"Dominance" - The Competition Authority's perspective.
The Competition Authority's recent Interim Report of the study on the newspaper industry offers a useful insight into the Competition Authority's perception of what constitutes "dominance". The Report resulted from a request by the Minister for Enterprise and Employment to the Competition Authority to undertake a study and analysis of the practice and method of competition affecting the supply and distribution of newspapers in Ireland.
In Chapter 6 of the Report the Competition Authority concluded that to be regarded as dominant, a firm must have the ability to exercise market power, that is, it must have sufficient power to enable it to raise prices or to act in some other way independently of rivals. The Competition Authority regards this as requiring not just that a firm must have a large market share but that the prospect of entry by new competitors which might reduce the dominant firm's market power must also be limited to some degree. In the absence of entry barriers any attempt by a firm with market power to raise prices, for example, would attract new firms into the market thus driving down prices.
In reaching this conclusion the Competition Authority rejected the application of the contestability theory which considers that in a contestable market a firm cannot exercise any market power so that the question of dominance does not arise. The Competition Authority concluded that a large market share is not of itself proof of dominance although maintenance of a large market share may be evidence of dominance. The relevant level of market share required to indicate dominance will depend on the number and strength of competitors in the market in a particular time period. Market share is only one of a number of factors to be taken into account in finding the existence of dominance and other factors noted by the Competition Authority include barriers to entry to the market, access to capital and the use of intellectual property rights to prevent access to new technology.
The Report provides an important synopsis of the principles which underlie a finding of "dominance" by the Competition Authority under Irish law and also provides a useful insight into the Competition Authority's approach to definition of markets and, in particular, the markets which comprise the Irish newspaper industry.
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