Commission guidelines on market analysis and the assessment of significant market power under the Community regulatory framework for electronic communications networks and services (Text with EEA relevance)
Date: 2002-07-11
Institutions: European Commission
Subjects: access to information, competition law, consumer protection, data processing, domestic market, electronic mail, systems interconnection, transmission network

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Commission guidelines on market analysis and the assessment of significant market power under
the Community regulatory framework for electronic communications networks and services

(2002/C 165/03)

(Text with EEA relevance)

1. INTRODUCTION

1.1. Scope and purpose of the guidelines

1. These guidelines set out the principles for use by national
regulatory authorities (NRAs) in the analysis of markets
and effective competition under
the new regulatory
framework for electronic communications networks and
services.

communications

the European Parliament and of

2. This new regulatory framework comprises five Directives:
Directive 2002/21/EC of the European Parliament and of
the Council of 7 March 2002 on a common regulatory
framework for electronic communications networks and
services (1), hereinafter the framework Directive; Directive
the
2002/20/EC of
Council of 7 March 2002 on the authorisation of elec-
tronic communications networks and services (2), here-
inafter the authorisation Directive; Directive 2002/19/EC
of the European Parliament and of the Council of 7
March 2002 on access to, and interconnection of, elec-
tronic
associated
facilities (3), hereinafter
the access Directive; Directive
2002/22/EC of
the
Council of 7 March 2002 on universal service and
communications
users'
networks
the universal
service Directive; a Directive of the European Parliament
and of the Council concerning the processing of personal
data and the protection of privacy in the electronic
last
communications
Directive is formally adopted, Directive 97/66/EC of the
European Parliament and the Council concerning the
processing of personal data and protection of privacy
in the telecommunications
the
data protection Directive, remains the relevant Directive.

relating to electronic
and services (4), hereinafter

the European Parliament and of

sector (5). However, until

sector (6), hereinafter

networks

rights

and

this

regulation were

laid down in the

3. Under the 1998 regulatory framework, the market areas
of the telecommunications sector that were subject to
relevant
ex-ante
directives, but were not markets defined in accordance
with the principles of competition law. In these areas
defined under the 1998 regulatory framework, NRAs
had the power
to designate undertakings as having
significant market power when they possessed 25 %
market share, with the possibility to deviate from this
threshold taking into account the undertaking's ability
to influence the market, its turnover relative to the size
its control of the means of access to
of the market,
end-users,
resources and its
experience in providing products and services in the
market.

to financial

its access

4. Under the new regulatory framework, the markets to be
regulated are defined in accordance with the principles of
European competition law. They are identified by the

to Article 15(1) of

Commission in its recommendation on relevant product
and service markets pursuant
the
framework Directive (hereinafter ‘the Recommendation’).
When justified by national circumstances, other markets
can also be identified by the NRAs, in accordance with
in Articles 6 and 7 of
the procedures set out
the
In case of transnational markets
framework Directive.
they will
which are susceptible to ex-ante regulation,
where appropriate be identified by the Commission in
a decision on relevant
transnational markets pursuant
to Article 15(4) of the framework Directive (hereinafter
‘the Decision on transnational markets’).

5. On all of these markets, NRAs will intervene to impose
obligations on undertakings only where the markets are
considered not to be effectively competitive (7) as a result
of such undertakings being in a position equivalent to
dominance within the meaning of Article 82 of the EC
Treaty (8). The notion of dominance has been defined in
the case-law of the Court of Justice as a position of
economic strength affording an undertaking the power
independently of
to behave to an appreciable extent
consumers.
competitors,
customers
in
Therefore, under
contrast with the 1998 framework,
the Commission
and the NRAs will rely on competition law principles
and methodologies
to be
to define
regulated ex-ante and to assess whether undertakings
have significant market power (‘SMP’) on those markets.

the new regulatory framework,

the markets

ultimately

and

6. These guidelines are intended to guide NRAs in the
exercise of
for defining
their new responsibilities
markets and assessing SMP. They have been adopted by
the Commission in accordance with Article 15(2) of the
framework Directive, after consultation of the relevant
national authorities and following a public consultation,
the results of which have been duly taken into account.

7. Under Article 15(3) of the framework Directive, NRAs
should take the utmost account of
these guidelines.
This will be an important factor in any assessment by
the Commission of the proportionality and legality of
proposed decisions by NRAs, taking into account the
policy objectives
the
framework Directive.

laid down in Article 8 of

8. These

guidelines

specifically
(a) market definition;

address
following
the
subjects:
(b) assessment of SMP;
(c) SMP designation; and (d) procedural issues related to
all of these subjects.

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9. The guidelines have been designed for NRAs to use as

follows:

— to define

the geographical dimension of

those
product and service markets identified in the Recom-
mendation. NRAs will not define the geographic
scope of any transnational markets, as any Decision
on transnational markets will define their geographic
dimension,

— to carry out, using the methodology set out

in
Section 3 of the guidelines, a market analysis of the
conditions of competition prevailing in the markets
identified in the Recommendation and Decision and
by NRAs,

— to identify relevant national or sub-national product
and service markets which are not
listed in the
Recommendation when this is justified by national
circumstances and following the procedures set out
in Articles 6 and 7 of the framework Directive,

— to designate,

following the market analysis, under-
takings with SMP in the relevant market and to
impose proportionate ex-ante measures consistent
with the terms of
the regulatory framework as
described in Sections 3 and 4 of the guidelines,

— to assist Member States and NRAs in applying Article
11(1f) of the authorisation Directive, and Article 5(1)
of
the framework Directive, and thus ensure that
undertakings comply with the obligation to provide
information necessary for NRAs to determine relevant
markets and assess significant market power thereon,

— to guide NRAs when dealing with confidential
information, which is likely to be provided by:

— undertakings under Article 11(1f) of the author-
the

and Article

5(1)

of

isation Directive
framework Directive,

well as to define relevant markets outside this Recom-
mendation. Section 3 describes the criteria for assessing
SMP in a relevant market. Section 4 outlines the possible
conclusions
that NRAs may reach in their market
analyses and describes the possible actions that may
result. Section 5 describes the powers of investigation
of NRAs, suggests procedures for coordination between
NRAs and between NRAs and NCAs, and describes coor-
dination and cooperation procedures between NRAs and
the Commission. Finally, Section 6 describes procedures
for public
consultation and publication of NRAs'
proposed decisions.

11. The major objective of these guidelines is to ensure that
NRAs use a consistent approach in applying the new
regulatory framework, and especially when designating
undertakings with SMP in application of the provisions
of the regulatory framework.

12. By issuing these guidelines, the Commission also intends
to explain to interested parties
and undertakings
operating in the electronic communications sector how
NRAs should undertake their assessments of SMP under
the framework Directive, thereby maximising the trans-
parency and legal certainty of
the
sector specific legislation.

the application of

13. The Commission will amend these guidelines, whenever
appropriate,
taking into account experience with the
application of the regulatory framework and future devel-
the Court of First
opments in the jurisprudence of
Instance and the European Court of Justice.

14. These guidelines do not in any way restrict the rights
conferred by Community law on individuals or under-
takings. They are entirely without prejudice to the
application of Community law, and in particular of the
competition rules, by the Commission and the relevant
national authorities, and to its interpretation by the
Justice and the Court of First
European Court of
Instance. These guidelines do not prejudice any action
the Commission may take or
the
Commission may issue in the future with regard to the
application of European competition law.

any guidelines

— national competition authorities (NCAs) as part of
the cooperation foreseen in Article 3(5) of the
framework Directive, and

1.2. Principles and policy objectives behind sector specific

measures

— the Commission and a NRA in another Member
State as part of the cooperation foreseen in Article
5(2) of the framework Directive.

10. The guidelines are structured in the following way:

Section 1 provides an introduction and overview of the
background, purpose,
the
scope
guidelines. Section 2 describes the methodology to be
used by NRAs to define the geographic scope of the
markets identified in the market Recommendation as

content of

and

15. NRAs must

seek to achieve

the policy objectives
identified in Article 8(2), (3) and (4) of the framework
Directive. These fall into three categories:

— promotion of an open and competitive market for
services and

electronic communications networks,
associated facilities,

— development of the internal market, and

— promotion of the interests of European citizens.

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16. The purpose of imposing ex-ante obligations on under-
takings designated as having SMP is to ensure that under-
takings cannot use their market power either to restrict
or distort competition on the relevant market, or to
leverage such market power onto adjacent markets.

17. These regulatory obligations should only be imposed on
those electronic communications markets whose charac-
teristics may be such as to justify sector-specific regu-
lation and in which the relevant NRA has determined
that one or more operators have SMP.

18. The product and service markets whose characteristics
may be such as to justify sector-specific regulation are
identified by the Commission in its Recommendation
and, when the definition of different relevant markets is
justified by national
the NRAs
following the procedures set out in Articles 6 and 7 of
the framework Directive (9).
In addition, certain other
the
markets are specifically identified in Article 6 of
access Directive
the
and Articles 18 and 19 of
universal service Directive.

circumstances, by

19. In respect of each of these relevant markets, NRAs will
assess whether the competition is effective. A finding that
effective competition exists on a relevant market
is
equivalent to a finding that no operator enjoys a single
or joint dominant position on that market. Therefore, for
the purposes of applying the new regulatory framework,
effective competition means that there is no undertaking
in the relevant market which holds alone or together
with other undertakings a single or collective dominant
position. When NRAs conclude that a relevant market is
they will designate under-
not effectively competitive,
takings with SMP on that market, and will either
impose appropriate specific obligations, or maintain or
amend such obligations where they already exist,
in
accordance with Article 16(4) of
framework
Directive.

the

20. In carrying out the market analysis under the terms of
Article 16 of the framework Directive, NRAs will conduct
a forward looking, structural evaluation of the relevant
market, based on existing market conditions. NRAs
should determine whether the market is prospectively
competitive, and thus whether any lack of effective
competition is durable (10), by taking into account
expected or foreseeable market developments over the
course of a reasonable period. The actual period used
should reflect the specific characteristics of the market
and the expected timing for the next review of
the
relevant market by the NRA. NRAs should take past
data into account in their analysis when such data are
relevant to the developments in that market in the fore-
seeable future.

21. If NRAs designate undertakings as having SMP, they must
impose on them one or more regulatory obligations, in
accordance with the relevant Directives and taking into
account the principle of proportionality. Exceptionally,
NRAs may impose obligations for access and intercon-
nection that go beyond those specified in the access
Directive, provided this
is done with the prior
agreement of the Commission, as provided by Article
8(3) of that Directive.

22. In the exercise of their regulatory tasks under Article 15
and 16 of the framework Directive, NRAs enjoy discre-
tionary powers which reflect the complexity of all the
relevant factors that must be assessed (economic, factual
and legal) when identifying the relevant market and
determining the existence of undertakings with SMP.
These discretionary powers remain subject, however, to
the procedures provided for in Article 6 and 7 of the
framework Directive.

23. Regulatory decisions adopted by NRAs pursuant to the
Directives will have an impact on the development of the
internal market. In order to prevent any adverse effects
on the functioning of the internal market, NRAs must
ensure that they implement the provisions to which these
guidelines apply in a consistent manner. Such consistency
can only be achieved by close coordination and coop-
eration with other NRAs, with NCAs and with the
Commission, as provided in the framework Directive
and as recommended in Section 5.3 of these guidelines.

1.3. Relationship with competition law

24. Under the regulatory framework, markets will be defined
and SMP will be assessed using the same methodologies
as under competition law. Therefore the definition of the
geographic scope of markets identified in the Recommen-
dation,
relevant
the definition where necessary of
product/services markets outside the Recommendation,
and the assessment of effective competition by NRAs
should be consistent with competition case-law and
practice. To ensure such consistency,
these guidelines
are based on (1) existing case-law of the Court of First
Instance and the European Court of Justice concerning
market definition and the notion of dominant position
within the meaning of Article 82 of the EC Treaty and
Article 2 of the merger control Regulation (11); (2) the
‘Guidelines on the application of EEC competition rules
(3)
the
in
relevant
‘Commission notice on the definition of
markets for the purposes of Community competition
law’ (13), hereinafter the ‘Notice on market definition’;
and (4) the ‘Notice on the application of competition
rules to access agreements in the telecommunications
sector’ (14), hereinafter the ‘Access notice’.

telecommunications

sector’ (12);

the

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25. The use of

the same methodologies ensures that

the
relevant market defined for the purpose of sector-specific
regulation will in most cases correspond to the market
definitions that would apply under competition law. In
some cases, and for the reasons set out in Section 2 of
these guidelines, markets defined by the Commission and
competition authorities in competition cases may differ
from those
identified in the Recommendation and
Decision, and/or from markets defined by NRAs under
Article 15(3) of the framework Directive. Article 15(1) of
the framework Directive makes clear that the markets to
be defined by NRAs for the purpose of ex-ante regulation
are without prejudice to those defined by NCAs and by
the Commission in the exercise of their respective powers
under competition law in specific cases.

26. For

that

the concept of

the purposes of

the application of Community
the Commission's Notice on market
competition law,
definition explains
the relevant
market is closely linked to the objectives pursued under
Community policies. Markets defined under Articles 81
and 82 EC Treaty are generally defined on an ex-post
In these cases, the analysis will consider events
basis.
that have already taken place in the market and will
not be influenced by possible future developments.
Conversely, under the merger control provisions of EC
competition law, markets are generally defined on a
forward-looking basis.

should not

ignore, where

the framework Directive is not

27. On the other hand, relevant markets defined for the
purposes of sector-specific regulation will always be
assessed on a forward looking basis, as the NRA will
include in its assessment an appreciation of the future
the market. However, NRAs' market
development of
relevant, past
analyses
the
evidence when assessing the future prospects of
relevant market (see also Section 2, below). The starting
point for carrying out a market analysis for the purpose
of Article 15 of
the
existence of an agreement or concerted practice within
the scope of Article 81 EC Treaty, nor a concentration
within the scope of the Merger Regulation, nor an alleged
abuse of dominance within the scope of Article 82 EC
Treaty, but
forward-looking
assessment of the structure and the functioning of the
and
examination. Although NRAs
market
competition authorities, when examining the
same
issues in the same circumstances and with the same
should
objectives,
same
it cannot be excluded that, given the
conclusions,
differences outlined above, and in particular the broader
focus of the NRAs' assessment, markets defined for the
purposes of competition law and markets defined for the
purpose of sector-specific regulation may not always be
identical.

is based on an overall

principle

under

reach

the

in

28. Although merger analysis is also applied ex ante, it is not
carried out periodically as is the case with the analysis of
the new regulatory framework. A
the NRAs under
competition authority does not,
in principle, have the
opportunity to conduct a periodic review of its decision
in the light of market developments, whereas NRAs are
bound to review their decisions periodically under Article
16(1) of
factor can
the framework Directive. This
influence the scope and breadth of the market analysis
and the competitive assessment carried out by NRAs, and
for this reason, market definitions under the new regu-
latory framework, even in similar areas, may in some
cases, be different
from those markets defined by
competition authorities.

