19 Feb 2024

Implications of the Revised Market Definition Notice for Western Balkan Countries

On February 8, 2024, the European Commission (“EC”) unveiled an updated Market Definition Notice (“the Notice”).  The revision plays a crucial role in the EC’s approach to assessing mergers and antitrust cases by delineating the competitive boundaries and assessing the market power of companies.

The Notice extends beyond EU Member States, mandating compliance from Western Balkan countries (“WBs“) aligned with the EU competition law acquis.   Namely, all WBs, through the Stabilization and Association Agreements, have committed to enforce the criteria derived from the implementation of competition rules applicable in the EU, in particular from famous Articles 101, 102, 106 and 107 of the Treaty on the Functioning of the European Union.

The Notice guides legal and business practices within the EU.  It significantly influences the competition law landscape in the WBc, necessitating vigilant compliance and strategic adaptation from companies operating in these regions.  In other words, all novelties introduced by the Notice and elaborated below will directly apply in WBs.

Main Novelties

The Notice retains the core methodology of its 1997 predecessor but updates it to reflect current market realities and advancements in EC practices and EU jurisprudence.  Highlights of the Notice include:

  1. Principles of Market Definition

The Notice explains that companies are subject to three main sources of competitive constraints: (i) demand substitution, (ii) supply substitution, and (iii) potential competition.  The EC defines the relevant product market by evaluating how interchangeable products are from a consumer’s standpoint, a process referred to as demand substitution.  Also, it clarifies that supply substitution becomes pertinent in defining the product market when suppliers utilize identical assets and processes to manufacture related products, which aren’t customer substitutes, and when this results in comparable competitive conditions across these related products.

  1. Enhanced Focus on Non-Price Competition Factors in multi-sided platform cases

The Notice broadens its focus to include innovation, supply reliability, and the quality of products/services.  Namely, in cases that concern multi-sided platforms, the EC focuses on non-price parameters such as (i) product functionalities, (ii) intended use, (iii) evidence of past or hypothetical substitution, (iv) barriers or costs of switching, such as interoperability with other products, data portability, and licensing features.[1]  In addition, the EC could also apply the ‘SSNDQ test,’ which, as noted above, assesses the switching behavior of customers in response to a small but significant non-transitory decrease in quality.

  1. Forward-Looking Approach in Innovation-Driven Markets

The Notice guides forward-looking approaches for defining markets amidst technological or regulatory shifts; in cases requiring a forward-looking analysis, especially when defining markets based on future shifts in competitive dynamics, any anticipated changes must be substantiated by credible evidence, showing a high likelihood of their actual occurrence.  However, during such assessments, certain types of evidence might be less reliable or not available at all.  For instance, historical substitution data might not exist for new, still-developing products.  On the other hand, routine internal documents from companies or independent industry reports with solid forecasts can be particularly valuable in conducting a forward-looking assessment.

  1. Market definition in after-markets, bundles, and digital ecosystems:

After-markets are sectors in which using a durable, primary product leads to using a related, secondary product.  The Notice outlines three methods EC might use to define relevant product markets in these scenarios: (i) as a system market, encompassing both the primary and secondary products; (ii) as multiple markets, one for the primary product and separate ones for the secondary products tied to each brand of the primary product; and (iii) as dual markets, with distinct markets for the primary and secondary products.

The Notice also applies these principles to digital ecosystems, which may consist of a primary digital product and several secondary digital products linked through technology or interoperability.  The EC might treat bundled secondary digital products as a separate market in such cases.  Additionally, the EC considers other factors like (i) network effects, (ii) switching costs, and (iii) customer choices between single or multiple service usage in defining the relevant market, acknowledging that not all digital ecosystems conform to the after-market or bundle models.

  1. Geographic Market Definition

The EC defines the relevant geographic market by assessing whether conditions of competition are sufficiently homogeneous for the effects of the conduct or concentration to be assessed.  Notably, the EC recognizes that markets can range from local to global, depending on the case facts.  When customers worldwide have access to the same suppliers on similar terms, regardless of the customers’ location, the relevant market is likely to be global.  Relevant factors for defining geographic markets are (i) market shares, (ii) prices, (iii) customer preferences, (iv) purchasing behavior, (v) switching costs and other barriers to supplying customers in different areas, (vi) transport costs and (vii) trade flows.

