Determining the exact contours of the "relevant market" is a fundamental step in competition law and the principles of unfair competition. It is in this context that we assess whether a practice restricts competition or whether a company holds a dominant position. This exercise, already delicate in the traditional economy, becomes particularly complex with the rise of the internet and e-commercewhere boundaries sometimes seem to blur.
For a company operating online, understanding how the competition authorities define its market is essential, particularly for determining whether a company is in a dominant position. This makes it possible to assess the legality of commercial agreements, pricing strategies or plans for external growth. A wrong assessment can lead to major legal risks. This article aims to shed light on the specific issues involved in delimiting the markets for Internet access, e-commerce and online advertising, based on the approach of the French and European authorities.
Internet access: one market or several?
Internet access, an essential building block of the digital economy, has seen a number of different technologies coexist: ADSL, cable, fibre optics, and perhaps others in the future. The question has long been: are these technologies sufficiently interchangeable from the consumer's point of view to form part of a single market?
Initially, a number of factors led to debate. On the one hand, ADSL and cable offered increasingly similar characteristics: high speed, permanent connection, possibility of bundled offers (telephony, television, Internet - the famous "triple play"), etc. On the other hand, cable and ADSL offered increasingly similar characteristics: high speed, permanent connection, possibility of bundled offers (telephony, television, Internet - the famous "triple play"), etc.. These similarities led to the conclusion that they were substitutable for a large proportion of users.. On the other hand, the limited geographical coverage of cable compared with ADSL, historically deployed on the existing telephone network, could justify considering them as separate markets.
Competition authorities such as the European Commission, ARCEP (the French telecoms regulator) and the Autorité de la Concurrence have long been cautious, sometimes leaving the question open in their initial analyses.. However, with technological developments and the convergence of offerings, the trend has become more pronounced. The French competition authority has come to consider that there is a single market for broadband Internet access, encompassing different technologies such as ADSL and cable..
This approach shows that, despite the diversity of technologies, it is the end use - fast, reliable Internet access - and the consumer's perception that take precedence in defining the market. The massive arrival of fibre optics, with its superior performance, could revive the debate in the future, but the functional approach should remain the main guide. For a company providing Internet access, it is therefore likely that its competition is now being assessed on a broad broadband market, taking all technologies together.
E-commerce: a sales channel or a distinct market?
One of the most frequently asked questions concerns the relationship between online sales and sales in physical shops. Should the internet simply be considered as an additional distribution channel to shops, catalogues, etc., or does it constitute a market in its own right? The answer has direct implications for assessing the market power of a player or the scope of its distribution agreements.
The distinction between B2B (Business to Business) transactions and B2C (Business to Consumer) transactions provides an initial level of nuance..
In the B2B sector, the emergence of electronic marketplaces has raised questions. Are these platforms, which facilitate transactions between professionals, in direct competition with traditional supply methods (direct contacts, fax, telephone)? Initial analyses by the European Commission, for example in the MyAircraft.com case concerning the aeronautics industry, suggested that companies often regarded these electronic marketplaces as just one tool among others, forming part of a wider market for B2B transactions.. This view seems pragmatic: a company looking to buy will choose the most efficient channel, whether online or offline. As a result, unless it has very specific features, a B2B marketplace is generally seen as competing with other transaction methods..
For B2C sales, the debate has been more intense. Initially, the differences may have seemed significant: different buying experience, delivery times, associated services, sometimes aggressive online pricing policy, etc.. In the past, the Autorité de la concurrence has taken the view that distance distribution (including the internet) and in-store distribution were only imperfectly substitutable..
However, changes in purchasing behaviour (online searches before in-store purchases, click and collect, etc.) and the growing presence of traditional brands on the internet have blurred the lines. Recent decision-making practice now tends to define product markets (household appliances, books, toys, furniture, etc.) that encompass at the same time online sales and sales in physical shops. This reflects the reality experienced by consumers, who are increasingly choosing between these different channels for the same need. For a B2C e-tailer, this means that its competition includes not only other online sites, but also physical shops selling the same types of products.
There remains the question of the geographical dimension of these markets. Does the Internet abolish borders? In theory, a website can be accessed from anywhere. In practice, several factors still tend to maintain a geographical dimension that is often national, or even more local for certain goods or services. Language barriers are obvious. Added to this are differences in regulations (consumer protection, taxes), delivery costs and times, consumer habits, and sometimes the need to see or try out the product.. Thus, even for a product sold online, the relevant market is often considered to be national by the authorities.. For example, in a case involving online car classifieds, although the sites were accessible worldwide, the need for the potential buyer to meet the seller and inspect the vehicle effectively limited interest to local or regional listings..
Online advertising: a specific market?
The advertising sector has been profoundly transformed by digital technology, offering new possibilities for targeting and measurement. Competition authorities have had to analyse whether online advertising forms a single market or whether different segments need to be distinguished.
The first clear distinction is between online advertising and offline advertising (press, television, radio, billboard). Because of their very different characteristics (targeting, interactivity, performance measurement, costs), substitutability between these two worlds is considered to be very limited.. An advertiser looking to reach a specific audience with an interactive message will not find a satisfactory equivalent in traditional media.
Within online advertising itself, other distinctions can be made. In particular, the Autorité de la concurrence (French competition authority) has considered that search advertising (sponsored links appearing on search engines such as Google) could constitute a specific market.. What makes it special is that it is targeted on the basis of the intention expressed by the Internet user via their keywords, which makes it very different from other forms of online advertising such as display advertising (banners) or advertising on social networks, which are based more on a logic of interruption or awareness.
Similarly, advertising in online directories, which is based on a different business model and use, has also been considered as a separate market..
The exact definition of online advertising markets remains a complex exercise, influenced by the rapid evolution of technologies and uses (rise of video, programmatic advertising, etc.). The authorities often adopt a cautious approach, analysing the substitutability between different formats and platforms on a case-by-case basis..
As for the geographical dimension, as with e-commerce, it is generally considered to be national for online advertising, mainly because of the linguistic and cultural barriers that naturally segment advertising campaigns..
In conclusion, defining the relevant market in the digital world requires a detailed analysis of the uses, technologies and perceptions of economic players. While there is an emerging trend towards the integration of online and offline channels for the sale of many products, there are still major differences in terms of access to infrastructures and certain advertising segments. The constant evolution of this environment calls for particular vigilance.
Correctly defining the relevant market is essential for assessing your online sales practices. For an analysis tailored to your business, our team is at your disposal.
Sources
- Commission notice on the definition of the relevant market for the purposes of Community competition law (97/C 372/03)
- Autorité de la concurrence merger control guidelines
- Commercial Code, in particular Book IV
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