29. It is considered that markets which are not identified in
the Recommendation will not warrant
ex-ante sector
specific regulation, except where the NRA is able to
justify such regulation of an additional or different
in accordance with the procedure in
relevant market
Article 7 of the framework Directive.

30. The designation of an undertaking as having SMP in a
market identified for the purpose of ex-ante regulation
does not automatically imply that this undertaking is
also dominant for the purpose of Article 82 EC Treaty
or similar national provisions. Moreover, the SMP desig-
nation has no bearing on whether that undertaking has
committed an abuse of a dominant position within the
meaning of Article 82 of
the EC Treaty or national
competition laws. It merely implies that, from a structural
perspective, and in the short
the
operator has and will have, on the relevant market
identified, sufficient market power to behave to an appre-
ciable extent independently of competitors, customers,
and ultimately consumers, and this, solely for purposes
of Article 14 of the framework Directive.

to medium term,

31. In practice, it cannot be excluded that parallel procedures
under ex-ante regulation and competition law may arise
with respect to different kinds of problems in relevant
markets (15). Competition authorities may therefore carry
out their own market analysis and impose appropriate
competition law remedies alongside any sector specific
measures applied by NRAs. However, it must be noted
that
remedies by
different regulators would address different problems in
such markets. Ex-ante obligations imposed by NRAs on
undertakings with SMP aim to fulfil the specific objectives
set out in the relevant directives, whereas competition
law remedies aim to sanction agreements or abusive
behaviour which restrict or distort competition in the
relevant market.

such simultaneous application of

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32. As far as emerging markets are concerned, recital 27 of
the framework Directive notes that emerging markets,
where de facto the market
leader is likely to have a
substantial market share, should not be subject to inap-
propriate ex-ante regulation. This is because premature
imposition of ex-ante regulation may unduly influence
the competitive conditions taking shape within a new
and emerging market. At the same time, foreclosure of
such emerging markets by the leading undertaking
should be prevented. Without prejudice to the appropri-
ateness of intervention by the competition authorities in
individual cases, NRAs should ensure that they can fully
justify any form of early, ex-ante intervention in an
in particular since they retain the
emerging market,
in the context of
ability to intervene at a later stage,
the periodic re-assessment of the relevant markets.

2. MARKET DEFINITION

2.1. Introduction

the

change,

inherent

such as

considerable

33. In the Competition guidelines issued in 1991 (16), the
Commission recognised the difficulties
in
defining the relevant market in an area of rapid tech-
telecommunications
nological
sector. Whilst this statement still holds true today as far
as the electronic communications sector is concerned, the
Commission since the publication of those guidelines has
gained
the
experience
shaped by
competition rules
technological changes and innovation, as a
constant
role in managing the transition from
result of
its
monopoly to competition in this
should
however be recalled that the present guidelines do not
to explain how the competition rules apply,
purport
generally,
in the electronic communications sector, but
focus only on issues related to (i) market definition;
the assessment of significant market power
and (ii)
the framework
within the meaning of Article 14 of
Directive (hereafter SMP).

in a dynamic

in
sector

applying

sector.

It

is of

implies

fundamental

34. In assessing whether an undertaking has SMP, that is
‘enjoys a position of economic strength
whether
it
affording it
to behave to an appreciable
the power
extent independently of its competitors, customers and
ultimately consumers’ (17), the definition of the relevant
market
importance since effective
competition can only be assessed by reference to the
market thus defined (18). The use of the term ‘relevant
market’
the products or
the description of
services that make up the market and the assessment of
the geographical
terms
interchangeably
are
‘products’
throughout
should be
In that
recalled that relevant markets defined under the 1998
regulatory framework were distinct from those identified
for competition-law purposes, since they were based on
certain specific aspects of end-to-end communications
rather than on the demand and supply criteria used in
a competition law analysis (19).

that market
used
regard,

‘services’
text).

and
this

scope of

(the

it

or

and

prospective,

the Commission through

35. Market definition is not a mechanical or abstract process
but requires an analysis of any available evidence of past
market behaviour and an overall understanding of the
mechanics of a given sector.
In particular, a dynamic
rather than a static approach is required when carrying
out
forward-looking, market
a
analysis (20).
In this respect, any experience gained by
NRAs, NCAs
the
application of competition rules to the telecommuni-
cation sector clearly will be of particular relevance in
applying Article 15 of the framework Directive. Thus,
any information gathered, any findings made and any
relied upon by
studies or
NRAs
in
their
relation to the conditions of competition in the telecom-
munications markets (provided of course that market
conditions have since remained unchanged),
should
serve as a starting point for the purposes of applying
Article 15 of the framework Directive and carrying out
a prospective market analysis (21).

reports commissioned or
in the exercise of

(or NCAs)

tasks,

36. The main product and service markets whose charac-
teristics may be such as to justify the imposition of
ex-ante regulatory obligations are identified in the Recom-
mendation which the Commission is required to adopt
pursuant to Article 15(1) of the framework Directive, as
well as any Decision on transnational markets which the
Commission decides to adopt pursuant to Article 15(4) of
the framework Directive. Therefore, in practice the task
of NRAs will normally be to define the geographical
scope of the relevant market, although NRAs have the
possibility under Article 15(3) of the framework Directive
to define markets other than those listed in the Recom-
mendation in accordance with Article 7 of the framework
Directive (see below, Section 6).

seek

nonetheless

37. Whilst a prospective analysis of market conditions may
in some cases lead to a market definition different from
that resulting from a market analysis based on past
behaviour (22), NRAs
to
should
preserve, where possible, consistency in the methodology
adopted between, on the one hand, market definitions
developed for the purposes of ex-ante regulation, and
on the other hand, market definitions developed for the
the competition rules.
purposes of
Nevertheless,
the
of
the guidelines,
framework Directive and Section 1 of
sector-specific regulation are
markets defined under
defined without prejudice to markets
that may be
defined in specific cases under competition law.

the application of
stated

in Article 15(1)

as

2.2. Main criteria for defining the relevant market

38. The extent to which the supply of a product or the
provision of a service in a given geographical area
constitutes
on the
existence of competitive constraints on the price-setting
service provider(s)
behaviour of

the producer(s) or

relevant market

depends

the

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concerned. There are two main competitive constraints to
consider in assessing the behaviour of undertakings on
the market, (i) demand-side; and (ii) supply-side substi-
tution. A third source of competitive constraint on an
operator's behaviour exists, namely potential competition.
The difference between potential competition and supply-
substitution lies in the fact that supply-side substitution
responds promptly to a price increase whereas potential
entrants may need more time before starting to supply
the market. Supply substitution involves no additional
significant
at
significant sunk costs (23). The existence of potential
competition should thus be examined for the purpose
of assessing whether a market is effectively competitive
within the meaning of the framework Directive, that is
whether there exist undertakings with SMP (24).

costs whereas potential

entry occurs

39. Demand-side substitutability is used to measure the
extent to which consumers are prepared to substitute
other services or products for the service or product in
question (25), whereas supply-side substitutability indicates
whether suppliers other than those offering the product
or services in question would switch in the immediate to
short term their line of production or offer the relevant
products or
significant
additional costs.

services without

incurring

40. One possible way of assessing the existence of any
demand and supply-side substitution is to apply the
so-called ‘hypothetical monopolist test’ (26). Under this
test, an NRA should ask what would happen if there
were a small but significant,
lasting increase in the
price of a given product or service, assuming that the
prices of all other products or services remain constant
(hereafter, ‘relative price increase’). While the significance
of a price increase will depend on each individual case, in
should normally consider customers'
practice, NRAs
(consumers or undertakings) reactions to a permanent
price increase of between 5 to 10 % (27). The responses
by consumers or undertakings concerned will aid in
substitutable products do exist
determining whether
relevant
the boundaries of
and,
product market should be delineated (28).

so, where

the

if

and having

41. As a starting point, an NRA should apply this test firstly
to an electronic communications service or product
offered in a given geographical area, the characteristics
of which may be such as to justify the imposition of
add
regulatory obligations,
additional products or areas depending on whether
competition from those products or areas constrains
the price of the main product or service in question.
Since a relative price increase of a set of products (29) is
likely to lead to some sales being lost, the key issue is to
determine whether the loss of sales would be sufficient to
offset the increased profits which would otherwise be
made from sales made following the price increase.
Assessing the demand-side and supply-side substitution

done

so,

provides a way of measuring the quantity of the sales
likely to be lost and consequently of determining the
scope of the relevant market.

at

set

are

the

levels.

competitive

‘hypothetical monopolist

then such price is presumed,

42. In principle, the ‘hypothetical monopolist test’ is relevant
only with regard to products or services, the price of
which is freely determined and not subject to regulation.
the working assumption will be that current
Thus,
prevailing prices
If,
however, a service or product is offered at a regulated,
cost-based price,
in the
to be set at
indications to the contrary,
absence of
what would otherwise be a competitive level and
for
should therefore be taken as the starting point
test’ (30).
applying
In
if the demand elasticity of a given product or
theory,
service is significant, even at relative competitive prices,
the firm in question lacks market power. If, however,
elasticity is high even at current prices, that may mean
only that
the firm in question has already exercised
market power to the point that further price increases
will not increase its profits. In this case, the application of
the hypothetical monopoly test may lead to a different
market definition from that which would be produced if
the prices were set at a competitive level (31). Any
therefore take
assessment of market definition must
into account
this potential difficulty. However, NRAs
should proceed on the basis that the prevailing price
levels provide a reasonable basis from which to start
the relevant analysis unless there is evidence that this is
not in fact the case.

43. If an NRA chooses to have recourse to the hypothetical
monopolist test, it should then apply this test up to the
point where it can be established that a relative price
increase within the geographic and product markets
defined will not
lead consumers to switch to readily
available substitutes or to suppliers located in other areas.

2.2.1. The relevant product/service market

44. According to settled case-law,

the relevant product/
service market comprises all those products or services
that are sufficiently interchangeable or substitutable, not
only in terms of their objective characteristics, by virtue
of which they are particularly suitable for satisfying the
their
constant needs of consumers,
intended use, but also in terms of
the conditions of
competition and/or the structure of supply and demand
on the market in question (32). Products or services which
are only to a small, or relative degree interchangeable
with each other do not form part of the same market (33).
NRAs should thus commence the exercise of defining the
relevant product or service market by grouping together
products or services that are used by consumers for the
same purposes (end use).

their prices or

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45. Although the aspect of the end use of a product or
service is closely related to its physical characteristics,
different kind of products or services may be used for
the same end. For instance, consumers may use dissimilar
services such as cable and satellite connections for the
same purpose, namely to access the Internet. In such a
case, both services (cable and satellite access services)
may be included in the same product market. Conversely,
paging services and mobile telephony services, which
may appear to be capable of offering the same service,
that is, dispatching of two-way short messages, may be
found to belong to distinct product markets in view of
their different perceptions by consumers as regards their
functionality and end use.

retail electronic communications

46. Differences in pricing models and offerings for a given
product or service may also imply different groups of
consumers. Thus, by looking into prices, NRAs may
define separate markets
for business and residential
customers for essentially the same service. For instance,
the ability of operators engaged in providing inter-
to
national
discriminate between residential and business customers,
by applying different sets of prices and discounts, has led
the Commission to decide that these two groups form
separate markets as far as such services are concerned
to be
(see below). However,
viewed as demand-side substitutes it
is not necessary
that they are offered at the same price. A low quality
product or service sold at a low price could well be an
effective substitute to a higher quality product sold at
higher prices. What matters in this case is the likely
responses of
relative price
increase (34).

for products

following a

consumers

in order

services

47. Furthermore, product substitutability between different
electronic communications services will arise increasingly
through the convergence of various technologies. Use of
digital systems leads to an increasing similarity in the
performance and characteristics of network services
using distinct technologies. A packet-switched network,
for instance, such as Internet, may be used to transmit
digitised voice signals in competition with traditional
voice telephony services (35).

48. In order,

therefore,

to complete the market-definition
in addition to considering products
analysis, an NRA,
or services whose objective characteristics, prices and
intended use make them sufficiently interchangeable,
should also examine, where necessary,
the prevailing
conditions of demand and supply substitution by
applying the hypothetical monopolist test.

2.2.1.1. Demand-side substitution

49. Demand-side substitution enables NRAs to determine the
substitutable products or range of products to which
consumers could easily switch in case of a relative
price increase. In determining the existence of demand

substitutability, NRAs should make use of any previous
evidence of consumers' behaviour. Where available, an
NRA should examine historical price fluctuations in
potentially competing products, any records of price
In such
movements, and relevant
circumstances evidence showing that consumers have in
the past promptly shifted to other products or services, in
response to past price changes, should be given appro-
priate consideration. In the absence of such records, and
where necessary, NRAs will have to seek and assess the
likely response of consumers and suppliers to a relative
price increase of the service in question.

information.

tariff

50. The possibility for consumers to substitute a product or a
service for another because of a small, but significant
lasting price increase may, however, be hindered by
switching costs. Consumers who have
considerable
invested in technology or made any other necessary
investments in order
to receive a service or use a
product may be unwilling to incur any additional costs
involved in switching to an otherwise substitutable
In the same vein, customers of
service or product.
existing providers may also be ‘locked in’ by long-term
contracts or by the prohibitively high cost of switching
terminals. Accordingly,
in a situation where end users
face significant switching costs in order to substitute
product A for product B,
these two products should
not be included in the same relevant market (36).

51. Demand substitutability focuses on the interchangeable
character of products or services from the buyer's point
of view. Proper delineation of the product market may,
consideration of potential
however,
substitutability from the supply side.

require

further

2.2.1.2. Supply-side substitution

lasting price increase.

52. In assessing the scope for supply substitution, NRAs may
also take into account the likelihood that undertakings
not currently active on the relevant product market may
decide to enter the market, within a reasonable time
frame (37), following a relative price increase, that is, a
small but significant,
In circum-
stances where the overall costs of switching production
to the product in question are relatively negligible, then
that product may be incorporated into the product
market definition. The fact that a rival firm possesses
some of the assets required to provide a given service
is
is
needed to market and offer profitably the services in
question (38). Furthermore, NRAs will need to ascertain
whether a given supplier would actually use or switch
its productive assets to produce the relevant product or
offer the relevant service (for instance, whether their
capacity
long-term supply
agreements, etc.). Mere hypothetical supply-side substi-
tution is not sufficient for the purposes of market defi-
nition.

significant additional

investment

committed

immaterial

under

is

if

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53. Account should also be taken of any existing legal,
statutory or other regulatory requirements which could
defeat a time-efficient entry into the relevant market and
as a result discourage
supply-side substitution. For
instance, delays and obstacles in concluding intercon-
nection or
co-location agreements, negotiating any
other form of network access, or obtaining rights of
ways for network expansion (39), may render unlikely in
the short term the provision of new services and the
deployment of new networks by potential competitors.

price increase,
expanded to incorporate those ‘outside’ operators.

then the market definition should be

59. In the electronic communications sector, the geographical
the relevant market has traditionally been

scope of
determined by reference to two main criteria (42):

(a) the area covered by a network (43); and

54. As can been seen from the above considerations, supply
substitution may serve not only for defining the relevant
market but also for identifying the number of market
participants.

