Concept and legal classification of relative market power
Die relative market power is a central concept of German and European competition law and describes a special situation of economic dependence between companies that does not necessarily rely on a dominant market position. While absolute market power is generally based on quantitatively measurable market shares and a superior market position, the assessment of relative market power focuses particularly on the structural dependence of individual market participants on the business conduct of other companies.
Definition of relative market power
Relative market power refers to the ability of a company, without holding a dominant market position, to enforce its independent conduct to a significant extent over certain other companies, especially because those other companies are significantly dependent on the supply or purchase of specific goods or services. This situation typically occurs where alternative procurement or distribution options are, in reality or economically, nonexistent or only very limited.
Distinction from absolute market power
Relative market power differs from absolute (dominant) market power primarily in that it is not based on a superior position in the entire market, but rather a specific superiority in the relationship with one or more business partners. While market dominance is typically determined by market share, the determination of relative market power focuses on whether the dependent market participant has existential or structural business relationships with a supplier or buyer that significantly restrict their business activities.
Legal foundations
Provisions in German law
In German law, relative market power is regulated especially in the Act against Restraints of Competition (GWB). The central provision is Section 20 GWB, which prohibits anti-competitive conduct by companies with relative market power towards small and medium-sized enterprises (SMEs).Section 20 GWB Para. 1 prohibits companies, on which other companies as small or medium-sized enterprises are dependent, from treating them unequally without objectively justified reason or from hindering them in obtaining or selling goods or services. This provision is specifically intended to protect smaller companies, often weaker than larger companies, from abuse and to maintain diversity of opportunity in competition.
Criteria of dependence
Whether a company is relatively market powerful depends in particular on:
- the economic or existential dependence of the other company,
- the actual restriction to only a few sources of supply or distribution channels,
- contractual obligations,
- investment commitments that hinder willingness to switch,
- and the absence of practical alternatives (e.g. due to high switching costs, specific technological standards, regional scarcity).
References under European law
There is no explicit regulation of relative market power in European antitrust law. However, the European Commission and the Court of Justice have also recognized dependencies between companies within the scope of Article 102 TFEU (abuse of a dominant market position) as a possible scenario for anti-competitive conduct if narrowly defined specific positions of power exist.
Examples of application and case groups
Classic case groups from practice
Relative market power can occur in a wide variety of economic sectors, including:
- Powerful trading companies towards suppliers (e.g. retail companies with high purchasing concentration)
- Platform operators towards software or content providers
- Suppliers who make a significant contribution to the production of a major customer
- Digital markets where network effects and data access lead to dependency
Typical forms of abuse
Typical scenarios of abuse include:
- Unequal treatment of contracting partners without objective reason
- Refusal to supply or purchase without justified motive
- Imposing unreasonably low prices or excessive terms
- Discrimination in access to essential data or interfaces
Legal assessment and enforcement
Proceedings and sanctions
Die Enforcement of competition law claims on the basis of relative market power is generally pursued through proceedings before the competition authorities or civil courts. The Federal Cartel Office may, pursuant to Section 32 GWB, issue orders to remedy the abuse, while injured companies may also file claims for injunction or damages.
The burden of proof for demonstrating the existence of relative market power and dependence lies primarily with the affected company (the applicant), whereas the authorities or courts conduct a comprehensive assessment of all economic and factual circumstances.
Importance for market practice
The statutory recognition of relative market power is an important instrument for safeguarding a functioning competitive structure, especially among SMEs, and for preventing situations of exploitation or discrimination in favor of powerful market actors. Especially in the era of digital platforms, new markets, and hybrid procurement and distribution structures, the assessment of relative market power is gaining increasing importance.
Literature and additional legal sources
- Act against Restraints of Competition (GWB)
- Decisions of the Federal Court of Justice (BGH) on relative market power, especially in the areas of retail chains, energy supply, and digital markets
- European case law on Article 102 TFEU
- Specialist publications on antitrust law and market-related corporate practice
The above statements provide a comprehensive overview of the concept of relative market power in law and shed light on all essential aspects from the definition to the legal foundations and practical application.
Frequently Asked Questions
When is relative market power assumed in the legal sense?
In the legal context, particularly under German and European antitrust law, relative market power is assumed when companies are so predominantly dependent in their business relationship with another company that the latter is substantially hindered or even prevented from switching to other providers in the market. This is typically the case when the dependent company relies on the procurement or sale of specific products or services and has no realistic possibility of switching to alternative suppliers or buyers. In German law, this is governed primarily by Section 20 GWB (Act against Restraints of Competition). Establishing relative market power always requires a careful case-by-case assessment, considering in particular market entry barriers as well as economic and structural framework conditions. The degree of dependence, revenue share, and contract structure are also decisive.
What are the legal consequences of determining relative market power?
Once relative market power is established from a legal perspective, the company with market power is subject to special behavioral obligations towards the dependent market participants. In particular, the prohibition of abuse of market power applies, such as the prohibition of unreasonable obstruction or discrimination (§ 19 and § 20 GWB). Contractual disadvantages, forcing unreasonable terms, or the abrupt termination of business relationships may lead to sanctions by the competition authorities. Fines, penalty payments, and the nullity of agreements in violation of antitrust law can ensue. Injured parties also have the option to assert claims for injunctive relief or damages.
Which companies are typically affected by relative market power?
Typically, small and medium-sized enterprises (SMEs), dealers, or suppliers are affected by relative market power, provided they are particularly dependent on business relationships with a larger company. The issue is particularly pronounced in economic sectors with a few large buyers and many small providers (e.g. grocery retail, automotive industry, platform economy). Start-ups that rely on sales channels or platforms can also find themselves in such a dependency. However, large companies are not categorically excluded from consideration, provided there is one-sided dependence on another company.
How are relative market power and dominant market position legally differentiated?
The legal distinction lies in the nature of market power: While the dominant position of a company is exercised over the entire relevant market and all market participants, relative market power refers exclusively to the bilateral relationship between two companies. The company with relative market power does not necessarily dominate the entire market but is of such significance for a particular company that it can, under certain circumstances, control or significantly influence that company. Both concepts are subject to different antitrust review criteria and intervention thresholds.
How is dependence demonstrated in the context of relative market power?
Proof of dependence requires a comprehensive examination of market and contractual relationships. It must be examined whether and to what extent the affected company can realistically switch to other suppliers or buyers (so-called substitutability). Important indicators include ties to particular products or brands, the significance of business volumes, exclusivity agreements, and technical or legal barriers to changing suppliers. Temporal aspects such as notice periods and switching costs are also taken into account. Internal documents, business reports, and correspondence can be helpful for providing evidence.
What role does relative market power play in digital platforms?
In the context of digital platforms, relative market power is becoming increasingly important, as platform operators such as online marketplaces, app stores, or social networks have become central gatekeepers for many providers. This gatekeeper function can create substantial economic dependence for dealers, app developers, or content providers because, without access to the platform, they often have no realistic possibility of selling their products. The GWB Digitalisation Act has therefore further tightened the regulations regarding platform abuse and specifically adapted them to scenarios of relative market power in multi-sided markets and network effects.
Are there exceptions or justifications for conduct despite relative market power?
Certain conduct by a relatively market-powerful company may be permissible despite existing market power if there are objectively justified, legitimate reasons. For example, supply cessation or contract termination may be allowed if the conduct of the dependent customer constitutes a significant breach of contract or if there are security risks. The decision-making freedom of the company with market power fundamentally remains intact, but must be exercised proportionately in consideration of the dependency relationship. Whether an objective reason exists is always assessed on a case-by-case basis.
