Dominant Position

Section 18 of the Competition Act 1998 provides that, 'Subject to section 19, any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in a market is prohibited if it may affect trade within the United Kingdom' — this is 'referred to in this Act as the Chapter II prohibition'. The section gives examples of abusive conduct, including 'directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions' and 'limiting production, markets or technical development to the prejudice of consumers'. 'Dominant position' is defined in s.18(3) as 'a dominant position within the United Kingdom' (or any part of it), leaving the underlying economic concept to be developed through guidance and case law rather than a statutory formula.

The CMA's guidance (originally issued as OFT402 and adopted by the CMA Board) explains how dominance is assessed by reference to market share and other factors, stating that 'dominance can be presumed in the absence of evidence to the contrary if an undertaking has a market share persistently above 50 per cent', while dominance is considered unlikely, though not impossible, where the relevant market share is below 40 per cent. Market share alone is not decisive — the guidance also has regard to the strength of competitors, barriers to entry and expansion, and countervailing buyer power. A finding of dominance is not itself unlawful; liability under the Chapter II prohibition arises only where that dominant position is abused.