(b) the

existence
instruments (44).

of

legal

and

other

regulatory

2.2.2. Geographic market

55. Once the relevant product market is identified, the next
the
step to be undertaken is
geographical dimension of the market. It is only when
the geographical dimension of the product or service
market has been defined that a NRA may properly
assess the conditions of effective competition therein.

the definition of

60. On the basis of these two main criteria (45), geographic
markets can be considered to be local, regional, national
or covering territories of two or more countries (for
instance, pan-European, EEA-wide or global markets).

2.2.3. Other issues of market definition

56. According

to

the

case-law,

established

relevant
geographic market comprises an area in which the under-
takings concerned are involved in the supply and demand
in which area the
of the relevant products or services,
conditions of competition are similar or
sufficiently
homogeneous and which can be distinguished from
neighbouring areas in which the prevailing conditions
of competition are appreciably different (40). The defi-
nition of the geographic market does not require the
conditions of competition between traders or providers
of services to be perfectly homogeneous. It is sufficient
that they are similar or sufficiently homogeneous, and
accordingly, only those areas in which the conditions
of competition are ‘heterogeneous’ may not be considered
to constitute a uniform market (41).

57. The process of defining the limits of

the geographic
those
as
lines
market proceeds
discussed above in relation to the assessment of
the
demand and supply-side substitution in response to a
relative price increase.

along

same

the

58. Accordingly, with regard to demand-side substitution,
NRAs should assess mainly consumers' preferences as
well as their current geographic patterns of purchase.
In particular, linguistic reasons may explain why certain
services are not available or marketed in different
language areas. As far as supply-side substitution is
concerned, where it can be established that operators
which are not currently engaged or present on the
relevant market, will, however, decide to enter
that
term in the event of a relative
market

in the short

61. For the purposes of ex-ante regulation, in certain excep-
tional cases, the relevant market may be defined on a
route-by-route basis. In particular, when considering the
dimension of markets for international retail or wholesale
it may be appro-
electronic communications services,
priate to treat paired countries or paired cities as
separate markets (46). Clearly, from the demand side, the
delivery of a call to one country is not a substitute for the
delivery of the same to another country. On the other
transmission
hand,
services, that is, re-routing or transit of the same call
supply-side
via a third country,
effective
represent
substitutes depends on the specificities of
the market
and should be decided on a case-by-case basis (47).
However, a market for the provision of services on a
bilateral route would be national in scope since supply
and demand patterns in both ends of the route would
most likely correspond to different market structures (48).

the question of whether

indirect

In essence,

expanded to take

62. In its Notice on market definition, the Commission drew
attention to certain cases where the boundaries of the
into
relevant market may be
consideration products or geographical areas which,
although not directly substitutable, should be included
in the market definition because of so-called ‘chain
substitutability’ (49).
chain substitutability
occurs where it can be demonstrated that although
products A and C are not directly substitutable, product
B is a substitute for both product A and product C and
therefore products A and C may be in the same product
market since their pricing might be constrained by the
substitutability of product B. The same reasoning also
applies for defining the geographic market. Given the
inherent
the
relevant market, findings of chain substitutability should
be adequately substantiated (50).

risk of unduly widening the scope of

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2.3. The Commission's own practice

63. The Commission has adopted a number of decisions
under Regulation No 17 and the merger control Regu-
lation relating to the electronic communications sector.
These decisions may be of particular relevance for NRAs
with regard to the methodology applied by
the
Commission in defining the relevant market (51). As
stated above, however,
in a sector characterised by
constant innovation and rapid technological convergence,
it is clear that any current market definition runs the risk
in the near
of becoming inaccurate or
future (52).
under
competition law are without prejudice
to markets
defined under the new regulatory framework as the
context and the timeframe within which a market
analysis is conducted may be different (53).

Furthermore, markets

irrelevant

defined

least

sector at

64. As stated in the Access notice, there are in the electronic
communications
two main types of
relevant markets to consider, that of services provided
to end users (services market) and that of access to
facilities necessary to provide such services
(access
market) (54). Within these two broad market definitions
further market distinctions may be made depending on
demand and supply side patterns.

65. In particular,

loop,

(local,

regards

services,

instance, as

to networks

(wholesale) access

in its decision-making practice,

the
Commission will normally make a distinction between
the provision of services and the provision of underlying
network infrastructure. For
the
provision of infrastructure, the Commission has identified
long
separate markets for the provision of local
infrastructure (55). As regards
distance and international
distinguished
the Commission has
fixed
between subscriber
to switched voice
(retail) access
telephony services (local, long distance and international),
operator
long
distance and international) and business data communi-
cations services (56).
In the market for fixed telephony
the Commission has also distinguished
retail services,
connection and the monthly
initial
between the
rental (57). Retail services are offered to two distinct
classes of consumers, namely, residential and business
users,
the latter possibly being broken down further
into a market for professional, small and medium sized
business customers and another for large businesses (58).
With regard to fixed telephony retail services offered to
residential users, demand and supply patterns seem to
indicate that two main types of services are currently
being offered, traditional fixed telephony services (voice
and narrowband data transmissions) on the one hand,
and high speed communications services (currently in
the form of xDSL services) on the other hand (59).

66. As regards the provision of mobile communications
services,
from a
demand-side point of view, mobile telephony services

the Commission has

found that,

fixed

services

telephony

constitute
the mobile market,

separate
and
markets (60). Within
evidence
gathered from the Commission has indicated that the
market for mobile communications services encompasses
both GSM 900 and GSM 1800 and possibly analogue
platforms (61).

67. The Commission has found that with regard to the
‘access’ market, the latter comprises all types of infra-
structure that can be used for the provision of a given
service (62). Whether
for network infra-
the market
should be divided into as many separate
structures
submarkets as there are existing categories of network
infrastructure, depends clearly on the degree of substitu-
tability among such (alternative) networks (63). This
exercise should be carried out in relation to the class of
users to which access to the network is provided. A
distinction
between
therefore,
provision of infrastructure to other operators (wholesale
level) and provision to end users (retail level) (64). At the
retail
segmentation may take place
between business and residential customers (65).

level, a further

be made

should,

68. When the service to be provided concerns only end users
subscribed to a particular network, access to the termi-
nation points of that network may well constitute the
relevant product market. This will not be the case if it
can be established that the same services may be offered
to the same class of consumers by means of alternative,
easily accessible competing networks. For example, in its
loop (66), the
Communication on unbundling the local
Commission stated that although alternatives
to the
communications
PSTN for
(fibre optic
services
networks, wireless
loops or upgradable TV
networks), none of these alternatives may be considered
as a substitute to the fixed local loop infrastructure (67).
changes may,
Future
however, justify different conclusions (68).

providing
to residential

high
consumers

and technological

innovative

speed

local

exist

69. Access to mobile networks may also be defined by
reference to two potentially separate markets, one for
call origination and another for call termination. In this
respect,
to
mobile infrastructure relates to access to an individual
mobile network or to all mobile networks,
in general,
should be decided on the basis of an analysis of the
structure and functioning of the market (69).

the question whether

the access market

3. ASSESSING SIGNIFICANT MARKET POWER (DOMINANCE)

70. According to Article 14 of the framework Directive ‘an
undertaking shall be deemed to have significant market
power if, either individually or jointly with others,
it
enjoys a position equivalent to dominance, that is to
the
say a position of economic strength affording it

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82

the

of Article

power to behave to an appreciable extent independently
of competitors customers and ultimately consumers’. This
is the definition that the Court of Justice case-law ascribes
to the concept of dominant position in Article 82 of the
Treaty (70). The new framework has aligned the definition
of SMP with the Court's definition of dominance within
Treaty (71).
the meaning
of
Consequently,
in applying the new definition of SMP,
NRAs will have to ensure that their decisions are in
accordance with the Commission's practice and the
relevant jurisprudence of the Court of Justice and the
Court of First Instance on dominance (72). However, the
application of the new definition of SMP, ex-ante, calls for
certain methodological adjustments to be made regarding
the way market power is assessed. In particular, when
assessing ex-ante whether one or more undertakings are
in a dominant position in the relevant market, NRAs are,
in principle, relying on different sets of assumptions and
expectations than those relied upon by a competition
authority applying Article 82, ex post, within a context
of an alleged committed abuse (73). Often, the lack of
evidence or of records of past behaviour or conduct
the market analysis will have to be
will mean that
assessment. The
on a
based mainly
accuracy of the market analysis carried out by NRAs
thus be conditioned by information and data
will
existing at
the relevant
decision.

the adoption of

the time of

prospective

71. The fact that an NRA's initial market predictions do not
finally materialise in a given case does not necessarily
mean that its decision at the time of its adoption was
inconsistent with the Directive. In applying ex ante the
concept of dominance, NRAs must be accorded discre-
tionary powers correlative to the complex character of
the economic, factual and legal situations that will need
to be assessed.
In accordance with the framework
Directive, market assessments by NRAs will have to be
undertaken on a regular basis. In this context, therefore,
NRAs will have the possibility to react at regular intervals
to any market developments and to take any measure
deemed necessary.

3.1. Criteria for assessing SMP

72. As the Court has stressed, a finding of a dominant
position does not preclude some competition in the
It only enables the undertaking that enjoys
market.
such a position, if not to determine, at least to have an
appreciable effect on the conditions under which that
competition will develop, and in any case to act
in
disregard of any such competitive constraint so long as
such conduct does not operate to its detriment (74).

73. In an ex-post analysis, a competition authority may be
faced with a number of different examples of market
behaviour each indicative of market power within the
meaning of Article 82. However,
in an ex-ante
environment, market power is essentially measured by
reference of the power of the undertaking concerned to

raise prices by restricting output without
significant loss of sales or revenues.

incurring a

74. The market power of an undertaking can be constrained
by the existence of potential competitors (75). An NRA
should thus take into account the likelihood that under-
takings not currently active on the relevant product
market may in the medium term decide to enter the
market following a small but significant non-transitory
price increase. Undertakings which,
in case of such a
price increase, are in a position to switch or extend
their line of production/services and enter the market
should be
as potential market
participants even if they do not currently produce the
relevant product or offer the relevant service.

treated by NRAs

75. As explained in the paragraphs below, a dominant
position is found by reference to a number of criteria
is based, as stated above, on a
and its assessment
forward-looking market
analysis based on existing
market conditions. Market shares are often used as a
proxy for market power. Although a high market share
alone is not sufficient
to establish the possession of
significant market power (dominance), it is unlikely that
a firm without a significant share of the relevant market
would be in a dominant position. Thus, undertakings
with market shares of no more than 25 % are not
likely to enjoy a (single) dominant position on the
market concerned (76).
In the Commission's decision-
making practice, single dominance concerns normally
arise in the case of undertakings with market shares of
over 40 %, although the Commission may in some cases
have concerns about dominance even with lower market
shares (77),
the
existence of a large market share. According to estab-
lished case-law, very large market shares — in excess
of 50 % — are in themselves, save in exceptional circum-
a dominant
stances,
position (78). An undertaking with a large market share
may be presumed to have SMP,
to be in a
dominant position,
its market share has remained
stable over time (79). The fact that an undertaking with
a significant position on the market is gradually losing
market share may well
is
becoming more competitive, but it does not preclude a
finding of significant market power. On the other hand,
fluctuating market shares over time may be indicative of
a lack of market power in the relevant market.

as dominance may occur without

indicate that

existence of

evidence of

the market

that

the

is,

if

76. As regards the methods used for measuring market size
and market shares, both volume sales and value sales
provide useful information for market measurement (80).
In the case of bulk products preference is given to
volume whereas in the case of differentiated products
(i.e. branded products) sales in value and their associated
market share will often be considered to reflect better the
relative position and strength of each provider. In bidding
markets the number of bids won and lost may also be
used as approximation of market shares (81).

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77. The criteria to be used to measure the market share of
the undertaking(s) concerned will depend on the charac-
teristics of the relevant market. It is for NRAs to decide
which are the criteria most appropriate for measuring
leased lines revenues,
instance,
market presence. For
leased capacity or numbers of leased line termination
points are possible criteria for measuring an under-
taking's relative strength on leased lines markets. As the
Commission has indicated, the mere number of leased
line termination points does not take into account the
different types of leased lines that are available on the
market — ranging from analogue voice quality to
leased lines, short distance to long
high-speed digital
distance international
leased lines. Of the two criteria,
leased lines revenues may be more transparent and less
complicated to measure. Likewise, retail revenues, call
minutes or numbers of
lines or
subscribers of public telephone network operators are
possible criteria for measuring the market shares of
undertakings operating in these markets (82). Where the
market defined is that of interconnection, a more realistic
measurement parameter would be the revenues accrued
for terminating calls to customers on fixed or mobile
networks. This is so because the use of revenues, rather
than for example call minutes, takes account of the fact
that call minutes can have different values (i.e. local, long
distance and international) and provides a measure of
reflects both the number of
market presence that
customers and network coverage (83). For
the same
reasons,
the use of revenues for terminating calls to
customers of mobile networks may be the most appro-
priate means to measure the market presence of mobile
network operators (84).

fixed telephone

78. It is important to stress that the existence of a dominant
position cannot be established on the sole basis of large
market shares. As mentioned above, the existence of high
market shares simply means that the operator concerned
might be in a dominant position. Therefore, NRAs should
undertake a thorough and overall analysis of
the
economic characteristics of the relevant market before
coming to a conclusion as to the existence of significant
market power. In that regard, the following criteria can
also be used to measure the power of an undertaking to
behave to an appreciable extent
its
competitors, customers and consumers. These criteria
include amongst others:

independently of

— overall size of the undertaking,

— control of infrastructure not easily duplicated,

— technological advantages or superiority,

— absence of or low countervailing buying power,

— easy or privileged access to capital markets/financial

resources,

— product/services diversification (e.g. bundled products

or services),

— economies of scale,

— economies of scope,

— vertical integration,

— a highly developed distribution and sales network,

— absence of potential competition,

— barriers to expansion.

