Normally, the dominant firm faces a number of small competitors, referred to as a competitive fringe. However, it is an asymmetric oligopoly because the firms are not of equal size. An industry with a dominant firm is therefore often an oligopoly in that there are a small number of firms. Dominant firms can raise competition concerns when they have the power to set prices independently. Dominant firms are typically considered to have market shares of 40 per cent or more. 30) and Judgment of the Court of First Instance of in case T-102/96, Gencor Ltd v Commission, (1999) E.C.R., page II-0753Ī dominant firm is one which accounts for a significant share of a given market and has a significantly larger market share than its next largest rival. See: Article 102 TFEU and the Merger Regulation, On collective dominance see also: Commission Decision No 97/26/EC of in case IV/M.619 - Gencor/Lonrho (OJ L 11,, p. As the Court has ruled in Gencor, there is no reason in legal or economic terms to exclude from the notion of economic links the relationship of interdependence existing between the parties to a tight oligopoly within which those parties are in a position to anticipate each one another’s behaviour and are therefore strongly encouraged to align their conduct in the market. This situation is called collective (or joint or oligopolistic) dominance. A dominant position may also be enjoyed jointly by two or more independent economic entities being united by economic links in a specific market. The EU merger control system (merger control procedure) differs insofar from this principle, as it prohibits merged entities from obtaining or strengthening a dominant position by way of the merger. Instead, competition rules do not allow companies to abuse their dominant position. Under EU competition law, it is not illegal to hold a dominant position, since a dominant position can be obtained by legitimate means of competition, for example by inventing and selling a better product. A dominant firm holding such market power would have the ability to set prices above the competitive level to sell products of an inferior quality or to reduce its rate of innovation below the level that would exist in a competitive market.

© European Court of JusticeĪ firm is in a dominant position if it has the ability to behave independently of its competitors, customers, suppliers and, ultimately, the final consumer. The legal definition of a dominant position in EU law was given by the ECJ in Case 2/76 United Brands Company and United Brands Continentaal BV v Commission of the European Communities : 'a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, its customers and ultimately of its consumers'.

Abstract notion definition