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3.2 SMP vs. Dominance
3.2.1 Convergence of SMP and dominance
As we discussed above, the prerequisite of intervention of regulation under the new framework directive is the indication of SMP; therefore, following defining a relevant market, the regulator must access whether there exists SMP on the relevant market. The new framework directive states that 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 say a position of economic strength affording it the power to behave to an appreciable extent independently of competitors customers and ultimately consumers. 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.
As regards the criteria for accessing SMP, the Guideline extends the market share criteria for dominance to assess SMP, which is that undertakings with market shares of no more than 25% are not likely to enjoy (single) SMP on the market concerned, whereas SMP may occur without the existence of a large market share. According to established case law, very large market shares, in excess of 50%, are in themselves, save in exceptional circumstances, evidence of the existence of a dominant position.
Moreover, consistent with assessment of dominance, the guideline alleges that the existence of SMP cannot be established on the sole basis of large market shares. The Framework Directive provides a number of non-exhaustive criteria for assisting the regulators in the assessment of collective dominance. Compared to the practices of competition law , it also just lists a set of factor as indicators of SMP without particular order and without it being clear how much weight each individual factor carries. And according to the categorisation of factors for assessing dominance , those factors to assess SMP can be classified as: (1) factor related to market structure, which including overall size of the undertaking, absence of or low countervailing buying power, economies of scale, economies of scope, vertical integration, absence of potential competition and barriers to expansion; (2) factors related to firm structure, which including control of infrastructure not easily duplicated, technological advantages or superiority, easy or privileged access to capital markets/financial resources, product/services diversification (e.g. bundled products or services) and a highly developed distribution and sales network. Accordingly, we can see that the new notion SMP is not substantially different from dominance and is rather a new label.
3.2.2 Divergence of SMP and dominance
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 designation 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. This means the convergence of applying same methodology to identify SMP and dominance does not necessarily lead to the identical decision and sometimes maybe divergent results. The divergence of assessing SMP and dominance maybe comes from the following reasons.
First, SMP is launched for imposition of regulatory obligations and its legal basis is article 14 of the framework Directive. Nevertheless, dominance is a traditional competition law concept for the application of Article 82 EC. They are two different concepts created for difference legal objectives and affiliated to different legal systems, which cannot guarantee they produce the same legal effect.
Second, the common legal prerequisite to assessing SMP and dominance is to define relevant market. According we have analysed before, the market definition for SMP is taken from a prospective way, whereas that for dominance from a static way. Thus, they may make different market definition. Then how could we ensure they will make the same decision according to different market definition?
Third, dominance is assessed in an ex post way, which means there must have existed prima facie evidence of abusing dominant position beforehand. Sometimes, the prima facie evidence has self-proved the dominant position. Nevertheless, this is impossible for ex post assessment. When assessing ex ante whether one or more undertakings are enjoying SMP in the relevant market, NRAs are, in principle, relying on different sets of assumptions and expectations than those relied upon by a competition applicantity applying Article 82, ex post, within a context of an alleged committed abuse. Often, the lack of evidence or of records of past behaviour or conduct will mean that the market analysis will have to be based mainly on a prospective assessment. Therefore, when identifying market power on the relevant market, the regulator has more difficulties than competition authorities do. This difficulty to assess SMP prospectively would arise two outcomes for the regulator: whether it lower down the standard to assess SMP compared to competition authority or it must tolerate the existence of some SMP on the relevant market that would be regarded as dominance by competition authority.
3.3 A deeper thought on the move of convergence
3.3.1 The advantages of convergence
The extension of competition law methodology to regulatory regime has positive far-reaching impact on the deregulation process in the European telecommunications sector. Firstly, competition law methodology relies on the economic reality of the market and therefore produces less regulatory failure. The introduction economic methodology into imposition of regulatory obligations would avoid regulatory inefficiency to an appreciable extent. Secondly, as regulatory decisions based on more forty-year well-establish competition case law, this move will greatly improve legal certainty and transparency in the regulation regime. That would be good news for market player. Thirdly, this process will ensure a better harmonisation of regulatory decision across Europe. Due to the principle of subsidiarity, the implementation of regulatory obligations mostly falls into the competence of Member States, which probably results into inconsistence of regulatory system and accordingly make against the common market policy. Now extension of competition law principles which are generally applies to all Member States into regulatory regime would ‘standardize’ the regulatory obligations across all Member States. Fourthly, it is more important that this move will level the playing ground for the pure application of competition law when sector-specific regulation will no longer be necessary on telecommunications sector.
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