79. A dominant position can derive from a combination of
the above criteria, which taken separately may not neces-
sarily be determinative.

in principle,

(i.e. GSM/DCS

80. A finding of dominance depends on an assessment of
ease of market entry. In fact, the absence of barriers to
entry deters,
independent anti-competitive
behaviour by an undertaking with a significant market
share. In the electronic communications sector, barriers
to entry are often high because of existing legislative and
the
regulatory requirements which may limit
other
number of available licences or the provision of certain
services
services).
or
Furthermore, barriers to entry exist where entry into
the relevant market requires large investments and the
programming of capacities over a long time in order to
be profitable (85). However, high barriers to entry may
become less relevant with regard to markets characterised
by on-going
In electronic
technological progress.
communications markets, competitive constraints may
come from innovative threats from potential competitors
that are not currently in the market. In such markets, the
competitive assessment should be based on a prospective,
forward-looking approach.

3G mobile

there is for

the EC Treaty,

81. As regards the relevance of the notion of ‘essential facil-
ities’ for the purposes of applying the new definition of
the moment no jurisprudence in
SMP,
sector.
communications
electronic
relation to the
However,
this notion, which is mainly relevant with
regard to the existence of an abuse of a dominant
position under Article 82 of
is less
relevant with regard to the ex-ante assessment of SMP
the framework
within the meaning of Article 14 of
Directive. In particular, the doctrine of ‘essential facilities’
is complementary to existing general obligations imposed
on dominant undertaking, such as the obligation not to
discriminate among customers and has been applied in
cases under Article 82 in exceptional circumstances, such
as where the refusal to supply or to grant access to third
parties would limit or prevent the emergence of new
markets, or new products, contrary to Article 82(b) of
It has thus primarily been associated with
the Treaty.

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it

is

‘essential’ or

‘indispensable’

true that an undertaking which is

access issues or cases involving a refusal to supply or to
deal under Article 82 of the Treaty, without the presence
of any discriminatory treatment. Under existing case-law,
a product or service cannot be considered ‘necessary’ or
‘essential’ unless there is no real or potential substitute.
Whilst
in
possession of an ‘essential facility’
is by definition in a
dominant position on any market for that facility, the
that a given
contrary is not always true. The fact
an
for
facility is not
economic activity on some distinct market, within the
the existing case-law (86) does not mean
meaning of
that
this facility might not be in a
dominant position. For instance, a network operator
can be in a dominant position despite the existence of
alternative competing networks if the size or importance
of its network affords him the possibility to behave inde-
pendently from other network operators (87).
In other
words, what matters is to establish whether a given
facility affords its owner significant market power in
thus being necessary to further
the market without
the said facility can also be considered
establish that
‘essential’ or
‘indispensable’ within the meaning of
existing case-law.

the owner of

whole in which Tetra Pak was found to be dominant
were horizontal, close associative
links, within the
meaning of
the Court's case-law, will most often be
found in vertically integrated markets. This is often the
case in the telecommunications sector, where an operator
often has a dominant position on the infrastructure
market and a significant presence on the downstream,
services market (90). Under such circumstances, an NRA
may consider it appropriate to find that such operator
in
has SMP on both markets taken together. However,
practice, if an undertaking has been designated as having
SMP on an upstream wholesale or access market, NRAs
will normally be in a position to prevent any likely
spill-over or leverage effects downstream into the retail
or services markets by imposing on that undertaking any
of the obligations provided for in the access Directive
which may be
to avoid such effects.
is only where the imposition of ex-ante
Therefore,
in
obligations on an undertaking which is dominant
the
in
result
effective competition on the (retail) downstream market
that NRAs should examine whether Article 14(3) may
apply.

(access) upstream market would not

appropriate

it

82. It follows from the foregoing that the doctrine of the
‘essential facilities’
is less relevant for the purposes of
applying ex ante Article 14 of the framework Directive
than applying ex-post Article 82 of the EC Treaty.

85. The foregoing considerations are also relevant in relation
to horizontal markets (91). Moreover,
irrespective of
whether the markets under consideration are vertical or
horizontal, both markets should be electronic communi-
cations markets within the meaning of Article 2 of the
framework Directive and both should display such
characteristics as to justify the imposition of ex-ante regu-
latory obligations (92).

3.1.1. Leverage of market power

83. According to Article 14(3) of the framework Directive,
‘where an undertaking has significant market power on a
specific market, it may also be deemed to have significant
market power on a closely related market, where the
links between the two markets are such as to allow the
market power held in one market to be leveraged into
the other market,
thereby strengthening the market
power of the undertaking’.

3.1.2. Collective dominance

86. Under Article 82 of the EC Treaty, a dominant position
can be held by one or more undertakings (‘collective
dominance’). Article 14(2) of the framework Directive
also provides that an undertaking may enjoy significant
market power, that is, it may be in a dominant position,
either individually or jointly with others.

In that case,

in Tetra Pak II (88).

84. This provision is intended to address a market situation
comparable to the one that gave rise to the Court's
the Court
judgment
decided that an undertaking that had a dominant
position in one market, and enjoyed a leading position
on a distinct but closely associated market, was placed as
a result in a situation comparable to that of holding a
dominant position on the markets in question taken as a
whole. Thanks to its dominant position on the first
market, and its market presence on the associated,
secondary market, an undertaking may thus leverage
the market power which it enjoys in the first market
and behave independently of its customers on the latter
market (89). Although in Tetra Pak the markets taken as a

87. In the Access notice, the Commission had stated that,
the time both its own practice and the
although at
case-law of the Court were still developing,
it would
consider two or more undertakings to be in a collective
dominant position when they had substantially the same
position vis-à-vis their customers and competitors as a
single company has if
is in a dominant position,
provided that no effective competition existed between
them. The
in
practice, to the existence of certain links between those
companies. The Commission had also stated, however,
that the existence of such links was not a prerequisite
for a finding of joint dominance (93).

lack of competition could be due,

it

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88. Since the publication of the Access notice, the concept of
collective dominance has been tested in a number of
decisions taken by the Commission under Regulation
No 17 and under the merger control Regulation.
In
addition, both the Court of First Instance (CFI) and the
Court of Justice of the European Communities (ECJ) have
given judgments which have contributed to further clar-
ifying the exact scope of this concept.

would thus be affected by the reduction in price
levels’ (99). As the Court pointed out, market conditions
may be such that ‘each undertaking may become aware
of common interests and, in particular, cause prices to
increase without having to enter into an agreement or
resort to concerted practice’ (100).

3.1.2.1. The jurisprudence of the CFI/ECJ

89. The expression ‘one or more undertakings’ in Article 82
of the EC Treaty implies that a dominant position may be
held by two or more economic entities which are legally
and economically independent of each other (94).

in the sense of structural

90. Until the ruling of the ECJ in Compagnie maritime belge (95)
and the ruling of the CFI in Gencor (96) (see below),
it
might have been argued that a finding of collective
dominance was based on the existence of economic
links,
links, or other factors
which could give rise to a connection between the under-
takings concerned (97). The question of whether collective
dominance could also apply to an oligopolistic market,
that is a market comprised of few sellers, in the absence
of any kind of links among the undertakings present in
such a market, was first raised in Gencor. The case
concerned the legality of a decision adopted by the
Commission under
control Regulation
the merger
prohibiting the notified transaction on the grounds that
it would lead to the creation of a duopoly market
conducive to a situation of oligopolistic dominance (98).
Before the CFI, the parties argued that the Commission
had failed to prove the existence of ‘links’ between the
members of
the
existing case-law.

the duopoly within the meaning of

together

constitute

92. The CFI's ruling in Gencor was later endorsed by the ECJ
in Compagnie maritime belge, where the Court gave
to how the term of collective
further guidance as
to which
dominance should be understood and as
conditions must be fulfilled before such finding can be
made. According to the Court, in order to show that two
or more undertakings hold a joint dominant position, it
the undertakings
is necessary to consider whether
entity
collective
a
concerned
vis-à-vis their competitors,
their trading partners and
their consumers on a particular market (101). This will
be the case when (i) there is no effective competition
among the undertakings in question; and (ii) the said
undertakings adopt a uniform conduct or common
policy in the relevant market (102). Only when that
question is answered in the affirmative, is it appropriate
to consider whether the collective entity actually holds a
dominant position (103). In particular,
it is necessary to
ascertain whether economic links exist between the
undertakings concerned which enable them to act inde-
pendently
and
consumers. The Court recognised that an implemented
agreement, decision or concerted practice (whether or
not covered by an exemption under Article 81(3) of
the Treaty) may undoubtedly result in the undertakings
concerned being linked in a such way that their conduct
on a particular market on which they are active results in
them being perceived as a collective entity vis-à-vis their
competitors, their trading partners and consumers (104).

competitors,

customers

their

of

91. The CFI dismissed the application by stating,

the

links

relationship of

inter alia,
that there was no legal precedent suggesting that the
notion of ‘economic links’ was restricted to the notion
of structural links between the undertakings concerned:
According to the CFI, ‘there is no reason whatsoever in
legal or economic terms to exclude from the notion of
economic
interdependence
existing between the parties to a tight oligopoly within
which, in a market with the appropriate characteristics,
in particular in terms of market concentration, trans-
parency and product homogeneity, those parties are in
a position to anticipate one another's behaviour and are
therefore strongly encouraged to align their conduct in
the market, in particular in such a way as to maximise
their joint profits by restricting production with a view to
increasing prices. In such a context, each trader is aware
that highly competitive action on its part designed to
increase its market share (for example a price cut)
would provoke identical action by the others, so that it
would derive no benefit from its initiative. All the traders

93. The mere fact, however, that two or more undertakings
are linked by an agreement, a decision of associations of
undertakings or a concerted practice within the meaning
itself,
of Article 81(1) of
constitute a necessary basis for such a finding. As the
Court
collective dominant
position may also be based on other connecting factors
and would depend on an economic assessment and, in
particular, on an assessment of
the
market in question’ (105).

the Treaty does not, of

the structure of

finding of

stated,

‘a

a

94. It follows from the Gencor and Compagnie maritime
belge judgments that, although the existence of structural
links can be relied upon to support a finding of a
collective dominant position, such a finding can also be
made in relation to an oligopolistic or highly concen-
trated market whose structure alone in particular,
is
conducive
relevant
market (106).

to coordinated effects on the

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3.1.2.2. The Commission's decision-making practice
Annex II of the framework Directive

and

— absence of excess capacity,

95. In a number of decisions adopted under the merger
the Commission considered the
control Regulation,
concept of collective dominance.
in those
cases to ascertain whether the structure of the oligop-
olistic markets in question was conducive to coordinated
effects on those markets (107).

It sought

96. When assessing ex-ante the likely existence or emergence
of a market which is or could become conducive to
collective dominance in the form of tacit coordination,
NRAs, should analyse:

— high barriers to entry,

— lack of countervailing buying power,

— lack of potential competition,

— various kind of informal or other links between the

undertakings concerned,

(a) whether the characteristics of the market makes it

— retaliatory mechanisms,

conducive to tacit coordination; and

to deviate

(b) whether such form of coordination is sustainable that
is, (i) whether any of the oligopolists have the ability
and incentive
coordinated
outcome, considering the ability and incentives of
the non-deviators to retaliate; and (ii) whether buyers/
fringe competitors/potential entrants have the ability
and incentive to challenge any anti-competitive coor-
dinated outcome (108).

from the

under

the merger

the notion of

97. This analysis is facilitated by looking at a certain number
of criteria which are summarised in Annex II of the
framework Directive, which have also been used by the
collective
Commission in applying
dominance
control Regulation.
According to this Annex,
‘two or more undertakings
can be found to be in a joint dominant position within
the meaning of Article 14 if, even in the absence of
structural or other links between them, they operate in
a market, the structure of which is considered to be
conducive to coordinated effects (109). Without prejudice
Justice on joint
to the case-law of
dominance,
this is likely to be the case where the
market satisfies a number of appropriate characteristics,
in particular in terms of market concentration, trans-
parency and other characteristics mentioned below:

the Court of

— mature market,

— stagnant or moderate growth on the demand side,

— low elasticity of demand,

— homogeneous product,

— similar cost structures,

— similar market shares,

— lack of technical innovation, mature technology,

— lack or reduced scope for price competition’.

98. Annex II of the framework Directive expressly states that
the above is not an exhaustive list, nor are the criteria
cumulative. Rather, the list is intended to illustrate the
sorts of evidence that could be used to support assertions
concerning the existence of a collective (oligopolistic)
tacit coordination (110). As
dominance in the form of
stated above, the list also shows that the existence of
links among the undertakings concerned is
structural
not a prerequisite for
finding a collective dominant
position. It is however clear that where such links exist,
they can be relied upon to explain, together with any of
the other abovementioned criteria, why in a given oligop-
olistic market coordinated effects are likely to arise. In the
absence of such links,
in order to establish whether a
is conducive to collective dominance in the
market
form of tacit coordination, it is necessary to consider a
number of characteristics of
the market. While these
characteristics are often presented in the form of the
abovementioned list,
it is necessary to examine all of
them and to make an overall assessment rather than
mechanistically applying a ‘check list’. Depending on
the circumstances of
that one or
the case,
another of
the structural elements usually associated
with collective dominance may not be clearly established
is not in itself decisive to exclude the likelihood of a
coordinated outcome (111).

the fact

in particular,

99. In an oligopolistic market where most, if not all, of the
abovementioned criteria are met, it should be examined
whether,
the market operators have a
strong incentive to converge to a coordinated market
outcome and refrain from reliance on competitive
conduct. This will be the case where the long-term
benefits of an anti-competitive conduct outweigh any
short-term gains resulting from a resort to a competitive
behaviour.

100. It must be stressed that a mere finding that a market is
concentrated does not necessarily warrant a finding that
its structure is conducive to collective dominance in the
form of tacit coordination (112).

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tacit

applying

instance,

notion of

coordination,

in
in the

the
form of

collective
101. Ultimately,
dominance
the
criteria which will carry the most sway will be those
to a coordinated outcome in the
which are critical
in
specific market under consideration. For
Case COMP/M.2499 — Norske Skog/Parenco/Walsum,
the Commission came to the conclusion that even if
the markets
and wood-containing
magazine paper were concentrated, the products were
inelastic, buyer
homogeneous, demand was highly
power was limited and barriers to entry were high,
nonetheless the limited stability of market shares, the
lack of symmetry in costs structures and namely, the
lack of transparency of investments decisions and the
absence of a credible retaliation mechanism rendered
unlikely and unsustainable any possibility of tacit coor-
dination among the oligopolists (113).

newsprint

for

3.1.2.3. Collective dominance and the telecommunications

sector

102. In applying the notion of collective dominance, NRAs
may also take into consideration decisions adopted
under the merger control Regulation in the electronic
in which the Commission has
communications sector,
the notified transactions
examined whether any of
could give rise to a finding of collective dominance.

