Research Programs
More
What are you looking for?
Showing 9 of 168 Publications in Exclusionary Conduct
ICLE White Paper Abstract The concept of fairness is not foreign to competition law, nor are considerations of fairness new to it. Persistent uncertainty regarding what constitutes fairness . . .
The concept of fairness is not foreign to competition law, nor are considerations of fairness new to it. Persistent uncertainty regarding what constitutes fairness has, however, traditionally counseled against its application as a standalone legal standard. Indeed, antitrust enforcers often have been reluctant to define even what constitutes unfair terms and conditions. Nonetheless, amid a swell of accusations of undue corporate power and market concentration in the digital economy, debates about fairness have recently taken center stage in the policy debate—particularly in Europe, where several recent regulatory interventions have been touted as promoting fairness in digital markets. This paper argues that policymakers are attracted to “fairness” remedies precisely because the term’s meaning is so ambiguous, thus granting them more discretion and room for intervention.
In public debates over the emerging ubiquity of digital markets and platform-business models, the concept of “fairness” has been elevated into a guiding principle of competition-law enforcement. Dissatisfied with the ways that profits are allocated in digital-services markets and decrying what they see as undue corporate power and market concentration, interlocutors in such debates have invoked fairness as the cure for bigness.
This is particularly apparent in the European Union (EU), where several recent legislative initiatives have been adopted with the stated goal of promoting fairness in the digital economy. A central focus of such initiatives is the “gatekeeping” position enjoyed by a few large online platforms, which purportedly allows them to exert intermediation power over whether and under what terms the platform’s business users can reach their end users. As such, critics of so-called “Big Tech” assert, these platforms represent unavoidable trading partners who can exploit their superior bargaining power by imposing unfair contract terms and conditions. Moreover, since they often occupy a dual role—acting simultaneously as intermediaries and as competitors on their own platforms—they may have incentive to discriminate in favor of their own services or subsidiaries (so-called self-preferencing).[1]
In response to the perceived risks generated by these conflicts of interest and imbalances of bargaining power, policymakers in various jurisdictions around the world have proposed or enacted provisions intended to ensure a level playing field and to neutralize the competitive advantages of large intermediator platforms. According to this line of reasoning, Big Tech firms must be compelled to treat both their rivals and their guests on the platform fairly.
Fairness has therefore become part of the larger debate on the role of competition law in the digital economy, with some militating for more aggressive intervention to ensure fairness and questioning whether the consumer welfare standard should remain the lodestar of antitrust law. Because it eschews many other potential goals of competition law, the argument goes, the consumer welfare standard systematically biases antitrust toward underenforcement,[2] with some even labeling it a “distraction” or a “catch phrase.”[3] Rather than the efficiency-oriented approach favored by the Chicago School, the ostensibly holistic approach that has earned support among progressives would combine competition law with other fields of law in order to take into account such broad social interests and ethical goals as labor protection, wealth inequality, and environmental sustainability.[4]
Considerations of fairness are not, however, new to competition law.[5] The history of antitrust law in the United States, for example, demonstrates that U.S. lawmakers and jurists have long had a profound concern for economic liberty as a notion embedded in the nation’s conception of freedom.[6] After all, “[i]f efficiency is so important in antitrust, then why doesn’t that word, ‘efficiency,’ appear anywhere in the antitrust statutes?”[7] Indeed, antitrust has been described as a body of law designed to promote economic justice, fairness, and opportunity.[8] Therefore, the purpose of antitrust law is to protect the competitive process in service of both prosperity and freedom. Rather than a myopic focus on promoting efficiency, antitrust economics should be concerned with ensuring that competition may flourish among a significant number of rivals in free and open markets.[9] And at the heart of the competitive process is the guarantee that “everyone participating in the open market—consumers, farmers, workers, or anyone else” has the opportunity to choose freely among alternative offers.[10]
This is also evident in the EU, where competition law has always reflected various social, political, and ethical objectives, even as the so-called “more economic approach” was adopted in the late 1990s.[11] Moreover, the goal of ensuring equal opportunity in the marketplace by guaranteeing a level playing field among firms has been incorporated in EU antitrust law, reflecting the influence of the philosophy of Ordoliberalism and the Freiburg School of economic thought.[12] From this perspective, fairness would include the protection of economic freedom, rivalry, the competitive process, and small- and medium-size firms.[13]
Nonetheless, it should not be overlooked that the rise of the Chicago School approach, which affirms the need to anchor antitrust enforcement in objective criteria, was itself a response to the limitations and drawbacks of prioritizing various noneconomic goals in competition law. Precisely because “fairness” is so difficult to both define and delineate, it has traditionally proven unsuitable as a standalone legal standard.[14] The same doubts are raised today by some U.S. scholars regarding the possibility of replacing the consumer welfare standard with what has been called the “competitive process test.”[15]
Like considerations of distribution or justice, debates about fairness are inevitably bedeviled by the existence of many differing and sometimes contradictory definitions, rendering the term’s content undefined and incomplete.[16] Despite its many appealing features in the abstract, fairness is a subjective and vague moral concept and, hence, essentially useless as a decision-making tool. Behavioral economics has provided evidence that fairness motives do affect many people’s behavior and can restrict the actions of profit-seeking firms, while simultaneously confirming that notions of fairness can vary widely among individuals.[17] As a result, it is inherently unclear what benchmark should be applied to measure fairness. This poses a serious challenge for legal certainty, as actors cannot predict ex ante whether a practice will be sanctioned for having trespassed the unfairness threshold. Accordingly, policymakers have been invited to give no weight to fairness in choosing legal rules, but rather to assess policies entirely on the basis of their effects on individuals’ well-being.[18]
As notions of fairness have taken a central place in recent EU regulatory interventions, it is worth investigating whether a clear and enforceable definition has been provided (and, in this case, whether the content of fairness has been specified as a rule or as a standard) or whether the vagueness and ambiguity associated with the term’s meaning can be exploited to grant policymakers convenient procedural shortcuts. Indeed, an unmeasurable goal will tend to be irresistibly attractive to enforcement agencies, as it can mean anything they want it to. This paper aims to demonstrate that the revival of fairness considerations in competition law functions primarily to offer policymakers greater latitude to intervene, relieving them of the burden of economic analysis and allowing them to pursue political ends. Chief among the latter is restoring what the U.S. neo-Brandeisian movement considers the original mission of antitrust law: namely, to ensure a more democratic distribution of power and to protect “small dealers and worthy men.”[19] Rather than being used to assess whether practices are anti-competitive, fairness is used to correct market outcomes.
Similar concerns have been raised about a new policy statement issued recently by the U.S. Federal Trade Commission (FTC) regarding the scope of the agency’s authority to prohibit unfair methods of competition (UMC) under the Section 5 of the FTC Act.[20] The FTC points to the legislative record to argue that Section 5 was enacted to protect “smaller, weaker business organizations from the oppressive and unfair competition of their more powerful rivals.”[21] Against the declared aim of “reactivating Section 5,”[22] Commissioner Christine S. Wilson noted in her dissent that, by preferring a “near-per se approach” that discounts or ignores both the business rationales that may underly challenged conduct and the potential efficiencies that such conduct may generate, the policy statement reflects a “repudiation of the consumer welfare standard and the rule of reason” and resembles the work of an academic or a think tank fellow who “dreams of banning unpopular conduct and remaking the economy.”[23]
This paper is structured as follows. Section I describes how fairness considerations lie at the core of European Commissioner for Competition Margrethe Vestager’s political mandate. Section II examines how the notion of unfairness has been applied in EU antitrust case law. Section III analyzes the use of fairness as a rationale for recent EU legislative initiatives in the digital economy. Section IV illustrates that these initiatives do not provide a meaningful contribution to the application of fairness, either as a standard or as a rule. Section V concludes.
As has been widely noted, fairness has emerged as a guiding principle of EU competition policy during Commissioner Vestager’s previous and current terms.[24] She has referred to fairness in numerous speeches, characterizing her political mandate as one of advocating vigorously for antitrust rules to uphold notions of fairness. But rather than articulate a substantive standard of fairness that could be applied consistently in antitrust enforcement, Vestager has weaponized the notion of fairness as political signaling.
Among Vestager’s pronouncements on the subject are that “competition policy also reflects an idea of what society should be like” and that this is “the idea of a Europe that works fairly for everyone.”[25] She has contended that “when competition works, we end up with a market that treats people more fairly.”[26] Moreover, Vestager concludes that “fair markets are just what competition is about”[27] and “we all have a responsibility to help build a fairer society.”[28] As the power of digital platforms has grown, Vestager says, “it’s become increasingly clear that we need something more, to keep that power in check, and to keep our digital world open and fair.”[29]
The Europe envisaged by the founders of the Treaty of Rome is, she argues, “one that would bring prosperity and fairness, not just to a few, but to all Europeans.”[30] While some of the commissioner’s speeches invoke fairness primarily in the context of competition giving consumers the power to demand a “fair deal”[31] by ensuring that “their choices and preferences count,”[32] others imply that firms have a responsibility to run their businesses “in a way that is fair to your competitors, fair to your business partners.”[33]
Taken as a whole, her various invocations of fairness frame antitrust law not as economic policy, but as a kind of morality play.[34] Addressing her speeches to the “people,” Vestager emphasizes competition law’s fundamental role in building a fair society. [35]
People don’t just want to be told that open markets make us better off. They want to know that they benefit everyone, not just the powerful few. And that is exactly what competition enforcement is about … public authorities are here to defend the interests of individuals, not just to take care of big corporations. And that everyone, however rich or powerful, has to play by the rules.[36]
The notion of fairness is not foreign to EU competition law. The Preamble to the Treaty on the Functioning of the European Union (TFEU) includes a reference to “fair competition.” Its antitrust provisions, while prohibiting restrictive agreements and practices, creates an exception for those that grant consumers a “fair share” of procompetitive benefits (Article 101). The provisions also prohibit abuses of dominant position that impose “unfair purchase or selling prices” or other “unfair trading conditions” (Article 102). Moreover, Vestager has argued that state-aid rules, which prevent member states from granting companies a selective advantage, likewise reflect the notion of fairness within “the ordinary meaning of the word.”[37]
In general, these provisions endorse a standard-based approach to fairness that specifies the content of the law ex post, rather than a rule-based approach that introduces more specific legal commands ex ante.[38] Because fairness remains undefined and its meaning is disputed, the standard is hard to operationalize.
While only a handful of judgments and decisions by the European Court of Justice (CJEU) and the European Commission analyze the notion of unfairness, what these typically share is a focus on clauses that either were not functional to achieve the purpose of the agreement or that unjustifiably restricted the freedom of the parties.[39] The relationship between unfairness and the absence of a functional relationship between the contract’s purpose and challenged contractual clauses was highlighted in Tetra Pak II[40] and Duales System Deutschland (DSD).[41] It can be inferred from some of the Commission’s other decisions that unfairness may been associated with opaque contractual conditions that render a dominant firm’s counterparties weaker, particularly when those counterparties are unable to understand the terms of the commercial offer in question.[42]
Recent years have seen a revival of cases concerning “unfair prices,” particularly in cases concerned with drug pricing or the collection of royalties.[43] But rather than establish the meaning of fairness, courts and competition authorities have tended toward a rule-based approach to identify unfair prices, developing alternative measures rooted in economic reasoning.[44] Indeed, since United Brands, the CJEU has evaluated whether a price is unfair by determining whether it has a reasonable relation to the economic value of the product.[45] For example, in SABAM, the CJEU confirmed that the royalty rate requested by a collective society should bear relation to the economic value of the copyright work.[46] But courts and antitrust authorities have also struggled to apply the test set out by the CJEU in United Brands to assess whether prices are unfair.[47] As acknowledged in AKKA-LAA, “there is no single adequate method” to evaluate unfair-pricing cases.[48] Given this, Advocate General Nils Wahl has argued that a price charged by a dominant undertaking should be deemed abusive only when no rational economic explanation (other than a firm possessing the capacity and willingness to use its market power) can be found for why it is so high.[49]
Unfair-pricing practices have also been investigated in the context of the margin-squeeze strategy, which is a standalone abuse under EU competition law on grounds that it undermines equality of opportunity between economic operators.[50] Rather than refusing to supply, a vertically integrated dominant firm may instead charge a price for a product on the upstream market that would not allow an equally efficient competitor to compete profitably on a lasting basis with the price the dominant firm charges on the downstream market. A margin squeeze exists if the difference between the retail prices charged by a dominant undertaking and the wholesale prices it charges its competitors for comparable services is negative, or insufficient to cover the product-specific costs to the dominant operator of providing its own retail services to end-users.[51] Accordingly, the unfair spread between the upstream price and the retail price is deemed exclusionary when it squeezes rivals’ margins on the retail market, thereby undermining their ability to compete on equal terms. The dominant player is therefore required to leave its rivals a fair margin between the wholesale and retail prices.[52]
The notion of fairness has also been raised in the context of standard-essential patents (SEPs), whose holders are subject to fair, reasonable, and non-discriminatory (FRAND) licensing obligations.[53] The process of developing standards can create opportunities for companies to engage in anticompetitive behavior where such standards give rise to holdup problems involving the strategic use of patents. The claim is that SEPs confer market power because the standardization process leads to the exclusion of alternative technologies. As a consequence, SEP owners enjoy ex post monopoly power that could enable them to charge excessively high royalty rates in their licensing agreements or to constructively refuse to license their patents.
To address these concerns, standard-setting organizations (SSOs) typically require SEPs holders to submit FRAND commitments. The goal is to make SEPs available at a price equivalent to what patents would have been worth in the market prior to the time they were declared essential.
It is a matter of debate, however, whether FRAND commitments can effectively prevent SEP owners from imposing excessive royalty obligations on licensees. In fact, there are no generally agreed-upon tests to determine whether a particular license does or does not satisfy a FRAND commitment. There is also little consensus regarding the legal effects of FRAND commitments, such as whether they imply a waiver of the general law of remedies (more precisely, injunctive relief and other extraordinary remedies). Such broad uncertainty has prompted a wave of litigation around the globe in recent decades.
While some SSOs and courts have moved toward a rule-based approach to define fair/reasonable rates and to develop methods for the valuation of FRAND royalties, the CJEU in Huawei[54] endorsed a hybrid approach.[55] Indeed, rather than define the meaning of FRAND (which remains left to a standard-based approach), the CJEU imposed a procedural framework for good-faith SEP-licensing negotiations. The framework identifies the steps that patent holders and implementers must follow in negotiating FRAND royalties, with the threats of antitrust liability and patent enforcement as levers to steer the parties toward a mutually agreeable level. Nonetheless, none of these approaches has thus far proven effective in reducing either uncertainty or litigation.
Over the years, several EU member states have adopted provisions related to the abuse of economic dependence (also known as relative market power or superior bargaining power), creating yet another context in which the unfairness of terms and conditions may be implicated.[56] Rules forbidding the abuse of economic dependence reflect concerns about the asymmetry of economic power in business-to-business relationships, which is considered a potential source of unfair-trading practices.
Although abuse of economic dependence is not regulated at the EU level, national-level legislation is authorized by Article 3(2) of the Regulation 1/2003 on the implementation of competition rules, which allows member states to adopt and apply stricter laws prohibiting or sanctioning unilateral conduct.[57] Recital 8 of the regulation refers specifically to national provisions that prohibit or impose sanctions on abusive behavior toward economically dependent undertakings.
Economic dependence is typically the result of significant switching costs that may lock a party into a business relationship and prevent it from finding equivalent alternative solutions. Therefore, evaluations of economic dependence include examining the amount of relationship-specific investment the dependent firm has undertaken (i.e., investments required to support its trading relationship), which may expose weak parties to holdup, as well as whether the counterparty should be considered an unavoidable trading partner because of its exclusive control over an essential input.
It is worth noting that recent legislative initiatives signal a willingness by EU member states to rely on abuse-of-economic-dependence claims to tackle digital platforms’ purportedly unfair conduct and trading relationship with business users. In 2020, Belgium approved an amendment to its Code of Economic Law to insert a provision on abuse of economic dependence,[58] with lawmakers making specific reference to the perceived legislative gap concerning digital platforms. In 2021, alongside its new antitrust tool focused on firms of “paramount significance for competition across markets,” the German Bundestag extended its economic-dependence provision to target firms acting as “intermediaries on multi-sided markets,” insofar as business users are significantly dependent on their intermediary services to access supply and sales markets such that sufficient and reasonable alternatives do not exist.[59] Finally, in 2022, the Italian Annual Competition Law included a specific provision introducing a rebuttable presumption of economic dependence when a firm uses intermediation services provided by a digital platform that play a “key role” in reaching end users or suppliers due to network effects or the availability of data.[60]
There are two primary takeaways from this brief overview of fairness in EU antitrust law. First, despite some references in the TFEU, antitrust enforcers have traditionally been reluctant to engage with the unfairness of terms and conditions. Uncertainty regarding the definition and legal boundaries of fairness make it challenging to use as an actionable standard for the evaluation of anticompetitive behavior. Second, if recent case law is suggestive of how attitudes about the use of fairness in antitrust are evolving, courts and competition authorities likely will continue to prefer that fairness be anchored in specific economic values or a detailed code of conduct (i.e., switching to a rule-based approach), rather than relying on political or moral considerations. The ongoing disputes over how to assess whether prices are excessive, as well as determining “fair” royalties for SEPs, suggest that questions about the scope and nature of unfair conduct cannot be usefully resolved by references to “the ordinary meaning of the word.”
Moreover, while fairness is explicitly mentioned in exploitative-abuse cases, Article 102 TFEU makes no reference to fairness as a benchmark for such cases. In this regard, the CJEU’s Servizio Elettrico Nazionale ruling affirmed the effects-based approach the court would take to assessing the abusive nature of unfair practices.[61] Notably, the CJEU definitively stated that competition law is not intended to protect the existing structure of the market, but rather that the ultimate goal of antitrust intervention is the protection of consumer welfare.[62] Accordingly, as the court previously found in Intel, not every exclusionary effect is necessarily detrimental to competition.[63] Competition on the merits may, by definition, mean that less-efficient competitors who are less attractive to consumers in terms of price, choice, quality, or innovation may be marginalized or forced to exit the market.[64]
The preceding overview of EU antitrust enforcement demonstrates that, despite recent political interest in the subject of fairness, authorities and courts continue to struggle to apply it as a substantive standard. Commissioner Vestager’s fairness agenda nonetheless permeates several recent legislative initiatives to regulate the digital economy through specific rules, rather than a general standard.
A common feature of these interventions is their preoccupation with the intermediation (or bottleneck) power that some large online platforms may wield vis-à-vis business users, to the extent that they may be unavoidable trading partners in a wide range of contexts. As a result, proponents argue, the interventions are needed to ensure a level playing field and to prevent unfair behavior to the detriment of business users.
In 2019, the EU adopted the regulation on promoting fairness and transparency for business users of online intermediation services (P2B Regulation).[65] Its aim was to lay down rules to ensure that digital intermediation platforms and search engines grant appropriate transparency, fairness, and effective redress to business users and corporate websites, respectively.[66] According to the P2B Regulation, online intermediation services can be “crucial” for the commercial success of firms who use such services to reach consumers. Given that dependence, such platforms often have superior bargaining power that enables them to behave unilaterally in ways that can be unfair, harmful to the legitimate interests of their business users, and also, indirectly, to consumers.[67]
While fairness is referenced in the P2B Regulation’s formal title, its provisions are more concerned with enhanced transparency, rather than forbidding or prescribing specific conduct. Nonetheless, the regulation left open the potential for further measures if its provisions proved insufficient to adequately address imbalances and unfair commercial practices in the sector.[68] A few months after the P2B Regulation was promulgated, the European Commission unveiled in a communication to the European Parliament its view for the circumstances under which further legislative intervention would be needed.[69] Since platforms that act as “private gatekeepers to markets, customers and information” may jeopardize the fairness and openness of markets, and “competition policy alone cannot address all the systemic problems that may arise in the platform economy,” the Commission noted that additional rules may still be needed to ensure contestability, fairness, and innovation in digital markets, as well as the possibility of market entry.[70] Notably, the Commission’s declared policy goal was to ensure “a level playing field for businesses,” which it argued “is more important than ever” in the digital era.[71]
It was against this backdrop that the European Commission proposed the Digital Markets Act (DMA),[72] with the goal of ensuring “contestability and fairness” for digital markets.[73] In the Commission’s view, the distinctive characteristics of digital services (i.e., the presence of strong economies of scale, indirect network effects, economies of scope due to the role of data as a critical input, and conglomerate effects, along with consumers’ behavioral biases and single-homing tendency) generate significant barriers to entry that confer gatekeeping power on certain large platforms.[74]
The Commission warned that this situation would lead to “serious imbalances in bargaining power and, consequently, to unfair practices and conditions” both for business users and for platforms’ end users, to the detriment of prices, quality, “fair competition,” choice, and innovation in the market.[75] Moreover, gatekeepers frequently play a dual role, being simultaneously operators of a marketplace and sellers of their own products and services in competition with rival sellers.[76] Therefore, the Commission contended, rules are needed to prevent gatekeepers from unfairly benefitting and to impose on them a special responsibility to ensure a level playing field, which de facto amounts to the introduction of a platform-neutrality regime.[77]
Implicit in the DMA is the presumption that market processes are often incapable of ensuring “fair economic outcomes” with regard to core platform services,[78] apparently requiring a rethinking of competition policy. Under this view, competition law is deemed unfit to effectively address challenges posed by gatekeepers that are not necessarily dominant in competition-law terms.[79] Indeed, antitrust is limited to certain examples of market power (e.g., dominance on specific markets) and of anti-competitive behavior.[80] Further, its enforcement occurs ex post and requires an extensive investigation on a case-by-case basis of what are often very complex facts.[81]
The DMA therefore aims to protect a different legal interest from antitrust rules. Rather than protect undistorted competition on any given market, as defined in competition law terms, the DMA seeks to ensure that markets where gatekeepers are present are and remain “contestable and fair,” independent of the actual, likely, or presumed effects of gatekeeper conduct.[82] As a result, it introduces a set of ex ante obligations for online platforms designated as gatekeepers, thereby effectively relieving enforcers of the responsibility to define relevant markets, prove dominance, and measure market effects.
Despite that proclaimed protection of a different legal interest, however, there is no indication that the DMA’s promotion of fairness and contestability differs from the substance and scope of competition law.[83] The draft DMA didn’t define either fairness or contestability, nor did it indicate how the obligations it would impose on digital gatekeepers was intended to deliver each objective. The final version fills part of this gap, including a definition of these goals. With regard to contestability, the DMA targets practices that increase barriers to entry or expansion in digital markets and imposes obligations that tend to lower these barriers.[84] Therefore, contestability relates to firms’ ability to “effectively overcome barriers to entry and expansion and challenge the gatekeeper on the merits of their products and services.”[85] With respect to fairness, the obligations seek to address the “imbalance between the rights and obligations of business users” that allows gatekeepers to obtain a “disproportionate advantage” by appropriating the benefits of market participants’ contributions.[86] Indeed, “[d]ue to their gateway position and superior bargaining power, it is possible that gatekeepers engage in behaviour that does not allow others to capture fully the benefits of their own contributions, and unilaterally set unbalanced conditions for the use of their core platform services or services provided together with, or in support of, their core platform services.”[87]
Nonetheless, the DMA also considers fairness to be “intertwined” with contestability.[88] “The lack of, or weak, contestability for a certain service can enable a gatekeeper to engage in unfair practices. Similarly, unfair practices by a gatekeeper can reduce the possibility for business users or others to contest the gatekeeper’s position.”[89] Therefore, an obligation may address both. Unfortunately, because the DMA does not index the obligations based on the specific goal they purportedly advance, it also does not clarify which obligations are intended to safeguard contestability and/or promote fairness. This is despite the fact that the title of the DMA’s Chapter III refers to practices of gatekeepers that limit contestability “or” are unfair.[90]
The confusion between the two policy goals is confirmed in several passages of the text, which refer indiscriminately to contestability “and” fairness.[91] In line with the definition of contestability and fairness provided in the DMA, the table below summarizes the obligations according to protected interests and principal beneficiaries.
The vast majority of the DMA’s provisions seek to promote contestability. Most are clearly described in this way, including explicit references to terms such as contestability, switching, multi-homing, and barriers to entry and expansion.[92] Two of the provisions instead introduce pure transparency obligations. Although they are described as functional to promote contestability and fairness,[93] they do not appear to either affect the imbalance of bargaining power or lower barriers to entry and expansion.
An interesting case is provided by the ban on “sherlocking” (i.e., the use of business users’ data to compete against them), which apparently does not belong to any of the proclaimed goals. Indeed, even if the prohibition is justified to prevent gatekeepers from unfairly benefitting from their dual role,[94] the characterization of the conduct in question does not match the definition of fairness provided in Recital 33.
The goal of fairness is almost always confused (rectius, “intertwined”) with contestability. Indeed, some provisions are justified on grounds that the imposition of contractual terms and conditions by gatekeepers may limit inter-platform contestability.[95] Other provisions are deemed necessary to promote multi-homing and to prevent reinforcing business users’ dependence on gatekeepers’ core platform services.[96] Further, to ensure a “fair commercial environment” and to protect the contestability of the digital sector, the DMA considers it important to safeguard the right to raise concerns about unfair practices by gatekeepers.[97] Moreover, the DMA contends that, since certain services are “crucial” for business users, gatekeepers should not be allowed to leverage their position against their dependent business users and therefore “the freedom of the business user to choose alternative services” should be protected.[98] Finally, the law suggests that some practices should be prohibited because they give gatekeepers a means to capture and lock in new business users and end users, thus raising barriers to entry.[99]
Thus, there is significant definitional overlap between contestability and fairness under the DMA. Further, while Recital 33 links the notion of fairness to the imbalance between business users’ rights and obligations, some provisions also protect end users against unfair practices.[100] The law also embraces fairness as a notion applicable to both contractual terms and market outcomes. Indeed, in order to justify intervention that exceeds traditional antitrust rules, the DMA states that market processes are often incapable of ensuring “fair economic outcomes” with regard to core platform services.[101] In other words, rather than concern itself with specific practices, the DMA’s approach to fairness starts with a presumption that the outcome is unfair and regulates some practices to redress this.
Article 6(12) represents the only provision clearly addressed at ensuring just fairness as defined in Recital 33. Indeed, describing the FRAND access obligation, Recital 62 includes several keywords from that definition, stating that pricing or other general-access conditions should be considered unfair if they lead to an “imbalance of rights and obligations” imposed on business users or confer a “disproportionate advantage” on the gatekeeper. But “fairness” in such circumstances acts as a standard rather than a rule. To avoid the scenario already illustrated with regard to SEPs, Recital 62 provides some benchmarks to determine the fairness of general-access conditions.
