Policy Brief: Substantial Market Power and Competition

How to apply competition laws to dominant firms? This question has raised much interest in recent years. While significant differences persist in the enforcement practices of competition regimes around the world, there is substantial agreement that single firm conduct provisions should apply only to firms with a high degree of market power. Unilateral acts by a firm with high degree of market power are much more likely to harm consumer welfare and distort the competitive process than are unilateral act by firms with little or no power.

Sound competition law enforcement therefore requires competition authorities and courts to distinguish between firms that have substantial market power and those that do not when applying single firm conduct provisions. Making this distinction in practice, however, is not a straightforward task. There is no single, clear economic test that can be used to distinguish between market power that is of concern in unilateral conduct cases and the lesser degree of market power that should not be.

Competition authorities and courts must instead look at a range of different types of evidence, mostly indirect, to determine whether a firm has substantial market power.

This Policy Brief looks at how competition authorities can use various types of evidence to determine whether a firm has substantial market power.

OECD: Policy Brief: Remedies and Sanctions for Abuse of Market Dominance, December 2008 http://www.oecd.org/dataoecd/17/44/41814852.pdf

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