103. In MCI WorldCom/Sprint,

the Commission examined
whether
the merged entity together with Concert
Alliance could be found to enjoy a collective dominant
position on the market for global telecommunications
services (GTS). Given that operators on that market
competed on a bid basis where providers were selected
essentially in the first instances of the bidding process on
the basis of their ability to offer high quality, tailor-made
sophisticated services, and not on the basis of prices, the
Commission's investigation was focused on the incentives
for market participants to engage in parallel behaviour as
to who wins what bid (and who had won what bids) (114).
After having examined in depth the structure of
the
(homogenous product, high barriers of entry,
market
the Commission
customers countervailing power, etc.)
concluded that
it was not able to show absence of
competitive constraints from actual competitors, a key
factor in examining whether parallel behaviour can be
sustained, and thus decided not to pursue further its
objections in relation to that market (115).

104. In BT/Esat (116), one of

Eircom,

the issues examined by the
Commission was whether market conditions in the Irish
market for dial-up Internet access lent themselves to the
the incumbent
emergence of a duopoly consisting of
operator,
The
the merged
Commission concluded that this was not the case for
the following reasons. First, market shares were not
stable; second, demand was doubling every six months;
internet access products were not considered
third,
homogeneous; and finally,
technological developments
were one of the main characteristics of the market (117).

entity.

and

(namely D2 and E-Plus,

105. In Vodafone/Airtouch (118), the Commission found that the
merged entity would have joint control of two of the
four mobile operators present on the German mobile
market
the other two being
T-Mobil and VIAG Interkom). Given that entry into the
market was highly regulated,
in the sense that licences
were limited by reference to the amount of available
radio frequencies, and that market conditions were trans-
parent, it could not be ruled out that such factors could
lead to the emergence of a duopoly conducive to coor-
dinated effects (119).

the

players,

Proximus

two existing

106. In France Telecom/Orange the Commission found that,
prior to the entry of Orange into the Belgian mobile
market,
and
Mobistar, were in a position to exercise joint dominance.
As the Commission noted, for the four years preceding
Orange's entry, both operators had almost similar and
transparent pricing,
their prices following exactly the
same trends (120). In the same decision the Commission
further dismissed claims by third parties as to the risk of
a collective dominant position of Vodafone and France
Telecom in the market for the provision of pan-European
mobile services
to internationally mobile customers.
Other than significant asymmetries between the market
shares of the two operators, the market was considered
to be emerging, characterised by an increasing demand
and many types of different services on offer and on
price (121).

4. IMPOSITION, MAINTENANCE, AMENDMENT OR WITH-
DRAWAL OF OBLIGATIONS UNDER THE REGULATORY
FRAMEWORK

107. Section 3 of these guidelines dealt with the analysis of
relevant markets that NRAs must carry out under Article
16 of the framework Directive to determine whether a
market is effectively competitive,
i.e. whether there are
undertakings in that market who are in a dominant
position. This section aims to provide guidance for
NRAs on the action they should take following that
analysis,
the imposition, maintenance, amendment
or withdrawal, as appropriate, of specific regulatory obli-
gations on undertakings designated as having SMP. This
section also describes the circumstances in which similar
obligations than those that can be imposed on SMP
operators may, exceptionally, be imposed on under-
takings who have not been designated as having SMP.

i.e.

108. The

specific

regulatory obligations which may be
imposed on SMP undertakings can apply both to
wholesale and retail markets. In principle, the obligations
related to wholesale markets are set out in Articles 9 to
13 of the access Directive. The obligations related to
retail markets are set out in Articles 17 to 19 of the
universal service Directive.

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separation (Article 11), obligations

109. The obligations set out in the access Directive are: trans-
parency (Article 9); non-discrimination (Article 10);
accounting
for
access to and use of specific network facilities (Article
12), and price control and cost accounting obligations
(Article 13).
access
In addition, Article 8 of
Directive provides that NRAs may impose obligations
outside this list. In order to do so, they must submit a
request to the Commission, which will take a decision,
the Communications
after
Committee, as
the NRA concerned is
permitted to impose such obligations.

the
to whether

advice of

seeking

the

given market, without imposing any appropriate regu-
latory obligations, is inconsistent with the provisions of
the new regulatory framework, notably Article 16(4) of
the framework Directive.
In other words, NRAs must
impose at least one regulatory obligation on an under-
taking that has been designated as having SMP. Where an
NRA determines the existence of more than one under-
taking with dominance,
that a joint dominant
i.e.
position exists, it should also determine the most appro-
priate regulatory obligations to be imposed, based on the
principle of proportionality.

110. The obligations set out in the universal service Directive
are: regulatory controls on retail services (Article 17),
availability of the minimum set of leased lines (Article
18 and Annex VII) and carrier selection and preselection
(Article 19).

111. Under the regulatory framework, these obligations should
only be imposed on undertakings which have been
designated as having SMP in a relevant market, except
in certain defined cases, listed in Section 4.3.

115. If an undertaking was previously subject to obligations
under the 1998 regulatory framework, the NRA must
consider whether
similar obligations continue to be
appropriate under the new regulatory framework, based
on a new market analysis carried out in accordance with
these guidelines. If the undertaking is found to have SMP
in a relevant market under the new framework, regu-
latory obligations similar to those imposed under the
1998 regulatory framework may therefore be maintained.
Alternatively, such obligations could be amended, or new
obligations provided in the new framework might also be
imposed, as the NRA considers appropriate.

4.1. Imposition, maintenance, amendment or withdrawal

of obligations on SMP operators

the notion of effective
112. As explained in Section 1,
there is no undertaking with
competition means that
dominance on the relevant market.
In other words, a
finding that a relevant market is effectively competitive
is, in effect, a determination that there is neither single
joint dominance on that market. Conversely, a
nor
finding
effectively
competitive is a determination that there is single or
joint dominance on that market.

relevant market

is not

that

a

113. If an NRA finds that a relevant market is subject to
effective competition, it is not allowed to impose obli-
gations on any operator on that relevant market under
Article 16. If the NRA has previously imposed regulatory
obligations on undertaking(s)
in that market, the NRA
must withdraw such obligations and may not impose
any new obligation on that undertaking(s). As stipulated
in Article 16(3) of the framework Directive, where the
NRA proposes to remove existing regulatory obligations,
it must give parties affected a reasonable period of notice.

114. If an NRA finds that competition in the relevant market
is not effective because of the existence of an undertaking
or undertakings in a dominant position, it must designate
in accordance with Article 16(4) of
the framework
Directive the undertaking or undertakings concerned as
having SMP and impose appropriate regulatory obli-
gations on the undertaking(s)
concerned. However,
merely designating an undertaking as having SMP on a

116. Except

the

where

Community's

the universal

international
commitments under international treaties prescribe the
regulatory obligation (see Section 4.4) or
choice of
remedies as
when the Directives prescribe particular
under Article 18 and 19 of
service
Directive, NRAs will have to choose between the range
of regulatory obligations set out in the Directives in order
to remedy a particular problem in a market found not to
be effectively competitive. Where NRAs intend to impose
other obligations for access and interconnection than
those listed in the access Directive, they must submit a
their proposed
request
course of action. The Commission must seek the advice
of
the Communications Committee before taking its
decision.

for Commission approval of

117. Community law, and in particular Article 8 of

the
framework Directive, requires NRAs to ensure that the
measures they impose on SMP operators under Article 16
of the framework Directive are justified in relation to the
objectives set out in Article 8 and are proportionate to
the achievement of those objectives. Thus any obligation
imposed by NRAs must be proportionate to the problem
to be remedied. Article 7 of the framework Directive
requires NRAs to set out the reasoning on which any
proposed measure is based when they communicate
that measure to other NRAs and to the Commission.
Thus, in addition to the market analysis supporting the
finding of SMP, NRAs need to include in their decisions a
justification of the proposed measure in relation to the
objectives of Article 8, as well as an explanation of why
their decision should be considered proportionate.

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118. Respect for the principle of proportionality will be a key
criterion used by the Commission to assess measures
proposed by NRAs under the procedure of Article 7 of
framework Directive. The principle of proportionality is
the
well-established in Community law.
principle of proportionality requires
the means
used to attain a given end should be no more than
what is appropriate and necessary to attain that end. In
order to establish that a proposed measure is compatible
with the principle of proportionality, the action to be
taken must pursue a legitimate aim, and the means
employed to achieve the aim must be both necessary
and the least burdensome, i.e. it must be the minimum
necessary to achieve the aim.

In essence,
that

legitimate

119. However, particularly in the early stages of implemen-
tation of the new framework, the Commission would
not expect NRAs to withdraw existing regulatory obli-
gations on SMP operators which have been designed to
regulatory needs which remain
address
those
relevant, without presenting clear evidence that
obligations have
and are
achieved
therefore no longer
competition is
deemed to be effective on the relevant market. Different
remedies are available in the new regulatory framework
identified problems and remedies
to address different
should be tailored to these specified problems.

required since

their purpose

120. The Commission, when consulted as provided for in
Article 7(3) of the framework Directive, will also check
that any proposed measure taken by the NRAs is in
conformity with the regulatory framework as a whole,
and will assess the impact of the proposed measure on
the single market.

121. The Commission will assist NRAs to ensure that as far as
possible they adopt consistent approaches in their choice
of remedies where similar situations exist in different
Member States. Moreover, as noted in Article 7(2) of
the framework Directive, NRAs shall seek to agree on
the types of remedies best suited to address particular
situations in the marketplace.

4.2. Transnational markets: joint analysis by NRAs

122. Article 15(4) of

the framework Directive gives

the
Commission the power to issue a Decision identifying
product and service markets
that are transnational,
covering the whole of the Community or a substantial
part thereof. Under the terms of Article 16(5) of the
framework Directive, the NRAs concerned must jointly
conduct the market analysis and decide whether obli-
gations need to be imposed. In practice, the European
Regulators Group is expected to provide a suitable
forum for such a joint analysis.

123. In general, joint analysis by NRAs would follow similar
procedures (e.g. for public consultation) to those required
when a single national regulatory authority is conducting
a market analysis. Precise arrangements for collective
analysis and decision-making will need to be drawn up.

4.3. Imposition of certain specific regulatory obligations

on non-SMP operators

124. The preceding parts of this section set out the procedures
whereby certain specific obligations may be imposed on
SMP undertakings, under Articles 7 and 8 of the access
the universal service
Directive and Article 16-19 of
Directive. Exceptionally,
similar obligations may be
imposed on operators other than those that have been
designated as having SMP, in the following cases, listed in
Article 8(3) of the access Directive:

— obligations covering inter alia access to conditional
access systems, obligations to interconnect to ensure
end-to-end interoperability, and access to application
program interfaces and electronic programme guides
to ensure accessibility to specified digital TV and
radio broadcasting services (Article 5(1), 5(2) and 6
of the access Directive),

— obligations that NRAs may impose for co-location
where rules relating to environmental protection,
town and country planning
health,
deprive other undertakings of viable alternatives to
co-location (Article 12 of the framework Directive),

security or

— obligations for accounting separation on undertakings
providing electronic communications services who
enjoy special or exclusive rights in other sectors
(Article 13 of the framework Directive),

— obligations relating to commitments made by an
undertaking in the course of a competitive or
comparative selection procedure for a right of use
of radio frequency (Condition B7 of the Annex to
the authorisation Directive, applied via Article 6(1)
of that Directive),

numbering

to handle calls

to subscribers using
— obligations
specific
obligations
necessary for the implementation of number port-
ability (Articles 27, 28 and 30 of
the universal
service Directive),

resources

and

— obligations based on the relevant provisions of the

data protection Directive, and

— obligations to be imposed on non-SMP operators in
order to comply with the Community's international
commitments.

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4.4. Relationship to WTO commitments

125. The EC and its Member States have given commitments
in the WTO in relation to undertakings that are ‘major
suppliers’ of basic telecommunications services (122). Such
undertakings are subject to all of the obligations set out
in the EC's and its Member States' commitments in the
WTO for
services. The
provisions of the new regulatory framework, in particular
relating to access and interconnection, ensure that NRAs
continue to apply the relevant obligations to under-
takings that are major suppliers in accordance with the
WTO commitments of the EC and its Member States.

telecommunications

basic

5. POWERS OF

INVESTIGATION AND COOPERATION
PROCEDURES FOR THE PURPOSE OF MARKET ANALYSIS

5.1. Overview

126. This

section of

in
respect of an NRA's powers to obtain the information
necessary to conduct a market analysis.

the guidelines covers procedures

127. The regulatory framework contains provisions to enable
NRAs to require undertakings that provide electronic
communications networks and services to supply all the
information,
information,
necessary for NRAs to assess the state of competition
in the relevant markets and impose appropriate ex-ante
obligations and thus to ensure compliance with the regu-
latory framework.

confidential

including

128. This section of the guidelines also includes guidance as to
measures to ensure effective cooperation between NRAs
and NCAs at national
level, and among NRAs and
between NRAs and the Commission at Community
level. In particular this section deals with the exchange
of information between those authorities.

129. Many electronic communication markets are fast-moving
and their structures are changing rapidly. NRAs should
ensure that the assessment of effective competition, the
public consultation, and the designation of operators
having SMP are all carried out within a reasonable
period. Any unnecessary delay in the decision could
have harmful effects on incentives for investment by
undertakings in the relevant market and therefore on
the interests of consumers.

5.2. Market analysis and powers of investigation

130. Under Article 16(1) of the framework Directive, NRAs
must carry out an analysis of
the relevant markets
identified in the Recommendation and any Decision as
soon as possible after
their adoption or subsequent
revision. The conclusions of the analysis of each of the
relevant markets, together with the proposed regulatory
action, must be published and a public consultation must
be conducted, as described in Section 6.

131. In order to carry out their market analysis, NRAs will
first need to collect all the information they consider
necessary to assess market power in a given market. To
the extent that such information needs to be obtained
the author-
directly from undertakings, Article 11 of
isation Directive provides that undertakings are required
by the terms of their general authorisation to supply the
information necessary for NRAs to conduct a market
analysis within the meaning of Article 16(2) of
the
framework Directive. This is reinforced by the more
the framework
general obligation in Article 5(1) of
Directive which provides
shall
ensure that undertakings providing electronic communi-
cations networks and services provide all the information
conformity with
necessary
Community law.

that Member States

for NRAs

ensure

to

132. When NRAs request information from an undertaking,
they should state the reasons justifying the request and
the time limit within which the information is to be
provided. As provided for in Article 10(4) of the author-
isation Directive, NRAs may be empowered to impose
to
financial penalties on undertakings
provide information.

failure

for

133. In accordance with Article 5(4) of

the framework
information that
Directive, NRAs must publish all
would contribute to an open and competitive market,
acting in accordance with national
rules on public
access to information and subject to Community and
national rules on commercial confidentiality.

134. However, as regards information that is confidential in
nature, the provisions of Article 5(3) of the framework
Directive, require NRAs to ensure the confidentiality of
such information in accordance with Community and
national rules on business confidentiality. This confiden-
tiality obligation applies equally to information that has
been received in confidence
from another public
authority.