Article 5(3) forbids parity clauses, also known as most-favored nation (MFN) agreements or across-platform parity agreements (APPAs). The provision bans both the broad and narrow versions of such clauses, thereby prohibiting gatekeepers from restricting business users’ ability to offer products or services under more favorable conditions through other online intermediation services or through direct online sales channels. The DMA maintains that, while the broad version of the parity clause may limit inter-platform contestability, its narrow version would unfairly restrain business users’ freedom to use direct online sales channels.[102]
To the extent that the rationale for the ban is to protect weak business parties against the superior bargaining power exerted by digital intermediaries, the potential effects of broad and narrow MFNs differ significantly. While broad parity clauses are more likely to produce net anti-competitive effects, efficiency justifications related to the protection of platforms’ investments against the risk of free riding usually prevail in case of narrow parity clauses. Indeed, the original DMA proposal only forbade broad MFNs, as the European Commission has traditionally endorsed a case-by-case analysis of their effects under competition law.[103] The more lenient approach toward narrow MFNs is seen in the new guidelines on vertical restraints, where it is stated that narrow retail-parity obligations are more likely to fulfil the conditions of Article 101(3) TFEU than across-platform retail parity obligations “primarily because their restrictive effects are generally less severe and therefore more likely to be outweighed by efficiencies” and “[m]oreover, the risk of free riding by sellers of goods or services via their direct sales channels may be higher, in particular because the seller incurs no platform commission costs on its direct sales.”[104]
By banning narrow MFNs, the final version of the DMA disregards these efficiency justifications. A more fulsome notion of fairness would be concerned not only with gatekeepers’ disproportionate advantage, but also with the risk of free riding by business users, which may reduce the incentive to invest in platform development.[105] Indeed, relying on the definition provided in Recital 33, this could be a case where fairness may even be invoked by a gatekeeper against business users, because the former may be unable to fully capture the benefits of its own investment.
Ambiguity about the notion of fairness also characterizes the proposed Data Act.[106] On the one hand, the proposal pursues the goal of “fairness in the allocation of value from data” among actors in the data economy.[107] This concern stems from the observation that the value of data is concentrated in the hands of relatively few large companies, while the data produced by connected products or related services are an important input for aftermarket, ancillary, and other services.[108] Given this, the Data Act attempts to facilitate access to and use of data by consumers and businesses, while preserving incentives to invest in ways of generating value from data. On the other hand, to ensure fairness in the underpinning data-processing services and infrastructure, the proposal seeks “fairer and more competitive markets” for data-processing services, such as cloud-computing services.[109]
Moreover, such objectives include operationalizing rules to ensure “fairness in data sharing contracts.”[110] Notably, to prevent the exploitation of contractual imbalances that hinder fair data-access and use for small or medium-sized enterprises (SMEs),[111] Chapter IV of the Data Act addresses unfair contractual terms in data-sharing contracts in situations where a contractual term is imposed unilaterally by one party on a SME. The proposal justifies this requirement by assuming that SMEs will typically be in a weaker bargaining position, without meaningful ability to negotiate the conditions for access to data. They are thus often left with no other choice but to accept take-it-or-leave-it contractual terms.[112]
Terms imposed unilaterally on SMEs are subject to an unfairness test,[113] where a contractual term is considered unfair if it is of such a nature that its use grossly deviates from good commercial practice, contrary to good faith and fair dealing.[114] But given how vague and broad concepts such as “gross deviation from good commercial practices” or “contrary to good faith and fair dealing” are, the unfairness test may simply serve to generate further uncertainty, which could be heightened by potential differing interpretations at the national level.
Therefore, rather than outline specific rules, the proposed Data Act opts for a standard-based approach and provides a yardstick to interpret the unfairness test.[115] Article 13 includes a list of terms that are always considered unfair and another list of terms that are presumed to be unfair. If a contractual term is not included in these lists, the general unfairness provision applies. Moreover, model contractual terms recommended by the Commission may assist commercial parties in concluding contracts based on fair terms.
Some terms considered unfair by the Data Act are clearly inspired by the abuse-of-economic-dependence standard.[116] Given the implicit parallel between data dependence and economic dependence, the exclusion of SMEs from the scope of application of Article 13 is not justified.[117] Indeed, abuse-of-economic-dependence cases involve scrutinizing the unfairness of terms and conditions due to the imbalance of bargaining power between business parties, regardless of the size of the players involved. Moreover, in the case of data-sharing contracts, such imbalance would be generated by data dependence, which may also emerge when SMEs exert control over certain data.
In summary, to achieve a greater balance in the distribution of the economic value from data among actors, the fairness of both contractual terms and market outcomes are addressed in the Data Act. The creation of a cross-sectoral governance framework for data access and use aims to ensure contractual fairness by rebalancing the bargaining power of SMEs vis-à-vis large players in data sharing contracts.[118] As a result, fairer and more competitive market outcomes shall be promoted in aftermarkets and in data processing services.[119]
Recent EU legislative efforts motivated by the objective of promoting fairness in digital markets have thus far appeared to confirm traditional doubts about the possibility of relying on it as a suitable tool to assess anti-competitiveness.
If fairness has proven to be unsuitable to serve as a substantive standard in EU competition-law enforcement, the shift towards a rule-based approach does not seem to provide a significant improvement. Fairness represents a vague overarching goal. The envisaged black and white rules do not plainly address fairness, which instead is still essentially treated according to a standard-based approach. Moreover, the lack of clarity about the meaning of the term and the boundaries of its scope remains a relevant and thorny issue.
Indeed, the recent initiatives apply fundamentally different concepts of fairness. While the P2B Regulation treats fairness as de facto equivalent to transparency rules, the DMA defines it as referring to an imbalance in bargaining power that prevents a fair share of value among all players that contribute to a platform ecosystem. That definition notwithstanding, almost all of the DMA’s obligations putatively intended to promote fairness are, in effect, addressed at promoting contestability. Furthermore, the only provision clearly aimed at ensuring fairness as defined in the DMA relies on a standard-based approach. In a similar vein, the proposed Data Act treats fairness as a standard, introducing contractual protections based solely on the size of the players (i.e., SMEs) and providing a yardstick to apply the unfairness test.
Alongside the apparent difficulties in operationalizing fairness as either a standard or a rule, in practice, the lines separating fairness in the process from the outcomes of competition are inevitably blurred.[120] After all, Commissioner Vestager has not hidden her dissatisfaction with current market outcomes, showing an inclination to evaluate market structure as a proxy for fairness. Despite the efforts to describe efficiency and fairness as converging objectives for competition-policy enforcers, she implicitly acknowledged the trade-off between these goals.[121] Notably, Vestager argued that “[i]t’s true that competition, by its very nature, involves winners and losers. But as long as the social market economy is working properly, the efficiency gains that accrue from this process can be fairly and justly shared across all stakeholders.”
It is hard to deny the fundamental contradiction between defending efficient markets and promoting distributive justice. It is also difficult to reconcile Vestager’s message with the CJEU’s well-established principle that exclusionary effects do not necessarily undermine competition.[122] Indeed, rather than interpret fairness as equality of initial opportunities, Vestager explicitly refers to the fairness of market outcomes.
From this perspective, it would be more coherent to state that the reason why there is no clash between efficiency and fairness is because they perform different functions. While the former acts as a substantive standard for antitrust enforcement, the latter is a mere aspiration that has proven useful for political signaling.
It is not surprising that the recent push to revive fairness considerations in digital markets has originated outside the competition-law framework. Such policy choices implicitly acknowledge the impossibility of using fairness as an alternative standard to competition on the merits in antitrust law. As recently recalled by the CJEU, the ultimate goal of antitrust intervention is the protection of consumer welfare, rather than any particular market structure. The exclusion of as-efficient competitors is key to triggering antitrust liability for competition foreclosure. Therefore, for those who pursue the political agenda of building a fairer society,[123] it is necessary to bypass competition law, arguing—as the DMA does—that it is unfit to address the new challenges posed by digital gatekeepers. Indeed, in the setting of per se regulation, fairness can be invoked to justify more discretion, disregarding economic analysis and demonstration of the anticompetitive effects of conduct.
Against this background, the definition of fairness envisaged by the DMA (as protection against the asymmetric negotiating power of digital gatekeepers vis-à-vis business users to ensure an adequate sharing of the surplus) appears insufficient to provide the much-needed limits to its scope of application. This particular flavor of distributive justice may, indeed, favor regulatory capture, justifying interventions that actually reflect rent-seeking strategies aimed at shielding some legacy players from competition at the expense of consumers.
This is apparently the case with some EU policy initiatives such as the directive on copyright in the Digital Single Market.[124] In line with the proclaimed purpose of achieving “a well-functioning and fair marketplace for copyright,”[125] the directive grants to publishers a right to control the reproduction of digital summaries of press publications, which currently are often offered by information-service providers.[126] The new right aims to address the value gap dispute between digital platforms and news publishers, as the former are accused of capturing a huge share of the advertising revenue that might otherwise go to the latter by free riding on the investments made in producing news content. The argument is that these platforms take advantage of the value created by publishers when they distribute content that they do not produce and for which they do not bear the costs.[127]
Notably, because of publishers’ reliance on some Big Tech platforms for traffic (i.e., Google and Facebook), the latter are deemed to exert substantial bargaining power, which makes it difficult for publishers to negotiate on an equal footing.[128] Accordingly, it has been argued that a harmonized legal protection is needed to put publishers in better negotiating position in their contractual relations with large online platforms.
The European reform has not, however, been guided by an evidence-led approach. Indeed, there is no empirical evidence to support the free-riding narrative.[129] It relies merely on evidence of the crisis in the newspaper industry, without proof of the claim that digital infomediaries negatively impact legacy publishers by displacing online traffic. Looking at the previous ancillary-rights solutions at the national level (i.e., in Germany and Spain), empirical results show no evidence of a substitution effect, but rather demonstrate the existence of a market-expansion effect. This therefore proves that online news aggregators complement newspaper websites and may benefit them in terms of increased traffic and more advertising revenue. Such aggregators allow consumers to discover news outlets’ content that they would not otherwise be aware of, while reducing search times and enabling readers to consume more news.[130]
In a similar vein, as part of the 2030 digital-policy program,[131] the Commission and other European institutions appear set to deliver another legislative initiative that would force some large online platforms to contribute to the cost of telecommunications infrastructure.[132] Indeed, telecom operators claim that internet-traffic markets are unbalanced, arguing that just a few large online companies generate a significant portion of all network traffic, but they do not adequately contribute to the development of such networks[133]. As the argument goes, while network operators bear massive investments to ensure connectivity, digital platforms free ride on the infrastructure that carries their services.
Moreover, strong competition in the retail telecommunications market and regulatory interventions on the wholesale level have contributed to declining profit margins for telecom firms’ traditional retail revenue streams. Therefore, telecom operators argue that their costs of capital are higher than their returns on capital. Finally, network operators complain that they are not in a position to negotiate fair terms with these platforms due to their strong market positions, asymmetric bargaining power, and the lack of a level regulatory playing field. Hence, they argue, a legislative intervention is needed to address such imbalances and ensure a fair share of network usage costs are financed by large online content providers.[134]
Following this path, the EU Council has recently supported the view expressed in the European Declaration on Digital Rights and Principles for the Digital Decade that it is necessary to develop adequate frameworks so that “all market actors benefiting from the digital transformation assume their social responsibilities and make a fair and proportionate contribution to the costs of public goods, services and infrastructures, for the benefit of all Europeans.”[135]
The arguments advanced by telecom operators to support introducing a network-fee payment scheme would amount to a sending-party-network-pays system. Such proposals are not new, and they have already been rejected. As the Body of European Regulators for Electronic Communications (BEREC) noted 10 years ago, such proposals overlook that it is the success of content providers that lies at the heart of increases in demand for broadband access.[136] Indeed, requests for data flows stem not from content providers. but from internet consumers, from whom internet service providers already derive revenues.[137] From this perspective, both sides of the market (content providers and end users) already contribute to paying for Internet connectivity.[138] Further, “[t]his model has enabled a high level of innovation, growth in Internet connectivity, and the development of a vast array of content and applications, to the ultimate benefit of the end user.”[139]
Moreover, by charging Big Tech firms, the proposal may clash with the legal obligation of equal treatment that ensues from the Net Neutrality Regulation,[140] which has been justified under the opposite view that is it broadband providers who enjoy endemic market power as terminating-access monopolies, and hence should be precluded from discriminating against some traffic.[141] From this perspective, it would be difficult to justify an intervention intended to restore fairness in the relationship between network operators and content providers on the premise that the former suffers from an asymmetry of bargaining power without repealing the Net Neutrality Regulation.
BEREC recently affirmed its view in a preliminary assessment of the mechanism of direct compensation to telecom operators.[142] Changes in the traffic patterns do not modify the underlying assumptions regarding the sending-party-network-pays charging regime, therefore “the 2012 conclusions are still valid.”[143] The sending-party-network-pays model, BEREC argues, would provide ISPs “the ability to exploit the termination monopoly” and such a significant change could be of “significant harm to the internet ecosystem.”[144] Further, BEREC questioned the assumption that an increase in traffic directly translates into higher costs, noting that the costs of internet-network upgrades necessary to handle an increased traffic volume are very low relative to total network costs, while upgrades come with a significant increase in capacity.[145] Moreover, BEREC once again found no evidence of free riding along the value chain[146]: the IP-interconnection ecosystem is still largely competitive and the costs of internet connectivity are typically covered and paid for by ISP customers.
Like the sirens’ music in the Odyssey, fairness exerts an irresistible allure. By evoking principles of equity and justice, fairness makes it hard for anyone to disagree with the pursuit of a goal that would make not just markets, but the whole society better off. As Homer warned, however, the rhetoric may be deceptive and designed to distract from the proper path. We see such risk in the call for fairness to serve as the guiding principle of EU competition policy in digital markets.
The experience of EU competition-law enforcement is illustrative of the difficulties inherent in relying on fairness as an applicable standard. It also underscores why enforcers have traditionally been reluctant to do so. Indeed, attempts to evaluate the unfairness of prices have required courts and competition authorities to identify economic values, while the struggle in finding agreement on the economic definition of what is fair has generated a wave of litigation in the SEP-licensing scenario. Therefore, while seeking refuge in the “ordinary meaning of the word” is apparently useless, envisaging an economic proxy for fairness is particularly challenging.
Despite this background, the EU institutions have embarked on a mission to appoint fairness as the lodestar of policy in digital markets. The DMA offers one definition of fairness, while all the other initiatives (P2B Regulation, the proposed Data Act, the Copyright Directive, and the ongoing discussion on the cost of telecom infrastructure) are likewise moved to address imbalances in bargaining power that do not guarantee that surplus will be adequately shared among market participants. On closer inspection, however, the initiatives are not fully consistent with any particular definition. The notion of fairness is often merged with contestability and is invoked to protect a wide range of stakeholders (business users, end users, rivals, or just small players), even when there is no evidence of disproportionate advantage for large online companies. Moreover, rather than being translated into specific rules, fairness is still primarily promoted according to a standard-based approach.
The revival of fairness considerations appears motivated primarily by policymakers’ desire to be free of any significant procedural constraints. An analogous policy trend can be seen among U.S. authorities, who likewise question the role of efficiency in antitrust enforcement and call for a “return to fairness.”[147] In the name of fairness, various business practice, strategies, and contractual terms can be evaluated without incurring the burden of economic analysis. And even the market structure can be questioned.
Fairness has the power to transform policymakers into judges, deciding what is right and who is worthy, which is a temptation that would require the sagacious foresight of Ulysses.
[1] Giuseppe Colangelo, Antitrust Unchained: The EU’s Case Against Self-Preferencing, International Center for Law & Economics (Oct. 7, 2022) ICLE White Paper, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4227839.
[2] Jonathan Kanter, Remarks at New York City Bar Association’s Milton Handler Lecture, U.S. Justice Department (May 18, 2022) https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-delivers-remarks-new-york-city-bar-association.
[3] Ibid.
[4] See, e.g., Amelia Miazad, Prosocial Antitrust, 73 Hastings Law J. 1637 (2022); Dina I. Waked, Antitrust as Public Interest Law: Redistribution, Equity and Social Justice, 65 Antitrust Bull. 87 (Feb. 28, 2020); Ioannis Lianos, Polycentric Competition Law, 71 Curr Leg Probl 161 (Dec. 1, 2018); Lina M. Khan & Sandeep Vaheesan, Market Power and Inequality: The Antitrust Counterrevolution and its Discontents, 11 Harv. L. & Pol’y Rev. 235 (2017). See also Margrethe Vestager, Fairness and Competition Policy, European Commission (Oct. 10, 2022), https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_22_6067, arguing that properly functioning markets become an instrument of social change and progress as, e.g., “keeping markets open to smaller players and new entrants benefits female entrepreneurs and entrepreneurs with a migrant background.”
[5] Eleanor M. Fox, The Battle for the Soul of Antitrust, 75 Cal. L. Rev. 917 (May 1987).
[6] Kanter, supra note 2; See also Alvaro M. Bedoya, Returning to Fairness, Federal Trade Commission, 2 (Sep. 22, 2022), available at https://www.ftc.gov/system/files/ftc_gov/pdf/returning_to_fairness_prepared_remarks_commissioner_alvaro_bedoya.pdf, noting that “when Congress convened in 1890 to debate the Sherman Act, they did not talk about efficiency.”; See also Waked, supra note 4, framing antitrust as public-interest law and arguing that a sole focus on efficiency goals is inconsistent with the history of antitrust; For analysis of the conceptual links among competition, competition law, and democracy in the EU and the United States, see Elias Deutscher, The Competition-Democracy Nexus Unpacked—Competition Law, Republican Liberty, and Democracy, Yearbook of European Law (forthcoming), arguing that the idea of a competition-democracy nexus can only be explained through the republican conception of liberty as nondomination; In a similar vein, see Oisin Suttle, The Puzzle of Competitive Fairness, 21 PPE 190 (Mar. 7, 2022), distinguishing competitive fairness from equality of opportunity, sporting fairness (e.g., a level playing field), and economic efficiency, and arguing that competitive fairness is justified under the republican ideal of nondomination, namely the status of being a free agent protected from subjection to arbitrary interference.
[7] Bedoya, supra note 6, 8.
[8] See, e.g., Louis B. Schwartz, “Justice” and Other Non-Economic Goals of Antitrust, 127 Univ PA Law Rev 1076 (1979); John J. Flynn, Antitrust Jurisprudence: A Symposium on the Economic, Political and Social Goals of Antitrust Policy, 125 Univ PA Law Rev 1182 (1977).
[9] Eleanor M. Fox, Modernization of Antitrust: A New Equilibrium, 66 Cornell L. Rev. 1140 (August 1981).
[10] Kanter, supra note 2; See also Bedoya, supra note 6, 5, stating that “[w]hen antitrust was guided by fairness, these farmers’ families were part of a thriving middle class across rural America. After the shift to efficiency, their livelihoods began to disappear.”
[11] See Anu Bradford, Adam S. Chilton, & Filippo Maria Lancieri, The Chicago School’s Limited Influence on International Antitrust, 87 U Chi L Rev 297 (2020), arguing that the influence of the Chicago School has been more limited outside the United States.
[12] Niamh Dunne, Fairness and the Challenge of Making Markets Work Better, 84 Mod Law Rev 230, 236 (March 2021).
[13] Christian Ahlborn & Jorge Padilla, From Fairness to Welfare: Implications for the Assessment of Unilateral Conduct Under EC Competition Law, in Claus-Dieter Ehlermann & Mel Marquis (eds.), European Competition Law Annual 2007: A Reformed Approach to Article 82 EC (Hart Publishing, 2008), 55, 61-62; See also Vestager, supra note 4, stating that “[f]airness is what motivated us to take a look at the working conditions of the solo self-employed. … And fairness is what we considered first in our design of the Temporary Crisis Framework – avoiding subsidy races while ensuring those most affected by the crisis can receive the support they need.”
[14] See, e.g., Dunne, supra note 12, 237; Maurits Dolmans & Wanjie Lin, How to Avoid a Fairness Paradox in EU Competition Law, in Damien Gerard, Assimakis Komninos, & Denis Waelbroeck (eds.), Fairness in EU Competition Policy: Significance and Implications, GCLC Annual Conference Series, Bruylant (2020), 27-76; Francesco Ducci & Michael Trebilcock, The Revival of Fairness Discourse in Competition Policy, 64 Antitrust Bull. 79 (Feb. 12, 2019); Harri Kalimo & Klaudia Majcher, The Concept of Fairness: Linking EU Competition and Data Protection Law in the Digital Marketplace, 42 Eur. Law Rev. 210 (2017).
[15] See Einer Elhauge, Should The Competitive Process Test Replace The Consumer Welfare Standard?, ProMarket (May 24, 2022), https://www.promarket.org/2022/05/24/should-the-competitive-process-test-replace-the-consumer-welfare-standard; Herbert Hovenkamp, The Slogans and Goals of Antitrust Law, Faculty Scholarship at Penn Carey Law. 2853, (Jun. 2, 2022) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4121866.
[16] See Bart J. Wilson, Contra Private Fairness, 71 Am J Econ Sociol 407 (April 2012), arguing that the understanding and use of the term “fair” in economics can be described as muddled, at best.
[17] Daniel Kahneman, Jack L. Knetsch, & Richard Thaler, Fairness as a Constraint on Profit Seeking: Entitlements in the Market, 76 Am Econ Rev 728 (September 1986); See also Ernst Fehr & Klaus M. Schmidt, A Theory of Fairness, Competition, and Cooperation, 114 Q J Econ 817 (August 1999).
[18] Louis Kaplow & Steven Shavell, Fairness Versus Welfare, Harvard University Press (2002).
[19] United States v. Trans-Mo. Freight Ass’n, 166 U.S. 290, 323 (1897); See Bedoya, supra note 6, 2, arguing that “today, it is axiomatic that antitrust does not protect small business. And that the lodestar of antitrust is not fairness, but efficiency” (emphasis in original); See also Margrethe Vestager, The Road to a Better Digital Future, European Commission (Sep. 22, 2022), https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_22_5763, welcoming the Digital Markets Act because it will empower the EU “to make sure large digital platforms do not squeeze out small businesses.”
[20] Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act, U.S. Federal Trade Commission (Nov. 10, 2022), https://www.ftc.gov/legal-library/browse/policy-statement-regarding-scope-unfair-methods-competition-under-section-5-federal-trade-commission.
[21] Ibid., footnotes 15, 18, and 21.
[22] Lina M. Khan, Rebecca Kelly Slaughter, Alvaro M. Bedoya, On the Adoption of the Statement of Enforcement Policy Regarding Unfair Methods of Competition Under Section 5 of the FTC Act, U.S. Federal Trade Commission (Nov. 10, 2022), 1, https://www.ftc.gov/legal-library/browse/cases-proceedings/public-statements/statement-of-chair-khan-commissioners-slaughter-bedoya-on-policy-statement-regarding-section-5.
[23] Christine S. Wilson, Dissenting Statement Regarding the Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act, U.S. Federal Trade Commission (Nov. 10, 2022), 1-3, https://www.ftc.gov/legal-library/browse/cases-proceedings/public-statements/dissenting-statement-of-commissioner-wilson-on-policy-statement-regarding-section-5, also arguing that “[t]he only crystal-clear aspect of the Policy Statement pertains to the process following invocation of an adjective: after labeling conduct ‘facially unfair,’ the Commission plans to skip an in-depth examination of the conduct, its justifications, and its potential consequences.”
[24] See, e.g., Konstantinos Stylianou & Marios Iacovides, The Goals of EU Competition Law: A Comprehensive Empirical Investigation, Leg Stud (forthcoming), reporting the various goals mentioned in speeches by EU commissioners during their terms in office; Dunne, supra note 12, 238, noting that Vestager invoked fairness in 85% of speeches in her first term in office.
[25] Margrethe Vestager, Fair Markets in a Digital World, European Commission (Mar. 9, 2018), https://wayback.archive-it.org/12090/20191129214609/https://ec.europa.eu/commission/commissioners/2014-2019/vestager/announcements/fair-markets-digital-world_en.
[26] Ibid.
[27] Ibid.
[28] Margrethe Vestager, Competition and Fairness in a Digital Society, European Commission (Nov. 22, 2018) https://perma.cc/VF53-2ULV.
[29] Margrethe Vestager, Competition in a Digital Age, European Commission (Mar. 17, 2021), https://ec.europa.eu/commission/commissioners/2019-2024/vestager/announcements/competition-digital-age_en.
[30] Margrethe Vestager, What Is Competition For?, European Commission (Nov. 4, 2021), https://ec.europa.eu/commission/commissioners/2019-2024/vestager/announcements/speech-evp-margrethe-vestager-danish-competition-and-consumer-authority-2021-competition-day-what_en.
[31] See, e.g., Margrethe Vestager, Fairness and Competition, European Commission (Jan. 25, 2018), https://perma.cc/XXC2-7P7J; Margrethe Vestager, Making the Decisions that Count for Consumers, European Commission (May 31, 2018) https://perma.cc/BU47-D95T.
[32] Vestager, supra note 25.
[33] Margrethe Vestager, A Responsibility to Be Fair, European Commission (Sep. 3, 2018), https://perma.cc/AC36-B4KS.
[34] Thibault Schrepel, Antitrust Without Romance, 13 N. Y. Univ. J. Law Lib. 326 (May 4, 2020); As noted by Dolmans & Lin, supra note 14, 38, fairness, “with its moral overtones, confers a rhetorical flourish and sense of intrinsic righteousness when used to describe an act or situation.”; However, see Sandra Marco Colino, The Antitrust F Word: Fairness Considerations in Competition Law, 5 J. Bus. Law 329, 343 (2019), arguing that “[i]t makes little sense to defend a competition policy that develops with its back purposefully turned to the attainment of moral and social justice.”; For a more balanced reading, see Johannes Laitenberger, Fairness in EU Competition Law Enforcement, European Commission (Jun. 20, 2018) https://ec.europa.eu/competition/speeches/text/sp2018_10_en.pdf, arguing that “while ‘fairness’ is a guiding principle, it is not an instrument that competition enforcers can use off the shelf to go about their work in detail. In each and every case the Commission looks into, it must dig for evidence; conduct rigorous economic analysis; and check findings against the law and the guidance provided by the European Courts.”
[35] Margrethe Vestager, Competition for a Fairer Society, European American Chamber of Commerce (Sep. 29, 2016) https://eaccny.com/news/chapternews/eu-commissioner-margrethe-vestager-competition-for-a-fairer-society; see also Margrethe Vestager, Antitrust for the Digital Age, European Commission (Sep. 16, 2022) https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_22_5590, arguing that the power that large platforms wield “is not just an issue for fair competition; it is an issue for our very democracies” and that the most important goal of competition policy is to make markets work for people; Margrethe Vestager, Keynote at the Making Markets Work for People Conference, European Commission (Oct. 27, 2022) https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_22_6445, stating that “[t]he only policy goal for markets is to serve the people.”; on the social rationale of competition law, see Damien Gerard, Fairness in EU Competition Policy: Significance and Implications, 9 J. Eur. Compet 211 (2018).
[36] Vestager, supra note 4, stating that “[w]e are on the side of the people, sometimes when no one else is.”; in a similar vein, on the U.S. side, see Bedoya, supra note 6, 9, describing antitrust as a way to protect “people living paycheck to paycheck” (“For me, that’s what antitrust is about: your groceries, your prescriptions, your paycheck. I want to make sure the Commission is helping the people who need it the most.”); see also Ariel Ezrachi & Maurice E. Stucke, The Fight over Antitrust’s Soul, 9 J. Eur. Compet 1 (2018), arguing that “[u]ltimately the divide is over the soul of antitrust: Is antitrust solely about promoting some form of economic efficiency (or as cynics argue, the interests of the powerful who hide behind a narrow utilitarian approach) or the welfare of the powerless (the majority of citizens who feel increasingly disenfranchised by big government and big business)?”; see also Adi Ayal, Fairness in Antitrust: Protecting the Strong from the Weak, Hart (2016).
[37] Vestager, supra note 28; see also @vestager, Twitter (Nov 8, 2022, 4:39 AM) https://twitter.com/vestager/status/1589915517833412610, featuring Vestager’s reaction to the European Court of Justice’s (CJEU) judgment annulling the Commission’s decision that found Luxembourg had granted selective tax advantages to Fiat in Fiat Chrysler Finance Europe v. Commission.
