Competition Law Economics
| Market Power

Section 46(1) prohibits a corporation with substantial market power taking advantage of that market power for a prohibited purpose. On the issue of market power (in a case relating a merger) Justice Emmett in his trial judgment in Metcash stated:

[164] Realistically, almost every participant in a market has some economic market power in the sense that the participant has some discretion over its prices and its level of product quality.  However, the degree of market power that is of concern in relation to competition policy is higher than economic market power in that sense.  Thus, for example, s 46 of the Competition Act employs the concept of substantial degree of market power as the threshold of concern.  Substantial market power is the ability to earn returns substantially in excess of the opportunity cost of capital, without attracting the entry of participants who would be likely to impose significant competitive constraints.

[165] Market power is not necessarily correlated with market share, although participants with relatively high market share often exercise substantial market power and participants with relatively low market share seldom exercise substantial market power.  Participants are generally able to exercise substantial market power not only as a consequence of having a high market share, but also because the relevant market is protected by barriers to entry and expansion.  Markets that are easy to enter are generally characterised by intense competition.  On the other hand, where barriers to entry into a market are high, incumbents can more easily exercise market power because the threat of entry is more remote.

Forthcoming

Extracts forthcoming

For case law discussing market power see cases page.

See the reading page