5.3. Cooperation procedures

Between NRAs and NCAs

135. Article 16(1) of the framework Directive requires NRAs
to associate NCAs with the market analyses as appro-
priate. Member States should put in place the necessary
procedures to guarantee that the analysis under Article
16 of the framework Directive is carried out effectively.
As the NRAs conduct their market analyses in accordance
with the methodologies of competition law, the views of
NCAs in respect of the assessment of competition are
highly relevant. Cooperation between NRAs and NCAs
will be essential, but NRAs remain legally responsible
for conducting the
relevant analysis. Where under
national law the tasks assigned under Article 16 of the
framework Directive are carried out by two or more
separate
should
ensure clear division of tasks and set up procedures for
consultation and cooperation between regulators in order
to assure coherent analysis of the relevant markets.

bodies, Member

regulatory

States

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for

the

136. Article 3(5) of the framework Directive requires NRAs
and NCAs to provide each other with the information
necessary
regulatory
application
framework, and the receiving authority must ensure the
same level of confidentiality as the originating authority.
NCAs should therefore provide NRAs with all relevant
information obtained using the former's investigatory
and
confidential
information.

enforcement

including

powers,

the

of

137. Information that is considered confidential by an NCA, in
rules on
accordance with Community and national
business confidentiality, should only be exchanged with
NRAs where
the
application
regulatory
of
framework. The
information exchanged should be
limited to that which is relevant and proportionate to
the purpose of such exchange.

is necessary for
the

such exchange

provisions

the

of

Between the Commission and NRAs

138. For the regulatory framework to operate efficiently and
effectively, it is vital that there is a high level of coop-
It is
eration between the Commission and the NRAs.
particularly important that effective informal cooperation
takes place. The European Regulators Group will be of
great
importance in providing a framework for such
cooperation, as part of its task of assisting and advising
the Commission. Cooperation is likely to be of mutual
benefit, by minimising the likelihood of divergences in
approach between different NRAs, in particular divergent
remedies to deal with the same problem (123).

139. In accordance with Article 5(2) of

the framework
supply the Commission with
Directive, NRAs must
information necessary for it to carry out its tasks under
the Treaty. This covers information relating to the regu-
latory framework (to be used in verifying compatibility of
NRA action with the legislation), but also information
in
that
considering compliance with WTO commitments.

the Commission might require,

for example,

140. NRAs must ensure that, where they submit information
to the Commission which they have requested under-
takings to provide, they inform those undertakings that
they have submitted it to the Commission.

141. The Commission can also make

such information
available to another NRA, unless the original NRA has
made an explicit and reasoned request to the contrary.
Although there is no legal requirement to do so, the
Commission will normally inform the undertaking
which originally provided the information that
it has
been passed on to another NRA.

Between NRAs

required under Article 7(2) of

142. It is of the utmost importance that NRAs develop a
common regulatory approach across Member States
that will contribute to the development of a true single
market for electronic communications. To this end, NRAs
are
framework
Directive to cooperate with each other and with the
Commission in a transparent manner
to ensure the
consistent application, in all Member States, of the new
regulatory framework. The European Regulators' Group
is expected to serve as an important forum for coop-
eration.

the

143. Article 5(2) of the framework Directive also foresees that
NRAs will exchange information directly between each
other, as long as there is a substantiated request. This
will be particularly necessary where a transnational
market needs
it will also be
required within the framework of cooperation in the
European Regulators' Group.
exchanges of
the NRAs are required to maintain the
information,
confidentiality of information received.

to be analysed, but

In all

6. PROCEDURES FOR CONSULTATION AND PUBLICATION

OF PROPOSED NRA DECISIONS

6.1. Public consultation mechanism

144. Except in the urgent cases as explained below, an NRA
that
intends to take a measure which would have a
significant impact on the relevant market should give
the interested parties the opportunity to comment on
the draft measure. To this effect, the NRA must hold a
public consultation on its proposed measure. Where the
draft measure concerns a decision relating to an SMP
designation or non-designation it should include the
following:

— the market definition used and reasons therefor, with
in
the exception of information that is confidential
accordance with European and national
law on
business confidentiality,

— evidence relating to the finding of dominance, with
in
the exception of information that is confidential
accordance with European and national
law on
business confidentiality together with the identifi-
cation of any undertakings proposed to be designated
as having SMP,

— full details of the sector-specific obligations that the
to impose, maintain, modify or
NRA proposes
withdraw on the
abovementioned undertakings
together with an assessment of the proportionality
of that proposed measure.

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145. The period of

the consultation should be reasonable.
However, NRAs' decisions
should not be delayed
excessively as this can impede the development of the
market. For decisions related to the existence and desig-
the Commission
nation of undertakings with SMP,
considers
two months would be
reasonable for the public consultation. Different periods
could be used in some cases if
justified. Conversely,
where a draft SMP decision is proposed on the basis of
the results of an earlier consultation, the length of consul-
tation period for these decisions may well be shorter than
two months.

that a period of

6.2. Mechanisms to consolidate the internal market for

electronic communications

6.3. Commission power to require the withdrawal of

NRAs' draft measures

150. Under

the terms of Article 7(4) of

the framework
there are two specific situations where the
Directive,
Commission has the possibility to require an NRA to
withdraw a draft measure which falls within the scope
of Article 7(3):

— the draft measure concerns the definition of a relevant
identified in the

market which differs from that
Recommendation, or

— the draft measure concerns a decision as to whether
to designate, or not to designate, an undertaking as
having SMP, either individually or jointly with others.

in

the

other

together with

the measures,

specific Articles

146. Where an NRA intends to take a measure which falls
the market definition or market
within the scope of
analysis procedures of Articles 15 and 16 of
the
framework Directive, as well as when NRAs apply
regulatory
certain
framework (124) and where the measures have an effect
the NRAs must
on trade between Member States,
communicate
their
reasoning, to NRAs in other Member States and to the
the
Commission in accordance with Article 7(3) of
framework Directive. It should do this at the same time
as it begins its public consultation. The NRA must then
give other NRAs and the Commission the chance to
comment on the NRA's proposed measures, before
adopting any final decision. The time available for
other NRAs and the Commission to comment should
be the same time period as that set by the NRA for its
national public consultation, unless the latter is shorter
than the minimum period of one month provided for in
Article 7(3). The Commission may decide in justified
circumstances to publish its comments.

151. In respect of

the above two situations, where the
Commission has indicated to the NRA in the course of
the consultation process that it considers that the draft
measure would create a barrier to the single European
market or where the Commission has serious doubts as
to the
draft measure with
Community law, the adoption of the measure must be
delayed by a maximum of an additional two months.

compatibility of

the

the

Communications

152. During this two-month period,
consulting

the Commission may,
Committee
after
following the advisory procedure (126),
take a decision
requiring the NRA to withdraw the draft measure. The
Commission's decision will be accompanied by a detailed
and objective analysis of why it considers that the draft
measure should not be adopted together with specific
proposals
the
Commission does not
take a decision within that
period, the draft measure may be adopted by the NRA.

for amending the draft measure.

If

147. With regard to measures that could affect trade between
Member States, this should be understood as meaning
measures that may have an influence, direct or indirect,
actual or potential, on the pattern of
trade between
in a manner which might create a
Member States
barrier to the single European market (125). Therefore,
the notion of an effect on trade between Member
States is likely to cover a broad range of measures.

148. NRAs must make public the results of the public consul-
tation, except in the case of information that is confi-
dential in accordance with Community and national law
on business confidentiality.

149. With the exception of two specific cases, explained in the
following paragraph, the NRA concerned may adopt the
final measure after having taken account of views
expressed during its mandatory consultation. The final
measure must then be communicated to the Commission
without delay.

6.4. Urgent cases

and

153. In exceptional circumstances, NRAs may act urgently in
order to safeguard competition and protect the interest of
users. An NRA may therefore, exceptionally, adopt
proportionate
provisional measures without
consulting either interested parties, the NRAs in other
Member States, or the Commission. Where an NRA has
taken such urgent action,
it must, without delay,
communicate these measures, with full reasons, to the
Commission, and to the other NRAs. The Commission
will verify the compatibility of
those measures with
Community law and in particular will assess their propor-
tionality in relation to the policy objectives of Article 8
of the framework Directive.

154. If the NRA wishes to make the provisional measures
permanent, or extends the time for which it is applicable,
the NRA must go through the normal consultation
It is difficult to foresee any
procedure set out above.
circumstances that would justify urgent action to define
a market or designate an SMP operator, as such measure
are not those that can be carried out immediately. The
Commission therefore does not expect NRAs to use the
exceptional procedures in such cases.

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transmit

will
Committee as appropriate.

the information to the Communications

156. Likewise, NRAs should publish the names of under-
takings that they have designated as having SMP and
the obligations imposed on them. They should ensure
that up-to-date information is made publicly available
in a manner that guarantees all
interested parties easy
access to that information.

6.5. Adoption of the final decision

155. Once an NRA's decision has become final, NRAs should
notify the Commission of the names of the undertakings
that have been designated as having SMP and the obli-
in accordance with the
gations
the universal service
requirements of Article 36(2) of
the access
Directive and Articles 15(2) and 16(2) of
Directive. The Commission will
thereafter make this
information available in a readily accessible form, and

imposed on them,

(1) OJ L 108, 24.4.2002, p. 33.

(2) OJ L 108, 24.4.2002, p. 21.

(3) OJ L 108, 24.4.2002, p. 7.

(4) OJ L 108, 24.4.2002, p. 51.

(5) To be adopted.

(6) OJ L 24, 30.1.1998, p. 1.

(7) Except where the new regulatory framework expressly permits obligations to be imposed independently of the competitive state of the market.

(8) Article 14 of the framework Directive.

(9) In addition, transnational markets whose characteristics may be such as to justify sector-specific regulation may be identified by the Commission

in a Decision on transnational markets.

(10) Recital 27 of the framework Directive.

(11) Regulation (EEC) No 4064/89 on the control of concentrations between undertakings (OJ L 395, 30.12.1989, p. 1), as last amended by

Regulation (EC) No 1310/97 of 30 June 1997 (OJ L 180, 9.7.1997, p. 1) (hereafter the merger control Regulation).

(12) Guidelines on the application of EEC competition rules in the telecommunications sector (OJ C 233, 6.9.1991, p. 2).

(13) Commission notice on the definition of relevant market for the purposes of Community competition law (OJ C 372, 9.12.1997, p. 5).

(14) Notice on the application of the competition rules to access agreements in the telecommunications sector (OJ C 265, 22.8.1998, p. 2).

(15) It is expected that effective cooperation between NRAs and NCAs would prevent the duplication of procedures concerning identical market

issues.

(16) Guidelines on the application of EEC competition rules in the telecommunications sector (OJ C 233, 6.9.1991, p. 2).

(17) Article 14(2) of the framework Directive.

(18) Case C-209/98, Entreprenørforeningens Affalds [2000] ECR I-3743, paragraph 57, and Case C-242/95 GT-Link [1997] ECR I-4449, paragraph 36. It
should be recognised that the objective of market definition is not an end in itself, but part of a process, namely assessing the degree of a firm's
market power.

(19) See Directive 97/33/EC of the European Parliament and of the Council of 30 June 1997 on interconnection in telecommunications with regard to
ensuring universal service and interoperability through application of the principles of open network provision (ONP) (OJ L 199, 26.7.1997, p.
32) (the interconnection Directive); Council Directive 90/387/EEC of 28 June 1990 on the establishment of the internal market for tele-
communications services through the implementation of open network provision (OJ L 192, 24.7.1990, p. 1) (the ONP framework Directive);
Council Directive 92/44/EEC of 5 June 1992 on the application of open network provision to leased lines (OJ L 165, 19.6.1992, p. 27) (the
leased lines Directive); Directive 95/62/EC of the European Parliament and of the Council of 13 December 1995 on the application of open
network provision (ONP) to voice telephony (OJ L 321, 30.12.1995, p. 6), replaced by Directive 98/10/EC of the European Parliament and of the
Council of 26 February 1998 on the application of open network provision (ONP) to voice telephony and on universal service for tele-
communications in a competitive environment (OJ L 101, 1.4.1998, p. 24) (the ONP voice telephony Directive).

(20) Joined Cases C-68/94 and C-30/95, France and Others v Commission [1998] ECR I-1375. See, also, Notice on market definition, at paragraph 12.

(21) To the extent that the electronic communications sector is technology and innovation-driven, any previous market definition may not necessarily

be relevant at a later point in time.

(22) Notice on market definition, paragraph 12.

(23) See, also, Notice on market definition, paragraphs 20-23, Case IV/M.1225 — Enso/Stora, (OJ L 254, 29.9.1999), paragraph 40.

(24) See Notice on market definition, paragraph 24. Distinguishing between supply-side substitution and potential competition in electronic
communications markets may be more complicated than in other markets given the dynamic character of the former. What matters,
however, is that potential entry from other suppliers is taken into consideration at some stage of the relevant market analysis, that is, either
at the initial market definition stage or at the subsequent stage of the assessment of market power (SMP).

(25) It is not necessary that all consumers switch to a competing product; it suffices that enough or sufficient switching takes place so that a relative
price increase is not profitable. This requirement corresponds to the principle of ‘sufficient interchangeability’ laid down in the case-law of the
Court of Justice; see below, footnote 32.

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(26) See, also, Access notice, paragraph 46, and Case T-83/91, Tetra Pak v Commission, [1994] ECR II-755, paragraph 68. This test is also known as
‘SSNIP’ (small but significant non transitory increase in price). Although the SSNIP test is but one example of methods used for defining the
relevant market and notwithstanding its formal econometric nature, or its margins for errors (the so-called ‘cellophane fallacy’, see below), its
importance lies primarily in its use as a conceptual tool for assessing evidence of competition between different products or services.

(27) See Notice on market definition, paragraphs 17-18.

(28) In other words, where the cross-price elasticity of demand between two products is high, one may conclude that consumers view these products
as close substitutes. Where consumer choice is influenced by considerations other than price increases, the SSNIP test may not be an adequate
measurement of product substitutability; see Case T-25/99, Colin Arthur Roberts and Valerie Ann Roberts v Commission, [2001] ECR II-1881.

(29) Within the context of market definition under Article 82 of the EC Treaty, a competition authority or a court would estimate the ‘starting price’
for applying the SSNIP on the basis of the price charged by the alleged monopolist. Likewise, under the prospective assessment of the effects
which a merger may have on competition, the starting price would be based on the prevailing prices of the merging parties. However, where an
NRA carries out a market analysis for the purposes of applying Article 14 of the framework Directive the service or product in question may be
offered by several firms. In such a case, the starting price should be the industry ‘average price’.

(30) It is worth noting that prices which result from price regulation which does not aim at ensuring that prices are cost-based, but rather at ensuring
an affordable offer within the context of the provision of universal services, may not be presumed to be set at a competitive level, nor should
they serve as a starting point for applying the SSNIP test.

