Potential anti-competitive effects of presuming dominance or substantial market power based on market shares
Publication date : 23/09/2008
This paper addresses the question, put by certain ICN members, as to what empirical evidence exists to support our view, that presumptions of dominance or substantial market power based on market shares can actually harm consumer welfare by discouraging potentially pro-competitive behavior by companies wrongly presumed to have market power.
Our Sub-Group believes that market share is a crude and -more importantly- often misleading indicia of market power. As a result, it can lead to "false positives", ascribing monopoly power or dominance to firms that in fact do not possess such power. This, in turn, can lead to the punishment or deterrence of competitively neutral or even pro-competitive conduct.
Single firm conduct is often ambiguous and distinguishing between pro- and anti- competitive conduct depends on a variety of factors - one of which is whether the firm in question enjoys a monopoly or market dominating position. Presuming such market power from market share alone may thus skew the whole analysis and lead to the condemnation of conduct is neutral or pro-competitive, in part because it is being undertaken by a firm with no real market power. Worse yet, it may lead to self-regulation by such firms, causing them to avoid behavior that is competitively neutral or beneficial to consumers.