[38] There is an extensive literature devoted to investigating the tradeoffs between rules and standards: see, e.g., Daniel A. Crane, Rules Versus Standards in Antitrust Adjudication, 64 Wash. Lee Law Rev. 49 (2007); Louis Kaplow, Rules Versus Standards: An Economic Analysis, 42 Duke L.J. 557 (1992); Isaac Ehrlich & Richard A. Posner, An Economic Analysis Of Legal Rulemaking, 3 J. Leg. Stud. 257 (January 1974).
[39] See, e.g., CJEU, Case C-127/73, Belgische Radio en Televisie and Société Belge des Auteurs, Compositeurs et Editeurs v. SV SABAM and NV Fonior (Mar. 27, 1974), EU:C:1974:25, para. 15, holding that an exploitative abuse may occur when “the fact that an undertaking entrusted with the exploitation of copyrights and occupying a dominant position … imposes on its members obligations which are not absolutely necessary for the attainment of its object and which thus encroach unfairly upon a member’s freedom to exercise his copyright.”
[40] European Commission, Case IV/31.043, Tetra Pak II (Jul. 24, 1991), paras. 105-108, (1992) OJ L 72/1.
[41] European Commission, Case COMP D3/34493, DSD (Apr. 20, 2001), para. 112, (2001) OJ L 166/1; affirmed in GC, Case T-151/01, DerGrünePunkt – Duales System DeutschlandGmbH v. European Commission (May 24, 2007), EU:T:2007:154 and CJEU, Case C-385/07 P (Jul. 16, 2009), EU:C:2009:456.
[42] See European Commission, Case COMP/E-2/36.041/PO, Michelin (Michelin II) (Jun. 20, 2001), paras. 220-221 and 223-224, (2002) OJ L143/1, arguing that a discount program was unfair because it “placed [Michelin’s dealers] in a situation of uncertainty and insecurity,” because “it is difficult to see how [Michelin’s dealers] would of their own accord have opted to place themselves in such an unfavourable position in business terms,” and because Michelin’s retailers were not in a position to carry out “a reliable evaluation of their cost prices and therefore [could not] freely determine their commercial strategy.”
[43] Opinion of Advocate General Pitruzzella, Case C-372/19, Belgische Vereniging van Auteurs, Componisten en Uitgevers CVBA (SABAM) v. Weareone.World BVBA, Wecandance NV (Jul. 16, 2020), EU:C:2020:598, para. 21; see also Marco Botta, Sanctioning Unfair Pricing Under Art. 102(a) TFEU: Yes, We Can!, 17 Eur. Compet. J. 156 (2021); for an overview of recent case law, see Giovanni Pitruzzella, Recent CJEU Case Law on Excessive Pricing Cases, in The Interaction of Competition Law and Sector Regulation: Emerging Trends at the National and EU Level (Marco Botta, Giorgio Monti, and Pier Luigi Parcu, eds.), Elgar 2022, 169; Margherita Colangelo, Excessive Pricing In Pharmaceutical Markets: Recent Cases in Italy and in the EU, ibid., 210.
[44] Dolmans & Lin, supra note 14, 59-60; see also Botta, supra note 43, arguing that, since the imposition of excessive prices by a dominant firm directly harms consumer welfare, the resurgence of excessive-pricing cases is linked to the role of consumer’s welfare standard in EU competition policy.
[45] CJEU, Case C-27/76, United Brands Company and United Brands Continental BV v. Commission of the European Communities (Feb. 14, 1978) EU:C:1978:22.
[46] CJEU, Case C-372/19, Belgische Vereniging van Auteurs, Componisten en Uitgevers CVBA (SABAM) v. Weareone.World BVBA, Wecandance NV (Nov. 25, 2020), EU:C:2020:959.
[47] United Brands, supra note 45, para. 252, holding that the questions to be determined are “whether the differences between the costs actually incurred and the price actually charged is excessive, and, if the answer to this question is in the affirmative, whether a price has been imposed which is either unfair in itself or when compared to competing products.”
[48] CJEU, Case C-177/16, Autortiesi?bu un Komunice?s?ana?s Konsulta?ciju Ag?entu?ra v. Latvijas Autoru Apvieni?ba v Konkurences Padome (Sep. 14, 2017), EU:C:2017:689, para. 49.
[49] Opinion of Advocate General Wahl, Case C-177/16 (Apr. 6, 2017), EU:C:2017:286, para. 131.
[50] See European Commission, Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, (2009) OJ C 45/7, para. 80; CJEU, 14 October 2010, Case C-280/08 P, Deutsche Telekom AG v. European Commission, EU:C:2010:603; CJEU, 17 February 2011, Case C-52/09, Konkurrensverket v. TeliaSonera Sverige AB, EU:C:2011:83; CJEU, 10 July 2014, Case C?295/12 P, Telefónica SA and Telefónica de España SAU v. European Commission, EU:C:2014:2062; CJEU, 25 March 2021, Case C-165/19 P, Slovak Telekom a.s. v. Commission, EU:C:2021:239.
[51] However, in Teliasonera (supra note 50), the CJEU found that there can be an exclusionary abuse even where the margin level of input purchasers is positive (so-called positive margin squeeze theory), being enough that rivals’ margins are insufficient, for instance because they must operate at artificially reduced levels of profitability.
[52] On the US side, rejecting margin squeeze as a stand-alone offense, the Supreme Court in Pacific Bell Tel. Co. v. linkLine, 555 U.S. 438 (2009) argued that it is nearly impossible for courts to determine the fairness of rivals’ margins and quoted Town of Concord v. Boston Edison Co., 915 F. 2d 17, 25 (1st Cir. 1990) asking “how is a judge or jury to determine a ‘fair price?’ Is it the price charged by other suppliers of the primary product? None exist. Is it the price that competition ‘would have set’ were the primary level not monopolized? How can the court determine this price without examining costs and demands, indeed without acting like a rate-setting regulatory agency, the rate-setting proceedings of which often last for several years? Further, how is the court to decide the proper size of the price ‘gap?’ Must it be large enough for all independent competing firms to make a ‘living profit,’ no matter how inefficient they may be? . . . And how should the court respond when costs or demands change over time, as they inevitably will?”
[53] For an overview, see Oscar Borgogno & Giuseppe Colangelo, Disentangling the FRAND Conundrum, DEEP-IN Research Paper (2019), https://ssrn.com/abstract=3498995.
[54] CJEU, Case C-170/13, Huawei Technologies Ltd. v. ZTE Corp. (Jul. 16, 2015), EU:C:2015:477.
[55] Nicolas Petit & Amandine Le?onard, FRAND Royalties: Relus v Standards? Chi.-Kent J. Intell. Prop. (forthcoming).
[56] For an overview, see Giuseppe Colangelo, The European Digital Markets Act and Antitrust Enforcement: A Liaison Dangereuse, 47Eur. Law Rev. 597 (July 2022); see also Inge Graef, Differentiated Treatment in Platform-to-Business Relations: EU Competition Law and Economic Dependence, 38 Yearbook of European Law 448 (2019), suggesting giving a stronger role to economic dependence both within and outside EU competition law.
[57] Council Regulation (EC) No. 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, [2003] OJ L 1/1.
[58] Belgian Royal Decree of 31 July 2020 amending books I and IV of the Code of economic law as concerns the abuse of economic dependence, Article 4.
[59] GWB Digitalization Act, 18 January 2021, Section 20.
[60] Italian Annual Competition Law, 5 August 2022, No. 118, Article 33.
[61] CJEU, Case C-377/20, Servizio Elettrico Nazionale SpA v. Autorità Garante della Concorrenza e del Mercato (May 12, 2022), EU:C:2022:379.
[62] Ibid., para. 46.
[63] CJEU, Case C-413/14 P, Intel v. Commission (Sep. 6, 2017), EU:C:2017:632, paras. 133-134. The same principle has been affirmed in discrimination and margin-squeeze cases, such as CJEU, C?525/16, MEO v. Autoridade da Concorrência (Apr. 19, 2018), EU:C:2018:270 and CJEU, Case C-209/10, Post Danmark A/S v. Konkurrencerådet (Mar. 27, 2012), EU:C:2012:172, respectively.
[64] CJEU, Intel, supra note 63, para. 73; see Alfonso Lamadrid de Pablo, Competition Law as Fairness, 8 J. Eur. Compet 147 (Feb. 15, 2017), arguing that the notion of merit-based competition implicitly carries in it a sense of fairness, understood as equality of opportunity; see also Alberto Pera, Fairness, Competition on the Merits and Article 102, 18 Eur. Compet. J. 229 (April 2022).
[65] Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services, [2019] OJ L 186/57.
[66] Ibid., Article 1(1).
[67] Ibid., Recital 2.
[68] Ibid., Recital 49.
[69] European Commission, Shaping Europe’s Digital Future, COM(2020) 67 final.
[70] Ibid., 8-9.
[71] Ibid., 8.
[72] Regulation (EU) 2022/1925 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act), (2022) OJ L 265/1.
[73] Ibid., Recital 7.
[74] Ibid., Recital 2.
[75] Ibid., Recitals 2 and 4.
[76] Ibid., Recitals 46, 47, 51, 56, and 57.
[77] Colangelo, supra note 60; see also Oscar Borgogno & Giuseppe Colangelo, Platform and Device Neutrality Regime: The New Competition Rulebook for App Stores?, 67 Antitrust Bull. 451 (2022).
[78] DMA, supra note 72, Recital 5.
[79] Ibid.
[80] Ibid.
[81] Ibid.
[82] Ibid., Recital 11.
[83] Pinar Akman, Regulating Competition in Digital Platform Markets: A Critical Assessment of the Framework and Approach of the EU Digital Markets Act, 47 Eur. Law Rev. 85 (Mar. 30, 2022); Colangelo, supra note 60; Heike Schweitzer, The Art to Make Gatekeeper Positions Contestable and the Challenge to Know What Is Fair: A Discussion of the Digital Markets Act Proposal, 3 ZEuP 503 (May 7, 2021).
[84] DMA, supra note 72, Recital 32. See also Article 12(5).
[85] Ibid..
[86] Ibid., Recital 33 and Article 12(5); see also Recital 62 providing some benchmarks that can serve as a yardstick to determine the fairness of general access conditions (i.e., prices charged or conditions imposed for the same or similar services by other providers of software application stores; prices charged or conditions imposed by the provider of the software application store for different related or similar services or to different types of end users; prices charged or conditions imposed by the provider of the software application store for the same service in different geographic regions; prices charged or conditions imposed by the provider of the software application store for the same service the gatekeeper provides to itself).
[87] Ibid.; see also Monopolkomission, Recommendations for an Effective and Efficient Digital Markets Act, (2021) 15, https://www.monopolkommission.de/en/reports/special-reports/special-reports-on-own-initiative/372-sr-82-dma.html, recommending that the DMA objective of fairness should address the economic dependence of business users vis-a?-vis a gatekeeper, and hence the asymmetric negotiating power favoring the gatekeeper; see also Gregory S. Crawford, Jacques Cre?mer, David Dinielli, Amelia Fletcher, Paul Heidhues, Monika Schnitzer, Fiona M. Scott Morton, & Katja Seim, Fairness and Contestability in the Digital Markets Act, Yale Digital Regulation Project, Policy Discussion Paper No. 3 (2021), 4-10, https://tobin.yale.edu/sites/default/files/Digital%20Regulation%20Project%20Papers/Digital%20Regulation%20Project%20-%20Fairness%20and%20Contestability%20-%20Discussion%20Paper%20No%203.pdf, supporting the interpretation of fairness with respect to surplus sharing. According to the authors, since a platform ecosystem is a co-creation of the platform itself and its users, regulation should correct the distortion related to unfair outcomes when users are not rewarded for their contribution to the success of the platform.
[88] DMA, supra note 72, Recital 34.
[89] Ibid.; see also Recital 16 referring to “unfair practices weaking contestability.”; see, instead, Monopolkomission, supra note 87, 16, suggesting to clearly distinguish the objectives pursued by the DMA, which should be understood such that only ecosystem-related questions of contestability are addressed by the DMA when it comes to the intersection of exclusion and fairness with exploitation of business users.
[90] See also DMA, supra note 72, Articles 12(1, 3, 4, and 5), 19(1), 41(3 and 4), and Recitals 15, 69, 77, 79, 93.
[91] Ibid., Articles 1(1 and 5), 18(2), 40(7), 53 (2 and 3), and Recitals 8, 11, 28, 31, 42, 45, 50, 58, 67, 73, 75, 97, 104, 106.
[92] Ibid., Recital 36 regarding Article 5(2), Recital 50 regarding Article 6(4), Recital 51 regarding Article 6(5), Recital 53 regarding Article 6(6), Recital 59 regarding Article 6(9), Recital 61 regarding Article 6(11), Recital 64 regarding Article 7.
[93] Ibid., Recital 45 regarding Article 5(9-10) and Recital 58 regarding Article 6(8).
[94] Ibid., Recital 46; see also European Commission, Commission Sends Statement of Objections to Amazon for the Use of Non-Public Independent Seller Data and Opens Second Investigation into Its E-Commerce Business Practices (Nov. 10, 2020), https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2077.
[95] DMA, supra note 72, Recital 39 regarding Article 5(3).
[96] Ibid., Recital 40 regarding Article 5(4).
[97] Ibid., Recital 42 regarding Article 5(6).
[98] Ibid., Recital 43 regarding Article 5(7).
[99] Ibid., Recital 44 regarding Article 5(8).
[100] Ibid., Articles 5(6), 5(8), and 6(13); see also Recital 2 referring to the impact on “the fairness of the commercial relationship between [gatekeepers] and their business users and end users.”
[101] Ibid., Recital 5; see also Recital 42 referring to “fair commercial environment.”
[102] Ibid., Recital 39.
[103] Commission Staff Working Document accompanying the Report from the Commission to the Council and the European Parliament Final Report on the E-commerce Sector Inquiry, SWD(2017) 154 final. Conversely, in Germany, the Federal Supreme Court has supported the Bundeskartellamt’s strict approach against narrow price parity clauses used. See Bundesgerichtshof, Case KVR 54/20, Booking.com (May 18, 2021).
[104] European Commission, Guidelines on Vertical Restraints (2022) OJ C 248/1, para. 374.
[105] Ibid., para. 372.
[106] European Commission, Proposal for a Regulation of the European Parliament and of the Council on Harmonised Rules on Fair Access and Use of Data (Data Act), COM(2022) 68 final; see also Giuseppe Colangelo, European Proposal for a Data Act – A First Assessment, CERRE Assessment Paper (Aug. 30, 2022) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4199565.
[107] Data Act, supra note 106, Explanatory Memorandum, 2.
[108] Ibid., Recital 6 and Explanatory Memorandum, 1.
[109] European Commission, Inception Impact Assessment – Data Act, Ares (2021) 3527151, 1, https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13045-Data-Act-amended-rules-on-the-legal-protection-of-databases_en,1-2.
[110] Data Act, supra note 106, Explanatory Memorandum, 3.
[111] Ibid., Recital 5.
[112] Ibid., Recital 51 and Explanatory Memorandum, 13
[113] Ibid., Recital 52
[114] Ibid., Article 13(2).
[115] Ibid., Recital 55.
[116] See, e.g., ibid., Article 13(4)(e), according to which a contractual term is presumed unfair if its object or effect is to enable the party that unilaterally imposed the term to terminate the contract with unreasonably short notice, taking into consideration the reasonable possibilities of the other contracting party to switch to an alternative and comparable service and the financial detriment caused by such termination.
[117] Colangelo, supra note 106.
[118] European Commission, supra note 109, 2.
[119] Ibid..
[120] Dunne, supra note 12, 239; see also Massimo Motta, Competition Policy: Theory and Practice, Cambridge University Press, 2004, 26, distinguishing between ex ante equity, which is consistent with competition policy and implies equal initial opportunities of firms in the marketplace, and ex post equity representing equal outcomes of market competition.
[121] Vestager, supra note 4.
[122] CJEU, supra notes 61 and 63; see also Opinion of Advocate General Rantos, Case C?377/20, Servizio Elettrico Nazionale SpA v. Autorità Garante della Concorrenza e del Mercato (Dec. 9, 2021), EU:C:2021:998, para. 45, arguing that if any conduct having an exclusionary effect were automatically classed as anticompetitive, antitrust would become a means for protecting less-capable, less-efficient undertakings and would in no way protect more meritorious undertakings that can serve as a stimulus to a market’s competitiveness.
[123] Vestager, supra note 28.
[124] Directive (EU) 2019/790 of 17 April 2019 on copyright and related rights in the Digital Single Market and amending Directives 96/9/EC and 2001/29/EC, [2019] OJ L 130/92.
[125] Ibid., Recital 3.
[126] Ibid., Article 15.
[127] See Giuseppe Colangelo, Enforcing Copyright Through Antitrust? The Strange Case of News Publishers Against Digital Platforms, 10 J. Antitrust Enforc 133 (Jun. 22, 2022).
[128] Directive 2019/790, supra note 124, Recitals 54 and 55; see also European Commission, Impact Assessment on the Modernisation of EU Copyright Rules, SWD(2016) 301 final, §5.3.1, arguing that the gap in the current EU rules “further weakens the bargaining power of publishers in relation to large online service providers.”
[129] Ibid.; see also Lionel Bently, Martin Kretschmer, Tobias Dudenbostel, Maria Del Carmen Calatrava Moreno, & Alfred Radauer, Strengthening the Position of Press Publishers and Authors and Performers in the Copyright Directive, European Parliament (September 2017) http://www.europarl.europa.eu/RegData/etudes/STUD/2017/596810/IPOL_STU(2017)596810_EN.pdf.
[130] See, e.g., Susan Athey, Markus Mobius, & Jeno Pal, The Impact of Aggregators on Internet News Consumption, NBER Working Paper No. 28746 (2021), http://www.nber.org/papers/w28746; Joan Calzada & Ricard Gil, What Do News Aggregators Do?, 39 Mark. Sci. 134 (2020); Joint Research Centre for the European Commission, Online News Aggregation and Neighbouring Rights for News Publishers, (2017) https://www.asktheeu.org/en/request/4776/response/15356/attach/6/Doc1.pdf.
[131] See European Commission, 2030 Digital Compass: the European Way for the Digital Decade, COM/2021/118 final; and European Commission, Proposal for a Decision of the European Parliament and of the Council Establishing the 2030 Policy Programme “Path to the Digital Decade,” (2021) https://data.consilium.europa.eu/doc/document/ST-11900-2021-INIT/en/pdf.
[132] See the public statements released in May 2022 by Commissioners Margrethe Vestager (https://www.reuters.com/business/media-telecom/eus-vestager-assessing-if-tech-giants-should-share-telecoms-network-costs-2022-05-02) and Thierry Breton (https://www.euractiv.com/section/digital/news/commission-to-make-online-platforms-contribute-to-digital-infrastructure).
[133] Axon Partners Group Consulting, Europe’s Internet Ecosystem: Socio-Economic Benefits of a Fairer Balance Between Tech Giants and Telecom Operators, (2022) Report prepared for the European Telecommunications Network Operators’ Association (ETNO), https://etno.eu/downloads/reports/europes%20internet%20ecosystem.%20socio-economic%20benefits%20of%20a%20fairer%20balance%20between%20tech%20giants%20and%20telecom%20operators%20by%20axon%20for%20etno.pdf; see also Frontier Economics, Estimating OTT Traffic-Related Costs on European Telecommunications Networks, (2022) A report for Deutsche Telekom, Orange, Telefonica, & Vodafone, https://www.telekom.com/resource/blob/1003588/384180d6e69de08dd368cb0a9febf646/dl-frontier- g4-ott-report-stc-data.pdf.
[134] See also the appeal published by the CEOs of Telefo?nica, Deutsche Telekom, Vodafone and Orange, United Appeal of the Four Major European Telecommunications Companies (2022), https://www.telekom.com/en/company/details/united-appeal-of-the-four-major-european-telecommunications-companies-646166; and, more recently, the statement released by several CEOs, CEO Statement on the Role of Connectivity in Addressing Current EU Challenges (2022), https://etno.eu//downloads/news/ceo%20statement_sept.2022_26.9.pdf.
[135] European Commission, European Declaration on Digital Rights and Principles for the Digital Decade, COM(2022) 28 final, 3; see also European Council, 2030 Policy Programme ‘Path to the Digital Decade’: The Council Adopts Its Position (2022), https://www.consilium.europa.eu/en/press/press-releases/2022/05/11/programme-d-action-a-l-horizon-2030-la-voie-a-suivre-pour-la-decennie-numerique-le-conseil-adopte-sa-position.
[136] Body of European Regulators for Electronic Communications, BEREC’s Comments on the ETNO Proposal for ITU/WCIT or Similar Initiatives Along These Lines, BoR(12) 120 (2012), 3, https://www.berec.europa.eu/en/document-categories/berec/others/berecs-comments-on-the-etno-proposal-for-ituwcit-or-similar-initiatives-along-these-lines; see also Body of European Regulators for Electronic Communications, Report on IP-Interconnection practices in the Context of Net Neutrality, BoR (17) 184 (2017), https://www.berec.europa.eu/en/document-categories/berec/reports/berec-report-on-ip-interconnection-practices-in-the-context-of-net-neutrality, finding the internet-protocol-interconnection market to be competitive.
[137] See former Commissioner Neelie Kroes, Adapt or Die: What I Would Do if I Ran a Telecom Company (2014), https://ec.europa.eu/commission/presscorner/detail/de/SPEECH_14_647, arguing that the current situation of European telcos is not the fault of OTTs, given that the latter are the ones driving digital demand: “[EU homes] are demanding greater and greater bandwidth, faster and faster speeds, and are prepared to pay for it. But how many of them would do that, if there were no over the top services? If there were no Facebook, no YouTube, no Netflix, no Spotify?”
[138] Body of European Regulators for Electronic Communications, supra note 136, 4. Concerns about side effects on consumers of the possible introduction of a network infrastructure fee have been raised by the European consumer organisation BEUC, Connectivity Infrastructure and the Open Internet, (2022) https://www.beuc.eu/sites/default/files/2022-09/BEUC-X-2022-096_Connectivity_Infrastructure-and-the_open_internet.pdf; see also the open letter signed by 34 civil-society organisations from 17 countries (https://epicenter.works/sites/default/files/2022_06-nn-open_letter_cso_0.pdf) arguing that nothing has changed that would merit a different response to the proposals that have been already discussed over the past 10 years and that charging content and application providers for the use of internet infrastructure would undermine and conflict with core net-neutrality protections; see also David Abecassis, Michael Kende, & Guniz Kama, IP Interconnection on the Internet: A European Perspective for 2022, (2022) https://www.analysysmason.com/consulting-redirect/reports/ip-interconnection-european-perspective-2022, finding no evidence for significant changes to the way interconnection works on the internet and arguing that the approach advocated by proponents of network-usage fees would involve complexity and regulatory costs, and risks being detrimental to consumers and businesses in Europe; futhermore, see David Abecassis, Michael Kende, Shahan Osman, Ryan Spence, & Natalie Choi, The Impact of Tech Companies’ Network Investment on the Economics of Broadband ISPs (2022), https://www.analysysmason.com/internet-content-application-providers-infrastructure-investment-2022, reporting significant investments undertaken by content and application providers in Internet infrastructure.
[139] Body of European Regulators for Electronic Communications, supra note 136, 4. In the next months, the BEREC is expected to assess again the impact of the potential sending party network pays principle the on Internet ecosystem: see Body of European Regulators for Electronic Communications, Work Programme 2023, BoR (22) 143 (2022), 26-27, https://www.berec.europa.eu/en/document-categories/berec/berec-strategies-and-work-programmes/draft-berec-work-programme-2023.
[140] Regulation (EU) 2015/2120 laying down measures concerning open internet access and amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services and Regulation (EU) No 531/2012 on roaming on public mobile communications networks within the Union, (2015) OJ L 310/1.
[141] For a summary of the net-neutrality debate, see Giuseppe Colangelo & Valerio Torti, Offering Zero-Rated Content in the Shadow of Net Neutrality, 5 M&CLR 41 (2021); see also Tobias Kretschmer, In Pursuit of Fairness? Infrastructure Investment in Digital Markets, (2022) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4230863, arguing that the policy solution at issue would fall short of the principles of efficient risk allocation, time consistency, and net neutrality, and might seem like arbitrarily targeting a group of (largely U.S.-based) firms while letting (at least partly European) newcomers and/or smaller firms enjoy the same externalities at no cost. Indeed, the author notes that a transfer from Big Tech to telecom-infrastructure providers would be equivalent to a tax on success, since it would be based on ex post estimates of benefits from prior investments. Further, a direct and unrestricted transfer may not ensure sufficient infrastructure investment in the future, as it is not conditional on future behavior, but rather it would serve as a windfall profit for past (imprudent) behavior that can finance any kind of activity by telecom-infrastructure providers. Finally, a fair distribution of investment financing would require all complementors to the basic service to pay a share of future investments proportional to the expected benefit from the investments to be undertaken.
[142] Body of European Regulators for Electronic Communications, BEREC preliminary assessment of the underlying assumptions of payments from large CAPs to ISPs, BoR (22) 137 (2022).
[143] Ibid., 4-5.
[144] Ibid., 5.
[145] Ibid., 7-8.
[146] Ibid., 11-14.
[147] Bedoya, supra note 6, 8.
TOTM In the world of video games, the process by which players train themselves or their characters in order to overcome a difficult “boss battle” is . . .
In the world of video games, the process by which players train themselves or their characters in order to overcome a difficult “boss battle” is called “leveling up.” I find that the phrase also serves as a useful metaphor in the context of corporate mergers. Here, “leveling up” can be thought of as acquiring another firm in order to enter or reinforce one’s presence in an adjacent market where a larger and more successful incumbent is already active.
Read the full piece here.
TOTM As 2023 draws to a close, we wanted to reflect on a year that saw jurisdictions around the world proposing, debating, and (occasionally) enacting digital . . .
As 2023 draws to a close, we wanted to reflect on a year that saw jurisdictions around the world proposing, debating, and (occasionally) enacting digital regulations. Some of these initiatives amended existing ex-post competition laws. Others were more ambitious, contemplating entirely new regulatory regimes from the ground up.
Scholarship Bullet Points Starting with the Intel ruling, the European judiciary has slowly crafted a coherent framework for Article 102 enforcement. However, doubts persist concerning the . . .
Competition cases routinely hinge on the fundamental distinction between conduct that anti-competitively serves to exclude competitors, on the one hand, and competition on the merits that may lead firms to exit the market, on the other.[1] While even first-year law students intuitively understand this critical distinction, it can prove challenging to distinguish between the two in real-world cases. The reason is simple: anticompetitive foreclosure and competition on the merits both ultimately result in the same observable outcome: namely, that rivals exit the market. In order to draw the line, policymakers must infer both the root causes and the effects of firms’ market exit.
Against this backdrop, it is becoming increasingly clear that the 2017 Intel ruling marked a crucial turning point in the enforcement of Article 102 TFEU.[2] The ruling’s powerful legacy notably looms large over other recent court cases, such as the European Court of Justice’s (“ECJ”) ruling in Servizio Elettrico Nazionale and Others, as well as the General Court’s (“GC”) Intel Renvoi and Qualcomm judgments.[3] In these Intel-inspired rulings, the European judiciary appears to have settled largely on a workable effects-based standard that sorts the wheat from the chaff in all Article 102 TFEU cases. It does this, notably, by looking at the effect that a firm’s behaviour has on “as-efficient competitors”, while also creating an administrable standard of proof to govern such proceedings.