(31) Indeed, one of the drawbacks of the application of the SSNIP test is that in some cases, a high-demand cross-price elasticity may mean that a firm
has already exercised market power, a situation known in competition law and practice as the ‘cellophane fallacy’. In such cases, the prevailing
price does not correspond to a competitive price. Determining whether the prevailing price is set above the competitive level is admittedly one of
the most difficult aspects of the SSNIP test. NRAs faced with such difficulties could rely on other criteria for assessing demand and supply
substitution such as functionality of services, technical characteristics, etc. Clearly, if evidence exist to show that in the past a firm has engaged in
anti-competitive behaviour (price-fixing) or has enjoyed market power, then this may serve as an indication that its prices are not under
competitive constraint and accordingly are set above the competitive level.

(32) Case C-333/94 P, Tetra Pak v Commission [1996] ECR I-5951, paragraph 13, Case 31/80 L'Oréal [1980] ECR 3775, paragraph 25, Case 322/81,
Michelin v Commission [1983] ECR 3461, paragraph 37, Case C-62/86, AkzoChemie v Commission [1991] ECR I-3359, Case T-504/93, Tiercé
Ladbroke v Commission [1997] ECR II-923, paragraph 81, T-65/96, Kish Glass v Commission [2000] ECR II-1885, paragraph 62, Case C-475/99,
Ambulanz Glöckner and Landkreis Südwestpfalz, [2001] ECR I-0000, paragraph 33. The test of sufficient substitutability or interchangeability was
first laid down by the Court of Justice in Case 6/72, Europemballage and Continental Can v Commission, [1973] ECR 215, paragraph 32 and Case
85/76, Hoffmann La-Roche v Commission [1979] ECR 461, paragraph 23.

(33) Case C-333/94 P, Tetra Pak v Commission [1996] ECR I-5951, paragraph 13, Case 66/86, Ahmed Saeed [1989] ECR 803, paragraphs 39 and 40,
Case United Brands v Commission [1978] ECR 207, paragraphs 22 and 29, and 12; Case T-229/94, Deutsche Bahn v Commission [1997] ECR
II-1689, paragraph 54. In Tetra Pak, the Court confirmed that the fact that demand for aseptic and non-aseptic cartons used for packaging fruit
juice was marginal and stable over time relative to the demand for cartons used for packaging milk was evidence of a very little interchangeability
between the milk and the non-milk packaging sector, idem, paragraphs 13 and 15.

(34) For example, in the case of a relative price increase, consumers of a lower quality/price service may switch to a higher quality/price service if the
cost of doing so (the premium paid) is offset by the price increase. Conversely, consumers of a higher quality product may no longer accept a
higher premium and switch to a lower quality service. In such cases, low and high quality products would appear to be effective substitutes.

(35) Communication from the Commission — Status of voice on the Internet under Community law, and in particular, under Directive 90/388/EEC
— Supplement to the Communication by the Commission to the European Parliament and the Council on the status and implementation of
Directive 90/388/EEC on competition in the markets for telecommunications services (OJ C 369, 22.12.2000, p. 3). Likewise, it cannot be
excluded that in the future. xDSL technology and multipoint video distribution services based on wireless local loops may be used for the
transmission of TV materials in direct competition with other existing TV delivery systems based on cable systems, direct-to-home satellite
transmission and terrestrial analogue or digital transmission platforms.

(36) Switching costs which stem from strategic choices by undertakings rather than from exogenous factors should be considered, together with some
other form of entry barriers, at the subsequent stage of SMP assessment. Where a market is still growing, total switching costs for already
‘captured’ consumers may not be significant and may not thus deter demand or supply-side substitution.

(37) The time frame to be used to assess the likely responses of other suppliers in case of a relative price increase will inevitably depend on the

characteristics of each market and should be decided on a case-by-case basis.

(38) See, also, Case C-333/94, Tetra Pak v Commission, op. cit., paragraph 19. As mentioned above, the required investments should also be undertaken

within a reasonable time frame.

(39) See, also, Case COMP/M.2574 — Pirelli/Edizione/Olivetti/Telecom Italia, paragraph 58.

(40) United Brands, op. cit., paragraph 44, Michelin, op. cit., paragraph 26, Case 247/86 Alsatel v Novasam [1988] ECR 5987, paragraph 15; Tiercé

Ladbroke v Commission, op. cit., paragraph 102.

(41) Deutsche Bahn v Commission, op. cit., paragraph 92. Case T-139/98 AAMS v Commission, [2001] ECR 0000-II, paragraph 39.

(42) See, for instance, Case IV/M.1025 — Mannesmann/Olivetti/Infostrada, paragraph 17, and Case COMP/JV.23 — Telefónica Portugal Telecom/Médi

Telecom.

(43) In practice, this area will correspond to the limits of the area in which an operator is authorised to operate. In Case COMP/M.1650 —
ACEA/Telefónica, the Commission pointed out that since the notified joint venture would have a licence limited to the area of Rome, the
geographical market could be defined as local; at paragraph 16.

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(44) The fact that mobile operators can provide services only in the areas where they have been authorised to and the fact that a network architecture
reflects the geographical dimension of the mobile licences explains why mobile markets are considered to be national in scope. The extra
connection and communications costs that consumers face when roaming abroad, coupled with the loss of certain additional service func-
tionalities (i.e. lack of voice mail abroad) further supports this definition; see Case IV/M.1439 — Telia/Telenor, paragraph 124, Case IV/M.1430
— Vodafone/Airtouch, paragraphs 13-17, Case COMP/JV.17 — Mannesmann/Bell Atlantic/Omnitel, paragraph 15.

(45) Physical interconnection agreements may also be taken into consideration for defining the geographical scope of the market, Case IV/M.570 —

TBT/BT/TeleDanmark/Telenor, paragraph 35.

(46) Case IV/M.856 — British Telecom/MCI (II), paragraph 19s., Case IV/JV.15 — BT/AT & T, paragraph 84 and 92, Case COMP/M.2257 — France
Telecom/Equant, paragraph 32, It is highly unlikely that the provision of electronic communications services could be segmented on the basis of
national (or local) bilateral routes.

(47) Reference may be made, for instance, to the market for backhaul capacity in international routes (i.e. cable station serving country A to country
E) where a potential for substitution between cable stations serving different countries (i.e., cable stations connecting Country A to B, A to C and
A to D) may exist where a supplier of backhaul capacity in relation to the route A to E is or would be constrained by the ability of consumers to
switch to any of the other ‘routes’, also able to deal with traffic from or to country E.

(48) Where a market is defined on the basis of a bilateral route, its geographical scope could be wider than national if suppliers are present in both

ends of the market and can satisfy demand coming from both ends of the relevant route.

(49) See Notice on market definition, paragraphs 57 and 58. For instance, chain substitutability could occur where an undertaking providing services
at national level constraints the prices charged by undertakings providing services in separate geographical markets. This may be the case where
the prices charged by undertakings providing cable networks in particular areas are constrained by a dominant undertaking operating nationally;
see also, Case COMP/M.1628 — TotalFina/Elf (OJ L 143, 29.5.2001, p. 1), paragraph 188.

(50) Evidence should show clear price interdependence at the extremes of the chain and the degree of substitutability between the relevant products or

geographical areas should be sufficiently strong.

(51) The Commission has, inter alia, made references in its decisions to the existence of the following markets: international voice-telephony services
(Case IV/M.856 — British Telecommunications/MCI (II), OJ L 336, 8.12.1997), advanced telecommunications services to corporate users (Case
IV/35.337, Atlas, OJ L 239, 19.9.1996, paragraphs 5-7, Case IV/35617, Phoenix/Global/One, OJ L 239, 19.9.1996, paragraph 6, Case IV/34.857,
BT-MCI (I), OJ L 223, 27.8.1994), standardised low-level packet-switched data-communications services, resale of international transmission
capacity (Case IV/M.975 — Albacom/BT/ENI, paragraph 24) audioconferencing (Albacom/BT/ENI, paragraph 17), satellite services (Case
IV/350518 — Iridium, OJ L 16, 18.1.1997), (enhanced) global telecommunications services (Case IV/JV.15 — BT/AT & T, Case COMP/M.1741
— MCI WorldCom/Sprint, paragraph 84, Case COMP/M.2257 — France Telecom/Equant, paragraph 18), directory-assistance services (Case
IV/M.2468 — SEAT Pagine Gialle/ENIRO, paragraph 19, Case COMP/M.1957 — VIAG Interkom/Telenor Media, paragraph 8), Internet-access
services to end users (Case IV/M.1439 — Telia/Telenor, Case COMP/JV.46 — Blackstone/CDPQ/Kabel Nordrhein/Westfalen, paragraph 26, Case
COMP/M.1838 — BT/Esat, paragraph 7), top-level or universal Internet connectivity (Case COMP/M.1741 — MCI WorldCom/Sprint, paragraph
52), seamless pan-European mobile telecommunications services to internationally mobile customers (Case COMP/M.1975 — Vodafone Airtouch/
Mannesmann, Case COMP/M.2016 — France Telecom/Orange, paragraph 15), wholesale roaming services (Case COMP/M.1863 — Vodafone/
Airtel, paragraph 17), and market for connectivity to the international signalling network (Case COMP/2598 — TDC/CMG/Migway JV,
paragraphs 17-18).

(52) See, also, Joined Cases T-125/97 and T-127/97, The Coca-Cola Company and Others v Commission [2000] ECR II-1733, at paragraphs 81 and 82.

(53) See, also, Article 15 of the framework Directive.

(54) Access notice, paragraph 45.

(55) See Case COMP/M.1439 — Telia/Telenor.

(56) See Telia/Telenor, BT/AT & T, France Télécom/Equant, op. cit. See also Commission Decision of 20 May 1999, Cégétel + 4 (OJ L 218,
18.8.1999), paragraph 22. With regard to the emerging market for ‘Global broadband data communications services — GBDS’, the Commission
has found that such services can be supported by three main network architectures: (i) terrestrial wireline systems; (ii) terrestrial wireless systems;
and (iii) satellite-based systems, and that from a demand side, satellite-based GBDS can be considered as a separate market, Case COMP/M.1564
— Astrolink, paragraphs 20-23.

(57) Directive 96/19/EC, recital 20 (OJ L 74, 22.3.1996, p. 13). See, also, communication from the Commission, ‘Unbundled access to the local loop:
enabling the competitive provision of a full range of electronic communication services, including broadband multimedia and high speed Internet’
(OJ C 272, 23.9.2000, p. 55). Pursuant to point 3.2, ‘While categories of services have to be monitored closely, particularly given the speed of
technological change, and regularly reassessed on a case-by-case basis, these services are presently normally not substitutable for one another, and
would therefore be considered as forming different relevant markets’.

(58) The Commission has identified separate markets for services to large multinational corporations (MNCs) given the significant differences in the
demand (and supply) of services to this group of customers compared to other retail (business) customers, see Case IV/JV.15 — BT/AT & T, Case
COMP/M.1741 — MCI WorldCom/Sprint, Case COMP/M.2257 — France Télécom/Equant.

(59) See communication on ‘Unbundled access to the local loop’, op.cit, point 3.2. The market for ‘high-speed’ communications services could
possibly be further divided into distinct segments depending on the nature of the services offered (i.e. Internet services, video-on-demand, etc.).

(60) Case COMP/M.2574 — Pirelli/Edizione/Olivetti/Telecom Italia, paragraph 33. It could also be argued that dial-up access to the Internet via
existing 2G mobile telephones is a separate market from dial-up access via the public switched telecommunications network. According to the
Commission, accessing the Internet via a mobile phone is unlikely to be a substitute for existing methods of accessing the Internet via a PC due
to difference in sizes of the screen and the format of the material that can be obtained through the different platforms; see Case COMP/M.1982
— Telia/Oracle/Drutt, paragraph 15, and Case COMP/JV.48 Vodafone/Vivendi/Canal+.

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(61) Case COMP/M.2469 — Vodafone/Airtel, paragraph 7, Case IV/M.1430 — Vodafone/Airtouch, Case IV/M.1669, Deutsche Telecom/One2One,
paragraph 7. Whether this market can be further segmented into a carrier (network operator) market and a downstream service market should be
decided on a case-by-case basis; see Case IV/M.1760 — Mannesmann/Orange, paragraphs 8-10, and Case COMP/M.2053 — Telenor/BellSouth/
Sonofon, paragraphs 9-10.

(62) For instance, in British Interactive Broadcasting/Open, the Commission noted that for the provision of basic voice services to consumers, the
relevant infrastructure market included not only the traditional copper network of BT but also the cable networks of the cable operators, which
were capable of providing basic telephony services, and possibly wireless fixed networks, Case IV/36.359, (OJ L 312, 6.12.1999, paragraphs
33-38). In Case IV/M.1113 — Nortel/Norweb, the Commission recognised that electricity networks using ‘digital power line’ technology could
provide an alternative to existing traditional local telecommunications access loop, paragraphs 28-29.

(63) In assessing the conditions of network competition in the Irish market that would ensue following full liberalisation, the Commission also relied
on the existence of what, at that period of time, were perceived as potential alternative infrastructure providers, namely, cable TV and electricity
networks, Telecom Eireann, cit., paragraph 30. The Commission left open the question whether the provision of transmission capacity by an
undersea network infrastructure constitutes a distinct market from terrestrial or satellite transmissions networks, Case COMP/M.1926 — Tele-
fonica/Tyco/JV, at paragraph 8.

(64) Case COMP/M.1439, Telia/Telenor, paragraph 79. For instance, an emerging pan-European market for wholesale access (SMS) to mobile

infrastructure has been identified by the Commission in Case COMP/2598 — TDC/CMG/Migway JV, at paragraphs 28-29.

(65) In applying these criteria, the Commission has found that, as far as the fixed infrastructure is concerned, demand for the lease of transmission
capacity and the provision of related services to other operators occurs at wholesale level (the market for carrier's carrier services; see Case
IV/M.683 — GTS-Hermes Inc./HIT Rail BV, paragraph 14, Case IV/M.1069 — WorldCom/MCI (OJ L 116, 4.5.1999, p. 1), Unisource (OJ L 318,
20.11.1997, p. 1), Phoenix/Global One (OJ L 239, 19.9.1996, p. 57), Case IV/JV.2 — Enel/FT/DT. In Case COMP/M.1439 — Telia/Telenor, the
Commission identified distinct patterns of demand for wholesale and retail (subscriber) access to network infrastructure (provision or access to
the local loop, and provision or access to long distance and international network infrastructure), paragraphs 75-83.

(66) See footnote 58.

(67) Fibre optics are currently competitive only on upstream transmission markets whereas wireless local loops which are still to be deployed will
target mainly professionals and individuals with particular communications needs. With the exception of certain national markets, existing cable
TV networks need costly upgrades to support two ways broadband communications, and, compared with xDLS technologies, they do not offer a
guaranteed bandwidth since customers share the same cable channel.

