The concept of potential competition

There have been increasing calls for greater clarity on the way that potential competition is treated within competition law. This reflects the fact that the importance of potential competition in the competitive analysis of many markets has been increasing as the pace of product evolution becomes more and more dynamic. While understanding the intensity of existing competition is still important, it therefore becomes crucial to explore barriers to entry, and the timeframe, likelihood and strength of the potential competitive constraints that are posed by potential entrants and by existing competitors whose potential threat might grow.

Potential competitive constraints can be relevant to the full ambit of competition agencies’ work since:

they can be excluded (as for example, is suggested by Kill-Zone theories of harm);
they can agree not to compete (as for example, in the case of pay-for-delay agreements);
they can be acquired (as for example, in killer acquisition theories of harm); or
they can, as a third party, provide constraints that might mitigate concerns over a merger.

In June 2021, the OECD held a roundtable that explored the concept of potential competition. It looked at what potential competition is, in the context of different markets, and consider the timeframe over which it is assessed. It also looked at barriers to entry, and the way in which the potential, rather than existing, nature of a competitive threat affects the way that the threat is analysed.

» Read the OECD Background Note

» OECD Handbook on Competition Policy in the Digital Age

» See full list of best practice roundtables on competition