This is not to say that Article 102 TFEU case law is entirely settled—far from it. For instance, it is arguably still unclear whether “non-price” conduct, such as self-preferencing, should be assessed under the general framework laid out in Intel, which concerned price-rebate schemes. To wit, the GC’s Google Shopping judgment marks a clear departure from the Intel framework under the justification that “[i]n the present case, the practices at issue are not pricing practices”.[4] Despite nominally looking into the effects of Google’s “self-preferencing”, the GC eschewed key aspects of the Intel framework, such as the effect of Google’s behaviour on “as efficient competitors”.[5] This and other aspects of the ruling led to criticism that the GC failed to establish a clear boundary between anticompetitive self-preferencing and permissible instances of firms favoring their own products. As Elias Deutscher has observed:
Although the Court considered various pathways to determine the legality of self-preferencing, it failed to articulate a clear legal test that establishes limiting principles as to when self-preferencing by a dominant firm violates EU competition law.[6]
With this in mind, the pending Google Shopping appeal ruling offers the ECJ a unique opportunity to settle the debate. Namely, the ECJ may confirm that the lessons from the Intel strand of case law apply across the board, and reaffirm the dividing line between anticompetitive and benign conduct, including self-preferencing under Article 102 TFEU. This may prove a politically fraught endeavor, as the Digital Markets Act (“DMA”) will essentially outlaw the same behaviour—at least for so-called “gatekeeper” firms.[7] It is, however, vital to safeguard the internal consistency of competition enforcement under Article 102 TFEU.
The history leading up to the Intel cases is well-known. In 2009, the European Commission (“commission”) found that rebates granted by Intel to certain original equipment manufacturers (“OEMs”) foreclosed its competitor AMD from the market.[8] During the administrative procedure, the Commission claimed it did not need to take into account the effects of the practice, as the exclusivity rebates in question were automatically illegal under Article 102 TFEU.[9] The Commission nevertheless carried out an “as efficient competitor” (“AEC”) test “for the sake of completeness”.[10] In a nutshell, the AEC test inquires whether a rebate scheme is able to exclude competitors from the market that are at least as efficient as the dominant firm.
During the subsequent annulment proceedings, Intel claimed the Commission had failed to apply the AEC test correctly. The GC dismissed Intel’s appeal on grounds that its conduct was per se illegal. The Commission was thus not required to assess the effects of the exclusivity rebates.[11]
Intel took the case to the ECJ, which overturned the GC’s ruling and found that—while the Commission can, under certain circumstances, rely on a presumption of illegality—exclusivity rebates are not automatically illegal under Article 102 TFEU.[12] In other words, the anticompetitive effects of a practice must always be assessed, regardless of how the burden of proof is allocated.
The ECJ laid out the standard of proof that parties must meet in such cases. It held that:
138. [W]here the undertaking concerned submits, during the administrative procedure, on the basis of supporting evidence, that its conduct was not capable of restricting competition and, in particular, of producing the alleged foreclosure effects.… 139. [T]he Commission is not only required to analyse, first, the extent of the undertaking’s dominant position on the relevant market and, secondly, the share of the market covered by the challenged practice, as well as the conditions and arrangements for granting the rebates in question, their duration and their amount; it is also required to assess the possible existence of a strategy aiming to exclude competitors that are at least as efficient as the dominant undertaking from the market (see, by analogy, judgment of 27 March 2012, Post Danmark, C?209/10, EU:C:2012:172, paragraph 29).[13]
138. [W]here the undertaking concerned submits, during the administrative procedure, on the basis of supporting evidence, that its conduct was not capable of restricting competition and, in particular, of producing the alleged foreclosure effects.…
139. [T]he Commission is not only required to analyse, first, the extent of the undertaking’s dominant position on the relevant market and, secondly, the share of the market covered by the challenged practice, as well as the conditions and arrangements for granting the rebates in question, their duration and their amount; it is also required to assess the possible existence of a strategy aiming to exclude competitors that are at least as efficient as the dominant undertaking from the market (see, by analogy, judgment of 27 March 2012, Post Danmark, C?209/10, EU:C:2012:172, paragraph 29).[13]
The underlying standard appears rather straightforward: if and when a defendant raises such an objection, the Commission must show that the firm’s conduct is capable of excluding “as efficient” competitors. The focus on AECs is repeated in the following paragraph:
140. That balancing of the favourable and unfavourable effects of the practice in question on competition can be carried out in the Commission’s decision only after an analysis of the intrinsic capacity of that practice to foreclose competitors which are at least as efficient as the dominant undertaking.[14]
The ECJ’s ruling sparked numerous debates. Scholars notably questioned how it would be interpreted by the lower court when it reexamined the case. The key question was whether Intel should be read mostly as a procedural ruling—in which case, the main problem was merely that the Commission and GC did not appropriately respond to certain of Intel’s claims, something that could be corrected upon reexamination[15]—or whether, instead, the ECJ had ultimately outlined a substantive framework to assess (at least) rebates under Article 102 TFEU.[16]
While the finer points of its so-called “renvoi” ruling are beyond the scope of this article, the GC appears to have opted for a maximalist interpretation of Intel. It examined the effects of Intel’s rebates in great detail, following each step of the ECJ’s framework. As it explained:
125. Having regard to the wording of paragraph 139 of the judgment on the appeal, the Commission is, as a minimum, required to examine those five criteria for the purposes of assessing the foreclosure capability of a system of rebates, such as that at issue in the present case.[17]
Following this logic, the GC examined several aspects of Intel’s rebates under a detailed-effects analysis, including their duration, market coverage, and age, as well as their effect on AECs (three of the five criteria set out in Intel).[18]
The Intel framework was also central to the GC’s more recent Qualcomm ruling, which appears to confirm and develop insights from Intel.[19] In the judgment, the GC quashed a EUR 1 billion fine the Commission imposed on Qualcomm under Article 102 TFEU. Under scrutiny was an agreement pursuant to which Apple received payments conditional upon sourcing all of its LTE chips from Qualcomm. According to the Commission, such “exclusivity payments” were capable of foreclosing competition, in that they reduced the incentives of a major purchaser of baseband chipsets to switch to competing producers.[20]
The GC ultimately overturned the Commission’s decision on both procedural and substantive grounds. It notably found that the Commission had carried out an improper analysis of anticompetitive effects. According to the Court, the Commission failed to show that Apple would not have sourced all its LTE chips from Qualcomm absent the impugned agreement. In fact, at the time of the “exclusive payment” agreement (2011-2015, and half of 2016), Qualcomm was the only company capable of satisfying Apple’s demand for LTE chips.[21] Accordingly, Qualcomm’s decision to buy exclusively from Qualcomm could easily be attributed to “competition on the merits”, rather than anticompetitive conduct.[22]
The GC reiterated that the Commission must consider all the relevant facts of the case, as well as the supporting evidence submitted by Qualcomm that its conduct could not restrict competition and, in particular, could not have the alleged foreclosure effects.[23] As the Court put it:
Indeed, if such conduct is to be characterised as abusive, that presupposes that that conduct was capable of restricting competition and, in particular, producing the alleged exclusionary effects, and that assessment must be undertaken having regard to all the relevant facts surrounding that conduct (see judgment of 30 January 2020, Generics (UK) and Others, C?307/18, EU:C:2020:52, paragraph 154 and the case-law cited).[24]
The upshot is that Qualcomm’s exclusivity payments were incapable of excluding competitors, as there were no competitors to exclude in the first place.[25] By failing to make the link between the relevant factual circumstances and its theory of harm (i.e., the alleged lessening of Apple’s incentives to switch to a competitor to source all its LTE chipset requirements for iPhones), the Commission had fallen afoul of a line of case law, epitomized by Post Danmark, establishing that competition-law analysis cannot be purely hypothetical.[26]
Throughout its judgment, the Qualcomm court makes numerous references to Intel and its key finding that anticompetitive behaviour must be capable of excluding as efficient competitors.[27] For instance, in paragraph 356 of the judgment, the GC states that:
the Court must examine all of the applicant’s arguments seeking to call into question the validity of the Commission’s findings as to the foreclosure capacity of competitors that are at least as efficient, relating to the practice in question (see, to that effect, judgment of 6 September 2017, Intel v Commission, C?413/14 P, EU:C:2017:632, paragraph 141).[28]
The judgment also highlighted the importance of identifying the difference between anticompetitive conduct and competition on the merits. The Commission had conflated the two, and it had cost it the case. As the GC found:
The fact – which was not properly taken into account in the contested decision – that Apple sourced LTE chipsets from the applicant, and not from the applicant’s competitors, in the light of the absence of alternatives fulfilling its own technical requirements could fall within competition on the merits, and not an anticompetitive foreclosure effect resulting from the payments concerned.[29] (emphasis added)
It had also failed to show how the conduct in question prevented competitors that were as efficient as Qualcomm from developing products that fulfilled Apple’s requirements, but “that Apple’s incentives to switch to the applicant’s competitors for all its LTE chipset requirements had been reduced”.[30]
Taken together, the two Intel rulings and Qualcomm mark a clear rejection of the forms-based approach that initially enabled the Commission to ignore the economic arguments put forward by firms like Intel and Qualcomm. At least as far as rebates are concerned, the rulings marked the end of a policy of excessively deferential judicial review that turned a blind eye to, arguably, important errors of economic analysis.
The preceding paragraphs raise an important question that goes to the very foundations of European competition law. Since its adoption in 2017, there have, broadly speaking, been two competing views concerning the ECJ’s Intel ruling.
The first view held that Intel was a contained statement of the law applying to rebates.[31] For instance, Marc Van der Woude, a judge at the GC, has argued that the Google Shopping case was correctly decided, among other things, because the Intel case law had little bearing on it. As reported by Mlex:
He said… [t]he Intel case involved the application of a framework set out by the EU’s top court, while “Google is a new phenomenon.” Van der Woude said… that the Commission did not always need to delve into economics. “It depends on the theory of harm you will develop as a regulator.”.[32]
He said… [t]he Intel case involved the application of a framework set out by the EU’s top court, while “Google is a new phenomenon.”
Van der Woude said… that the Commission did not always need to delve into economics. “It depends on the theory of harm you will develop as a regulator.”.[32]
Conversely, the second view contends that the Intel court was actually fleshing out a framework that undergirds all European competition law under Article 102 TFEU.[33] According to this interpretation, Intel is but the latest in a series of rulings, including Post Danmark and Cartes Bancaires, that seek to bring economic clarity to European competition law.[34]
There are important reasons to believe this second view is most likely the correct one. First, the GC’s Intel Renvoi and Google Shopping rulings appear to imply that Intel is not merely a rebate-specific rule. The Intel Renvoi ruling, while ostensibly dealing with the topic of rebates, ultimately rests on what appears to be a more generalized framework of presumptions and effects analysis:
124 [A]lthough a system of rebates set up by an undertaking in a dominant position on the market may be characterised as a restriction of competition, since, given its nature, it may be assumed to have restrictive effects on competition, the fact remains that what is involved is, in that regard, a mere presumption and not a per se infringement of Article 102 TFEU, which would relieve the Commission in all cases of the obligation to conduct an effects analysis.[35]
Second, the GC’s Google Shopping ruling adds two important pieces to this puzzle. The court notably reaffirms the idea that there are no “per se” or “by object” infringements under Article 102 TFEU, suggesting that the Shopping case should be assessed under an effects-based framework similar to the one laid out in Intel:
435 [U]nlike Article 101 TFEU, Article 102 TFEU does not distinguish forms of conduct that have as their object the prevention, restriction or distortion of competition from those which do not have that object but nevertheless have that effect.
Google Shopping also contains several important references to Intel. This is a clear sign the GC believes Intel is relevant outside the realm of rebates:
[W]here, in order to classify a practice in the light of the provisions of Article 102 TFEU, the Commission attaches real importance to an economic analysis, the Courts of the European Union are required to examine all of the arguments put forward by the undertaking penalised concerning that analysis (see, to that effect, judgment of 6 September 2017, Intel v Commission, C?413/14 P, EU:C:2017:632, paragraphs 141 to 144).[36] 157 Thus, not every exclusionary effect is necessarily detrimental to competition. Competition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation (see judgment of 6 September 2017, Intel v Commission, C?413/14 P, EU:C:2017:632, paragraph 134 and the case-law cited).[37]
[W]here, in order to classify a practice in the light of the provisions of Article 102 TFEU, the Commission attaches real importance to an economic analysis, the Courts of the European Union are required to examine all of the arguments put forward by the undertaking penalised concerning that analysis (see, to that effect, judgment of 6 September 2017, Intel v Commission, C?413/14 P, EU:C:2017:632, paragraphs 141 to 144).[36]
157 Thus, not every exclusionary effect is necessarily detrimental to competition. Competition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation (see judgment of 6 September 2017, Intel v Commission, C?413/14 P, EU:C:2017:632, paragraph 134 and the case-law cited).[37]
Along similar lines, Advocate General Nils Wahl had, in his Intel opinion, unequivocally endorsed the notion that effects analysis undergirds all of Article 102 TFEU enforcement—and not just rebate cases.[38] The AG notably surmised that “ an abuse of dominance is never established in the abstract”, and that courts should consider “the legal and economic context of the impugned conduct”. That AG Wahl subsequently uses predatory pricing (in a rebates case) to illustrate his point is further confirmation of this broad reading.[39]
Finally, and perhaps most dispositively, the ECJ’s recent Servizio Elettrico Nazionale and Others ruling, while pertaining to non-price conduct, is replete with references to Intel and to the notion that behaviour is only anticompetitive if it is capable of foreclosing competitors that are at least as efficient[40]:
En revanche, ainsi que la Cour l’a déjà souligné, ladite disposition ne s’oppose pas à ce que, du fait d’une concurrence par les mérites, disparaissent ou soient marginalisés sur le marché en cause des concurrents moins efficaces et donc moins intéressants pour les consommateurs du point de vue, notamment, des prix, du choix, de la qualité ou de l’innovation (arrêt du 6 septembre 2017, Intel/Commission, C?413/14 P, EU:C:2017:632, point 134 et jurisprudence citée).[41]
As if this reference to Intel—the passage is originally from the Post Danmark ruling, which also concerned rebates[42]—was not sufficiently clear, the judgment explicitly states that a practice’s effect on “as-efficient competitors” is a key part of the legal test for both price and non-price restrictions of competition. According to the court, it is this criterion, among others, that differentiates competition on the merits that forces less-efficient firms to exit the market from anticompetitive foreclosure that causes as-efficient ones to exit, too:
La pertinence de l’impossibilité, matérielle ou rationnelle, pour un hypothétique concurrent aussi efficace, mais n’étant pas en position dominante, d’imiter la pratique en cause, aux fins de déterminer si cette dernière repose sur des moyens relevant d’une concurrence fondée sur les mérites, ressort de la jurisprudence relative aux pratiques tant tarifaires que non tarifaires. [The case has not yet been translated to English][43]
This interpretation finds further support in the opinion issued by AG Rantos, who writes that:
[T]he case-law of the Court, in my view, confirms that exclusionary conduct of a dominant undertaking which can be replicated by equally efficient competitors does not represent, in principle, conduct that may lead to anticompetitive foreclosure and therefore comes within the scope of competition on the merits. … [A]s regards exclusionary practices not related to pricing – such as, for example, refusal to supply – the case-law seems to confirm the relevance of the test as regards the possibility of replication, inasmuch as a dominant undertaking’s decision to reserve for itself its own distribution network does not constitute a refusal to supply contrary to Article 102 TFEU when a competitor is able to create a second distribution network of a comparable size. In other words, there is no abuse if inputs refused by the dominant undertaking can be duplicated by equally efficient undertakings by purchasing them from other suppliers or developing them themselves.[44]
[T]he case-law of the Court, in my view, confirms that exclusionary conduct of a dominant undertaking which can be replicated by equally efficient competitors does not represent, in principle, conduct that may lead to anticompetitive foreclosure and therefore comes within the scope of competition on the merits.
…
[A]s regards exclusionary practices not related to pricing – such as, for example, refusal to supply – the case-law seems to confirm the relevance of the test as regards the possibility of replication, inasmuch as a dominant undertaking’s decision to reserve for itself its own distribution network does not constitute a refusal to supply contrary to Article 102 TFEU when a competitor is able to create a second distribution network of a comparable size. In other words, there is no abuse if inputs refused by the dominant undertaking can be duplicated by equally efficient undertakings by purchasing them from other suppliers or developing them themselves.[44]
The Servizio Elettrico Nazionale and Others ruling thus appears to confirm the substantive importance of Intel; clearly, it is not just a procedural ruling. It also appears to confirm Intel’s significance for Article 102 TFEU enforcement beyond rebates. Indeed, the numerous important references to Intel and its analytical framework would suggest that the case marks a clear turning point for European competition law. Moreover, the court explicitly acknowledges that the Intel framework also applies to “non-price” conduct.
All of this reinforces the sense that all Article 102 TFEU cases are ultimately subject to an effects analysis, with the implication that the Commission and courts cannot summarily disregard economic arguments put forward by the parties. None of this is entirely new, of course. Several scholars have observed that other cases, like Post Danmark and Cartes Bancaires, already went a long way toward bringing European competition law more in line with economic analysis.[45] However, the Intel cases crystallize this trend in a way that increasingly looks like a general framework for all Article 102 TFEU cases.
Subjecting all Article 102 TFEU cases to the Intel framework has far-reaching implications, including for ongoing cases such as Google Shopping. At its heart, the Intel framework ultimately seeks to ascertain whether conduct that can eliminate competitors is also anticompetitive. As the ECJ has explained in cases such as TeliaSonera and Post Danmark:
Not every exclusionary effect is necessarily detrimental to competition […]. Competition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less efficient and so less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation.[46]
In the Intel proceedings, the AEC test was one of the relevant tools used to establish whether that was indeed the case. However, under different circumstances, other tools may well be more useful in separating conduct that disadvantages or even eliminates competitors—and is also anticompetitive—from conduct that has essentially the same effect but is not. The Court of Justice says this much in its Servizio Elettrico Nazionale and Others ruling:
[L]’importance généralement accordée audit test, lorsque celui?ci est réalisable, n’en démontre pas moins que l’incapacité qu’aurait un hypothétique concurrent aussi efficace de répliquer le comportement de l’entreprise dominante constitue, s’agissant des pratiques d’éviction, l’un des critères permettant de déterminer si ce comportement doit être considéré comme étant ou non fondé sur l’utilisation de moyens relevant d’une concurrence normale.[47]
Several recent cases fall short in this respect, making them vulnerable to challenges under Intel. Google Shopping is a prime example. In its ruling, the GC appears to suggest that it is anticompetitive for a dominant platform to favor its downstream services if doing so reduces web traffic to rivals:
445. [T]he Commission was fully entitled to conclude… that those practices had led to a reduction of that traffic for almost all competing comparison shopping services and, secondly, that those practices had led to an increase in traffic to Google’s comparison shopping service…. and it may be concluded that the Commission established actual effects that are more or less pronounced, depending on the country, but in any event significant.
But unlike the detailed effects analysis of Intel, the GC’s approach is tantamount to a per se condemnation of so-called “self-preferencing”. Indeed, favoring one’s own services necessarily puts competitors at a disadvantage, some of whom might even exit the market. As Pablo Ibáñez Colomo has written:
If the notion of anticompetitive effects were equated with a competitive disadvantage, then self-preferencing would become, de facto and by definition, prima facie unlawful[48].
This forms-based analysis withers under the Intel framework. Indeed, in what would later turn out to be a direct contradiction of the upper court’s Servizio Elettrico Nazionale and Others ruling, the GC consciously ignores whether foreclosed rivals are as efficient as the dominant company:
538. The use of the as-efficient-competitor test is warranted in the case of pricing practices (predatory pricing or a margin squeeze, for example)…. In the present case, the practices at issue are not pricing practices.
We believe this is an unduly narrow reading of Intel. In Intel, the ECJ carefully distinguished the AEC test from the notion of “less attractive” or “less efficient” rivals. While the former is rightly confined to the realm of pricing practices, the latter offers a framework for deciding a much broader range of competition cases.
Few would argue it is desirable for less attractive websites to be displayed as prominently as more attractive ones, or that less efficient firms should be shielded from market exit if they cannot profitably compete in an auction (as is the case for rivals complaining about the Google Shopping remedy).[49] Focusing on efficiency (or attractiveness, to use the ECJ’s words) is critical to draw the line between market exit that occurs due to consumer demand and that stemming from an anticompetitive strategy that harms consumers. The standard outlined in Google Shopping ignores this distinction.
This error has important consequences. Practices whereby some firms—including dominant ones—give a leg up to their own products or services often result from competition on the merits.[50] This is especially true when one considers the Servizio Elettrico Nazionale and Others finding—quoted in full above[51]—that a dominant firm’s conduct is more likely to result from competition on the merits when non-dominant firms deploy similar strategies. Unfortunately, this very argument was rejected by the GC in Google Shopping:
Secondly, even if, as Google indicates in the application, ‘Bing’s product ads must link to pages where users can purchase the offer’, that does not address the competition concern identified. What is at issue in the present case is not Microsoft’s conduct via its Bing search engine, which, moreover, is not in a dominant position on the market for general search services, but Google’s conduct. The fact that Bing’s ads also link internet users to merchants does not preclude Google’s conduct from being anticompetitive.[52]
To be clear, nothing in the case law we have discussed suggests that non-dominant firms implementing the same practice as a dominant firm is dispositive proof that the conduct belongs to competition on the merits. It does, however, suggest that the GC was wrong to dismiss Google’s claim out of hand. Indeed, as explained above, whether non-dominant firms also implement a practice is part of the appropriate analysis to determine whether it amounts to competition on the merits. Ultimately, however, the clearest dividing line is whether the dominant firm’s conduct is capable of excluding as-efficient rivals.
This has important ramifications for policy. Allowing firms to exploit advantages obtained on the market—as opposed to government-granted privileges—may be precisely what stimulates those firms and their rivals to compete and innovate in the first place.[53] Self-preferencing is also at the core of certain franchising agreements, which have the advantage of allowing the rapid expansion of a successful brand.[54] In the specific case of Google, the “Google Shopping Box” may provide a better experience by giving users a more direct answer, instead of forcing them to scour through hyperlinks and retype their query.[55] All of these scenarios may be procompetitive.
In his opinion in Intel, AG Wahl argued that:
Experience and economic analysis do not unequivocally suggest that loyalty rebates are, as a rule, harmful or anticompetitive, even when offered by dominant undertakings. That is because rebates enhance rivalry, the very essence of competition[56].
If there remains insufficient empirical evidence to condemn an age-old practice like rebates without properly examining its ability to foreclose competitors, then policymakers should be particularly careful when drawing the boundaries for such comparatively novel practices as self-preferencing in digital markets.
In short, the Google Shopping ruling appears incompatible with the effects analysis that underpins Article 102 TFEU. It essentially rests on a per se prohibition that does not distinguish procompetitive and anticompetitive exclusion, rather than the efficiency analysis imposed by Intel. It thus provides no way to draw a line in the sand separating self-preferencing practices that disadvantage competitors and are also anticompetitive from instances in which dominant undertakings favor their own (usually downstream) products to the disadvantage of competitors but are not anticompetitive.
At the time of writing, Google has appealed the GC’s ruling.[57] It is more than likely that these distinctions will be pivotal to that case. Among other things, Google argues that:
The General Court erred in upholding the Decision despite the Decision’s failure to identify conduct that deviated from competition on the merits.… The General Court’s additional reasons as to why Google did not compete on the merits are legally invalid. [58]
Given what precedes, it goes without saying that the ECJ’s conclusions on this point will be pivotal for the future of European competition law. In light of its Intel and Servizio Elettrico Nazionale and Others rulings, the ECJ’s upper court has essentially two options.
The first would be to affirm the lower court’s distinction between price and non-price conduct. This would be unfortunate. From a purely legal standpoint, it would amount to no less than a soft renunciation of Servizio Elettrico Nazionale and Others and a pruning of Intel. It would further convey that the court’s Article 102 case law has no clear direction and is not guided by clear overarching principles. From a more substantive perspective, this first path would create an unfortunate distinction between price-related conduct—assessed under a single unified framework—and the rest of Article 102, in which formalistic distinctions determine what idiosyncratic criteria under which types of conduct are ultimately assessed.
The second option would be for the court to confirm that the potential exclusion of as-efficient competitors is a key part of the legal test for all conduct under Article 102. Not only would this conclusion safeguard the consistency of Article 102, but it would also give lower courts and competition authorities some guiding principle to assess whether novel conduct—such as self-preferencing—does or does not stem from competition on the merits. It would be insufficient for the Commission to prove (a) that a vertically integrated undertaking favors its own downstream products and (b) that this reduces the incentives of consumers to buy competing products. Accordingly, this second outcome would likely tee up so-called renvoi proceedings, where the General Court would reassess whether the Commission adduced sufficient evidence of anticompetitive foreclosure.
In short, there is every reason to believe that, when it is finally decided, the Google Shopping appeal will be a huge milestone for European competition enforcement.
European competition law has come a long way. From early cases like United Brands and Hoffman Laroche—widely derided for their lack of economic literacy—the European judiciary has slowly crafted a coherent framework for Article 102 enforcement.
Although many failed to recognize it at the time, it is increasingly clear that the 2017 Intel ruling was a major catalyst of this upheaval. The ruling indicates that, for any given conduct under EU competition law, there needs to be a way to discern competition on the merits from anticompetitive conduct. In most cases, this includes asking whether the conduct under investigation is capable of excluding as-efficient competitors. However, as we have explained throughout this article, this judicial revolution is not yet complete. Doubts persist concerning the exact scope of Intel and whether it is truly the lodestar that some (including us) make it out to be.
The upcoming Google Shopping ruling will likely be the bellwether that reveals the true legacy of Intel and the future direction of European competition law. The ECJ has an opportunity to clarify when self-preferencing is illegal under Article 102 TFEU. To do so, it must look at the broader implications and recognize that self-preferencing practices that disadvantage some competitors may nevertheless still be procompetitive, and that the two must be differentiated.
Such an outcome might, however, prove somewhat bittersweet. With the Digital Markets Act (“DMA”) just around the corner, careful assessment of effects under the Intel framework will largely be a thing of the past in most digital markets. For instance, both Article 102 and the DMA cover “self-preferencing practices”, but under Article 102, a prohibition is subject to different standards, a higher burden of proof, and certain limiting principles that the DMA does not possess. By its own admission, the DMA cares little about the distinction between procompetitive and anticompetitive conduct, or between competition on the merits and foreclosure, which it replaces with concepts such as fairness and contestability:
The purpose of this Regulation is to contribute to the proper functioning of the internal market by laying down rules to ensure contestability and fairness for the markets in the digital sector in general, and for business users and end users of core platform services provided by gatekeepers in particular.[59]
This does not make Intel and its legacy any less important. With the DMA in force, it will be even more important for competition policymakers to understand the difference between self-preferencing under Article 102 TFEU, which is not per se prohibited and which aims to protect competition to the benefit of consumers, and self-preferencing under the DMA, which aims to protect downstream competitors (“fairness”). By the DMA’s own admission, these are two different things. The DMA’s standards should not be unduly grafted unto competition law, even if it would be politically convenient to interpret longstanding EU competition-law principles in this still nascent and uncertain light.[60]
The stage is thus set for the European Court of Justice to put the finishing touches on the Intel framework, thereby bringing much-needed clarity and consistency to Article 102. This would complete a remarkable turnaround for a body of law that has often been criticized for its lack of unity and economic proficiency. Whether or not this will ultimately prove to be a swan song—with the DMA attracting the bulk of enforcement—is another question.
