented with different indicators that show the degree of competition in the relevant market. between a wholesale market and a retail market. Tetra Pak v Commission [1996] ECR I-5951.5 Leverage of significant market power to closely related markets Section 3-1 of the Electronic Communications Act reads: “Significant market power in one market may lead to a provider having significant market power in a closely related market”.

The Court of First Instance. The tacit coordination must be capable of being maintained over time. it may be relevant to assess collective dominance. 31 32 See paragraphs 85-86 of the Guidelines. 2. inasmuch as there are retaliatory mechanisms between the undertakings that make it unprofitable for the participating undertakings to break away or deviate from the coordination. a mature market. The most important criteria that must be present if this condition is to be met are market concentration. known as collective dominance. The reason for this is that by definition it is not possible to find collective dominance in a market where there is one operator who alone operates independently of the market. However. 3. High entry barriers will be key in the assessment of this condition. arrange matters mutually in a joint strategy. NPT will routinely publish any amendments to the Guidelines. has provided a more detailed amplification of the joint dominance requirement stated by the Court. It is however uncertain how the above-mentioned Airtours case will affect the content of the Guidelines. stagnating or moderate demand growth and homogeneous products. In addition. of which several should be met if more than one provider in conjunction are to be considered to have significant market power. The term collective dominance (joint dominance) is based on a relatively limited number of decisions of the European Court.Methodology for market analysis resolved by use of measures in the market in which the operator has significant market power. transparent market conditions. It is not possible to meet the criteria for single dominance (section 3. Case T-342/99.31 3. The Guidelines set up a range of criteria. Airtours 15 . in the same way as in the case of a single operator’s market power.2 above) and the criteria for collective dominance at the same time. in the decision on Airtours32. The judgement states three conditions that must all be met if two or more undertakings together are to be considered jointly dominant: 1.6 Criteria in assessment of joint significant market power for multiple providers (collective dominance) In accordance with the definition of significant market power. which was published in accordance with the Guidelines. a general assessment of criteria must be carried out. NPT has chosen not to go into detail in regard to the content of the individual criteria. Assessment of collective dominance is only relevant in markets where single dominance is not found. such that the undertakings may. The undertakings are in a position to have tacit coordination. with a sufficient degree of accuracy and speed. If the answer to this is negative. The results of the coordination must not be capable of being undermined by competitors or customers. because the market conditions are adequately transparent. multiple providers may be considered to have significant market power jointly if they can behave jointly independently of the market. For the moment therefore. As a result of this it will be natural to first undertake an assessment of whether there is an undertaking with single dominance in a market.

stagnant or moderate growth on the demand side 3. lack of technological innovation. similar market shares 7. mature technology 8. high barriers to entry 10. retaliatory mechanisms that prevent competition between the undertakings 14. lack or reduced scope of price competition ***** 33 See paragraph 98 of the Guidelines. low elasticity of demand 4. Some of these criteria are explained above in section 3. mature market 2. similar cost structures 6. absence of excess capacity 9.2. but the criteria’s significance will not necessarily be the same as with single dominance:33 1. lack of countervailing power 11. various kind of informal or other links between the undertakings concerned 13. 16 . lack of potential competition 12. homogeneous products 5.Methodology for market analysis The Guidelines list a range of criteria as relevant to the assessment of joint dominance.

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