Definition of the Relevant Market according to the Technology Transfer Block Exemption Regulation 772/2004

Innovation may be described as the new religion of the 21st Century. The acceleration of technical change and innovation has created a new competitive dynamism, which poses a challenge to the present competition policy. This competitive dynamism is particularly apparent in those markets that are referred to as constituting the ''new economy''. These markets are characterised by high intensity of R&amp&semicD, rapid innovation, intense competition based more on product development than on price and by the fact that the critical asset for competitive success often is intellectual property. Licensing of technology contributes to economic development by disseminating innovations and by encouraging new entry. This leads to a more efficient exploitation of intellectual property. Thus, to facilitate the dissemination of knowledge and to maximise the benefit of innovation, the European Commission adopted, as part of an ongoing programme of modernisation of EU competition law, a new Technology Transfer Block Exemption Regulation in 2004. This block exemption adopts a more economical approach than the technology transfer block exemption it replaced. While the benefits of technology licensing are acknowledged in its preamble, the question to be asked here is to what extent these benefits are achieved. The definition of the relevant market is a key concept in the application of European competition law. In European competition law a structure of analysis has evolved that begins with a relevant market definition, and then proceeds to the assessment of market power. After these two elements have been assessed focus is put on the anti-competitive behaviour and its consequences. This structural analysis can lead to errors in any case application but is particularly prone to error in dynamically competitive markets. Definition of the relevant market should merely be an intermediate step. A step that can only be a useful tool to aid the competitive assessment if it is conducted on a basis that is consistent with the aims of competition law. The Technology Transfer Block Exemption Regulation has been welcomed by the industry. However, it has also received criticism. Firstly, to define a relevant market is a complex endeavour which is further complicated when dealing with dynamically complex markets. The complexity of this endeavour is not eased by the Guidelines that accompany the Technology Transfer Block Exemption Regulation. These play an increasingly important role in the application of competition law as a consequence of the decentralisation of enforcement through self-assessment. They are an important tool for antitrust counsellors, national courts and competition authorities. The Guidelines lack clarity in a number of areas. This in turn creates uncertainty for business, coupled with the risk of a fragmented application at the national level. Secondly, the safe harbour that the block exemption offers is only available to parties that have a market share below the level set by the market share ceilings. In dynamic markets, these ceilings are easily and quickly reached. The result is that small innovative start-up companies, which lack large resources and are less familiar with competition law principles, are often put at a disadvantage. The disadvantage affects those companies that are arguably those that are vulnerable and in most need of the potential benefit of the Technology Transfer Block Exemption Regulation. Furthermore, the Technology Transfer Block Exemption Regulation introduces the concept of innovation markets. In light of the concept's debated usefulness, the European Commission has treaded lightly and carefully. The result of the European Commission's caution is an unclear application of the concept with the effect of further complicating the already complex Regulation