[1] Case C 209/10 Post Danmark, EU:C:2012:172, para 22; Case C?52/09 TeliaSonera, ECLI:EU:C:2011:83, para 43.
[2] Case C-413/14 P Intel v Commission, ECLI:EU:C:2017:788.
[3] Case C-377/20 Servizio Elettrico Nazionale and Others, ECLI:EU:C:2022:379 (“Servizio Elettrico Nazionale and Others”); Case T-286/09 RENV Intel v Commission, ECLI:EU:T:2022:19 ; Case T-235/18 Qualcomm v Commission, ECLI:EU:T:2022:358.
[4] Case T-612/17 – Google Shopping, ECLI:EU:T:2021:763.
[5] Id., para 538 (“[A]s regards the arguments summarised in paragraph 514 above, according to which the Commission failed to demonstrate that competing comparison shopping services that had experienced difficulties were as efficient as Google, when in fact they are not, the Commission is correct in maintaining that it was not required to prove this. The use of the as-efficient-competitor test is warranted in the case of pricing practices (predatory pricing or a margin squeeze, for example), in order, in essence, to assess whether a competitor that is as efficient as the dominant undertaking allegedly responsible for those pricing practices, and which, in order not to be driven immediately from the market, would charge its customers the same prices as those charged by that undertaking, would have to do so at a loss and accentuating that loss, causing it to leave the market in the longer term…. In the present case, the practices at issue are not pricing practices.”).
[6] Elias Deutscher, ‘Google Shopping and the Quest for a Legal Test for Self-preferencing Under Article 102 TFEU’ (2022) 6 European Papers, 1345-1361; see also Pablo Ibañez Colomo, ‘Self-Preferencing: Yet Another Epithet in need of Limiting Principles’ (2020) 43 World Competition, 417, 443.
[7] Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act) [2022] OJ L 265; on the potential overlaps and conflicts between EU competition law and the Digital Markets Act, see Giuseppe Colangelo, ‘The European Digital Markets Act and Antitrust Enforcement: A Liaison Dangereuse’ (2022) ICLE White Paper. A revised version of the paper is forthcoming in European Law Review, Available at SSRN: https://ssrn.com/abstract=4070310 or http://dx.doi.org/10.2139/ssrn.4070310.
[8] Intel (COMP/C-3/37.990) Commission Decision of 13 May 2009.
[9] Id., paras 920-24; 1760-61. See e.g., at 1760: “thirdly, the as efficient competitor analysis conducted in section VII.4.2.3 is not relevant for the purpose of deciding whether the Commission should impose a fine or for determining its level as it does not relate to the existence of the infringement or to the question whether it was committed intentionally or by negligence, or to its gravity within the meaning of Article 23(2)(a) of Regulation (EC) No 1/2003 and of the Guidelines, in particular points 19 to 23 thereof”.
[10] Id., paras 1002-1153.
[11] Case T-286/09 Intel v Commission, 145 and 152.
[12] Case C-413/14 P Intel v Commission.
[13] Id.
[14] Id.
[15] See, e.g., Ruppert Podszun, ‘The Role of Economics in Competition Law: The “Effects-Based Approach” After the Intel Judgment of the CJEU’ (2018) 7 Journal of European Consumer and Market Law 57, 64 . “Intel does not reconceptualise Article 102 TFEU. It is a case on procedural fairness. It does not call for an effects-based approach in competition law”.
[16] See, e.g., Pablo Ibáñez Colomo, ‘The Future of Article 102 TFEU after Intel’ (2018) 9 Journal of European Competition Law & Practice 293.
[17] Case T-286/09 RENV Intel v Commission.
[18] Id., para 128 et seq.
[19] Qualcomm v Commission.
[20] Qualcomm (Case COMP/AT.40220) Commission Decision of 24 January 2018.
[21] Id., para 405-417.
[22] Id., para 414
[23] Id., paras 354, 396.
[24] Id., para 355.
[25] Id., para. 410. (“The undisputed fact that, on the relevant market, there was no technical alternative to the applicant’s LTE chipsets for a very large part of Apple’s requirements during the period concerned is a relevant factual circumstance which must be taken into account when analysing the capability of the payments concerned to have foreclosure effects, since the Commission found that capability in the light of Apple’s total requirements for LTE chipsets and, in particular, in the light of the reduction of Apple’s incentives to switch to the applicant’s competitors for all its requirements.”).
[26] Id., paras 397, 412, 415; see also Case C?23/14 Post Danmark, EU:C:2015:651, para 65-68.
[27] For instance, id., para349-356.
[28] Commission v. Qualcomm, para 356.
[31] Nicholas Hirst, “Intel, Google Shopping Rules Don’t Conflict, Top EU Judge Says”, (Mlex, 31 March 2022), available at https://mlexmarketinsight.com/news/insight/intel-google-shopping-rulings-don-t-conflict-top-eu-judge-says.
[32] Id.
[33] See, e.g., Ibáñez Colomo (2018) 293. “The Court of Justice (hereinafter, the ‘Court’ or the ‘ECJ’) introduced an important clarification that will have a significant impact on the analysis of abusive practices under Article 102 TFEU…. Intel makes two fundamental contributions to our understanding of the notion of abuse.”
[34] Post Danmark; Case C?67/13 P Cartes Bancaires, ECLI:EU:C:2014:2204.
[35] Case T-286/09 RENV Intel v Commission, para 124.
[36] Google Shopping, para 131.
[37] Google Shopping, para 157.
[38] Opinion of AG Wahl in Case C-413/14 P Intel v Commission, ECLI:EU:C:2016:788, para 73. “In this section, I shall explain why an abuse of dominance is never established in the abstract: even in the case of presumptively unlawful practices, the Court has consistently examined the legal and economic context of the impugned conduct. In that sense, the assessment of the context of the conduct scrutinised constitutes a necessary corollary to determining whether an abuse of dominance has taken place. That is not surprising. The conduct scrutinised must, at the very least, be able to foreclose competitors from the market in order to fall under the prohibition laid down in Article 102 TFEU.”
[39] Id., para 78. “As I see it, the analysis of ‘context’—or ‘all the circumstances’, as it is termed in the Court’s case-law —aims simply but crucially to ascertain that it has been established, to the requisite legal standard, that an undertaking has abused its dominant position. Even in the case of seemingly evident exclusionary behaviour, such as pricing below cost, context cannot be overlooked. Otherwise, conduct which, on occasion, is simply not capable of restricting competition would be caught by a blanket prohibition. Such a blanket prohibition would also risk catching and penalising pro-competitive conduct” (footnotes omitted for ease of reading).
[40] Servizio Elettrico Nazionale and Others, paras 45, 46, 51, 73, 74 & 86.
[41] Id. para 45.
[42] Post Danmark, para 22.
[43] Id., para 79.
[44] Opinion of AG Rantos in Case C-377/20 Servizio Elettrico Nazionale and Others, paras 69-74.
[45] See, e.g., Jao Cardoso Pereira, ‘Groupement des Cartes Bancaires: Reshaping the Object Box’ (2015) 18 Competition and Regulation 265, 266. “This judgment shows how economic analysis plays an increasing role in shaping the boundaries of competition policy. In this judgment, the ECJ has taken insights from recent advances in the economic analysis of two-sided markets to reach the conclusion that the pricing measures adopted by the Groupement could not be treated as a restriction of competition by object.” See also, Dirk Auer & Nicolas Petit, ‘Two-Sided Markets and the Challenge of Turning Economic Theory into Antitrust Policy’ (2015) 60 The Antitrust Bulletin, 447.
[46] Post Danmark, para 22.
[47] Servizio Elettrico Nazionale and Others, para 82.
[48] Pablo Ibañez Colomo, ‘Self-Preferencing: Yet Another Epithet in need of Limiting Principles’ (2020) 43 World Competition, 417, 443.
[49] Dirk Auer, “Case Closed: Google Wins (for now)” (Truth on the Market, 19 November 2021), available at https://truthonthemarket.com/2021/11/19/case-closed-google-wins-for-now/.
[50] See. e.g., Geoffrey Manne, “Against the Vertical Discrimination Presumption” (2020) 2-2020 Concurrences 1. “The notion that self-preferencing by platforms is harmful to innovation is entirely speculative. Moreover, it is flatly contrary to a range of studies showing that the opposite is likely true. In reality, platform competition is more complicated than simple theories of vertical discrimination would have it, and there is certainly no basis for a presumption of harm.”
[51] Servizio Elettrico Nazionale and Others, para 79.
[52] Google Shopping, para. 354.
[53] Forcing those firms to share such advantages with rivals’ might encourage them to slack off and free-load. See, in this respect, Opinion of AG Jacobs’ opinion in Case C-7/97 Oscar Bronner, EU:C:1998:264. For a more detailed discussion, see. e.g., Dirk Auer, ‘Appropriability and the European Commission’s Android Investigation’ (2017) 23 Columbia Journal of European Law 647.
[54] Case 161/84 Pronuptia, EU:C:1986:41, para 15.
[55] Jakob Kucharczyk, “When Product Innovation Becomes a Competition Law Infringement: Preliminary Thoughts on the Google Shopping Decision”, (2017) 1 European Competition and Regulatory Law Review 193; see also Geoffrey Manne, “The Real Reason Foundem Foundered” (2018) ICLE Antitrust & Consumer Protection Research ProgramWhite Paper 2018-2, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3384297.
[56] Opinion of AG Wahl in Case C-413/14 P Intel v Commission, para 90.
[57] Appeal brought on 20 January 2022 by Google LLC and Alphabet, Inc. against the judgment of the General Court (Ninth Chamber, Extended Composition) delivered on 10 November 2021 in Case T-612/17, Google and Alphabet v Commission (Case C-48/22 P)
[58] Id.
[59] Regulation of the European Parliament and of the Council on contestable and fair markets in the digital sector (Digital Markets Act), point (7) of the preamble.
[60] Margethe Vestager has recently claimed the Apple Pay investigation would “inform the future application of the Digital Markets Act. It will set a precedent with regard to the analysis of the security concerns, and a recipe for effective and proportionate access to NFC for mobile payments.” See European Commission, “Remarks by Executive Vice-President Vestager on the Statement of Objections sent to Apple over practices regarding Apple Pay” (Brussels, 2 May, 2022), available at https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_22_2773.
TOTM Late last month, 25 former judges and government officials, legal academics and economists who are experts in antitrust and intellectual property law submitted a letter to Assistant . . .
Late last month, 25 former judges and government officials, legal academics and economists who are experts in antitrust and intellectual property law submitted a letter to Assistant Attorney General Jonathan Kanter in support of the U.S. Justice Department’s (DOJ) July 2020 Avanci business-review letter (ABRL) dealing with patent pools. The pro-Avanci letter was offered in response to an October 2022 letter to Kanter from ABRL critics that called for reconsideration of the ABRL. A good summary account of the “battle of the scholarly letters” may be found here.
TOTM When Congress created the Federal Trade Commission (FTC) in 1914, it charged the agency with condemning “unfair methods of competition.” That’s not the language Congress used in . . .
When Congress created the Federal Trade Commission (FTC) in 1914, it charged the agency with condemning “unfair methods of competition.” That’s not the language Congress used in writing America’s primary antitrust statute, the Sherman Act, which prohibits “monopoliz[ation]” and “restraint[s] of trade.”
ICLE Issue Brief On Nov. 10, 2022, the Federal Trade Commission (FTC) issued a new policy statement regarding the scope of “unfair methods of competition” (UMC) under Section 5 of the FTC Act. The new statement fills the gap left by the Commission’s July 2021 rescission of its 2015 policy statement.
On Nov. 10, 2022, the Federal Trade Commission (FTC) issued a new policy statement[1] regarding the scope of “unfair methods of competition” (UMC) under Section 5 of the FTC Act. The new statement fills the gap left by the Commission’s July 2021 rescission[2] of its 2015 policy statement.[3] Democratic appointees Chair Lina Khan and Commissioners Rebecca Slaughter and Alvaro Bedoya voted in favor of the new policy statement, while Commissioner Christine Wilson, a Republican appointee, dissented.[4]
The new statement describes the policy changes that the Commission majority previewed in 2021: the FTC will target a much broader range of conduct than it has in the past, as it untethers “unfair methods of competition” from, inter alia, consumer welfare, the rule of reason, and actual or likely harm to competition.
The policy statement sketches an architecture for UMC determinations that, on closer inspection, is ephemeral or, at best, radically unspecified. Under the new statement, unfair methods of competition mean “conduct undertaken by an actor in the marketplace—as opposed to merely a condition of the marketplace, not of the respondent’s making, such as high concentration or barriers to entry.”[5] That seems largely unhelpful. But for the suggestion that, following established law, monopoly (or high concentration) or structural barriers to entry are still not to be deemed prohibited in or of themselves, this seems a statement that conduct will not be deemed unfair unless it is, in fact, commercial conduct. The contrast with “competition on the merits” lacks content: the FTC has no statutory charge to define competition on the merits, except in the breach; it has not defined “competition on the merits” in the past and it does not do so in the present policy statement.
We are provided with a necessary conjunction. Conduct will only be deemed unfair if it is both:
The first term of the conjunction is satisfied by conduct fitting under a complex, if vague, disjunction: conduct that is “coercive, exploitative, collusive, abusive, deceptive, predatory” or acts that “involve the use of economic power of a similar nature,” or conduct that “may” be “otherwise restrictive or exclusionary.”
The second term is noteworthy mostly for what it is not. It does not specify either harm to competition or harm to consumers, but rather a tendency (not necessarily a likelihood) to “negatively affect” (perhaps to harm) “competitive conditions.”
We are told UMC will apply only to conduct that satisfies both sides of the conjunction, but we are also told that the FTC will evaluate conduct under these two complex criteria on a sliding scale, such that, where the markers of “unfairness” are clear, a lesser showing of a tendency to have a negative impact on competitive conditions may suffice for a finding of liability, and vice versa.
Before we try to unpack the conditions proffered by the Commission’s new policy statement, we are told to disabuse ourselves of familiar terms and standards. First, the Commission expressly abandons the consumer welfare standard. In its place, we have a sort of any-party-in-the-marketplace standard, concerned with effects on “consumers, workers, or other market participants.”[7] Second, whether conduct “tends to” affect (negatively) any party “does not turn to whether the conduct directly caused actual harm in the specific instance at issue.” Effects need not be “current” or “measurable” or even “actual,” the distinctions between “unmeasurable” and “immeasurable,” and between “actual,” “likely,” and “possible,” notwithstanding,
Some of this relaxation of standards is supposed to be necessary to get at incipient harms under Section 5, and not just under Section 7 of the Clayton Act. But there’s a bit of a fudge on established notions of incipiency, and on the broader antitrust notion of actual or likely harm. An invitation to collude may be more or less likely to succeed, but it is, in any case, an attempt to do something that is per se unlawful; that is, something that is extremely likely to cause actual harm to competition and consumers should it come to fruition. There is no procompetitive rationale for an invitation to collude. But here, incipiency is divorced even from the notion that a given course of conduct by some specific party is likely to harm competition and consumers, whether it comes to fruition or not.
Second, the Commission expressly disavows the rule of reason, calling it “open ended” and capable of delivering “inconsistent and unpredictable results.”[8] At the same time, the new statement lacks any limiting principle, and it is hard to see how it could be more consistent or in any way predictable in application.
When we come to positive criteria, we find the unfairness laundry list catalogued above. Yet most of those terms lack any clear meaning under U.S. antitrust law, even if they occur here and there in dicta in Supreme Court or lower-court opinions. For example, after reeling off six terms of the “unfair” disjunction (coercive, exploitative, collusive, abusive, deceptive, and predatory), the statement first cites Sperry & Hutchinson for the proposition that Section 5 reaches conduct “shown to exploit consumers.” True, 50 years ago, the Court did wax expansive on the scope of Section 5.[9] In doing so, the Court opined that a showing of the exploitation of consumers—harm to consumers—could constitute a violation of Section 5. But the current policy statement does not require harm to either competition or consumers; and the notion that the Court would today sustain a finding of UMC liability absent harm to either competition or consumers is dubious. Moreover, the Sperry & Hutchinson Court’s discussion of “exploitation” was in no way necessary to its decision in that matter; that was, namely, that the Commission had not made its case without the bounds of the antitrust laws:
The opinion is barren of any attempt to rest the order on its assessment of particular competitive practices or considerations of consumer interests independent of possible or actual effects on competition. Nor were any standards for doing so referred to or developed.[10]
In brief, the Court’s hoary discussion of “exploitation” has no clear precedential value. But if it did, the discussion would give no guidance to industry or the bar on the question what today’s Commission means by “exploitation.” The Commission’s statement offers no clue at all about the limits to the conduct the Commission purports to proscribe.
Elsewhere in the statement, the Commission cites Leegin in support of the proposition that Section 5 reaches “parallel exclusionary conduct that may cause aggregate harm.” The citation seems inapt, at best, given Leegin’s holding, “that Dr. Miles should be overruled and that vertical price restraints are to be judged by the rule of reason.”[11] The Commission characterizes Leegin as “holding that the extent of adoption of resale price maintenance across the industry is relevant to legality.” The Court does opine that “the number of manufacturers that make use of the practice in a given industry can provide important instruction” in a rule-of-reason inquiry into the legality of a practice.[12] But that is not the holding in Leegin, which reversed a 5th U.S. Circuit Court of Appeals decision applying a per se standard of liability, as had the trial court below it. Leegin emphasized the importance of the rule of reason (rejected by the current policy statement) and consumer welfare (rejected by the current policy statement) and noted that conduct such as retail price maintenance “may not be a serious concern unless the relevant entity has market power”[13] (again, rejected by the current policy statement). The Commission might also recall the 9th U.S. Circuit Court of Appeals’ decision in Boise Cascade: “to allow a finding of a Section 5 violation on the theory that the mere widespread use of a practice makes it an incipient threat to competition would be to blur the distinction between guilty and innocent commercial behavior.”[14]
Having provided an essentially vague and open-ended account of “unfair methods of competition,” the Commission rejects the notion that it must consider any justifications for conduct it deems facially violative of that “standard.” It may, but the statement is clearest on the question of what will not suffice. Neither a demonstration of “net efficiencies” nor a “numerical cost-benefit” test will suffice;[15] neither will benefit in another market, no matter how inextricably tied to the one in which there’s a purported tendency to foster the open-ended harms. We are told that “[s]ome well-established limitations on what defenses are permissible in an antitrust case apply in the Section 5 context as well”—as if, perhaps, we wondered whether pretextual justifications might do when net efficiencies or net consumer benefits would not.
To justify the broad expansion of its interpretation of its UMC authority, the Commission reaches extensively, if selectively, into the legislative history of the FTC Act. The statement argues that, when Congress passed the FTC Act in 1914, it intended the law to be broader than the Sherman Act. That claim, at that level of abstraction, is uncontroversial. The question had never been whether the bounds of Section 5 exceed those of the Sherman Act, to any degree, in any context. Rather, there were live questions about the extent to which Section 5 does so, and the methods by which standalone Section 5 violations might be determined. The FTC portrays the new statement as a “restoration” of “rigorous enforcement” of the ban on unfair methods of competition,[16] but it does so without any rigor of its own, or any clear justification for fixing on some certain days past as halcyon.
As Commissioner Wilson observes in her dissenting statement, the Commission’s selective appeals to legislative history elides the congressional backlash triggered by the FTC’s overplaying its hand in the 1970s. It also ignores much of the past century’s development of antitrust jurisprudence, in which the Sherman and Clayton Acts have proved effective, and the courts (and the antitrust agencies) have developed principles to provide guidance as to what makes conduct unlawful.
It is well-established, as Commissioner Wilson acknowledges, that Section 5 reaches “incipient violations” of the antitrust laws. But eliminating the need to show likely anticompetitive effects, market power, or consumer harm attached to any given course of conduct, along with the repudiation of measurement (or estimation) and efficiency—as the statement does—in favor of a focus on an ill-defined “tendency to generate negative consequences” for some market participant or other can only serve to diminish rigor in FTC analysis and predictability in its conclusions. Rather, as Commissioner Wilson suggests, it is likely to favor the personal views or intuitions of a sitting majority of commissioners.
Commissioner Wilson observes that the statement “resembles the work of an academic or a think tank fellow” with dreams of “remaking the economy.”[17] Adopting only vague notions of the meaning of unfairness, and lacking grounding in established antitrust analysis, the FTC promises enforcement and possible rulemaking based on the idea that appointed “expert” commissioners will be best suited to determine what conduct is unlawful. This increases the odds of arbitrary actions by the FTC. Commissioner Wilson explains that the policy statement reflects an “I know it when I see it” approach “premised on a list of nefarious-sounding adjectives” without antitrust or economic meaning or any clear methodology.[18]
Chair Khan responds to Commissioner Wilson by arguing that Congress purposefully created an expert agency that would target conduct outside the scope of the antitrust laws under a definition of unfair methods of competition that the agency itself would create.[19] Perhaps, but in 1914, “outside the scope of the antitrust laws” meant beyond the scope of the 1890 Sherman Act, as then understood, not beyond all antitrust statutes and amendments to follow, come what may. And however the Commission’s UMC authority was (and mostly was not) specified in the FTC Act, it is clear that the agency—as an institution—was supposed to develop its expertise and the notion of UMC with oversight by (and input from) Congress and the courts. Reaching past several decades of established agency practice and decisions of the federal courts, including those of the Supreme Court, was never part of the institutional design. Not incidentally, it calls into question the subject matter of the Commission’s purported expertise.
The FTC has provided some clues as to what it hopes to accomplish, if not by any definite method or subject to any limiting principle. In the new policy statement, the Commission states that the “size, power, and purpose of the respondent” may be relevant to its UMC inquiry.[20] Abandoning the protection of consumer welfare, and looking to possible effects on “other market participants,” the FTC is setting its sight on so-called “bigness” and the protection of weaker competitors.
In his supporting statement, Commissioner Bedoya makes plain that the FTC should ensure a “level playing field for small business” and “all competitors,” arguing that it is not the FTC’s job to promote efficiency.[21] Commissioner Bedoya provides examples of conduct that the FTC may bring under the UMC umbrella, including conduct that may pass muster under the antitrust laws (or specifically, the rule of reason): local price cutting, tying conduct, exclusive contracts, rebates and preferential contracts, dominant control of inputs, manipulation, certain forms of refusal to deal, information collection on rivals, and coercion, threats, and intimidation. What Commissioner Bedoya and the Commission majority do not provide is a method for assessing when such conduct runs afoul of Section 5, or a policy rationale for condemning conduct without a showing of actual or likely harm to competition or consumers.
Finally, the policy statement also reiterates that the current FTC believes it has the power to create binding, substantive UMC rules. The combination of an assertion of overly broad and loosely defined substantive coverage of conduct, together with an assertion of broad remedial and legislative powers, previews an aggressive agency with heavy-handed enforcement and rulemaking to come.
* Daniel Gilman is a senior scholar with the International Center for Law & Economics (ICLE) and a former advisor at the Federal Trade Commission. Gus Hurwitz is ICLE’s director of law & economics programs.
[1] Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act, Federal Trade Commission (Nov. 10, 2022), available at https://www.ftc.gov/system/files/ftc_gov/pdf/P221202Section5PolicyStatement.pdf [hereinafter “2022 UMC Policy Statement.”]
[2] Statement of Chair Lina M. Khan, Joined by Commissioner Rohit Chopra and Commissioner Rebecca Kelly Slaughter, on the Withdrawal of the Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act, Federal Trade Commission (Jul. 1, 2021), available at https://www.ftc.gov/system/files/documents/public_statements/1591498/final_statement_of_chair_khan_joined_by_rc_and_rks_on_section_5_0.pdf [hereinafter “2021 Withdrawal Statement.”]
[3] Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act, Federal Trade Commission (Aug. 13, 2015), available at https://www.ftc.gov/system/files/documents/public_statements/735201/150813section5enforcement.pdf.
[4] Dissenting Statement of Commissioner Christine S. Wilson, Federal Trade Commission (Nov. 10, 2022), available at https://www.ftc.gov/system/files/ftc_gov/pdf/P221202Section5PolicyWilsonDissentStmt.pdf [hereinafter “Wilson Dissent.’]
[5] 2022 UMC Policy Statement, supra note 1, at 8.
[6] 2022 UMC Policy Statement, supra note 1, at 9.
[7] Id.
[8] 2021 Withdrawal Statement, supra note 2, at 3.
[9] FTC v. Sperry & Hutchinson Co., 405 U.S. 233 (1972).
[10] Id., at para. 40.
[11] Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007).
[12] Id., at 17.
[13] Id., at 18.
[14] Boise Cascade v. FTC, 637 F.2d 573, 582 (9th Cir. 1980).
[15] 2022 UMC Policy Statement, supra note 1, at 11.
[16] FTC Restores Rigorous Enforcement of Law Banning Unfair Methods of Competition, Federal Trade Commission (Nov. 10, 2022), https://www.ftc.gov/news-events/news/press-releases/2022/11/ftc-restores-rigorous-enforcement-law-banning-unfair-methods-competition.
[17] Wilson Dissent, supra note 4, at 2.
[18] Id.
[19] Statement of Chair Lina M. Khan, Federal Trade Commission (Nov. 10, 2022), available at https://www.ftc.gov/system/files/ftc_gov/pdf/Section5PolicyStmtKhanSlaughterBedoyaStmt.pdf.
[20] 2022 UMC Policy Statement, supra note 1, at 9.
[21] Statement of Commissioner Alvaro M. Bedoya, Federal Trade Commission (Nov. 10, 2022), available at https://www.ftc.gov/system/files/ftc_gov/pdf/P221202Section5PolicyStmtBedoyaStmt.pdf.
TOTM Price-parity clauses have, until recently, been little discussed in the academic vertical-price-restraints literature. Their growing importance, however, cannot be ignored, and common misconceptions around their . . .
Price-parity clauses have, until recently, been little discussed in the academic vertical-price-restraints literature. Their growing importance, however, cannot be ignored, and common misconceptions around their use and implementation need to be addressed. While similar in nature to both resale price maintenance and most-favored-nations clauses, the special vertical relationship between sellers and the platform inherent in price-parity clauses leads to distinct economic outcomes. Additionally, with a growing number of lawsuits targeting their use in online platform economies, it is critical to fully understand the economic incentives and outcomes stemming from price-parity clauses.
ICLE White Paper Examining whether self-preferencing should be considered a new standalone offense under European competition law.
Whether self-preferencing is inherently anticompetitive has emerged as perhaps the core question in competition policy for digital markets. Large online platforms who act as gatekeepers of their ecosystems and engage in dual-mode intermediation have been accused of taking advantage of these hybrid business models to grant preferential treatment to their own products and services. In Europe, courts and competition authorities have advanced new antitrust theories of harm that target such practices, as have various legislative initiatives around the world. In the aftermath of the European General Court’s decision in Google Shopping, however, it is important to weigh the risk that labeling self-preferencing as per se anticompetitive may merely allow antitrust enforcers to bypass the legal standards and evidentiary burdens typically required to prove anticompetitive behavior. This paper investigates whether and to what extent self-preferencing should be considered a new standalone offense under European competition law.
