Presumptions of market dominance in German and European antitrust law
Introduction and definition of terms
Presumptions of market dominance play a central role in competition and antitrust law. They are statutorily regulated indications, on the basis of which it can be assumed under certain conditions that a company has a dominant market position in a particular market. The aim of this regulation is to facilitate the effective enforcement of antitrust law by reversing or easing the burden of proof for the existence of market power in favor of investigative authorities and courts to a certain extent.
Legal basis
German law: §§ 18, 19 GWB
The key provisions on presumptions of market dominance are found in the Gesetz gegen Wettbewerbsbeschränkungen (GWB — Act Against Restraints of Competition). In particular, §§ 18 and 19 GWB contain definitions and criteria for market dominance as well as the corresponding presumptions.
- § 18 para. 4 GWB provides for presumptions of individual and collective market dominance (so-called oligopoly presumption).
- § 19 GWB regulates the prohibition of the abuse of a dominant position, relevant among others for the abuse control.
Individual undertaking (§ 18 para. 4 sent. 1 GWB)
A company is generally presumed to be dominant if it holds a market share of at least 40% in the relevant market. This quantitative threshold is considered a core element of the statutory presumption and relates to the relevant product and geographic market.
Collective market dominance (§ 18 para. 6 GWB)
If there are three or fewer companies operating in a market and together hold a market share of at least 50%, it is presumed that they collectively have a dominant position (oligopolistic market dominance). This presumption may also affect smaller alliances provided that two companies together possess at least 66.6% market share.
European law: Art. 102 TFEU
In European antitrust law, there are no explicit statutory presumptions of market dominance as found in German law. Market dominance is rather determined on the basis of a comprehensive market analysis. However, the European Commission and the European Court of Justice (ECJ) apply comparable thresholds in their decision-making. For example, according to settled case law, a market share of 50% (as a rule) constitutes a dominant position. These values are, however, not legally binding, but arise from established decision-making practice.
Structure and effect of the presumptions of market dominance
Legal presumption effect
The presumptions of market dominance are rebuttable legal presumptions. They do not exempt the antitrust authorities or plaintiffs entirely from the obligation to set out all the requirements for a dominant market position, but they do facilitate proof. Once the threshold for market share is reached, the burden of assertion and proof shifts: the affected company has the opportunity to provide actual or legal grounds to rebut this presumption. For example, structural particularities of the market, actual competitive forces, or market flexibility may be considered.
Practical significance
Presumptions of market dominance can have significant practical effects, especially in the following areas:
- Merger control: Even before approving mergers, antitrust authorities examine whether the companies involved would exceed the thresholds after completion and whether dominance can therefore be presumed.
- Abuse control: As part of antitrust supervision, market shares are primarily used to assess whether the requirements for abusive behavior exist, for example, through price abuse, obstruction, or exploitation.
Distinction between presumptions of market dominance and other criteria for dominance
The presumptions of market dominance do not provide an exhaustive definition of dominance. Other key parameters are:
- Market entry barriers
- Financial resources
- Access to sources of supply
- Customer loyalty and switching costs
- Capacity for innovation
These and other qualitative criteria must be analyzed and considered by the parties or authorities, especially in borderline cases or to rebut the presumption.
Rebuttal of presumptions of market dominance
Criteria for rebuttal
In order to rebut the presumption, a company may particularly demonstrate that
- there are in fact significant competitive forces operating in the market,
- demand-side and supply-side flexibility prevent an effective restriction of competition,
- potential competitors can enter the market without significant barriers,
- the market shares are misleading (e.g., due to temporary market developments or imprecise market definition).
Procedural aspects
In practice, the burden of assertion and proof to rebut the presumption is borne by the company alleged to be dominant. Mere assertions are regularly insufficient; what is required are substantial and comprehensible explanations, often supported by market data, economic analyses and expert opinions.
Current developments and reform considerations
The discussion about the division of markets and their significance is becoming increasingly important with the ongoing emergence of new technologies and markets. In particular, traditional presumptions of market dominance are being critically scrutinized in the context of digital platforms and markets with dynamic competition. Authorities and courts are therefore developing new instruments to take more qualitative and dynamic competition aspects into account in their assessment.
