A firm is treated as a potential competitor if there is evidence that this firm could and would be likPely to undertake the necessary additional investments or other necessary switching costs to enter the relevant market in response to a small and permanent increase in prices. This assessment has to be based on realistic grounds: the mere theoreti- cal possibility to enter a market is not sufficient. Market entry needs to take place sufficiently fast so that the threat of potential entry is a constraint on the market participants’ behaviour. Normally, this means that entry has to occur within a short period, for example, a period of maximum one year for the purposes of the block exemption regulation on vertical restraints. However, in individual cases longer time periods can be taken into account. The time period needed by companies already active on the market to adjust their capacities can be used as a yardstick to determine this period.
(See: Commission notice on the definition of the relevant market for the purposes of Community competition law, paragraph 24 (OJ C 372, 9.12.1997, p. 5); Commission Decision 90/410/EEC in Case Elopak/Metal Box–Odin (OJ L 209, 8.8.1990, p. 15); guidelines on vertical restraints, paragraph 26 (OJ C 291, 13.10.2000, p. 1).)
Source: Glossary of terms used in EU competition policy, Antitrust and control of concentrations, European Commission, 2002