In recent years, widespread concern has emerged that large digital platforms may misuse their market positions by giving preferential treatment to their own products and services. One fear is that, by engaging in self-preferencing, so-called “Big Tech” firms may be able not only to entrench their power in core markets, but also to extend it into associated markets.1F[1] Notably, by controlling ecosystems of integrated complementary products and services—which usually represent important gateways for business users to reach end users—dominant platforms may enjoy a strategic market status that allows them to exercise bottleneck power. As the argument goes, by acting as gatekeepers and regulators within their ecosystems, these platforms represent unavoidable trading partners and may pick winners and losers in the marketplace.
Moreover, digital platforms often serve a dual role, acting as both an intermediary and a trader operating on the platform. Hence, they may be tempted to influence results in their own favor (so-called “biased intermediation”). Indeed, once an intermediation platform is also active in complementors’ markets, it loses its status of neutrality and risks of discrimination against rivals may arise because of potential conflict of interests. Therefore, quoting a slogan delivered by U.S. Sen. Elizabeth Warren (D-Mass.) during the 2020 Democratic Party presidential primary campaign: “you get to be the umpire or you get to have a team in the game—but you don’t get to do both at the same time.”2F[2] European Commissioner for Competition Margrethe Vestager has used a similar sporting analogy—arguing that a platform cannot be both a player who competes against rivals in the downstream market and, at the same time, the upstream referee who determines the conditions of that competition.3F[3]
In short, self-preferencing may allow large digital platforms to adopt a leveraging strategy to pursue a twofold anticompetitive effect—that is, excluding or impeding rivals from competing with the platform (defensive leveraging) and extending their market power into associated markets (offensive leveraging). The latter scenario may take the form of envelopment, in which a platform attempts to both exclude rivals and facilitate its own entry into a target market by tying the core functionalities of its platform to the services offered in that market.4F[4]
The legislative initiatives that have been undertaken around the world posit that, to ensure a level playing field, digital gatekeepers must be prevented from engaging in various forms of self-preferencing. The European Union’s Digital Markets Act (DMA), for example, prohibits gatekeepers from: engaging in any form of self-preferencing in ranking services and products offered by the platform itself; using any non-publicly available data generated through activities by business users to compete with those users on the platform; preventing the removal of preinstalled applications; giving preferential access to hardware, operating-system, or software features to their own ancillary services; and refusing to grant “fair, reasonable, and non-discriminatory” (FRAND) access to app stores, search engines, and social-networking services.5F[5] The United Kingdom’s proposed regulatory regime for digital markets, which imagines the adoption of firm-specific codes of conduct for online platforms with “strategic market status,” includes self-preferencing as an example of exclusionary behavior that large digital platforms sometimes engage in when they exert control over an ecosystem.6F[6] The German Digitalization Act likewise includes a ban on platforms favoring their own offers when they mediate access to supply and sales markets, particularly in cases where they present their own offers in a more favorable manner, exclusively pre-install them on devices, or integrate them in any other way.7F[7]
The American Innovation and Choice Online Act (AICOA) would go even further. The bill would declare it unlawful to engage in conduct that would “unfairly preference the covered platform operator’s own products, services, or lines of business over those of another business user on the covered platform in a manner that would materially harm competition on the covered platform.”8F[8] Accordingly, for example, Google would be prevented from launching only Google Maps in response to a query for restaurants, or from placing Google services at the top of a search-results page unless it is accompanied by all possible rival services. Similarly, Amazon would be constrained from showcasing its branded products or favoring third-party products that use its fulfillment service, while Apple would be banned from supplying prominent app-search results for its own apps or even from preinstalling its own apps.9F[9]
These provisions and others like them would essentially treat digital platforms as common carriers, and therefore subject them to a neutrality regime and utilities-style regulation. In some markets, lawmakers have proposed even more stringent reforms designed to reduce digital platforms’ potential bottleneck and intermediation power, and to prevent conflicts of interest, such as requirements that intermediation and operating units be structurally separated, restrictions on lines of business, and imposed duties to deal.10F[10]
In addition to these legislative initiatives, self-preferencing has also emerged as a theory of harm before European courts and antitrust authorities. After all, much of the behavior prohibited explicitly in the DMA initially attracted attention as part of antitrust investigations. In particular, the ban against self-preferencing appears to have been informed by the European Commission’s decision in the Google Shopping case, in which Google was fined for having systematically demoted the results of competing comparison-shopping products on its search results pages, while having granted prominent placement to its own comparison-shopping service.11F[11] The fact that the decision came following a protracted seven-year investigation has been cited as evidence of the need for an ex ante prohibition of such practices, thus removing the annoying hurdles and burdens posed by standard antitrust analysis.
The European General Court recently upheld the Commission’s decision,12F[12] although it narrowed the original decision’s scope by focusing on the context in which the practice occurred. Rather than articulating a legal test for a new antitrust offense, the Court applied fact-specific criteria to examine the potential for discrimination by a search engine. This approach notably differs from defining self-preferencing as a standalone abuse, as has been supported by the European Commission and some national competition authorities (NCAs).13F[13]
The DMA, it should be noted, will not displace Europe antitrust rules;14F[14] rather, the law will be implemented alongside them. This heightens the potential for interpretative uncertainty regarding the degree to which self-preferencing will or ought to be treated, in practice, as an infringement of competition law. This paper therefore sets out to investigate whether, in the aftermath of the Google Shopping ruling, self-preferencing by digital platforms has peculiar features that justify its consideration as a new theory of harm.
Indeed, one of the primary challenges posed by treating self-preferencing as a competitive harm, from a competition-law perspective, is the lack of an obvious limiting principle.15F[15] Notably, recent European case law suggests that, rather than a standalone theory of harm, self-preferencing is a catch-all category that includes various practices already addressed by antitrust rules. The risk is that labeling self-preferencing as per se anticompetitive would merely provide antitrust authorities with the opportunity to elide the application of legal standards and evidentiary burdens traditionally required to prove anticompetitive behavior.
This paper calls for appreciation of the continuing wisdom of antitrust orthodoxy against the prevailing zeitgeist, arguing that many of the perceived limits of antitrust actually represent its virtues.16F[16] Indeed, the goal of competition law ought not be to satisfy urgent policy objectives. Rather, antitrust is about limiting principles, even where that means it is unpopular.17F[17]
The remainder of the paper is structured as follows. Section II provides an overview of the relevant traditional antitrust theories of harm and emerging case law to analyze whether and to what extent self-preferencing could be considered a new standalone offense in EU competition law. Section III investigates whether platform neutrality more generally belongs to the scope of competition law, according to its legal foundations and settled principles. Section IV concludes.
The debate over self-preferencing revolves around its novelty. Antitrust concerns are raised regarding the preferential treatment granted by a vertically integrated dominant firm to its own products and services because of the firm’s dual role as both host and competitor. This is of particular interest when such potential conflicts of interest may result in the leveraging of market power in adjacent lines of business in ways capable of producing exclusionary effects.
From this perspective, competitive risks associated with self-preferencing do not appear significantly different from those that emerge in any scenario of vertical integration. Vertical integration is, indeed, often procompetitive, specifically because it can be used to improve efficiency and reduce transaction costs. Furthermore, while there is some dispute as to whether a dominant firm is required to ensure a level playing field by treating rivals in the same way as it does its own businesses, competition law is already equipped with tools to forbid practices that pursue discriminatory leveraging strategies. The emergence of digital platforms does not, in and of itself, challenge antitrust enforcement. To investigate whether self-preferencing should be considered a new standalone offense, it is necessary to first analyze the scope of relevant antitrust prohibitions and to evaluate the peculiar features of self-preferencing, as illustrated by courts and antitrust authorities that have recently sanctioned this behavior.
Although predatory pricing and loyalty rebates may sometimes lead a firm to favor its own downstream services, our attention will be devoted to those practices that appear closer to self-preferencing: namely, refusal to deal, tying, bundling and mixed bundling, margin squeezes, and discrimination. In particular, the last of these represents the most obviously relevant comparison, as the favorable treatment a platform grants to its own products and services entails discriminatory treatment of rivals.
Under European competition law’s non-discrimination provisions, preferential treatment may be investigated when a vertically integrated firm applies to rivals (primary line injury) or other partners (secondary line injury) more onerous conditions than it applies to its own downstream businesses.18F[18] The second-degree price discrimination is mainly addressed by Article 102(c) TFEU, which establishes the abusive character of applying dissimilar conditions to equivalent transactions with trading parties, thereby placing them at a competitive disadvantage. It has been noted that the provision may be considered a straightforward legal basis for a theory of self-preferencing, as shown by the case law that has predominantly applied the provision in settings where a vertically integrated dominant firm sought to advantage its downstream operations at the expense of rivals.19F[19]
In the aftermath of the MEO ruling and following the effects-based approach affirmed in Intel,20F[20] discrimination is not, in itself, problematic from the point of view of competition law.21F[21] As a consequence, not every disadvantage that affects some customers of a dominant firm will amount to an anticompetitive effect; competitive disadvantages cannot be presumed. Antitrust enforcers are instead required to consider all the circumstances of the relevant case, assessing whether there is a strategy to exclude from the downstream market a trading partner that is at least as efficient as its competitors.
Self-preferencing may also take the form of tying, bundling, or mixed bundling. In the first of these, a dominant player leverages its market position in the tying product, making the purchase of the latter subject to the acceptance of another (tied) product. Bundling refers to the way products are offered and priced. In the case of pure bundling, the products are only sold jointly in fixed proportions. In mixed bundling, the products are also made available separately, but the sum of prices when sold separately is higher than the bundled price.22F[22]
Any of these practices may lead to anticompetitive foreclosure in the tied market and, indirectly, in the tying market. The exclusion of as-efficient-competitors is key to triggering antitrust liability for competition foreclosure. Mixed bundling may be anticompetitive if the discount is so large that equally efficient competitors offering only some of the components cannot compete against the discounted bundle. With bundling, the greater the number of products on which the undertaking exerts market power, the stronger the likelihood of anticompetitive foreclosure. In the case of tying, if an insufficient number of customers would buy the tied product on its own to sustain competitors of the dominant undertaking in the tied market, the tying could lead to those customers facing higher prices. Finally, the risk of foreclosure in tying and bundling strategies is expected to be greater where the dominant player makes it last—e.g., through technical tying (i.e., designing a product in such a way that it only works properly with the tied product and not with alternatives offered by competitors).
As tying strategies can be implemented either through contractual terms or by technical means, antitrust authorities are increasingly prone to challenge platforms’ product-design decisions that favor their own products or services by limiting interoperability, thereby impeding compatibility with rival products or services.23F[23] In Microsoft, the European General Court argued that the ubiquity of a dominant player in the tying market is likely to foreclose competition in the tied market. The Court noted that the practice of bundling a specific piece of software to an operating system through pre-installation allows the tied product “to benefit from the ubiquity of that operating system … which cannot be counterbalanced by other methods of distributing media players.”24F[24]
Foreclosure also may arise when consumers obtain the tied product free of charge and are not prevented from obtaining rival services. In Google Android, the Commission fined Google for having engaged in a leveraging practice to preserve and strengthen its position in the search-engine market by requiring device manufacturers to preinstall Google Search and the Chrome browser as preconditions to license the Google Play app store. By locking down Android in the Google-controlled ecosystem, manufacturers wishing to pre-install Google apps were prevented from selling smart-mobile devices that run on versions of Android not approved by Google (so-called Android “forks”).25F[25] According to the Commission, pre-installation can create a status quo bias, which reduces the incentives for manufacturers to pre-install competing search and browser apps, as well as the incentives for users to download such apps. The therefore affects rivals’ ability to compete effectively with Google. Despite the fact that Android is mostly distributed as open-source software, the Commission rejected both of the justifications Google put forward: that leveraging practices reflected a legitimate appropriation strategy to preserve incentives to innovate in a regime of weak appropriability26F[26] and that fork restrictions fell under governance rules needed to protect multi-sided platforms from negative externalities (in this case, preventing software fragmentation and the potential diffusion of incompatible versions of the software).27F[27]
Taken to its extreme, self-preferencing can result in refusals to deal,28F[28] which explains why European policymakers have invoked the essential facilities doctrine to address such cases. The aim of the doctrine, which imposes on dominant firms a duty to deal with all who request access, is to prevent a firm with control over an essential asset from excluding rivals or from extending its monopoly into another stage of production. Because it requires sacrificing the dominant firm’s freedom of contract and right to property, however, it may weaken incentives to invest, innovate, and compete.
These refusal-to-deal infringements are, under European competition law, generally limited to “exceptional circumstances.” According to Magill, a refusal to deal may trigger an antitrust violation when: (i) access to the product or service is indispensable to a firm’s ability to do business in a market; (ii) the refusal is unjustified; (iii) the refusal excludes competition on a secondary market; and (iv), if intellectual property rights are involved, it prevents the emergence of a new product for which there is potential consumer demand.29F[29] The IMS30F[30] and Microsoft31F[31] judgments substantially dismantled the third and fourth requirements, respectively, by considering the secondary-market requirement met even if that market is just potential or hypothetical, and the new product requirement satisfied even when access to the facility is necessary for rivals to develop follow-on innovation (i.e., improved products with added value).
Nonetheless, pursuant to the interpretation provided in Bronner, the requirement that a requested facility be indispensable remains in place and represents the last bulwark against the dangers of uncontrolled application of the doctrine.32F[32] Indeed, access to an input is considered indispensable if there are no technical, legal, or even economic obstacles that would render it impossible (or even unreasonably difficult) to duplicate. To demonstrate the lack of realistic potential alternatives, a requesting firm must establish that it is not economically viable to create the resource on a scale comparable to that of the firm controlling the existing product or service.
Against this background, the recent Slovak Telekom judgment introduced a relevant novel claim that the conditions laid down in Bronner do not apply where the dominant undertaking does give access to its infrastructure but makes that access subject to unfair conditions.33F[33] In addition, the Court of Justice (CJEU) implied that enforcers do not have to prove indispensability when access to a facility has been granted as a result of a regulatory obligation.34F[34] The implications are particularly relevant to digital markets, as the regulatory framework established by the DMA requiring access to platforms designated as gatekeepers would exempt antitrust authorities from having to demonstrate the indispensability of those facilities.
Finally, self-preferencing may be construed as a “margin squeeze,” which EU competition law defines as a standalone abuse that undermines the condition of equality of opportunity between economic operators. The European Commission initially equated this practice to a constructive refusal to deal, noting that, instead of refusing to supply, a dominant undertaking charges a price for a product on the upstream market that would not allow even an equally efficient competitor to trade profitably in the downstream market on a lasting basis.35F[35] The Commission therefore introduced the so-called Telefonica exceptions to categorize a specific class of cases where Bronner’s requirements would not apply. These exceptions hold that an obligation to supply cannot have negative effects on the input owner’s and/or other operators’ incentives to invest and innovate upstream.36F[36] The CJEU has, however, gradually moved toward rejecting the concept of an implicit refusal to grant access, holding that margin squeezes should be treated as a separate theory of harm, thereby introducing an even broader exception to Bronner.
Notably, while an essential facility was involved in Deutsche Telekom I, the owner of the facility had a regulatory obligation to share and rivals’ margins were negative.37F[37] Teliasonera found a margin squeeze in a situation where the input of the dominant undertaking was not indispensable, there was no regulatory obligation to supply, and rival firms’ margins were positive, but insufficient, as the rivals were forced to operate at artificially reduced levels of profitability.38F[38] Telefonica39F[39] and Slovak Telekom40F[40] upheld the approach of considering margin squeezes as an independent form of abuse to which the criteria established in Bronner are not applicable.
Against this background, doubts about the potential to identify self-preferencing as a standalone abuse under EU law emerge from the court analysis and antitrust decisions that have been issued to date sanctioning dominant platforms for preferential treatment granted of own products and services. Indeed, recent European case law would appear to question whether self-preferencing is sufficiently novel to constitute a standalone theory of harm, given that it has been readily addressed under existing theories of harm. With the exceptions of the Amsterdam Court of Appeal41F[41] and the Italian Competition Authority,42F[42] courts generally do not even use the term “self-preferencing,” opting instead to label the conduct “favoring.”
The birth of self-preferencing as a standalone theory of harm is usually associated with the European Commission’s investigation of Google for having positioned and displayed, in its general search-results pages, its own comparison-shopping service more favorably than rival comparison-shopping services.43F[43]
However, a similar issue was addressed a few months earlier by the High Court of England and Wales in the dispute between Streetmap and Google, which involved the interaction of competition between online search engines and online maps.44F[44] Indeed, Streetmap contended that Google abused its dominant position by prominently and preferentially displaying its own related online-map product. Streetmap contended that, by visually displaying a clickable image from Google Maps (and no other map) in response to certain geographic queries (Maps OneBox) at or near the very top of its search-engine results page (SERP), and consequently relegating Streetmap to a blue link lower down the page, Google abused its dominant position in the market for online search and online search advertising.
Given the evident similarity with the Google Shopping case, Justice Roth’s analysis is worthy of examination. While Streetmap framed Google’s practice in terms of bundling or tying, and referred extensively to the European Microsoft decision, the U.K. Court held that the complaint should have been appropriately characterized as an allegation of discrimination.45F[45] The user who sees the Maps OneBox is, indeed, under no obligation to click on it or to use Google Maps; she remains free to use any other online-mapping provider without penalty. In contrast to Microsoft, where obtaining a competing streaming-media player by downloading from the Internet was regarded by a significant number of users as more complicated than using the pre-installed Microsoft product, the Google SERP includes clickable links to other relevant online maps and users experience no difficulty in clicking on those blue links.
To establish whether Google’s conduct constituted anticompetitive foreclosure, the Court concluded that it was necessary to prove that the effects of that conduct appreciably affected competition, which cannot simply be assumed. Indeed, the Google’s introduction a Maps OneBox containing a thumbnail map was intended to improve the quality of the SERP, and hence must be evaluated as a technical efficiency46F[46]: “The unusual and challenging feature of this case is that conduct which was pro-competitive in the market in which the undertaking is dominant is alleged to be abusive on the grounds of an alleged anti-competitive effect in a distinct market in which it is not dominant.”47F[47] For this reason, evaluating alternative ways that Google might have made this procompetitive improvement without allegedly distorting competition in online maps played a significant role in the Court’s analysis.
If anticompetitive effects are proven, then the issue of objective justification must be considered. This requires a proportionality assessment, which is a matter of fact and degree. Hence, the question of alternatives cannot be considered only with respect to competitive impact: “Where the efficiency is a technical improvement, proportionality does not require adoption of an alternative that is much less efficient in terms of greatly increased cost, or which imposes an unreasonable burden.”48F[48]
Following this line of reasoning, Justice Roth found that the introduction of the Maps OneBox with no shortcut hyperlinks to Streetmap (and other online maps) did not, in itself, have an appreciable effect in steering customers away from Streetmap; it therefore was not reasonably likely to give rise to anticompetitive foreclosure.49F[49] Moreover, even if it was likely to have such an effect, Google’s conduct was objectively justified because the way that it implemented the technical efficiency—i.e., presenting a thumbnail map on the SERP—was not disproportionate.50F[50]
The European Commission reached a different conclusion in Google Shopping. There, the Commission found that, by promoting its own comparison-shopping service in its search results and demoting those of competitors, Google engaged in a strategy of leveraging the dominance of its flagship product (i.e., the search engine) in the adjacent market for comparison-shopping services.
According to the Commission’s findings, Google’s strategy rested on two related practices: ensuring prominent placement for its own comparison-shopping service and demoting rival comparison-shopping services in its search results. Notably, while competing comparison-shopping services could appear only as generic search results—potentially subject to demotion in search listings by Google’s algorithms—Google’s own comparison-shopping service was prominently positioned, displayed in rich format, and free from the risk of demotion to the second page of search results.51F[51]
The Commission concluded that the conduct fell outside the scope of competition on the merits, could extend Google’s dominant position in the national markets for general search services to the national markets for comparison-shopping services (offensive leveraging), would tend to protect Google’s dominance in the former (defensive leveraging).
Rather than recognizing that it was deploying a novel theory of harm, the Commission argued that Google’s conduct belonged to the well-known category of leveraging. Accordingly, there was no need to look for a new legal test, since “it is not novel to find that conduct consisting in the use of a dominant position on one market to extend that dominant position to one or more adjacent markets can constitute an abuse.”52F[52] The Commission therefore found that self-preferencing constitutes a “well-established, independent, form of abuse.”53F[53]
To support its line of reasoning, the Commission invoked disparate case law, including judgments involving either specific theories of harm (e.g., Tetra Pack,54F[54] Irish Sugar,55F[55] and Microsoft,56F[56] with regards to tying and predatory pricing, loyalty rebates, and refusal to deal, respectively) or that are outdated (e.g., Telemarketing57F[57]).58F[58] The Commission’s rationale in offering this selection of decisions is unclear. References to one case in which the essential facilities doctrine was applied (i.e., Microsoft) and to another ruling that has since been replaced by the elaboration of the essential facilities doctrine (i.e., Telemarketing) are even more surprising.
The Commission ultimately dismissed Google’s claim that its conduct could be considered abusive only if Bronner’s criteria were fulfilled: namely, if access to Google’s general search results pages were indispensable to being able to compete.59F[59] According to the Commission, the decision merely required Google to cease the conduct. Hence, the Bronner criteria were “irrelevant in a situation, such as that of the present case, where bringing to an end the infringement does not involve imposing a duty on the dominant undertaking to transfer an asset or enter into agreements with persons with whom it has not chosen to contract.”60F[60]
The case spurred debate over the legal test applied to require Google to grant equal treatment to rival comparison-shopping services and its own service. Among the questions raised by the case are whether the conduct fell more within exclusionary or discriminatory abuses and, if it was the former, whether tying or the essential facilities doctrine was the proper framework to assess such self-preferencing abuse.61F[61] For instance, the experts appointed by the Commission to provide suggestions for the design of a competition policy for digital markets considered self-preferencing a specific technique of leveraging, which is not abusive per se, but subject to an effects test.62F[62] Furthermore, quoting Microsoft, they argued that, according to well-established case law, the owner of an essential facility must not engage in self-preferencing. Nonetheless, they believed that self-preferencing by a vertically integrated dominant digital platform can be abusive, not only under the preconditions set out by the essential facilities doctrine, but also wherever it is likely to result in leveraging market power and is not justified by a pro-competitive rationale.
In May 2020, the Amsterdam Court of Appeal handed down a decision in litigation between VBO Makelaars and NVM, two associations of real-estate agents, brokers, and appraisers.63F[63] NVM owns Funda, the largest online real-estate platform in the Netherlands and which, according to VBO, granted NVM agents more prominent positions in the ranking of properties. Funda also applied higher tariffs to and granted only limited website functionality to VBO agents, who also did not have access to the underlying Funda database. VBO’s complaint charged NVM with anticompetitive discrimination.
Upholding the decision of the district court, the Court of Appeal found that Funda did not abuse its dominant position in favoring the listings of NVM members over those of rival agents. Assessing self-preferencing as discriminatory conduct under Article 102(c) TFEU, the Court cited MEO, arguing that VBO’s complaint failed to demonstrate that the discrimination distorted the company’s competitive position in ways that led to a competitive disadvantage on the downstream market for real-estate services.
In particular, the Court noted that several factors play relevant roles in consumers’ home-purchase decisions and that it is implausible that a buyer would automatically assume that the listing placed highest on a website would be the one that best meets their demands. To the contrary, the Court concluded that the market for homes differs significantly from markets for other consumer products. For example, buyers generally conduct an intensive search over a long period of time to consider all relevant offers. Therefore, the Court found, a lower website ranking would be of minor importance and would not necessarily lead to a competitive disadvantage.
Accordingly, the Court considered comparisons with Google Shopping to be unhelpful.64F[64] In assessing NVM’s preferential treatment in accordance with the principles the CJEU elaborated in MEO, however, the Dutch court did frame self-preferencing as a discriminatory abuse, thus anticipating the approach that the European General Court would ultimately endorse in Google Shopping.
In June 2021, the French Competition Authority (AdlC) followed the European Commission’s lead in investigating practices implemented by Google in the online-advertising sector.65F[65]
Responding to referrals from news publishers who monetize their websites and mobile apps through advertising, the AdlC found that Google engaged in abusive practices to favor its own advertising intermediation technologies, granting preferential treatment to its proprietary technologies offered under the Google Ad Manager brand. Notably, in the Authority’s view, Google used its dominant publisher ad server (DoubleClick for Publishers, or DFP) both to favor its own programmatic advertising sales platform (AdX) and, separately, used AdX to favor DFP in the market for supply-side ad-intermediation platforms (SSPs). Regarding the first practice, the preferential treatment consisted of informing AdX of the prices offered by competing SSPs, thus allowing it to optimize the bidding process by varying the commissions received on impressions sold according to the intensity of competition. Regarding the second practice, Google imposed technical and contractual limitations on the use of the AdX platform through a third-party ad server. As a result, the modalities of interaction offered to third-party ad-server clients were inferior to the modalities of interaction between DFP and AdX, which penalized both third-party SSPs and publisher clients.
Similar concerns about the impact of Google’s conduct in ad-tech services have also been raised by the Australian Competition and Consumer Commission (ACCC). The ACCC concluded that Google’s vertical integration and dominance across the ad-tech supply chain and related services have allowed the company to engage in leveraging and self-preferencing conduct and that this, in turn, has likely interfered with the competitive process.66F[66]
According to the AdlC, the evidence showed that DFP’s favorable treatment of AdX had a foreclosure effect on competition among platforms selling ad space, significantly reducing the attractiveness of rival SSPs. In addition, according to the Authority, DFP’s preferential treatment strengthened Google’s dominant position, impairing the competitiveness of rival ad-server providers, and limiting their ability to compete on the merits. Therefore, as regards the latter, limitations on interoperability were deemed a practice that cannot be considered competition on the merits, as it would tend to impose on rivals a competitive disadvantage by applying to them less favorable technical conditions.67F[67]
By and large, the French decision did not provide insights on the theory of harm or type of abuse that this form of discrimination would constitute. Like the European Commission, the AdlC did not refer to self-preferencing explicitly, instead describing Google’s conduct as favoring. With regards to Google’s leveraging strategy, the AdlC cited Google Shopping and quoted the very same case law the Commission mentioned in that decision.68F[68] The only significant addition made by the Authority was a reference to Slovak Telekom, a margin-squeeze case that, as already mentioned, brought about a remarkable change in confining the application of Bronner’s indispensability condition to “pure” refusals to deal.69F[69]
However, the AdlC is also currently investigating Apple’s privacy policy, where self-preferencing is mentioned explicitly and appears to be framed differently.70F[70] Notably, in March 2021, the French Authority rejected the request for interim measures against Apple’s adoption of the App Tracking Transparency (ATT) framework for applications on iOS 14, which create new consent and notification requirements for app publishers. The ATT solicitation was considered part of Apple’s longstanding strategy to protect iOS users’ privacy and its implementation was not expected to impose unfair trading conditions, such as excessive or disproportionate restrictions on the activities of app developers. The AdlC nonetheless advised that, as part of its investigation into the merits of the case, it would examine how the user-consent collection processes differ between Apple’s own advertising services and third-party advertising services. Differences in those processes might result in a “form of discrimination (or self-preferencing)” if Apple applied, without justification, more binding rules on third-party operators than those it applies to itself for similar operations.71F[71]
The growing suspicion of self-preferencing has likewise prompted the German Competition Authority to initiate its own proceeding on Apple’s ATT policy,72F[72] while the U.K. Competition and Markets Authority (CMA) raised similar concerns in its market study on mobile ecosystems.73F[73]
Given this background, the European General Court’s judgment in Google Shopping was much awaited.74F[74] For those who were looking for legal certainty from the judgment, however, those expectations have been not completely met.