Summary
Presumptions of market dominance are a central instrument for enforcing antitrust law and ensuring effective competition in markets. They facilitate the determination of a dominant position by effecting a reversal of the burden of proof at certain market share thresholds. Nevertheless, the actual market position remains the result of a comprehensive overall assessment, which must also include qualitative characteristics and market dynamics. The great legal and economic significance of these presumptions is reflected both in German law and— in a modified form— in European law.
Frequently asked questions
When does the rebuttable presumption of market dominance under § 18 para. 4 GWB apply?
The rebuttable presumption of dominance applies under § 18 para. 4 GWB when a company holds a market share of at least 40% in the material and geographically relevant market. This presumption is not final, but rebuttable. This means that the affected company can demonstrate that it does not possess a dominant position despite its market share. Factors such as competitive pressure from other market participants, market entry barriers, the bargaining power of buyers, and market development are taken into account. Companies can argue, for instance, that due to high product substitutability, strong competition, or short-term market entries, no actual market power exists that could be abused. The Federal Cartel Office and the courts conduct a comprehensive evaluation of all circumstances relevant to competition, so exceeding the threshold alone does not automatically result in a finding of dominance.
What is the significance of collective presumptions of market dominance, and how do they differ from individual market dominance?
Collective presumptions of market dominance refer to cases where several companies jointly hold a dominant position in a market. According to § 18 para. 6 GWB, such collective dominance is presumed if three or fewer companies together hold at least 50% market share, or five or fewer companies together reach at least two thirds of the relevant market. In contrast to individual dominance—where a single company exercises market control—collective dominance concerns an oligopolistic market situation in which a few companies align their competitive decisions more closely and can largely eliminate competition. It is important to note that this presumption is also rebuttable and can be disproved by special market conditions.
What other indications besides market share are examined in the presumption of market dominance?
In addition to market share, a number of other competition-economic factors are included in the presumption of dominance. These include especially the companies’ financial resources, access to critical production inputs or preliminary products, technological requirements or innovations, brand loyalty or customer retention, vertical integration, network and scale effects as well as entry barriers for potential competitors. The responsiveness of buyers (buyer power), the existence of substitute products (substitutability), and the transparency of the market are also key criteria. Courts and the Federal Cartel Office must weigh these factors to decide, in each individual case, whether a dominant position exists or whether, despite exceeding the market share, there is no actual dominance.
How can companies rebut the presumption in practice?
Companies can rebut the presumption by demonstrating that despite a high market share, no dominant position exists. The main points of argument are the presentation and proof of significant competitive pressure from both existing and potential competitors, low barriers to market entry, high price sensitivity of buyers, or distinctive buyer power, making it impossible to behave independently of competition on a lasting basis. Market studies, economic opinions, and concrete market data can be used as evidence. Authorities examine in detail whether structures and behaviors indicate active competitive forces that relativize a company’s actual market power. Rebutting the presumption is often complex and requires close examination of all market circumstances.
What role do presumptions of market dominance play in merger control proceedings?
Presumptions of market dominance are a core element of merger control under German and European competition law. The Federal Cartel Office in particular examines whether a merger would enable a company to obtain or expand a dominant position. The legal presumption provisions are used as initial indicators of a threat to competition. If the market share thresholds of § 18 para. 4 or para. 6 GWB are exceeded, the companies involved must comprehensively demonstrate in the merger control proceedings that effective competition remains. Thus, the presumption facilitates the work of the competition authorities, but may transfer the burden of assertion and proof to the companies concerned.
Are there differences between German and European law with regard to the presumption of market dominance?
Under German law, the thresholds for presumption of market dominance are expressly regulated (§ 18 para. 4 and para. 6 GWB). In contrast, European antitrust law (Art. 102 TFEU) contains no fixed thresholds, but assesses dominance based on a case-by-case evaluation of various factors, where market share is considered an ‘important indicator’. Nevertheless, European competition authorities also often use market shares of about 40% as an indication of a dominant position, even if these are not legally binding. In conclusion, the German presumption is more specific and provides a certain facilitation of evidence for the competition authorities, while at the European level a more comprehensive but more individualized overall assessment is required.