  1. Quantitative Techniques

The Notice clarifies using analytical methods like the SSNIP test for defining markets.  Namely, the EC stresses that in some cases, to identify the boundaries of the relevant market, it would be necessary to assess quantitatively whether an SSNIP (small but significant non-transitory increase in price) would be profitable for a hypothetical monopolist. [2]

  1. Evidence Sources and Value:

The Notice advises on the types of evidence and their importance, drawing from the EC’s extensive experience.  Specifically, EC uses various sources of information and types of evidence to define the relevant market.  Certain types of evidence may be decisive in one case but of limited or no importance in other cases involving a different industry, product, or circumstances.  An open approach to empirical evidence is applied by the EC to effectively use all available information that may be relevant and make an overall assessment based on that evidence. [3]   On the other hand, the EC does not apply a rigid hierarchy of different sources of information or types of evidence. [4]

Impact on Western Balkan Countries

Given that National Competition Authorities (“NCAs”) in the WBs have already referred to EC practice and the EU court’s jurisprudence in their decisions on merger control review or antitrust infringements, the Notice will undoubtedly significantly impact their further enforcement.  In that vein, we highlight certain specificities of the Notice that are directly relevant to the NCAs.

  1. Resale price maintenance

The EC underscores the necessity of defining the relevant market as a mandatory step in all investigations related to abuse of dominant position, merger review, and specific restrictive agreements.  However, market-sharing cartels deem market definitions unnecessary, as these are considered per se infringements.  Notably, the Notice sidesteps the issue of vertical agreements with resale price maintenance provisions (“RPM”), possibly reflecting a nuanced stance post the Super Bock EU Court of Justice case[5].

The NCAs in the WBs, especially in Serbia, particularly regarding whether they (i) treat that infringement by object, (ii) do not define the relevant market, and (iii) do determine and assess negative market impact, may need reassessment in light of this stance.  Considering the EU Court of Justice’s stance in the Super Bock case, it appears the EC does not automatically categorize RPM as a per se infringement, signaling a potential shift in enforcement priorities that NCAs may need to mirror.

  1. Gathering and evaluating evidence

Furthermore, it is crucial to emphasize that the EC’s method of gathering and evaluating evidence unequivocally indicates that all companies, including those in the WBc, must comply with competition law rules.  Specifically, the EC highlights that evidence carries a higher probative value if it can be established that the evidence could not have been influenced by its investigation, such as evidence pre-dating discussions of a concentration or conduct and pre-dating EC’s investigation.

This implies that when companies in WBc are preparing business strategies for concentrations or during contract negotiations with other firms, they should consider that the documentation prepared in the ordinary course of business will be of greater significance to the NCAs compared to the documentation submitted in the course of proceedings before the NCAs.  Given this assessment of evidence by the EC, it becomes critically important for companies WBc to thoroughly document evidence and strategic considerations related to their business strategies and negotiations, particularly when finalizing acquisitions or agreements.

Moreover, the EC’s methodology for evidence gathering and evaluation underscores the imperative for companies in WBc to adhere to competition laws.  Emphasis is placed on the probative value of evidence unaffected by the EC’s investigations, suggesting that documentation generated in regular business activities holds greater significance for NCAs than that produced expressly for legal proceedings.  For instance, in Marriott International/Starwood Hotels & Resorts Worldwide, the EC relied on the fact that the merging parties benchmarked themselves against chain and independent hotels to find that these suppliers were in the same market [6].


The Notice is a crucial reference for legal and business operations within the EU and profoundly influences the competition law framework in the WBs.  Companies active in these areas must commit to diligent compliance and strategic planning to adeptly manage the changing legal environment.  This requires them to establish comprehensive compliance programs to successfully deal with the complexities of the broad EU competition law regulatory framework.

Reference list

[1] See, for instance, the market definition of consumer communication services and social networking services in case M.7217 Facebook/Whatsapp, paragraphs 24-33 and 51-61; general search services in case AT.39740 – Google Search (Shopping), paragraphs 163-183; professional social networking services in case M.8124 Microsoft/LinkedIn, paragraphs 108-110; Android app stores in case AT.40099 – Google Android, paragraphs 284-305, and of licensable smart mobile operating systems, paragraph 239.

[2] For example, EC applied the SSNIP test in case M.5658 Unilever/Sara Lee, paragraphs 92-94 and section 5.3 of the Technical Annex.

[3] In its judgment of July 6, 2010, Ryanair v Commission, T-342/07, EU: T:2010:280, paragraph 136, the General Court stated: “It is the Commission’s task to make an overall assessment of what is shown by the set of indicative factors used to evaluate the competitive situation. In that regard, it is possible for certain items of evidence to be prioritized and other evidence to be discounted”. The same reasoning applies mutatis mutandis to market definition.

[4] In its judgment of January 11, 2017, Topps Europe v Commission, T-699/14, EU: T:2017:2, paragraph 82, the General Court stated: “The definition of the relevant market does not require the Commission to follow a rigid hierarchy of different sources of information or types of evidence.” This was confirmed in the judgment of the General Court of June 22, 2022, Thyssenkrupp v Commission, T-584/19, EU: T:2022:386, paragraphs 78 and 156.

[5] See judgment of June 29, 2023, Super Bock Bebidas Case – 211/22.

[6] See case M.7902 Marriott International/Starwood Hotels & Resorts Worldwide, paragraph 28.


Author, Vuk Leković