Abuse of Economic Dependence - The Centre for European Policy ...

How to Rectify the Gap 91
proportional to the precedential significance of a case. Cases which have set
important precedents in the history of competition enforcement are cases
raising controversial issues that were addressed and given the judicial seal
of approval.
In addressing conduct of non-dominant firms the authorities should try
to maintain this ratio at one or ideally, and as case law on such conduct
progresses, lower than one. The authorities should be prepared though at
the initial stages of addressing such conduct to have this ratio at higher than
one, until the ‘learning curve’ of the authorities and the courts adapt to the
need as well as the method of addressing such conduct.
In addition, competition authorities should have criteria to assess the
likely harm resulting from the conduct under investigation. 40 Initial assessment
criteria to determine whether an allegedly anti-competitive conduct of
a non-dominant firm should be investigated further should include, inter
alia:
• Relative market shares.
The assessment of relative market shares draws a different picture than
the assessment of individual market shares. The relative market shares
may be an initial rough indication of the competitive constraints that
each firm is imposing on the other incumbents. 41 The importance of the
market share as an indication of market power depends on the level relative
to that of the nearest competitor as well as on factors tending to
entrench the market position of the firm (eg differentiation).
• Degree of differentiation in the market.
If the products are differentiated, so that products sold by different
participants in the market are not perfect substitutes for one another, an
anti-competitive conduct by the second biggest firm in a market with
differentiated products may diminish competition by enabling it to profit
by this conduct, without at the same time incurring substantial switching
of customers from its products to rivals’ products.
• Diversion between the firms’ products. 42
As mentioned above, what should be taken into account in differentiated
40 Annex 2 provides a list of the most important criteria that are used in the assessment of
single firm dominance/substantial market power in a number of jurisdictions that responded
to ICN questionnaires. These general criteria are also important in assessing whether a nondominant
firm can induce harm on consumer welfare by adopting anti-competitive conduct.
41 A more concrete analysis would need the calculation of diversion ratios. Market shares
must be used with caution in drawing conclusions. In markets with homogeneous products,
market shares can be used as proxies for diversion ratios.
42 The accurate calculation of diversion ratios at the initial stages of the assessment is likely
to be difficult and will depend on the availability of data. If such data are available, calculation
of the diversion ratio is likely to provide an accurate account not only of the non-dominant
firm’s market power but also of the realistic use of alternative sources.