Defining Significant Market Power: An Update

As a result of the European Commission's consultation on regulating for convergence (Com (2000) 239), the Commission issued a proposed directive for a new regulatory framework for electronic services and networks (the Framework Directive). The new framework aims, amongst other things, to ensure consistency between telecommunications specific rules and EC Treaty Competition rules.

Article 13 of the Framework Directive provides a new definition of undertakings with SMP (significant market power) based on the concept of "dominant position" in Article 82 of the EC Treaty. Article 14 of the Framework Directive provides that the Commission will adopt guidelines on market definition and the calculation of SMP in order to provide guidance to National Regulatory Authorities (NRAs) in the application of the SMP concept.

The proposed guidelines were published in March as Com (2001) 175.

The Guidelines
Describe the methodology for market definitions; describe the criteria for assessing SMP in a relevant market; outline the possible outcomes that NRAs may reach in their assessments of markets and set out the possible actions in respect of each possible outcome describe the powers of investigation of NRAs and suggest procedures for co-ordination between NRAs, between NRAs and National Competition Authorities and between NRAs and the Commission so as to ensure consistency of approach; and lastly, they describe procedures for public consultation and publication of the NRAs proposed decisions.

SMP status is significant because, under the new framework, it becomes the threshold for imposing sector specific obligations such as price controls, cost accounting obligations and, in particular, obligations to provide interconnection or access at cost-oriented prices.