The Effect of Barriers to Entry on the Concept of Market Power under Article 82

The main instrument to combat the abuse of a dominant position within the European Union is Article 82 ECT. It is not intended to prohibit dominance per se, but rather to offer a vehicle for the reaction to actual or potential abuses of undertakings. In order for the Article to come into play the prime requirement is that the undertaking undergoing scrutiny is indeed dominant. Dominance is a relative concept. The prime method of trying to catch a meaning of the concept is by calculating an undertaking's market power in relation to its competitors on the relevant market. When delimiting a relevant market there are three significant aspects that should be considered. First comes the delimiting of the relevant product market, important since it will give an answer to which range of products or services that should be viewed as belonging to the same market. Secondly, comes the determining of the geographical spread of the market. The relevant geographical market is the area in which the objective conditions are the same for all traders for the relevant range of products. Finally, the temporal market, i.e. the effect of time and seasonal changes on the relevant product and geographical market must be taken into account in the process. When the relevant market is defined, the undertakings market power must be assessed. An undertaking is considered dominant if it can act in relative disregard of its competitors and customers on a substantial part of the common market. In order to determine if that is the case, the size of the market share of the identified product range first has to be established. It is of importance in this assessment to look at the absolute market share and, the relative market share as well as the maintenance of market share over time. However, this will still not present an exhaustive analysis as it fails to take efficiency, structural, and competitive aspects into account. Therefore such other factors will play an important role and one group of these are referred to as barriers to entry. These are the factors that makes it difficult for other undertakings to enter and penetrate a relevant market where there is a strong undertaking established. Other structural factors such as a wide geographical presence as well as behavioral factors may also have a role to play. There is much controversy surrounding the concept of barriers to entry. The concept ultimately revolves around the central issue of what factors would allow an established undertaking to reap profit in excess of normal profit levels and artificially exclude equally, or more, efficient undertakings. A narrow definition of entry barriers will have the effect of excluding undertakings from the reach of Article 82, as they may be found to possess too little market power to be considered dominant. Thus they will be able to carry on with their abusive behavior unchecked. On the other hand, a broad definition risks to include factors not related to any artificial constraint on competition, thereby punishing a firm for its efficiency and demoting the aim of competition law. The Court and the Commission have given the concept of barriers to entry a relatively broad scope. This approach has been questioned as it may fail to take economic thinking into consideration. It is feared that the broad view does not fully distinguish between artificial clogs on competition and advantages achieved legitimately through superior efficiency. The importance of taking the factors dealt with as barriers to entry into account when assessing market power is, however, not questioned. It enhances the quality of the process of determining dominance by adding more aspects to the assessment. The aspects on this process introduced by the concept of barriers to entry are also becoming increasingly important, and so in particular regarding the effect of having superior technology and know-how. However, in order to use a barrier effectively in the process a relative value of some sort has to be attributed to it. This is rather difficult in the case of know-how, as no general rule of evaluation exists. By turning to a few Swedish tort cases I have tried to find examples of how this issue has been dealt with. Two approaches has been demonstrated, neither of them flawless. However, the approach taking account of market evaluation of the know-how seems preferable to the one attributing it a value based solely on development costs. I believe that the concept of barriers to entry has a given place when assessing market power, even if it is contains certain ambiguity. However, it would be an improvement if the Court and the Commission paid more attention to efficiency arguments and economic aspects than they have done so far