Review of EU Notice on Market Definition

Review of EU Notice on Market Definition

EU Commissioner Vestager has announced that the Commission will review and revise its 1997 market definition notice to take account of market developments and the globalisation of competition.

The definition of the relevant market, while intuitively simple and anchored in economic theory and legal precedents, can present particular issues in relation to the newer markets that have emerged in recent years.

Digitisation has changed how consumers interact with social media including in ways other than payment of money, such as exchange of personal data. 

The application of the so-called “Hypothetical monopolist test”, conveniently labelled as the “SSNIP” test (Small, Significant Non-Transitory Increase in Price) can present challenges when applied to newer markets.  This test seeks to assess the reactions of consumers in response to a company increasing its prices by, say, 5 – 10% over a period of time of about a year.  In Google Android the Commission had to address the fact that the Android operating system is available for free so instead of a SSNIP test the Commission asked what would happen if Google reduced the quality of Android software.

The Commission will also look at the potential lock-in effect of digital ecosystems where companies provide a full range of services making it hard for consumers to switch.