Potential competition

The concept of potential competition has had an increasing importance in the application of competition law, in both the analysis of the effects of mergers and in assessing the competitive effects of agreements and unilateral conduct under the Competition Act 1998. Potential competition is the constraint that undertakings currently outside of a market are able to exert through the prospect that they will enter that market. This concept is not hypothetical: it has real-world implications as undertakings already on the market, or considering entering, can be expected to take into account the prospect of other undertakings entering, and to adapt their behaviour accordingly. This article sets out the approach of the Competition and Markets Authority when considering potential competition issues in merger and antitrust cases, with reference to its mergers and antitrust guidance and experience.