The Treatment of Market Power

Abstract

Market power gives its possessor a degree of choice concerning the prices he may charge and the consequent levels of sales which he may expect. It is the crucial concept of competition theory because it is a measure of the economic loss which can be imposed upon the rest of the community by distorting consumer choice away from the cost-related basis which rules under pure competition. It is also of considerable importance in the practical application of many aspects of competition policy. Measures of market power, or ‘dominance’ often determine who comes within the scope of regulatory action. Regulatory intervention under Article 86 of the Treaty of Rome, for example, can be applied only to those who occupy a ‘dominant position’; which has been defined as:

a position of economic strength enjoyed by an undertaking which enables it to hinder the maintenance of effective competition in the relevant market by allowing it to behave to an appreciable extent independently of its competitors and customers. (Michelin v Commission 1983)