A two-step test is used to assess whether there is abuse of dominance:
Test 1: Whether the undertaking is dominant. A market leader is likely to be dominant when one or more of these factors are satisfied:
- It has a market share of 60% and above
- There are few or no competitors that its customers can go to
- Its customers do not have significant bargaining power
- Newcomers find it difficult to enter the market for instance, because of high capital cost or technological barriers
Test 2: If it is dominant, whether it is abusing that dominant position in a market. Being dominant is not against the law. But some dominant undertakings may either block rivals from competing against it or stop rivals from entering the market. Abusive tactics may include:
- Exclusive dealing: When the dominant undertaking binds other businesses into working exclusively with itself
- Predatory pricing: When it sets extremely low prices to drive competitors out of the market
- Discount schemes: When it ties its discounts with the purchase of other products and services
- Refusal to supply: When it withholds key products or services essential to other businesses.