Concept of Market Dominance
This issue borders on the extent of power, or control, that one company can have over dominant sectors of the economy. It is the amount of power that influences market activity without having to deal with much competition or customer preference. This is the position that the most productive firm occupies. It has the power to set prices, decide on the terms of trade, and even alter the level of output supplied of certain branded products and services. One of the abuse of power problems that competition law has to contend with is termed dominance and for good reason, it is regarded as harmful to the welfare of consumers and indeed stifling progress. It is argued that dominance is assessed both by numbers and judgement. The market share over an area is one important measure[1]. Sometimes a firm that controls more than 40 to 50 percent of a market is deemed to be commanding it, but this is relative to the level of competition existing and the barriers faced to entry. From a qualitative point of viewpoint, some factors such as leadership in technology, control of strategic facilities, and the goodwill of the firm are important. The dominance of Google in the global market of search engines can be attributed to their sophisticated algorithms, immense data, and integrated services.
Market dominance can be demonstrated by a number of different things. The most apparent has to be high market share, but it has to be evaluated with market attributes such as the existence of substitutes and competition. A major market share also serves as a powerful indicator in the form of high entry barriers such as capital investments, proprietary technology, or even some form of governmental regulation[2]. Companies such as Microsoft use their monopoly powers and proprietary software to dominate the industry. Furthermore, network effects which is where, the more of a product or service that is used, the greater the value becomes, also help to sustain the monopoly power of a company. For example, the Google search engine gets better the more people use it, creating a self-reinforcing cycle. Vertical integration is a further important indicator. A company increases its market power when it possesses different levels or adjacent parts of the value chain. This is what Microsoft does when he merges his operating systems with productivity software cloud and makes an entire application ecosystem which is very difficult for other firms to market. Moreover, dominance can come from the control of important resources or infrastructure including advertising and software or application marketplaces.
Per se, market power is not good or evil. It is only a problem if it is used powerfully. The Sherman Act in the United States and Article 102 of the Treaty on the Functioning of the European Union (TFEU) are some legal mechanisms that seek to curb power abuse. The Sherman Act prohibits monopolistic trade practices that obstruct trade, while Article 102 TFEU prohibits enterprises with market power from acting abusively towards competition that affects other businesses in the EU. In economic terms, market power relates to the concept of market dominance. This refers to the ability of a firm to profitably raise prices above what the market would otherwise support or cut back on production without losing sales to competitors. Many times, companies argue that their dominance stems from invention and efficiency and not from competition restraining conduct, as the Google and Microsoft cases illustrate.
Google and Microsoft available as fine examples of market hegemony. Google holds more than 90 percent of the global search engine market, a status that is cemented by its constant development of new algorithms, collection of services data, and the integration of YouTube and Android[3]. On the contrary, Microsoft attained dominance after its Windows operating system became people’s choice of PC all around the globe. The combination of Windows with Internet Explorer attracted antitrust scrutiny, revealing the difficulties associated with controlling powerful institutions.
This brings us to the economic aspects of the World Competitiveness Index as a business measure of some particular countries. The number of people employed and the income paid to them is as well as an indicator of how well that country as a business entity is performing. There remains a potential for market dominance and competition abuse among comparatively bigger and more established companies with intricate pricing strategies and consumer base when there is no dominance or monopoly control. Maintaining the balance between these aspects of welfare competition and abandoning them in attempt to safeguard consumers is where the challenge lies. Writing into existance and problem-solving without these aspects of global market concentration by multinational corporations which is dominated by Microsoft, Google and other market leaders, similarly rooted in understanding and curbing the domain needs balance[4]. These corporations may claim abuse of market place stature by competitors due to superior services to clients or other innovations which allows them to peruse more effectively.
[1]Geradin, D., Petit, N., Walker, M., Hofer, P., & Louis, F., “The Concept of Dominance in EC Competition Law” (July 2005), available at SSRN: https://ssrn.com/abstract=770144.
[2] U.S. Department of Justice, Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act – Chapter 2 (2008), available at https://www.justice.gov/archives/atr/competition-and-monopoly-single-firm-conduct-under-section-2-sherman-act-chapter-2.
[3] TOI Tech Desk, ‘Microsoft Search Market Share Doubles, as Google’s Share Falls Just Below 90% for the First Time’, The Times of India, 17 January 2025, available at: https://timesofindia.indiatimes.com/technology/tech-news/microsoft-search-market-share-doubles-as-googles-share-falls-just-below-90-for-the-first-time/articleshow/117320875.cms
[4]Alex Mengden, International Tax Competitiveness Index 2023, Tax Foundation, October 18, 2023, available athttps://taxfoundation.org/research/all/global/2023-international-tax-competitiveness-index/.