(68) See also Case IV/JV.11 — @Home Benelux BV.

(69) For example, if a fixed operator wants to terminate calls to the subscribers of a particular network, in principle, it will have no other choice but
to call or interconnect with the network to which the called party has subscribed. For instance, in light of the ‘calling party pays’ principle,
mobile operators have no incentives to compete on prices for terminating traffic to their own network. See also, OECD, ‘Competition issues in
telecommunications-background note for the secretariat’, DAFFE/CLP/WP2(2001)3, and Commission's press release IP/02/483.

(70) Case 27/76 United Brands v Commission [1978] ECR 207.

(71) See, also, recital 25 of the framework Directive.

(72) See Article 14, paragraph 2, and recital 28 of the framework Directive.

(73) It should be noted that NRAs do not have to find an abuse of a dominant position in order to designate an undertaking as having SMP.

(74) Case 85/76, Hoffmann-La Roche v Commission [1979] ECR 461, paragraph 39. It should be stressed here that for the purposes of ex-ante
if an undertaking has already been imposed regulatory obligations, the fact that competition may have been restored in the
regulation,
relevant market as a result precisely of the obligations thus imposed, this does not mean that that undertaking is no longer in a dominant
position and that it should no longer continue being designated as having SMP.

(75) The absence of any substitutable service or product may justify a finding of a situation of economic dependence which is characteristic of the
existence of a dominant position. See Commission decisions, Decca Navigator System (OJ L 43, 15.2.1987, p. 27) and Magill TV Guide: ITP, BBC,
RTE (OJ L 78, 21.3.1989, p. 43). See also, Case 22/78 Hugin v Commission 1979 [ECR] 1869, Case 226/84, British Leyland v Commission 1986
[ECR] p. 3263.

(76) See, also, recital 15 of Council Regulation (EEC) No 4064/89.

(77) United Brands v Commission, op. cit. The greater the difference between the market share of the undertaking in question and that of its
in Case COMP/M.1741 — MCI
it be that the said undertaking is in a dominant position. For instance,
competitors, the more likely will
WorldCom/Sprint it was found that the merged entity would have in the market for the provision of top-level Internet connectivity an absolute
combined market share of more than [35-45] %, several times larger than its closest competitor, enabling it to behave independently of its
competitors and customers (see paragraphs 114, 123, 126, 146, 155 and 196).

(78) Case C-62/86, AKZO v Commission, [1991] ECR I-3359, paragraph 60; Case T-228/97, Irish Sugar v Commission, [1999] ECR II-2969, paragraph
70, Case Hoffmann-La Roche v Commission, op. cit, paragraph 41, Case T-139/98, AAMS and Others v Commission [2001 ECR II-0000, paragraph
51. However, large market shares can become accurate measurements only on the assumption that competitors are unable to expand their
output by sufficient volume to meet the shifting demand resulting from a rival's price increase.

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(79) Case Hoffmann-La Roche v Commission, op. cit., paragraph 41, Case C-62/86, Akzo v Commission [1991] ECR I-3359, paragraphs 56, 59. ‘An
undertaking which has a very large market share and holds it for some time, by means of the volume of production and the sale of the supply
which it stands for — without holders of much smaller market shares being able to meet rapidly the demand from those who would like to
break away from the undertaking which has largest market share — is by virtue of that share in a position of strength which makes it an
unavoidable trading partner and which, because of this alone, secures for it, at the very least during relatively long periods, that freedom of action
which is the special feature of a dominant position’, Case AAMS and Others v Commission, op. cit., paragraph 51.

(80) Notice on market definition, op. cit., at p. 5.

(81) See Case COMP/M.1741 — MCI WorldCom/Sprint, paragraph 239-240. In bidding markets, however, it is important not to rely only on market
shares as they in themselves may not be representative of the undertakings actual position, for further discussion, see, also, Case COMP/M.2201
— MAN/Aüwarter.

(82) See, Determination of organisations with significant power (SMP) for the implementation of the ONP Directive, DG XIII, 1 March 1999, at

http://europa.eu.int/ISPO/infosoc/telecompolicy/en/SMPdeter.pdf, at paragraph 3.2.

(83) Idem, at paragraph 5.2.

(84) With regard to the interconnection market of fixed and mobile networks, the termination traffic to be measured should include own network

traffic and interconnection traffic received from all other fixed and mobile networks, national or international.

(85) Hoffmann-La Roche v Commission, op. cit., at paragraph 48. One of the most important types of entry barriers is sunk costs. Sunk costs are
particularly relevant to the electronic communications sector in view of the fact that large investments are necessary to create, for instance, an
efficient electronic communications network for the provision of access services and it is likely that little could be recovered if a new entrant
decides to exit the market. Entry barriers are exacerbated by further economies of scope and density which generally characterise such networks.
Thus, a large network is always likely to have lower costs than a smaller one, with the result that an entrant in order to take a large share of the
market and be able to compete would have to price below the incumbent, making it thus difficult to recover sunk costs.

(86) Joined Cases C-241/91 P and C-242/91 P, RTE and ITP v Commission, [1995] ECR I-743, Case C-7/97, Oscar Bronner [1998] ECR I-7791, and

Joined Cases T-374/94, T-375/94, T-384/94 and T-388/94, European Night Services and others v Commission [1998] ECR II-3141.

(87) Case COMP/M.1741 — MCI WorldCom/Sprint, paragraph 196.

(88) Case C-333/94 P, Tetra Pak v Commission [1996] ECR I-5951.

(89) See, also, Case COMP/M.2146 — Tetra Laval/Sidel, paragraphs 325-389, sub judice, T-5/02.

(90) See Access notice, paragraph 65.

(91) In the case of horizontal markets, the market analysis should focus on establishing the existence of close associative links which will enable an
undertaking dominant in one market to behave independently of its competitors in a neighbouring market. Such links may be found to exist by
reference to the type of conduct of suppliers and users in the markets under consideration (same customers and/or suppliers in both markets, i.e.
customers buying both retail voice calls and retail Internet access) or the fact that the input product or service is essentially the same (i.e.
provision by a fixed operator of network infrastructure to ISPs for wholesale call origination and wholesale call termination); see, also, Case
T-83/91, Tetra Pak v Commission, op. cit., paragraph 120 and Case COMP/M.2416 — Tetra Laval/Sidel.

(92) Article 14(3) of the framework Directive is not intended to apply in relation to market power leveraged from a ‘regulated’ market into an
emerging, ‘non-regulated’ market. In such cases, any abusive conduct in the ‘emerging’ market would normally be dealt with under Article 82 of
the EC Treaty.

(93) See Access notice, paragraph 79.

(94) Joined cases C-395/96 P and C-396/96 P, Compagnie maritime belge and others v Commission [2000] ECR I-1365.

(95) Idem, at paragraph 39.

(96) Case T102/96, Gencor v Commission [1999] ECR II-753.

(97) See Joined Cases T-68/89, T-77/89 and T-78/89, SIV and Others v Commission [1992] ECR II-1403, paragraph 358, Case C-393/92 Almelo [1994]
ECR I-1477, paragraph 43, Case C-96/94, Centro Servizi Spediporto [1995] ECR I-2883, paragraph 33, Joined Cases C-140/94, 141/94, and
C-142/94, DIP, [1995] ECR I-3257, paragraph 62, Case C-70/95, Sodemare [1997] ECR I-3395, paragraph 46, and Joined Cases C-68/94 and
C-30/95 France and Others v Commission [1998] ECR I-1375, paragraph 221.

(98) Case IV/M.619 — Gencor Lonhro (OJ L 11, 14.1.1997, p. 30).

(99) Gencor v Commission, op. cit., at paragraph 276.

(100) Idem, at paragraph 277.

(101) Compagnie maritime belge transports and Others, op. cit., at paragraph 39, see, also, Case T-342/99 Airtours/Commission [2002] ECR II-0000,

paragraph 76.

(102) See, in particular, France and Others v Commission, op. cit., paragraph 221.

(103) Compagnie maritime belge, at paragraph 39.

(104) Idem at paragraph 44.

(105) Idem at paragraph 45.

(106) The use here of the term ‘coordinated effects’ is no different from the term ‘parallel anticompetitive behaviour’ also used in Commission's

decisions applying the concept of collective (oligopolistic) dominance.

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(107) See in particular, Cases COMP/M.2498 — UPM-Kymmene/Haindl, and COMP/M.2499 — Norske Skog/Parenco/Walsum, Case COMP/M.2201 —
MAN/Auwärter, Case COMP/M.2097 — SCA/Matsä Tissue, Case COMP/M.1882 — Pirelli/BICC, Case COMP/M.1741 — MCI WorldCom/Sprint,
sub judice, T-310/00 Case IV/M.1524 — Airtours/First Choice (OJ L 93, 13.4.2000, p. 1), sub judice T-342/99, Case IV/M.1383 — Exxon/Mobil,
Case IV/M.1313 — Danish Crown/Vestjyske Slagterier (OJ L 20, 25.1.2000, p. 1), Case IV/M.1225 — Enso/Stora (OJ L 254, 29.9.1999, p. 9),
Case IV/M.1016 — Price Waterhouse/Coopers & Lybrand (OJ L 50, 26.2.1999, p. 27), Case IV/M.619 — Gencor/Lonrho, cit., Case IV/M.308,
Kali + Salz/MdK/Treuhand (OJ L 186, 21.7.1994, p. 38) and Case IV/M.190 — Nestlé/Perrier (OJ L 356, 5.12.1992, p. 1).

(108) This is in essence the type of analysis carried out by the Commission in past decisions related to collective dominance, see, for instance, Case
IV/M.190 — Nestlé/Perrier, (OJ L 356, 5.12.1992, p. 1), Gencor/Lonrho, cit., Case IV/M.1383 — Exxon/Mobil, paragraph 259, Case IV/M.1524
— Airtours/First Choice (OJ L 93, 13.4.2000, p. 1), and Case COMP/M.2499 — Norske Skog/Parenco/Walsum, paragraph 76; see, also, Airtours v
Commission, op. cit., paragraph 62.

(109) See, also, recital 26 of the framework Directive: ‘two or more undertakings can be found to enjoy a joint dominant position not only where there
exist structural or other links between them but also where the structure of the relevant market is conducive to coordinated effects, that is, it
encourages parallel or aligned anticompetitive behaviour on the market’.

(110) See Case COMP/M.2498 — UPM-Kymmene/Haindl, and Case COMP/M.2499 — Norske Skog/Parenco/Walsum, at paragraph 77.

(111) See, for instance, Case COMP/M.2097 — SCA/Metsä Tissue.

(112) For instance, in Case COMP/M.2201 — MAN/Auwärter, despite the fact that two of the parties present in the German city-bus market in
Germany, MAN/Auwärter and EvoBus, would each supply just under half of that market, the Commission concluded that there was no risk of
joint dominance. In particular, the Commission found that any tacit division of the market between EvoBus and MAN/Auwärter was not likely as
there would be no viable coordination mechanism. Secondly, significant disparities between EvoBus and MAN/Auwärter, such as different cost
structures, would make it likely that the companies would compete rather than collude. Likewise, in the Alcoa/British Aluminium case, the
Commission found that despite the fact that two of the parties present in the relevant market accounted for almost 80 % of the sales, the market
could not be said to be conducive to oligopolistic dominance since (i) market shares were volatile and unstable; and (ii) demand was quite
irregular making it difficult for the parties to be able to respond to each other's action in order to tacitly coordinate their behaviour. Furthermore,
the market was not transparent in relation to prices and purchasers had significant countervailing power. The Commission's conclusions were
further reinforced by the absence of any credible retaliation mechanism likely to sustain any tacit coordination and the fact that competition in
innovation and after-sales follow-up, Case
the market was not only based on prices but depended to a large extent on technological
COMP/M.2111 — Alcoa/British Aluminium.

(113) Likewise, in Case COMP/M.2348 — Outokumpu/Norzink, the Commission found that even if the zinc market was composed of few players,
entry barriers were high and demand growth perspectives low, the likelihood of the emergence of a market structure conducive to coordinated
outcome was unlikely if it could be shown that (i) parties could not manipulate the formation of prices; (ii) producers had asymmetric cost
structures and there was no credible retaliation mechanism in place.

(114) See Case COMP/M.1741 — MCI WorldCom/Sprint, paragraph 263.

(115) Idem, paragraphs 257-302.

(116) Case COMP/M.1838 — BT/Esat.

(117) Idem, paragraphs 10 to 14.

(118) Case IV/M.1430 — Vodafone/Airtouch.

(119) Idem, at paragraph 28. The likely emergence of a duopolistic market concerned only the three largest mobile operators, that is D2 and E-Plus, on
the one hand, and T-Mobil on the other hand, given that VIAG Interkom's market share was below 5 %. The Commission's concerns were finally
removed after the parties proposed to divest Vodafone's entire stake in E-Plus.

(120) Case COMP/M.2016 — France Telecom/Orange, at paragraph 26.

(121) Idem, at paragraphs 39-40. In its working document ‘On the initial findings of the sector inquiry into mobile roaming charges’, the Commission
made reference to (i) the likely existence of a number of economic links between mobile operators, namely through their interconnection
agreements, their membership of the GSM Association, the WAP and the UMTS forum, the fact that terms and conditions of roaming agreements
were almost standardised; and (ii) the likely existence of high barriers to entry. In its preliminary assessment the Commission also stressed that
the fact that the mobile market is, in general, technology driven, did not seem to have affected the conditions of competition prevailing on the
wholesale international roaming market, see: http://europa.eu.int/comm/competition/antitrust/others/sector_inquiries/roaming/, at pages. 24 and
25.

(122) GATS commitments taken by EC on telecommunications: http://gats-info.eu.int/gats-info/swtosvc.pl?&SECCODE=02.C.

(123) The Communications Committee in Article 22 of the framework Directive also aims at ensuring effective cooperation between the Commission

and the Member States.

(124) The specific Articles covered are as follows: Articles 15 and 16 of the framework Directive (the latter of which refers to Articles 16-19 of the
universal service Directive and Articles 7 and 8 of the access Directive), Articles 5 and 8 of the access Directive (the latter of which refers to the
obligations provided for in Articles 9-13 of the access Directive) and Article 16 of the universal service Directive (which refers to Articles 17-19
of universal service Directive). In addition, Article 6 of the access Directive, although not explicitly referenced in Article 7 of the framework
Directive, itself contains cross-reference to Article 7 of the framework Directive and is therefore covered by the procedures therein.

(125) Recital 38 of the framework Directive.

(126) As provided for in Article 3 of Council Decision 1999/468/EC laying the procedure for the exercising of implementing powers conferred on the
Commission, the Commission shall take the utmost account of the opinion delivered by the Committee, but shall not be bound by the opinion.