After identifying the relevant markets, an analysis is conducted in order to determine whether or not they are competitive, and, if they are not competitive, to identify the operator(s) with SMP.
According to art. 60, paragraph 1 of the ECL (Art. 14. of the Framework Directive) "an undertaking shall be deemed to have significant market power if, either individually or jointly with others, it enjoys a position equivalent to dominance, that is to say a position of economic strength affording it the power to behave to an appreciable extent independently of competitors, customers and consumers".
SMP may be held by only one company in the market (single dominance) or by more than one entity (joint dominance) 1.
In the assessment of SMP in the wholesale markets of leased lines, as in the previous market analysis, ICP ANACOM took the Guidelines (§19) into utmost account, assessing "whether competition is effective. A finding that effective competition exists on a relevant market is equivalent to a finding that no operator enjoys a single or joint dominant position on that market".
In the same document (§ 20), the EC indicates that "NRAs will conduct a forward looking, structural evaluation of the relevant market, based on existing market conditions. NRAs should determine whether the market is prospectively competitive, and thus whether any lack of effective competition is durable, by taking into account expected or foreseeable market developments over the course of a reasonable period. The actual period used should reflect the specific characteristics of the market and the expected timing for the next review of the relevant market by the NRA. NRAs should take past data into account in their analysis when such data is relevant to the developments in that market in the foreseeable future".
In the Guidelines, the EC presents market shares as an indicator of market power 2.
However, it also states that the existence (or absence) of a dominant position cannot be established on the sole basis of large (or small) market shares, whereby the NRA should make use of other criteria. The various criteria include the following:
- overall size of the company;
- barriers to entry and expansion;
- control of infrastructure which is not easily replicable;
- technological advantage or superiority;
- countervailing buying power;
- easy or privileged access to capital markets/financial resources;
- diversification of products/services;
- economies of scale and/or economies of scope;
- vertical integration;
- highly developed distribution and sales network;
– absence of potential competition; or
- barriers to expansion,
whereas a dominant position can derive from a combination of these criteria, which taken separately may not necessarily be determinative.
On this issue, the ERG published a document 3, where other criteria are developed for evaluating SMP:
- excessive pricing;
- ease of market entry;
- costs and barriers to switching;
- evidence of previous anti competitive behaviour;
- active competition on other parameters;
- existence of standards/conventions;
- customers ability to access and use information;
- Price trends and pricing behaviour; or
- international benchmarking.
1 Additionally, where an undertaking has SMP in a specific market, it may also be deemed to have SMP in an adjacent market, where the links between the two markets are such as to allow the market power held in one market to be leveraged into the other market, thereby strengthening the market power of the undertaking (SMP leveraging).
2 In administrative practice of the EC, concerns (and decisions) in respect of situations of individual dominance normally arise in cases of undertakings with market shares exceeding 40 percent.
3 ''Revised ERG Working paper on the SMP concept for the new regulatory framework'', October 2004http://www.erg.eu.int/doc/publications/public_hearing_concept_smp/erg0309rev1_smp_working_doc.pdf .