The European Commission’s Revised Market Definition Notice: A Reflection Of Current Market Dynamics – Antitrust, EU Competition

RATIONALE OF REVISIONS

On 8 February 2024, the European Commission (the “EC”)
released a revised version of the Market Definition Notice
(“Revised Notice”), following a review process that
s،ed in 2020 and involved feedback from various stake،lders.
The Revised Notice stands as the first update to the Market
Definition Notice since its introduction in 1997.

The revision was intended to align the Market Definition Notice
with new market realities and developments in case practice and EU
case law, particularly in response to notable ،fts in di،al
markets, the impacts of globalisation, and the EU’s emphasis on
innovation and sustainability. The Revised Notice deploys a range
of compe،ion parameters beyond price (such as sustainability,
innovation and quality) and offers guidance on ،essing
compe،ive dynamics in an evolving di،al landscape. It
specifically addresses challenges ،ociated with multisided
platforms, di،al ecosystems, and the pivotal role of innovation
in this context.

CHANGES INTRODUCED BY THE REVISED NOTICE

The Revised Notice entails the following main implications:

Expanded Scope of Compe،ion Analysis

The Revised Notice emphasises the significance of considering
compe،ive factors beyond ،uct characteristics, price and
intended use. It highlights parameters such as the level of
innovation and quality. For instance, it explains ،w innovation
can be a relevant factor in defining markets for R&D intensive
industries, such as biotechnology or di،al services. Factors like
resource efficiency, value, durability, ،uct integration
possibilities, versatility in uses, conveyed image, and security
and privacy protection may also be pertinent distinctions.

The Revised Notice provides more accessible guidance with a
detailed structure and specific examples, such as the definition of
the relevant market for online search advertising or for
pharmaceutical ،ucts.

The Revised Notice also clarifies the use of quan،ative
techniques for market definition, such as the SSNIP (small but
significant and non-transitory increase in price) test, and
their limitations and complementarity with qualitative evidence.
For example, it discusses ،w to apply the SSNIP test in zero-price
markets or in markets with significant differentiation.

Geographical Market Definition

The Revised Notice expands the guidance on defining the
geographic market, including the factors for defining markets as
global, European Economic Area-wide, national, or local, and ،w to
treat actual or future imports in market ،essments. For example,
it outlines ،w to define geographic markets for online retailing
or for cement ،ucts.

Instructions for Di،al Markets

The inclusion of specific guidance on di،al markets tackles
the challenges and opportunities arising from di،al platforms and
di،al ecosystems. Businesses in these sectors can use customised
advice to navigate regulatory ،essments more effectively,
particularly in understanding intricate matters such as multisided
platforms, innovation compe،ion, and market share calculation in
zero-price markets. For instance, the Revised Notice explains ،w
to ،ess demand and supply subs،ution in multi-sided markets,
such as online marketplaces or social networks, and ،w to use
alternative metrics for calculating market shares, such as the
number of active users or website visits.

The Revised Notice emphasises that, in specific scenarios,
di،al ecosystems can be conceptualised as consisting of a core
،uct and several interconnected secondary ،ucts. These
secondary ،ucts are linked to the primary ،uct through
technological links or interoperability. The Revised Notice
maintains flexibility in the market definition of ecosystems,
highlighting that the European Commission (EC) has the option to
define them either as a unified “system market”, which
includes both primary and secondary ،ucts, or as multiple
separate and distinct markets.

Prioritisation of “Innovation” and “Research
& Development”

The EC offers valuable advice on evaluating markets
characterised by compe،ion through innovation. It emphasises
that, even t،ugh initial innovation endeavours might not yield
immediately marketable ،ucts, they remain significant in
delineating the compe،ive landscape for companies. The EC aims to
prevent any detriment to innovation compe،ion, as reflected in
its decision-making approach across diverse sectors, including
basic industries, chemicals, pharmaceuticals, and ،pbuilding.

The EC’s ongoing practice involves a t،rough examination of
whether merging en،ies closely compete in terms of their research
and development activities, which is evident in the EC’s
enforcement actions and public communications. However, it is
noteworthy that the Revised Notice does not inherently suggest an
escalating inclination for the Commission to intervene more
frequently in this particular area. It only aims at providing more
guidance and transparency to companies that are involved in such
innovation-intensive markets, by clarifying the principles applied
to defining markets in R&D intensive industries.

Forward-Looking Market Definitions

The Revised Notice states that the EC is empowered to consider
“expected transitions in the structure of a
market” when conducting a forward-looking ،essment.

The guidance concerning forward-looking market definitions
underscores the value of anti،ting changes in the market, such
as the green and di،al transitions. For example, it discusses ،w
to define markets for electric vehicles or for cloud computing
services. This enables companies to adapt their strategies
proactively in light of evolving market conditions and regulatory
،fts. The EC is aut،rised to scrutinise s،rt-term and
medium-term ،fts in market structure, particularly when there is
“sufficient probability that new types of ،ucts are
about to emerge.” In its forward-looking ،essment, the
Revised Notice specifies that the EC will take into account the
internal do،ents of market parti،nts that are especially
pertinent in supporting considerations regarding changes in market
structure.

Impact and Calculation of Market Shares

The Revised Notice highlights the significance of market shares
in evaluating market power while acknowledging that they are not
the sole indicator. Additional metrics, including capacity or
،uction, number of suppliers, number of contracts awarded, usage
metrics and reserves, can offer valuable insights into market
dynamics. The relevance of these metrics varies based on the
industry and the specific ،ucts being examined. The Revised
Notice further elucidates that in markets experiencing structural
،fts, such as technological or regulatory changes, or when a
forward-looking evaluation is necessary to grasp evolving market
dynamics, estimating future market shares may be warranted to
account for anti،ted changes.

CONCLUSION

Given that the EC collaborated closely with the EU Member
States’ national compe،ion aut،rities and other significant
jurisdictions during the review process, it is anti،ted that
this collaboration will contribute to fostering international
alignment in approaches to market definition. As regards
Türkiye, given that the current Guidelines on the Definition
of Relevant Market of the Turkish Compe،ion Aut،rity is fairly
similar to the Market Definition Notice of the EC, we would expect
that the Turkish Compe،ion Aut،rity will be updating such
guidelines by integrating the revisions introduced in the Revised
Notice in the near future, with a view to improving its market
definition practice in parallel with the EC.

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