What was new in the ruling was its broad interpretation of the general principle of equal treatment, which the Court affirmed obligates vertically integrated platforms to refrain from favoring their own services over rivals.75F[75] While this approach was in line with the Commission’s expansive reading of the special responsibility of dominant firms, however, the ruling framed self-preferencing as a discriminatory abuse.76F[76] Notably, the Court highlighted that the various judgments the Commission cited in its original ruling do not support the conclusion that any use of a dominant position on one market to extend that position to one or more adjacent markets constitutes a “well-established” form of abuse.77F[77] After all, “leveraging” is a generic term covering several practices that are potentially abusive, such as tied sales, margin squeezes, and loyalty rebates.78F[78]
The three rulings the Court cited involve, instead, practices found to be discriminatory abuses specifically because they place third parties at a competitive disadvantage. Two of three involve discriminatory conditions applied by public undertakings operating a commercial port79F[79] and an airport.80F[80] This may support a link with recent legislative initiatives categorizing digital platforms as common carriers and thus subject to the neutrality regime of public utilities-style regulation. Nonetheless, the Court clarified that prohibiting self-preferencing to enforce the policy goal of neutrality is appropriate only when a competitive harm is demonstrated. Indeed, rather than deeming self-preferencing to be per se abusive, the Court moved to its potential anticompetitive effects. This is in line with the effects-based approach affirmed in MEO,81F[81] as well as in other judgments that, although they involve different abusive conduct, entail similar discriminatory elements.82F[82] The Court, however, surprisingly did not even mention MEO.
The Court’s ruling focused on potential exclusionary effects associated with specific leveraging strategies, reflected in the Commission’s original finding of abuse on the basis of certain relevant criteria.83F[83] The Commission had noted that, due to network effects, the traffic that Google’s search engine generates represents a critical asset; that users are significantly influenced by favoring, as they typically concentrate on the first few search results and tend to assume that the most visible results are the most relevant; and that traffic directed from Google’s search-results pages accounts for a large portion of traffic to competing comparison-shopping services, which cannot be effectively replaced by other sources.84F[84]
The Court outlined four criteria that differentiated Google’s self-preferencing from competition on the merits, therefore warranting a finding of antitrust liability.
First, the Court highlighted the “universal vocation” and openness of a search engine as features of its core mission.85F[85] These features distinguish a search engine, which designed to index results that might contain any possible content, from other services referenced in the case law, which consist of tangible or intangible assets (press-distribution systems or intellectual property rights, respectively) whose value depends on a proprietor’s ability to retain their exclusive use.86F[86]
While not explicitly mentioned, the reference is clearly to the essential facilities doctrine case law. Unlike these services, “the rationale and value of a general search engine lie in its capacity to be open” to results from external sources and to display multiple and diverse sources on its general results pages.87F[87] Moreover, the legal obligation of equal treatment that ensues from net-neutrality regulations88F[88] for Internet access providers on the upstream market cannot be disregarded when analyzing the practices of an operator like Google on the downstream market.89F[89]
Second, because Google holds a “superdominant” (or “ultra-dominant”) position on the market for general search services and acts as a “gateway” to the Internet, it is under a stronger obligation not to allow its behavior to impair genuine, undistorted competition on the related market for specialized comparison-shopping search services.90F[90]
Third, the market for general search services is characterized by very high barriers to entry.91F[91]
Fourth, in light of prior considerations (i.e., the mission of a search engine, Google’s dominance, and the presence of very high barriers to entry), the Court found that Google’s conduct is “abnormal.”92F[92] Indeed, for a search engine to limit the scope of its results to its own services entails an element of risk and is “not necessarily rational.” This is especially the case in a situation where, because of barriers to entry and the search engine’s own dominance, it is significantly unlikely that there would be market entry within a sufficiently short period of time in response to the limitations placed on Internet users’ choices.93F[93]
In this scenario, in the Court’s view, Google’s promotion of its own specialized results over third-party results contradicts the basic economic model of a search engine and hence involves a certain form of abnormality.94F[94] The suspicion is strengthened by Google’s “change of conduct.”95F[95] While it initially provided general search services and displayed all the results of specialized search services in the same way and according to the same criteria, once the firm had entered the market for specialized comparison-shopping search services—and after having experienced the failure of its dedicated comparison-shopping website (Froogle)—Google changed its practices and comparison-shopping services were no longer all treated equally.96F[96]
These four criteria suggest that the Court saw Google’s search engine as an essential facility. The Court, indeed, noted that, by envisaging equal treatment for any comparison-shopping services on Google’s general results pages, the Commission’s decision was seeking to provide competitors with access to Google’s general results pages. This was presented as particularly important to competing comparison-shopping services and something that was not effectively replaceable, as it accounted for such a large proportion of traffic to their websites.97F[97] Moreover, the Court acknowledged that the Commission considered Google’s traffic to be indispensable to competing comparison-shopping services.98F[98] As a consequence, the analysis would have required an assessment of preferential treatment pursuant to the conditions set out in Bronne, as Google itself had requested, rather than relying on the case law applicable to abusive leveraging, as the Commission did in its decision.
But despite characterized the features of Google’s general results page as “akin to those of an essential facility,”99F[99] the Court upheld the Commission’s decision not to apply Bronner’s indispensability requirement. In doing so, it drew a line between express refusals to supply and exclusionary practices that do not lie “principally” in a refusal, as such.100F[100] Indeed, “the present case is not concerned merely with a unilateral refusal by Google to supply a service to competing undertakings that is necessary in order to compete on a neighboring market, which would be contrary to Article 102 TFEU and would therefore justify the application of the ‘essential facilities’ doctrine.”101F[101]
Therefore, the Court shared the Commission’s viewpoint that Google’s self-preferencing was a standalone form of leveraging abuse, involving positive acts of discrimination in the treatment of the search results for comparison-shopping services.102F[102]
The Court’s ruling has been generally welcomed for two reasons. By affirming self-preferencing as an independent abuse, the judgment provides legal support to the policy goal of imposing a neutrality regime over large digital platforms, which has informed all the regulatory interventions promoted in different jurisdictions. At the same time, the Court advances a clearer legal qualification of the conduct in question. Indeed, while the Commission’s approach appeared unprecedented—because it revolved around the notion of favoring as a specific form of leveraging—the Court opted for the more defined legal framework of discrimination. The outcome should help to restrain the scope of application for self-preferencing prohibitions in comparison to other traditional practices that, although belonging to the general category of leveraging and including elements of discrimination, reflect specific theories of harm and are assessed according to their respective legal tests.103F[103] By and large, the Court confirms that there is no well-established case law that would forbid any extension of a dominant position in adjacent markets, in contrast with the Commission’s stance.
Nonetheless, the ruling raises new doubts. Notably, the definition of the conduct that would be covered remains unclear. While adopting the general principle of equal treatment as a legal basis to prohibit self-preferencing may allow intrusions into platforms’ design choices,104F[104] the listed criteria appear to define a narrow framework, ultimately calling into question the broad application of self-preferencing as a standalone abuse.
The Court underscored the relevance of the “particular context” in which favoring occurred.105F[105] Namely, the emphasis was on the role played by search engines on the Internet, including their “universal vocation” and “open” business models. This is strengthened by analogies to net neutrality, the characteristics “akin to those of an essential facility,” and the “superdominant position” that made Google a “gateway” to the Internet. Furthermore, the peculiar features of search engines (notably, their openness) are also deemed relevant in assessing the “abnormality” of Google’s behavior—which, in the Court’s evaluation, is indeed at odds with the basic economic model of its search engine. The legal framework is completed with the detection of opportunistic behavior by Google, which changed its strategy once it entered the adjacent market of comparison-shopping services.
It is left far from clear whether Google Shopping is even sanctioning the favoring practice as such. Indeed, the Court describes the anticompetitive strategy in question as formed by a combination of two practices—namely the promotion of Google’s own services and the demotion of its rivals’ services. Therefore, the conduct is not necessarily abusive even if it consists “solely in the special display and positioning” of the platform’s own products and services.106F[106] The practice has instead been judged illegal because it included the relegation of competing services in Google’s general results pages by means of adjustment algorithms. That, in conjunction with Google’s promotion of its own results, there was a simultaneous demotion of results from competing comparison services is considered a “constituent element” of the conduct and moreover plays a “major role” in the exclusionary effect identified.107F[107]
In summary, rather than articulating a legal test for a new antitrust offense, the criteria pointed out in the judgment for considering the preferential treatment abusive appear extremely fact-sensitive: both Google-specific and search engine-specific. Therefore, it is difficult to see how, according to these criteria, a self-preferencing prohibition may be applied to different forms of preferential treatment, digital services, and business models.108F[108]
A few weeks after the General Court’s ruling, the Italian Competition Authority (AGCM) handed down a decision that significantly departed from the legal framework elaborated in Google Shopping, thus confirming that the precise contours of self-preferencing abuses under Article 102 TFEU remained anything but clear.109F[109]
In late November 2021, the AGCM issued a mammoth fine against Amazon for granting preferential treatment to third-party sellers who use the company’s own logistics and delivery services (i.e., Fulfilment by Amazon, or FBA). Amazon was accused of having leveraged its dominance in the market for intermediation services on marketplaces to favor the adoption of its own FBA by sellers active on Amazon.it, as well as to strengthen its own dominant position. Under AGCM’s view, this strategy ultimately harmed both competing logistics operators, by putting them at a competitive disadvantage, and competing marketplaces, by creating incentives for sellers to single-home.
Indeed, although third-party sellers are free to manage the logistics associated with their operations on the platform themselves or outsource them to an independent operator (Merchant Fulfilment Network, or MFN), Amazon was deemed to be artificially pushing them to use its own logistics service, thus deterring them from multi-homing.110F[110] Notably, the Authority found that Amazon “tied” the use of FBA to access to a set of exclusive benefits essential for gaining visibility and increasing sales on the marketplace.111F[111]
Among those benefits, the most relevant is the Prime label, which allows sellers to participate in special events promoted by Amazon (e.g., Black Friday, Cyber Monday, Prime Day) and benefit from fast and free shipping. Furthermore, Prime increases the likelihood of sellers’ offers being selected as featured offers displayed in the Buy Box. This is of the utmost importance to sellers, as the Buy Box prominently displays just a single seller’s offer for a given product on Amazon’s marketplaces and generates the vast majority of all sales for that product.
Quoting from several of Amazon CEO Jeff Bezos’ letters to shareholders, the AGCM noted the company believes FBA is the “glue” that links Marketplace and Prime112F[112]: “Thanks to FBA, Marketplace and Prime are no longer two things … Their economics and customer experience are now happily and deeply intertwined.”113F[113] Furthermore, FBA is a “game changer” for sellers because it makes their items eligible for Prime benefits, which drives their sales.114F[114] Pursuant to its leveraging strategy, Amazon prevented third-party sellers from associating the Prime label with offers not managed by FBA. In addition, the AGCM noted that third-party sellers using FBA are not subject to the performance-evaluation metrics that Amazon applies in monitoring non-FBA sellers’ performance. Such metrics can ultimately lead to the suspension of non-compliant sellers’ accounts on Amazon.it. All these benefits derived from the use of FBA were considered, to various extents, to be “crucial” to success on the marketplace.115F[115]
It is worth noting that the European Commission has also launched an investigation of Amazon for facts identical to those already addressed in the Italian inquiry, with the relevant market defined as the European Economic Area, except for Italy.116F[116]
The alleged unequal treatment of non-FBA sellers has also been investigated by the Austrian Federal Competition Authority (BWB).117F[117] Although concerned about potential discrimination against sellers who organize their deliveries independently, the Authority conceded that a better ranking could have also resulted from the better service offered under FBA, compared with the independent organization of deliveries. Hence, the BWB remained open to the possibility that the appearance of preferential treatment for FBA Marketplace sellers was objectively justified.118F[118] The Austrian Authority concluded that a comprehensive and transparent legal framework was the best way to counter problematic business practices and accepted Amazon’s modifications to its terms and conditions.119F[119]
The link between Amazon Marketplace and FBA was also scrutinized as part of the investigation conducted by the U.S. House Judiciary Committee’s Antitrust Subcommittee into the state of competition in digital markets. The subcommittee’s final report found that many third-party sellers have no choice but to purchase fulfillment services from Amazon to maintain a favorable search-result position.120F[120] The report characterized Amazon’s strategy as tying.121F[121]
For the sake of our analysis, the Italian Amazon decision is especially remarkable because of how it contrasts with Google Shopping. As already mentioned, with the exception of the Amsterdam Court of Appeal, it represents the only decision in which the term self-preferencing is used.122F[122] Self-preferencing is here defined as an unequal and unjustified preferential treatment granted by a dominant player to its own services in pursuing a leveraging strategy, hence falling outside the scope of competition on the merits.123F[123] Therefore, rather than reflecting the criteria set out by the General Court, the Italian decision is clearly inspired by the Commission’s approach in Google Shopping. Indeed, in line with the idea of describing self-preferencing as a new form of leveraging abuse, Amazon’s practice is characterized as a form of tying.124F[124]
This definition of self-preferencing is convenient for enforcers, in that it would allow them to bypass the legal standards otherwise required to prove unlawful tying. Indeed, tying requires a form of coercion, such that customers do not have the choice to obtain the tying product without the tied product. In the Amazon case, by contrast, there is neither a contractual obligation nor technical integration between marketplace services and logistics services. Business users are free to run the logistics by themselves or to outsource it to an independent operator without losing the ability to operate on the Amazon e-commerce platform.
Apart from the legal qualification of the conduct in question (which may be more properly characterized as bundling), finding an abuse in a tying case also requires proof of potential foreclosure effects against equally efficient rivals. Looking at the effects on logistics operators, according to the AGCM’s view, vertical integration between the marketplace and logistics constitutes Amazon’s main competitive advantage, which is unmatchable even by equally efficient rivals.125F[125] Indeed, FBA is an integrated logistics service designed to represent “a one-stop shop solution” for storage, shipping, and customer service within a “closed and complete ecosystem” in which Amazon plays multiple roles.126F[126] While Amazon recently started offering a multi-channel logistics service, few retailers have adopted it due to its high operating costs.127F[127] Moreover, part of the AGCM’s decision concerning complaints raised by Amazon’s major e-commerce rival eBay—which reported that a large portion of its market share had been absorbed by Amazon—ultimately recognized that Amazon’s superiority stemmed from its popularity with users and retailers, especially in the critical areas of trust, shipping, and returns.128F[128]
In short, the thing that has made the playing field uneven has been Amazon’s creation of a successful ecosystem, which provides the company with competitive advantages that cannot be replicated either by pure online marketplaces or pure logistics providers.129F[129] A prohibition on self-preferencing may therefore functionally reflect a bias against ecosystems, which require massive and uncertain investment to create, and which provide significant benefits to both business users and final customers.
In summary, the AGCM endorsed an expansive view of the scope of anticompetitive self-preferencing that was at odds with the legal qualifications and narrow criteria set out by the General Court in Google Shopping, and that lacked the context the General Court had laid out to assess the circumstances in which preferential treatment constitutes discriminatory abuse. Notably, an online marketplace does not share many relevant features with an Internet search engine. Indeed, Amazon’s business model is “a closed and complete ecosystem.”130F[130] Moreover, unlike in the Google Shopping case, Amazon is not accused of changing its conduct in response to its market position. The only elements of the criteria defined in Google Shopping that Amazon could be argued to meet are operating in a market with high barriers to entry and being a vertically integrated firm with a super/hyper dominance in the upstream market.131F[131]
Although the General Court’s ruling is mentioned a few times,132F[132] these appear to be last-minute references included merely to note that the Commission’s decision had been upheld by the General Court.133F[133] Since the Italian Amazon decision was delivered just a few weeks after the Google Shopping ruling, it is possible that the AGCM simply did not have time to adjust its line of reasoning to comport with the Court’s qualifications and criteria.
A broad interpretation of self-preferencing could find that it covers the preferential provision of data and information, which could similarly be prohibited as abusive. Following this line of reasoning, the European Commission sent a statement of objections to Amazon in November 2020 informing the company of the Commission’s preliminary view that its practice of systematically using non-public business data from independent retailers who sell on its online marketplace infringes antitrust rules, on grounds that Amazon uses that data to benefit its own retail business that directly competes with those retailers.134F[134]
More recently, the UK CMA has also opened an investigation into how Amazon collects and uses third-party seller data, including whether Amazon gains an unfair advantage in business decisions made by its retail arm.135F[135] Similar concerns were raised by staff to the U.S. House Judiciary Antitrust Subcommittee, whose final report argued that Amazon’s asymmetric access to and use of third-party seller data constitutes unfair treatment of those third-party sellers.136F[136] The ACCC likewise warned that Apple and Google both have the ability and incentive to use their positions as app-marketplace operators to monitor downstream competitors.137F[137] For instance, the ACCC found that Apple’s Developer Agreement allows the company to develop, acquire, license, market, promote, and distribute products and software that perform functions the same or similar to any of the products, software or technologies provided by app developers that use the App Store. By contrast, Apple requires that app developers follow obligations to avoid being copycats.
Similar allegations of unfair use of user data have been levied against Facebook by the European Commission and the U.K. CMA, which charge that the company uses data gathered from advertisers in order to compete with them in markets in which Facebook is active, such as classified ads.138F[138] Finally, one focus of the European Commission’s investigation of Apple’s App Store rule requiring developers to use Apple’s in-app purchase mechanism for the distribution of paid apps and/or paid digital content is the potential that competing developers may be disintermediated from important customer data, while Apple can obtain valuable data about the activities and offers of its competitors.139F[139]
These investigations have inspired the bans on so-called “sherlocking” (i.e., the use of business users’ data to compete against them) included both in the DMA140F[140] and the proposed American Innovation and Competition Online Act,141F[141] as well as calls for structural separation and line-of-business restrictions.142F[142]
Amazon has faced accusations that it takes advantage of its dual role and hybrid business model in serving both as a marketplace-service provider and a retailer on the same marketplace, in competition with independent sellers. The charge is that the company can leverage its access to non-public third-party sellers’ data—such as the number of units ordered and shipped, the revenues sellers earn on the marketplace, the number of visits to sellers’ offers, data related to shipping and to sellers’ past performance, and consumer product claims—to identify and replicate popular and profitable products from among the hundreds of millions of listings on its marketplace.
Notably, according to the European Commission’s preliminary findings, such granular and real-time business data feed into the algorithms of Amazon’s retail business, allowing them to calibrate retail offers and strategic business decisions to the detriment of the other marketplace sellers. Thus, it is argued that the appropriation and the use of third-party sellers’ data enables Amazon to avoid the normal risks of retail competition, such as those associated with investing in a new product or choosing a specific price level, and to leverage its dominance in the market for the provision of marketplace services in France and Germany (i.e., the biggest markets for Amazon in the EU).143F[143]
The U.S. House Antitrust Subcommittee similarly charged that Amazon is able to use marketplace data from third-party merchants to create competing private-label products or to source products directly from manufacturers in order to free ride off sellers’ efforts.144F[144] The impact assessment study supporting the DMA confirmed this suspicion, noting that the launch of Amazon Basics (i.e., the most successful private label brand on Amazon’s marketplace) has negatively impacted the sales on Amazon of third-party products in identified attractive product segments.145F[145]
Leveraging this information exclusively, without sharing it with third-party sellers, is considered a form of self-preferencing because Amazon is in position to use data from its marketplace to gain a competitive advantage in market research and to identify new business opportunities without incurring any financial risk.146F[146] Furthermore, by using information from its Amazon fulfilment program, Amazon can also determine where products offered by third-party merchants are being manufactured and by whom. Since Amazon Basics products are sold in large volumes, Amazon can approach the manufacturers of goods for third-party merchants, buy these items in larger quantities, and sell them for a lower price than the competition on its own platform.147F[147]
This line of reasoning aligns with the core concerns about self-preferencing, such as conflicts of interest and the competitive advantages that a platform’s dual role may yield. But to invoke antitrust in cases where a platform performing a dual role gains a competitive advantage would require demonstrating proof of competitive harm, which isn’t apparent in this case. Indeed, while the impact on innovation appears uncertain,148F[148] Amazon’s practice likely benefits consumers by permitting close price comparisons, increasing output, and forcing sellers to reduce their prices.149F[149] Such effects are even more relevant when it comes to sellers with market power, as the introduction of products and services in competition with third parties would reduce double marginalization.
Moreover, the relevance of non-public third-party merchants’ data in facilitating copying by Amazon is questionable. Indeed, as noted, Amazon’s public product reviews supply a great deal of information and any competitor can obtain an item for the purposes of reverse engineering.150F[150] Conversely, if the products in question are protected by intellectual-property rights, Amazon could be found guilty of infringement. Finally, it is unclear whether and how this form of self-preferencing would meet the legal qualification and criteria set out by the General Court in Google Shopping.
Nonetheless, the European Commission is currently evaluating the commitments offered by Amazon, which has proposed to refrain from using non-public data relating to, or derived from, the activities of independent sellers on its marketplace for its retail businesses that compete with those sellers.151F[151] The relevant data would cover both individual and aggregate data (e.g., sales terms, revenues, shipments, inventory-related information, consumer-visit data, or seller performance on the platform). Amazon commits not to use such data for the purposes of selling branded goods, as well as in its private-label products.
Because preferential treatment may result from a wide range of practices, self-preferencing potentially covers different types of behavior that are subject to different legal standards and that may include exploitative elements.152F[152] Prohibitions on self-preferencing as per se anticompetitive would therefore grant antitrust enforcers significant leeway to bypass the legal standards ordinarily required to prove traditional anticompetitive harms. As a result, such prohibitions would provide antitrust authorities with a powerful tool to intervene in digital markets. This issue is particularly sensitive in Europe where the DMA entrusts the European Commission with the sole power to apply the new regulation but does not displace national competition law. Hence, national competition authorities will remain in charge of the enforcement of national and European antitrust rules.
Besides its potential as an enforcement shortcut, self-preferencing prohibitions may function to impose a neutrality regime on online gatekeepers. The aim would be to ensure a level playing field that currently appears uneven because of the bottleneck and intermediation power exerted by large online platforms. Such rules also could neutralize conflicts of interests raised by platforms’ dual-mode intermediation. The dual roles that some platforms perform fuel the never-ending debate over vertical integration and the related concern that, by giving preferential treatment to its own products and services, an integrated provider may leverage its dominance from one market to related markets. Indeed, the circumstances that may give rise to conflicts of interests and the circumstances that can give rise to leveraging strategies can be similar.153F[153] From this perspective, self-preferencing is a byproduct of the emergence of ecosystems. By integrating complementary products and services, a platform that controls and operates at all levels of the value chain may have an incentive to favor its own offers.154F[154]
But as antitrust authorities generally recognize, self-preferencing conduct is “often benign.”155F[155] Furthermore, since the value that the ecosystem generates depends on the activities of independent complementors, that value is not completely under the control of the platform owner.156F[156] Firms operating on the platform and competing with the platform owner may be disadvantaged by a variety of legal, technological, and informational measures implicated by self-preferencing, but there also may be legitimate justifications for such conduct that would need to be carefully considered in each instance.157F[157] Platforms implement different business models and are driven by different incentives, which in turn affects their strategies.
Against this backdrop, an outright ban on self-preferencing could undermine the very existence of ecosystems by challenging their design and monetization strategies.158F[158] Given that preferential treatment can take many different forms and have very different effects, the different business models adopted by platforms should be subject to case-by-case and effects-based assessment.159F[159] This is also consistent with the industrial-organization literature, which has found mixed evidence on the impact of duality on welfare, thereby supporting the insight that absolute neutrality is not desirable and interventions should be product- and platform-specific.160F[160]
Finally, and more importantly, antitrust law does not impose a general duty to ensure a level playing field by sharing competitive advantages with rivals. Indeed, a competitive advantage cannot be automatically equated with anticompetitive effects.161F[161] Within this framework, the relevance of the general principle of equal treatment that has been invoked by the General Court in Google Shopping to frame self-preferencing as a discriminatory abuse should be regarded with significant skepticism.
This is even more evident in the aftermath of the recent CJEU ruling in Servizio Elettrico Nazionale, which confirmed that the effects-based approach to the assessment of abusive practices remains core to European competition law.162F[162] Notably, the CJEU definitively stated that competition law is not intended to protect the competitive structure of the market, but rather to protect consumer welfare, which represents the goal of antitrust intervention.163F[163]
Accordingly, as illustrated in Intel, not every exclusionary effect is necessarily detrimental to competition.164F[164] Competition on the merits may, by definition, lead some competitors— those that are less efficient and thus less attractive to consumers from the standpoint of price, choice, quality or innovation—to become marginalized or to depart from the market.165F[165] In particular, given that exclusionary effects do not necessarily undermine competition, a distinction must be drawn between a risk of foreclosure and a risk of anticompetitive foreclosure, since only the latter may be penalized under Article 102 TFEU.166F[166] If any conduct having an exclusionary effect were automatically classified as anticompetitive, such rules would become a means to protect less capable, less efficient undertakings and would in no way protect the more meritorious undertakings that stimulate a market’s competitiveness.167F[167]
By and large, these well-settled principles do not support the claim that antitrust rules are designed to ensure platform neutrality. As acknowledged by the General Court in Google Shopping, self-preferencing cannot be considered prima facie unlawful and therefore outside the scope of competition on the merits. Its assessment instead requires the demonstration of anticompetitive effects, taking account of the circumstances of the case and the relevant legal and economic context.168F[168] Toward this aim, a dominant platform remains free to demonstrate that its practice, albeit producing an exclusionary effect, is objectively justified on the basis of all the circumstances of the case, or that the effects are counterbalanced or outweighed by efficiency advantages that also benefit consumers, such as through lower prices, better quality, or a wider choice of new or improved goods and services.169F[169]
In order to assess the anticompetitive nature of a practice, it is necessary to examine whether the means used come within the scope of normal competition.170F[170] Anticompetitive effects do not amount to a mere competitive disadvantage, but require an impact on efficient firms’ ability and incentive to compete.171F[171] Servizio Elettrico Nazionale also clarified the meaning of competition on the merits, considering outside its scope conduct that is not based on obvious economic reasons or objective reasons.172F[172] It is therefore necessary to assess the ability of equally efficient competitors to imitate the conduct of the dominant undertaking. Exclusionary conduct by a dominant firm that can be replicated by equally efficient competitors does not represent the sort of conduct that would lead to anticompetitive foreclosure; it therefore comes within the scope of competition on the merits.173F[173] In order to assess whether a given practice comes within the scope of competition on the merits, the test of whether it would be impossible for an equally efficient rival to imitate the dominant firm’s conduct arises from the case law on both price-related (e.g., TeliaSonera and Post Danmark II) and non-price-related conduct (e.g., Bronner).174F[174]
Moving away from the goal of ensuring a level playing field, recent European case law on self-preferencing centers instead on the competitive advantages that platforms enjoy due to their dual role. A competitive advantage, however, need not amount to anticompetitive foreclosure. Foreclosure not only needs to be proved, but also assessed against potential advantages for consumers, in terms of price, quality, and choice of new goods and services. It is even less clear how NCAs’ expansive approach toward self-preferencing as a standalone abuse fit within this legal framework. Both the AdlC’s decision in Google AdTech and the AGCM’s decision in Amazon Logistics appear inconsistent both with the legal qualification and criteria defined by the General Court, and with the CJEU principles recalled in Servizio Elettrico Nazionale. Similar doubts are raised by the investigations into the preferential access to and use of non-public business data. Moreover, in these cases, the benefits for consumers appear particularly significant as, for instance in Amazon Marketplace, the conduct under investigation led to an immediate output increase and price reduction: in short, more competition.
