The European Commission defines a market, typically comprising a product and a geographic dimension, when assessing mergers and in most competition cases. Market definition makes it possible to calculate market shares, which are used to assess an undertaking’s market power as a first screening tool to assess whether competition concerns may arise, as well as under certain procedural aspects of EU competition law such as to determine the application of the block exemption regulations, in the application of the EU Merger Regulation, or to assess whether there may be an effect on trade under Articles 101 and 102 of the TFEU. Other than under these specific procedures, market definition is not a mandatory step in all assessments under EU competition law and, where it is used, it is an intermediate step and does not prejudge the outcome of the legal assessment. The purpose of a Market Definition Notice is to provide transparency on Commission policy and decision-making. It codifies existing case law and practice and, specifically, sets out the main principles governing the definition of product and geographic markets (i.e. how the Commission determines demand side substitution and supply side substitution) and the evidence the Commission relies on to define the relevant market.

On 8 February 2024, the Commission adopted a revised version of its 1997 Market Definition Notice. The new Notice is intended to provide more accessible, up to date guidance with practical examples and to address changes in market conditions. This includes: greater emphasis on non-price elements such as innovation, quality, reliable supply and sustainability; new guidance on market definition concepts in digital markets (including multi-sided markets and digital “ecosystems” (e.g. products built around a mobile operating system)) and innovation-intensive markets where industries compete on innovation; and more guidance on geographic market definition including facts that may justify defining a market as global.

For example, the Notice states that, for a multi-sided platform (a platform that brings together two or more mutually dependent groups of users, such as buyers and sellers), the Commission may define the product market by reference to the products offered by the platform as a whole, encompassing all or multiple user groups, or it may define separate relevant product markets. In either case, the Commission takes into account, where relevant, the indirect network effects between user groups on different sides of the platform (i.e. when the value of a service increases for one user group when a new user of a different user group joins the network) when defining the relevant market or in the related competition assessment. In addition, as multi-sided platforms often supply a product at a zero monetary price, non-price elements become particularly relevant for the assessment of substitution (e.g. product functionalities and barriers or costs of switching such as interoperability with other products). The Commission may consider alternatives to the “small significant non-transitory increase in price” test to determine demand substitution such as by assessing the switching behaviour of customers in response to a “small but significant non-transitory decrease of quality.”

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