Beyond the Era of Convergence
Advances in Information, Communication and Entertainment Markets series
Edited by Hitoshi Mitomo, Hidenori Fuke and Erik Bohlin
Chapter 16: Understanding market definition, relevant market and significant market power (SMP) frameworks in the EU
The market intervention procedure in Europe is simplified as three steps to regulate inefficient markets: the first step is to identify the relevant market, the second step is to test whether there is any significant market power in the market and the third step is to apply the appropriate remedy to solve the market failure. While the ex ante regulation is mainly analysed and implemented based on economic frameworks, in practice the relevant market analysis is currently identified based on the principle of competition law. It is not uncommon for economics and law sometimes to go in different directions. This leaves scope for the regulatory body to trade-off one option for another. This study aims to fill the gap in regulation study by trying to understand the problems of market definition analysis and significant market power frameworks in the EU. The analysis of this study is based on document analysis of economic issues from previous studies and reports, including the public consultation in 2013 on the revision of the Recommendation on relevant markets. This study shows that economic issues along with the service convergence bring new challenges to both operators and regulators in the current European telecommunications sector. For example, the two-sided market in mobile telephony affects the mobile termination market when defining relevant market. Similarly, platform competition and substitution between fixed and mobile need to be considered when defining relevant market in wholesale broadband services. The static and dynamic trade-off should be under consideration throughout the procedure as it affects competition and investment in both the short and long run. Therefore it is important for market definition and SMP analysis to balance policy between economics and law, static and dynamic and consider market definition case by case, depending on the priority and situation in each member state perspective.
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