The interface between competition policy,
trade, investment and development
Geneva, 23 July 2007
Abuse of Market Power
Presentation by:
Ursula Ferrari
Consultant – Competition and Consumer Policies Branch/
Division on International Trade in Goods, Services and Commodities
UNCTAD
UNCTAD
Overview and objective of presentation
• Differentiate between legal and illegal use of
market power
• Determine when abuse of market dominance
occurs
• Describe how different restrictive practices can
be used by dominant firms to lessen competition
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The Abuse of Dominance
• Dominance vs. Market Power?
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Definition of Dominant position in Competition Law:
• “…a position of economic strength enjoyed by
an undertaking, which enables it to prevent
effective competition being maintained on the
relevant market by giving it the power to behave
to an appreciable extent independently of its
competitors, its customers and ultimately of the
consumers.”
(Source: EC jurisprudence, Case-27/76 United Brands v. Commission,
para. 65)
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A dominant position in a given
market is not in itself an offence
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Natural Monopolies
IN SOME MARKETS, THERE MAY ONLY BE
ROOM FOR:
ONE EFFICIENT ENTERPRISE
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Abuse is:
- Using a dominant position to lessen
competition in a market or to prevent
other firms from entering the market
PROHIBITED
by competition law
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Establishing Abuse of Market Dominance
Three steps:
1) Market definition
2) Market dominance
3) Abuse of dominant market power
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1) Market Definition:
Establishing the relevant market:
Broad: Interest of the challenged firm
Narrow: Interest of the competition
authority
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2) Market dominance:
Indicators used to establish whether or not an
enterprise controls the market
• Market shares
• Vigour of competition from smaller enterprises in the
•
•
•
•
market
Extent of countervailing power from customers
Nature and height of barriers to entry
Strength of import competition
Obstacles to direct foreign investment
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3) Abuse of dominant market power:
Restrictive practices used by dominant firms
 Predatory pricing (or conduct)
 Single branding and rebates
 Tie-in sales and bundling
 Price discrimination
 Refusal to deal or supply
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A HIGH DEGREE OF MARKET CONTROL
CANNOT EXIST UNLESS:
 There are relatively high barriers to entry by
new firms
 There are low levels of import competition
and countervailing power from customers
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Conclusion
The aim of Competition is :
• To ensure market access to all potential competitors in
order to ensure consumer welfare in the form of the best
prices, quality, innovation and choice, and to ensure an
efficient allocation of resources.
• To improve the trade related aspects such as liberalized
trade and competitiveness on the global market.
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Closing remarks:
• Important documents:
-
UNCTAD Model Law (2007)
UN Set of Principles and Rules on Competition (2000)
UN Guidelines on Consumer Protection (2001)
Manual on the formulation and application of competition
law (2004)
Available at:
www.unctad.org/competition
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