There are several ways of measuring market dominance. This is the percentage of the total market served by a firm or brand. A declining scale of market shares is common in most industries: that is, if the industry leader has say 50% share, the next largest might have 25% share, the next 12% share, the next 6% share, and all remaining firms combined might have 7% share. A company, brand, product, or service that has a combined market share exceeding 60% most probably has market power and market dominance.Īlthough there are no hard and fast rules governing the relationship between market share and market dominance, the following are general criteria : Market share is not a perfect proxy of market dominance.A market share of over 35% but less than 60%, held by one brand, product or service, is an indicator of market strength but not necessarily dominance.A market share of less than 35%, held by one brand, product or service, is not an indicator of strength or dominance and will not raise anti-competitive concerns by government regulators.Market shares within an industry might not exhibit a declining scale. There could be only two firms in a duopolistic market, each with 50% share or there could be three firms in the industry each with 33% share or 100 firms each with 1% share.
The concentration ratio of an industry is used as an indicator of the relative size of leading firms in relation to the industry as a whole. One commonly used concentration ratio is the four-firm concentration ratio, which consists of the combined market share of the four largest firms, as a percentage, in the total industry. The higher the concentration ratio, the greater the market power of the leading firms. Legally, the determination is often more complex.
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