COMPETITION • EUROPEAN LAW • ABUSE OF DOMINANT POSITION
According to the Commission, a relevant geographic market “comprises the area in which the firms concerned are involved in the supply of products or services and in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas”. When defining the relevant geographic market, the European authorities use various objective criteria.
One criterion is the nature of the product or service. Airports are only interchangeable to a limited extent, in particular due to the distance between them with each one therefore being regarded as constituting a distinct geographic market. Likewise, piloting services in a port represent in themselves a specific market. The capacity to guarantee technical support at short notice in case of technical failure could be used to define the regional market for railway traction services. Generally, transport costs are the essential factor for spatial delineation of the market as they restrict the ability to sell beyond a certain geographic radius, particularly in the case of cumbersome goods or those of a low intrinsic value. The greater their absolute or relative value compared to the price of the product, the higher the market power of the undertaking. Even where transport costs do not stand in the way of the distribution of a product, they are factors making the relevant market a single market that must be taken into consideration for its geographic delineation.
The location of the operators and customers of the undertaking in question also plays an important role in the delimitation of the geographical area concerned. A market is national when its operating conditions are characterized by close geographical proximity between the purchasers and suppliers present at the level of the Member State. On the other hand, the location of operators and consumers gives a market a global dimension when the products in question are manufactured by a large number of undertakings operating on a global scale and are sold throughout the world.
The definition of the geographic market also takes into consideration the existence of national or EU regulatory barriers.
In some cases the EU authorities will include a socio-psychological assessment in order to better evaluate the inelasticity characterizing a given market. Thus, consumers’ language and cultural preferences, local customs and users’ consumption habits, such as a preference for certain packaging or cigarette brands, may constitute factors defining the geographic market.
Taking a broad approach, the competition authorities underline that the geographic market must conform to the area in which, for economic operators, objective conditions of competition for the product or service are “similar” or “sufficiently homogeneous”. Homogeneity exists from the supply side where, in a defined area, the characteristics of products, the administrative regulation, the offerors and the degree of maturity of the market are identical or the volume of exchanges and level of substitutability of supply are high. As for the demand, the competition authorities consider in particular consumer behavior, the organization of distribution, the structure of the demand, supply policies and level of imports. The fact that there is no difference in prices between products within a given geographic area is regarded as an essential indication of the homogeneity of that area.
Article 102 TFEU prohibits any abuse of a dominant position within the internal market or in a substantial part of it. The “substantial part” is in fact a very contingent notion: the region of a Member State or a town or a neighborhood can be considered as a substantial part of the internal market if they are of economic importance to the internal market as a whole. Theoretically there is no minimum geographic scope. In determining whether a given territory is sufficiently large to be a substantial part of the internal market as defined in Article 102 TFEU, account must be taken in particular of the structure and volume of production and consumption of the product and habits and economic possibilities of sellers and purchasers. For example, a port – in respect of the volume of traffic and its significance in relation to maritime import and export operations as a whole in the Member State concerned, or an airport, in respect of the extent of passenger traffic, constitute specific markets covering a substantial part of the internal market. Evidence of the existence of a dominant position on a substantial part of the internal market sometimes results from national provisions setting forth a contiguous series of monopolies territorially limited but together covering the entire territory of a Member State or the holding of an exclusive right, such as collection, carriage and delivery of letter post on the territory of a Member State. A stable and non-negligible demand – even of varying intensity depending on the Member States – on the whole territory of the European Union, the possibility of obtaining supplies in other Member States and the low cost of transportation give an EU dimension to the geographic market. Lastly, the market for client PC operating systems, work group server operating systems and media players is worldwide since license agreements are valid worldwide and there is no restriction on imports.
