Adapting the rules to a new economy: the revised Market Definition Notice

The European Commission has published the revised Market definition Notice. Telefónica is confident that, by re-defining markets more appropriately, the Commission will better contribute to the Union’s competitiveness objectives.

Adapting the rules to a new economy - the revised Market Definition Notice
alejandra garcia hoyos

Alejandra García Hoyos

Reading time: 4 min

Telefónica celebrates 100 years of constant market evolution

With 100 years of experience as a European company and telecommunications operator, Telefónica has witnessed a major market evolution: from national infrastructure-based monopolistic structures to international data-driven markets where multiple infrastructure and non-infrastructure players coexist and interact. Throughout this process, telecommunications companies have consistently enabled innovation and have adapted to remarkable changes in technology.

The products and services offered in telecommunications markets have also undergone significant developments. Back in 1924, telephony was only conceived by automatic telephone exchange operated by switchboard operators who used electrical cords and switches to establish the connections. Today, artificial Intelligence is set to become ubiquitous in the way we live and work.

In 1986, Spain joined the European Union, giving its companies access to new markets, new opportunities, and new regulations. Since then, Telefónica has called for predictable regulatory and competition frameworks, including a transparent market definition tool to be applied on a case-by-case basis.

New market definition rules allow for a more accurate reflection of market realities

Market definition is one of the most important tools in the analysis of competition cases. The Commission defines product and geographic markets to assess companies’ market power. On 8 February 2024, the Commission published the revised Market Definition Notice (“Notice”). The new rules update the 1997 Notice with the purpose of taking into account the significant developments of the past twenty years.

First, the Notice gives leeway to the Commission to recognise new market realities. These include digitalisation and new ways of offering goods and services. In line with Telefónica’s response to the public consultation, the Notice confirms that the Commission is not bound to apply the definition of a relevant market from past decisions in future cases and will always be attentive to possible changes driven by broader trends such as digitalisation.

Secondly, the Commission is ready to consider expected short-term or medium-term structural market transitions when they would lead to effective changes in the general dynamics of demand and supply. In this respect, Telefónica argues that a proper market definition analysis should always include a forward-looking assessment, given the speed at which markets evolve today, and not only when, as the Notice states, ‘the case calls for it’.

Thirdly, Telefónica welcomes a more detailed assessment of market definition in specific circumstances. In particular, the introduction of a sufficiently flexible definition for multi-sided platforms, digital ecosystems, and the greater emphasis given to “non-price elements”.

Last, the Notice clarifies that calculating market shares is only one of the several purposes of market definition and that the Commission and companies may (but not have to) use market shares to assess a company’s competitive strength.

Market definition as means to contribute to Europe´s competitiveness

Telefónica has operated critical infrastructure for 100 years and is active in several markets which are strategic for the sovereignty of the European Union. In a context of geopolitical instability and economic challenges, it is essential that competition rules contribute to the enhancement of the Union´s competitiveness.

Market definition is a key tool to address the competitiveness challenges of telecommunications markets. For this reason, Telefónica welcomes that the Notice expressly mentions that competition policy and its tools shall contribute to the resilience of the internal market, the green and digital transitions, and the prevention of dependencies.  How?

  • In recent years, digital players and vertical market structures have irrupted in the telecommunications sector through, inter alia, the acquisition of spectrum, and the provision of internet and cloud services. Accordingly, to ensure that markets remain competitive and dynamic, the competitive pressure that non-telco players exert need to be considered in the definition of telecommunications markets.
  • Similarly, the Audio-visual (“AV”) sector has been facing increasing competition from new business models vertically integrated (OTTs and platforms such as Netflix, HBO, Disney +, and Amazon Prime). An accurate market definition of the AV sector should consider the competitive pressure that new business models exert in Pay-Tv and in the wholesale commercialisation of AV content and TV channels.

Telefónica is confident that, by re-defining markets more appropriately, considering new competitive constraints and new market structures, the Commission will better contribute to the Europe’s resilience objectives and ensure another 100 years of fair competition.


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