---
title: "Market Power"
url: "https://mahouse.world/glossary/market-power"
type: "glossary term"
topic: "Regulation"
author: "Ihor Vlasov"
reviewed: "2026-09-20"
published: "2026-09-09"
---

# Market Power

Market power is a firm's ability to raise prices, lower quality or exclude rivals without losing enough customers to make it unprofitable — the condition competition law exists to police. In a merger review it is the question the regulator asks of the combined firm, and in fintech it is why the Visa–Plaid acquisition was abandoned and why every large payments deal now waits on Washington, Brussels and London.

**Also known as:** Dominance, Significant market power

## Key facts

- **Used at:** merger control, abuse-of-dominance investigations, and the pricing of any deal that combines two firms in the same market
- **Binding:** yes — a merger that would substantially lessen competition can be blocked or unwound; abuse of a dominant position is unlawful
- **Typical measures:** market share (dominance is presumed in the EU from about 40–50%), the Herfindahl–Hirschman Index (HHI) of concentration, and evidence of price or switching behaviour
- **Typical thresholds:** under the 2023 US Merger Guidelines a post-merger HHI above 1,800 with a rise of more than 100 points is presumed to raise concerns
- **Parties:** the merging firms, the competition authority (DOJ or FTC, the European Commission, the CMA) and the customers and rivals it consults

## How market power works in practice

A regulator reviewing a deal defines the market first — which products compete, in which geography — and the definition decides the case. Two card acquirers merging may have 45% of card acceptance in one country and 4% of "payments" worldwide; the authority will pick the one where customers actually choose between them. It then measures concentration before and after, usually with the HHI, the sum of the squared market shares, and asks whether entry by a new competitor would discipline the merged firm's prices.

The harder cases are about the future. The Department of Justice sued to block Visa's $5.3bn purchase of Plaid in 2020 not because Plaid was a large rival but because Visa's own documents described it as one that could become one — a "volcano" under its debit business — and the deal was abandoned in January 2021. Nascent-competitor theories now shape fintech M&A: an incumbent buying a small firm that might have grown into a competitor faces the same review as one buying a large one.

For the deal itself, market power sets the timetable and the price. A transaction that needs a second-phase review adds six to twelve months, a break fee if clearance fails, and remedies — a divested business, a behavioural commitment — that reduce what the buyer gets. The acquisition case must be worth it after the remedy, not before.

## Example

A national market for card acquiring has six firms with shares of 30, 25, 15, 15, 10 and 5%: an HHI of 2,100. The third and fifth largest agree to merge, creating a firm with 25%. The post-merger HHI is 2,400 — a rise of 300 points in a market already above 1,800, which under the US guidelines is presumed to be anticompetitive and would draw a second request. The parties' response is to show that merchants switch acquirers easily and that two payment facilitators have taken 8 points of share in three years; the authority's response is to ask the merchants. The buyer builds a year of review and a €40m break fee into the price.

## Common mistakes

- Defining the market as widely as the deal needs and expecting the regulator to agree.
- Treating a small target as safe from review; the nascent-competitor theory is about size tomorrow.
- Signing without a break fee or a long-stop date, so a blocked deal leaves both sides in limbo.
- Modelling synergies that assume the pricing freedom the regulator will remove.
- Internal documents that describe the target as a threat to be neutralised — they will be read.

## Related terms

- [Antitrust Clearance](https://mahouse.world/glossary/antitrust-clearance.md)
- [Horizontal Merger](https://mahouse.world/glossary/horizontal-merger.md)
- [Switching Costs](https://mahouse.world/glossary/switching-costs.md)
- [Control Premium](https://mahouse.world/glossary/control-premium.md)
- [Synergies](https://mahouse.world/glossary/synergies.md)
- [Merger](https://mahouse.world/glossary/merger.md)

— Ihor Vlasov, M&A FinTech Expert. Last reviewed 2026-09-20. https://mahouse.world/authors/ihor-vlasov