In her opinion Post Danmark II opinion, Advocate General Juliane Kokott warned that, in enforcing antitrust rules, the CJEU “should not allow itself to be influenced so much by current thinking (‘Zeitgeist’) or ephemeral trends, but should have regard rather to the legal foundations on which the prohibition of abuse of a dominant position rests in EU law.”175F[175] Accordingly, this paper has addressed the prevailing zeitgeist in digital markets, analyzing the markets’ proclaimed peculiar features and the potential scope of application to evaluate whether it should be considered a novel standalone antitrust prohibition.
Indeed, common-carrier antitrust is on the rise. Following the 2017 decision in Google Shopping, the European Commission and some NCAs have advanced a new theory of harm pointing to the competitive disadvantage suffered by rivals. This therefore constitutes a de facto ban on any preferential treatment granted by dominant platforms to their own products and services. Such a strong stance in antitrust enforcement relies on the premise that the special responsibility that an incumbent dominant player bears implies that they must ensure a level playing field.
It remains the case, however, that European case law questions both the goal of relying on antitrust rules to impose a neutrality regime on dominant platforms and the very existence of self-preferencing as an autonomous abuse. Competition law does not impose a general duty to share competition advantages with rivals and does not protect the structure of the market; hence, not every exclusionary effect automatically undermines competition. Self-preferencing is not, in itself, unlawful and platform neutrality as such is outside the scope of competition law.
In contrast with the European Commission and some NCAs, the European General Court in Google Shopping not only framed self-preferencing as a discriminatory abuse but also highlighted some criteria to assess its potential exclusionary effects and considered it outside the scope of competition on the merits. Such criteria are particularly fact-sensitive, and therefore at odds with its wide application as a standalone abuse.
In summary, against the sirens of a fascinating, popular, and convenient new label, the limiting principles of competition law remind us that it cannot be weaponized to ensure a specific market outcome. Therefore, in the aftermath of the Google Shopping ruling, doubts about the characteristics and boundaries of self-preferencing remain on the table, and we still do not have a legal test that distinguishes such purported new antitrust offenses from other practices aimed at pursuing leveraging strategies and already addressed by antitrust rules.
[1] Jacques Cre?mer, Yves-Alexandre de Montjoye, and Heike Schweitzer, Competition Policy for the Digital Era, European Commission (2019) 7, available at https://ec.europa.eu/competition/publications/reports/kd0419345enn.pdf; Unlocking Digital Competition, UK Digital Competition Expert Panel (2019) 58, available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/785547/unlocking_digital_competition_furman_review_web.pdf.
[2] Elizabeth Warren, Here’s How We Can Break up Big Tech, Medium (2019) available at https://medium.com/@teamwarren/heres-how-we-can-break-up-big-tech-9ad9e0da324c.
[3] Margrethe Vestager, Statement Before the U.S. House of Representatives, Subcommittee on Antitrust, Commercial, and Administrative Law (2020) 2, available at https://www.euractiv.com/wp-content/uploads/sites/2/2020/07/Statement-EVP-Vestager-House-SubCommittee-30-July.pdf. See also id., Technology with Purpose (2020), https://ec.europa.eu/commission/commissioners/2019-2024/vestager/announcements/technology-purpose_en.
[4] Thomas Eisenmann, Geoffrey Parker, and Marshall Van Alstyne, Platform Envelopment, 32 Strateg. Manag. J. 1270 (2011).
[5] Regulation (EU) on Contestable and Fair Markets in the Digital Sector (Digital Markets Act), Article 6(1), (3), (5), (7), and (12), https://www.europarl.europa.eu/doceo/document/TA-9-2022-0270_EN.html.
[6] Impact Assessment – A New Pro-Competition Regime for Digital Markets, U.K. Government (2021) para. 21, https://www.gov.uk/government/consultations/a-new-pro-competition-regime-for-digital-markets.
[7] GWB Digitalization Act (Jan. 18, 2021), Section 19a, https://www.bundesrat.de/SharedDocs/beratungsvorgaenge/2021/0001-0100/0038-21.html.
[8] S.2992 – American Innovation and Choice Online Act, 117th Congress (2021-2022) Section 3(a)(1), available at https://www.congress.gov/117/bills/s2992/BILLS-117s2992rs.pdf.
[9] Richard J. Gilbert, The American Innovation and Choice Online Act: Lessons from the 1950 Celler-Kevaufer Amendment, Concurrentialiste (2022), https://leconcurrentialiste.com/gilbert-innovation-choice-act/?mc_cid=8bdf17d95a&mc_eid=34922555f0; Randal Picker, The House’s Recent Spate of Antitrust Bills Would Change Big Tech as We Know It, Promarket (2021), https://promarket.org/2021/06/29/house-antitrust-bills-big-tech-apple-preinstallation.
[10] Investigation of Competition in Digital Markets’, Majority Staff Reports and Recommendations, U.S. House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law (2020), 380, https://judiciary.house.gov/uploadedfiles/competition_in_digital_markets.pdf?utm_campaign=4493-519. See also Elettra Bietti, Self-Regulating Platforms and Antitrust Justice, Tex. Law Rev. (forthcoming); Nikolas Guggenberg, Essential Platforms, 24 STLR 237 (2021); Rory Van Loo, In Defense of Breakups: Administering a “Radical” Remedy, 105 Cornell L. Rev. 1955 (2020); Lina M. Khan, The Separation of Platforms and Commerce, 119 Columbia Law Rev. 973 (2019); K. Sabeel Rahman, Regulating Informational Infrastructure Internet Platforms as the New Public Utilities, 2 GLTR 234 (2018).
[11] Case AT.39740, Google Search (Shopping), European Commission (Jun. 27, 2017).
[12] Case T-612/17, Google LLC and Alphabet Inc. v. European Commission, European General Court (Nov. 10, 2021), EU:T:2021:763.
[13] See, e.g., Decision No. 29925, FBA Amazon, Autorità Garante della Concorrenza e del Mercato (Nov. 30, 2021), https://www.agcm.it/dettaglio?db=41256297003874BD&uid=801201274D8FDD40C12587AA0056B614&view=&title=A528-FBA%20AMAZON&fs=Abuso%20di%20posizione%20dominante. Previously, see Decision 21-D-11, Google, Autorité de la Concurrence (Jun. 7 2021) , https://www.autoritedelaconcurrence.fr/en/decision/regarding-practices-implemented-online-advertising-sector.
[14] Giuseppe Colangelo, The Digital Markets Act and EU Antitrust Enforcement: Double & Triple jeopardy, ICLE White Paper (2022), https://laweconcenter.org/resource/the-digital-markets-act-and-eu-antitrust-enforcement-double-triple-jeopardy.
[15] Pablo Iba?n?ez Colomo, Self-Preferencing: Yet Another Epithet in Need of Limiting Principles, 43 World Competition 417 (2020).
[16] Nicolas Petit, A Theory of Antitrust Limits, 28 Geo. Mason L. Rev. 1399 (2021).
[17] Herbert Hovenkamp, Selling Antitrust, Hastings L.J. (forthcoming).
[18] See Opinion of Advocate General Wahl, 20 December 2017, Case C?525/16, MEO — Serviços de Comunicações e Multimédia SA v. Autoridade da Concorrência, EU:C:2017:1020, paras. 76-77, arguing that a distinction must be drawn between undertakings that are vertically integrated (and have an interest in displacing competitors on the downstream market) and those that have no such interest. In the case of vertically integrated undertakings, the application by a dominant undertaking of discriminatory prices on the downstream or upstream market is, in reality, similar to first-degree price discrimination, which indirectly affects the undertaking’s competitors. See also Inge Graef, Differentiated Treatment in Platform-to-Business Relations: EU Competition Law and Economic Dependence, 38 YEL 448, 452-453 (2019), distinguishing among pure self-preferencing (whereby a vertically integrated platform treats its affiliated services more favorably than non-affiliated services), pure secondary line differentiation (whereby a non-vertically integrated platform engages in differentiated treatment among unaffiliated services in a market in which it is not active itself), and a hybrid category in which either a vertically integrated or a non-vertically integrated platform engages in differentiated treatment among unaffiliated services in an effort to favor its own business.
[19] Nicolas Petit, Theories of Self-Preferencing Under Article 102 TFEU: A Reply to Bo Vesterdorf, 1(3) CLPD 4 (2015).
[20] Case C-413/14 P, Intel v. Commission, Court of Justice of the European Union (Sept. 6, 2017), EU:C:2017:632.
[21] Id., C?525/16, MEO v. Autoridade da Concorrência (Apr. 19, 2018), EU:C:2018:270. See also Wahl, supra note 18, para. 61.
[22] Guidance on the Commission’s Enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive Exclusionary Conduct by Dominant Undertakings, European Commission (2009) OJ C 45/7, paras. 47-62.
[23] See Autorité de la Concurrence, supra note 13, para. 410, binding limits on interoperability with third-party services servers cannot be considered competition on the merits. See also Herbert Hovenkamp, Antitrust and the Design of Production, 103 Cornell L. Rev. 1155 (2018); Pablo Iba?n?ez Colomo, Product Design and Business Models in EU Antitrust Law, SSRN (2021), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3925396.
[24] Case T-201/04, Microsoft v. Commission, European General Court (Sept. 17, 2007), para. 1036, EU:T:2007:289.
[25] Case AT.40099, Google Android, European Commission, (Jul. 18, 2018), confirmed by Case T-604/18, Google v. Commission, European General Court (Sept. 14, 2022) EU:T:2022:541.
[26] Dirk Auer, Appropriability and the European Commission’s Android Investigation, 23 CJEL 647 (2017).
[27] Christopher S. Yoo, Open Source, Modular Platforms, and the Challenge of Fragmentation, 1 Criterion Journal on Innovation 619 (2016).
[28] UK Government, supra note 6, para. 21.
[29] Joined Cases C-241/91 P and 242/91 P, RTE and ITP v. Commission, Court of Justice of the European Union (Apr. 6, 1995), EU:C:1995:98.
[30] Id., 29, Case C-418/01, IMS Health GmbH & Co. OHG v. NDC Health GmbH & Co. GH (Apr. 29, 2004), EU:C:2004:257.
[31] European General Court, supra note 24.
[32] Case C-7/97, Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs- und Zeitschriftenverlag GmbH & Co. KG, Mediaprint Zeitungsvertriebsgesellschaft mbH & Co. KG and Mediaprint Anzeigengesellschaft mbH & Co. KG, Court of Justice of the European Union (Nov. 26, 1998), EU:C:1998:569.
[33] Id., Case C-165/19 P, Slovak Telekom a.s. v. Commission (Mar. 25, 2021) para. 50, EU:C:2021:239.
[34] Ibid., para. 57. In a similar vein, see Case T?814/17, Lietuvos gele?inkeliai AB v. Commission, European General Court (Nov. 18, 2020), para. 92, EU:T:2020:545.
[35] European Commission, supra note 22, para. 80.
[36] Ibid., para. 82; and Case COMP/38.784, Wanadoo Espan?a v. Telefo?nica, European Commission (Jul 4, 2007). This is likely to occur in two cases: where regulation compatible with EU law already imposes an obligation to supply on the dominant undertaking and it is clear, from the considerations underlying such regulation, that the necessary balancing of incentives has already been made by the public authority when imposing such obligation; or where the upstream market position of the dominant firm has been developed under the protection of special or exclusive rights or has been financed by state resources.
[37] Case C-280/08 P, Deutsche Telekom AG v. European Commission (Deutsche Telekom I), Court of Justice of the European Union (Oct. 14, 2010), EU:C:2010:603.
[38] Id., Case C-52/09, Konkurrensverket v. TeliaSonera Sverige AB (Feb. 17, 2011), EU:C:2011:83.
[39] Id., Case C?295/12 P, Telefónica SA and Telefónica de España SAU v. European Commission (Jul. 10, 2014), EU:C:2014:2062.
[40] Id., supra note 33.
[41] Case C/13/528337, VBO Makelaar v. Funda, Gerechtshof Amsterdam (May 16, 2020), para. 3.12.3.
[42] Autorità Garante della Concorrenza e del Mercato, supra note 13, paras. 236, 393, 436, 504, 708, 710, 716, and 901.
[43] European Commission, supra note 11.
[44] Streetmap.EU Ltd. v. Google and Others, [2016] EWHC 253 (ch).
[45] Ibid., paras. 51-54.
[46] Ibid., paras. 84 and 147.
[47] Ibid., para. 84.
[48] Ibid., para. 149.
[49] Ibid., para. 139.
[50] Ibid., para. 161.
[51] European Commission, supra note 11, para. 344.
[52] Ibid., para. 649.
[53] Ibid.
[54] Case C-333/94, Tetra Pak International SA v. Commission, Court of Justice of the European Union (Nov. 14, 1996), EU:C:1996:436.
[55] Case T-288/97, Irish Sugar plc v Commission, European General Court (Oct. 7, 1999), EU:T:1999:246.
[56] Id., supra note 24.
[57] Case C-311/84, Centre Belge D’Etudes de Marché – Télémarketing (CBEM) v. SA Compagnie Luxembourgeoise de Télédiffusion (CLT) and Information Publicité Benelux (IPB), Court of Justice of the European Union (Oct. 3, 1985), EU:C:1985:394.
[58] European Commission, supra note 11, para. 334.
[59] Ibid., para. 645.
[60] Ibid., para. 651.
[61] See, e.g., Jay Pil Choi and Doh-Shin Jeon, A Leverage Theory of Tying in Two-Sided Markets with Nonnegative Price Constraints, 13 Am Econ J Microecon 283 (2021); Edward Iacobucci and Francesco Ducci, The Google Search Case in Europe: Tying and the Single Monopoly Profit Theorem in Two?Sided Markets, 47 Eur. J. Law Econ. 15 (2019); Eduardo Aguilera Valdivia, The Scope of the ‘Special Responsibility’ upon Vertically Integrated Dominant Firms after the Google Shopping Case: Is There a Duty to Treat Rivals Equally and Refrain from Favouring Own Related Business?, 41 World Competition 43 (2018); Pinar Akman, The Theory of Abuse in Google Search: A Positive and Normative Assessment under EU Competition Law, 2 J. Tech. L. & Pol’y 301 (2017); Ioannis Kokkoris, The Google Case in the EU: Is There a Case?, 62 Antitrust Bull. 313 (2017); John Temple Lang, Comparing Microsoft and Google: The Concept of Exclusionary Abuse, 39 World Competition 5 (2016); Renato Nazzini, Unequal Treatment by Online Platforms: A Structured Approach to the Abuse Test in Google, SSRN (2016), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2815081; Bo Vesterdorf, Theories of Self-Preferencing and Duty to Deal – Two Sides of the Same Coin?, 1(1) CLPD 4 (2015); Petit, supra note 19.
[62] Cre?mer, de Montjoye, and Schweitzer, supra note 1.
[63] Gerechtshof Amsterdam, supra note 41.
[64] Ibid., para. 3.12.1.
[65] Autorité de la Concurrence, supra note 13.
[66] Digital Advertising Services Inquiry Final Report, Australian Competition and Consumer Commission (2021), available at https://www.accc.gov.au/system/files/Digital%20advertising%20services%20inquiry%20-%20final%20report.pdf.
[67] Autorité de la Concurrence, supra note 13, paras. 369 and 410.
[68] Ibid., paras. 366 and 369. Since Google did not hold a dominant position in the market for SSPs, the reference to Tetra Pak has also been used to argue that, under specific circumstances, behavior implemented in a non-dominated market that has effects on the dominated market may be considered abusive (see para. 367).
[69] CJEU, supra note 33.
[70] Decision 21-D-07, Apple, Autorité de la Concurrence, (Mar. 17, 2021) https://www.autoritedelaconcurrence.fr/en/decision/regarding-request-interim-measures-submitted-associations-interactive-advertising-bureau.
[71] Ibid., para. 163.
[72] Bundeskartellamt Reviews Apple’s Tracking Rules for Third-Party Apps (press release), Bundeskartellamt (2022) https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2022/14_06_2022_Apple.html.
[73] Mobile Ecosystems: Market Study Final Report, U.K. Competition and Markets Authority (2022), Chapter 6 and Appendix J, https://www.gov.uk/cma-cases/mobile-ecosystems-market-study.
[74] European General Court, supra note 12.
[75] Ibid., para. 155.
[76] More recently, see also Case 50972, Google Privacy Sandbox, U.K. Competition and Markets Authority (Feb. 11, 2022), https://www.gov.uk/cma-cases/investigation-into-googles-privacy-sandbox-browser-changes, which considered self-preferencing as a traditional discrimination abuse. In particular, the competitive risks the CMA highlighted involve Google’s self-preferencing its own ad inventory and ad-tech services by transferring key functionalities to Chrome. The Privacy Sandbox Project would offer Google the ability to affect digital-advertising-market outcomes through Chrome in a way that cannot be scrutinized by third parties. It could lead to conflicts of interests because Google operates as publisher and ad-tech provider simultaneously.
[77] General Court, supra note 12, para. 160.
[78] Ibid., para. 163.
[79] Case C-242/95, GT-Link A/S v. De Danske Statsbaner (DSB), Court of Justice of the European Union (Jul. 17, 1997), EU:C:1997:376.
[80] Id., Case C-82/01 P, Ae?roports de Paris v. Commission (Oct. 24, 2002), EU:C:2002:617.
[81] Id., supra note 21.
[82] See Lena Hornkohl, Article 102 TFEU, Equal Treatment and Discrimination after Google Shopping, 13 J. Eur. Compet. Law Pract. 99 (2022), mentioning Post Danmark I as an example of primary-line exclusionary discrimination in the predatory-pricing context and TeliaSonera (supra note 38) and Slovak Telekom (supra note 33) as examples of secondary-line exclusionary discrimination in the margin-squeeze context.
[83] General Court, supra note 12, paras. 166 and 175.
[84] Ibid., paras. 169-174.
[85] Ibid., paras. 176-177.
[86] Ibid.
[87] Ibid., para. 178.
[88] Regulation (EU) 2015/2120 laying down measures concerning open Internet access and amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services, and Regulation (EU) No 531/2012 on roaming on public mobile-communications networks within the European Union, (2015) OJ L 310/1.
[89] General Court, supra note 12, para. 180. Comparisons to net neutrality have also been made by the U.S. House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law, supra note 10, 382-383, recommending that Congress consider establishing nondiscrimination rules.
[90] General Court, supra note 12, paras. 180, 182 and 183.
[91] Ibid., paras. 178, 182, 183, and 237.
[92] Ibid., paras. 176 and 179.
[93] Ibid..
[94] Ibid., paras. 176 and 179.
[95] Ibid., para. 181.
[96] Ibid., paras. 182-184.
[97] Ibid., paras. 219-222.
[98] Ibid., paras. 227.
[99] Ibid., para. 224.
[100] Ibid., paras. 232 and 233.
[101] Ibid., para. 238.
[102] Ibid., para. 240.
[103] See Christian Ahlborn, Gerwin Van Gerven, and William Leslie, Bronner Revisited: Google Shopping and the Resurrection of Discrimination Under Article 102 TFEU, 13 J. Eur. Compet. Law Pract. 87 (2022); Friso Bostoen, The General Court’s Google Shopping Judgement Finetuning the Legal Qualification and Tests for Platform Abuse, 13 J. Eur. Compet. Law Pract. 75 (2022), and Hornkohl, supra note 82, arguing that the ruling has resurrected discriminatory abuses as potentially one of the most important tools for regulating the platform economy.
[104] See Elias Deutscher, Google Shopping and the Quest for a Legal Test for Self-preferencing Under Article 102 TFEU, 6 European Papers 1345, 1348 (2021), arguing that the judgment did not address the fundamental question of how far Article 102 TFEU can interfere with the design choices of dominant firms or prohibit them from granting favorable treatment to their own products or services.
[105] General Court, supra note 12, para. 196.
[106] Ibid., para. 187.
[107] Ibid., para. 245.
[108] See Bostoen, supra note 103, arguing that, at best, this form of favoritism may be applicable in other cases of prominent display and positioning in searches (e.g., the conduct of Amazon favoring its own retail offers); and Ahlborn, Van Gerven, and Leslie, supra note 103, noting that, in contrast to price discrimination, discriminatory access to an input can encompass a range of factors that are difficult to disentangle (e.g., greater interoperability or preferential access to core services).
[109] Autorità Garante della Concorrenza e del Mercato, supra note 13.
[110] Ibid., para. 702, describing Amazon’s conduct as an “abusive pressure.”
[111] Id., Italian Competition Authority: Amazon Fined over € 1,128 Billion for Abusing Its Dominant Position (2021), https://en.agcm.it/en/media/press-releases/2021/12/A528.
[112] Autorità Garante della Concorrenza e del Mercato, supra note 13, para. 254.
[113] Ibid..
[114] Ibid., paras. 253 and 737.
[115] Ibid., para. 698.
[116] See C(2020) 7692 Final, European Commission (Nov. 10, 2020). See also Margrethe Vestager, Statement by Executive Vice-President Vestager on Statement of Objections to Amazon for the Use of Non-Public Independent Seller Data and Second Investigation into Its E-Commerce Business Practices (2020), https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_20_2082. See also CMA Investigates Amazon over Suspected Anti-Competitive Practices, U.K. Competition and Markets Authority (2022), https://www.gov.uk/government/news/cma-investigates-amazon-over-suspected-anti-competitive-practices, opening an investigation into how Amazon sets criteria for allocation of suppliers to be the preferred in the Buy Box and how Amazon sets the eligibility criteria for selling under the Prime label. The European Commission is currently evaluating the commitments offered by Amazon (Commission Seeks Feedback on Commitments Offered by Amazon Concerning Marketplace Seller Data and Access to Buy Box and Prime, European Commission (2022) https://ec.europa.eu/commission/presscorner/detail/en/ip_22_4522). Amazon has committed to apply equal treatment to all sellers when selecting the winner of the Buy Box and to display a second competing offer to the Buy Box winner if there is a second offer that is sufficiently differentiated on price and/or delivery. Both offers will display the same descriptive information and provide for the same purchasing experience. Moreover, regarding Prime, Amazon has committed to set non-discriminatory conditions and qualifying criteria for marketplace sellers and offers, to allow Prime sellers to freely choose any carrier for their logistics and delivery services, and not to use any information obtained through Prime about the terms and performance of third-party carriers for its own logistics services.
[117] Bundeswettbewerbsbehörde (Jul. 17, 2019), available at https://www.bwb.gv.at/fileadmin/user_upload/Fallbericht_20190911_en.pdf.
[118] Ibid., para. 81.
[119] Ibid., para. 87.
[120] U.S. House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law, supra note 10, 287-291.
[121] Ibid., 287-288.
[122] Autorità Garante della Concorrenza e del Mercato, supra note 13, paras. 236, 504, 710, 716, and 901.
[123] Ibid., paras. 236, 504, 506, 716, 723, and 810.
[124] Ibid., paras. 505, 713, 726, 760, 826, 852, 857, and 874. See also Autorità Garante della Concorrenza e del Mercato, supra note 111.
[125] Id., supra note 13, para. 807.
[126] Ibid., paras. 127, 136, 188, 614, and 804.
[127] Ibid., paras. 834-835.
[128] Ibid., paras. 658-666, 679, and 682.
[129] Ibid., paras. 805-806.
[130] Ibid., para. 136.
[131] Ibid., paras. 506, 609, 610, 680, and 716.
[132] Ibid., paras. 610, 710, 716, and 723.
[133] Ibid., para. 710.
[134] Case AT.40462, Amazon Marketplace, European Commission (Nov. 10, 2020). See also Commission Sends Statement of Objections to Amazon for the Use of Non-Public Independent Seller Data and Opens Second Investigation into Its E-Commerce Business Practices, European Commission, (2020) https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2077.
[135] U.K. Competition and Markets Authority, supra note 116.
[136] U.S. House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law, supra note 10, 275.
[137] App Marketplaces: Interim Report, Australian Competition and Consumer Commission, (2021), 134, available at https://www.accc.gov.au/system/files/Digital%20platform%20services%20inquiry%20-%20March%202021%20interim%20report.pdf.
[138] Case AT.40684, Facebook leveraging, European Commission (Jun. 4, 2021), https://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=1_AT_40684; CMA Investigates Facebook’s Use of Ad Data, U.K. Competition and Markets Authority (2021), https://www.gov.uk/government/news/cma-investigates-facebook-s-use-of-ad-data.
[139] Case AT.40716, Apple – App Store Practices, European Commission (Jun. 16, 2020).
[140] DMA, supra note 5, Article 6(1).
[141] AICOA, supra note 8, Section 3.
[142] See, e.g., U.S. House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law, supra note 10, 380. See also Simon P. Anderson and O?zlem Bedre-Defolie, Hybrid Platform Model, CEPR Discussion Paper No. 16243 (2021), available at https://cepr.org/active/publications/discussion_papers/dp.php?dpno=16243, arguing that the hybrid business model leads to higher platform fees for third-party sellers, less variety on the platform, and lower consumer welfare, compared to when the platform is a pure marketplace. On a different note, see Herbert Hovenkamp, Antitrust and Platform Monopoly, 130 Yale Law J. 1952 (2021), considering structural separation as the worst solution for the problems raised by Amazon’s strategy. See also Andrei Hagiu, Tat-How Teh, and Julian Wright, Should Platforms Be Allowed to Sell on Their Own Marketplaces?, 53 Rand J Econ 297 (2022), arguing that a structural remedy, such as an outright ban on the dual mode, would be detrimental to consumer surplus or total welfare, since the presence of the intermediary’s products constrains the pricing of the third-party sellers on its marketplace. The authors consider preferable policy interventions that target specific behaviors by the platform, such as a ban on product imitation and on self-preferencing.
[143] European Commission, supra note 134.
[144] U.S. House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law, supra note 10, 275.
[145] Digital Markets Act: Impact Assessment Support Study (Annexes), European Commission (2020), 301-308, https://op.europa.eu/en/publication-detail/-/publication/2a69fd2a-3e8a-11eb-b27b-01aa75ed71a1/language-en/format-PDF/source-search.
[146] Ibid., 304.
[147] Ibid..
[148] See Hagiu, Teh, and Wright, supra note 142, arguing that a ban on product imitation by a platform restores sellers’ incentive to innovate; Erik Madsen and Nikhil Vellodi, Insider Imitation, SSRN (2022) available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3832712, finding that a ban on a platform’s use of marketplace data can either stifle or stimulate innovation, depending on the nature of innovation. Namely, it stimulates innovation only for experimental product categories with significant upside demand potential. On the impact of data usage on consumer welfare, because of the tradeoff between static benefits from lower prices and dynamic costs from lower sellers’ incentives to investment, see Federico Etro, Product Selection in Online Marketplaces, 30 J Econ Manag Strategy 614 (2021).
[149] See Herbert Hovenkamp, The Looming Crisis in Antitrust Economics, 101 B.U. L. 489, 543 (2021), finding no evidence to suggest that the practice is so prone to abuse or so likely to harm consumers in other ways that it should be categorically condemned: “Rather, it is an act of partial vertical integration similar to other practices that the antitrust laws have confronted and allowed in the past. One close analogy is dual distribution, which occurs when a firm sells through both independent franchisees and its wholly owned stores. Such practices nearly always increase output, benefitting consumers and typically even independent competing firms.” On the different impact of Amazon’s practice on consumer welfare and third-party sellers’ welfare, see also Feng Zhu and Qihong Liu, Competing with Complementors: An Empirical Look at Amazon.com, 39 Strateg. Manag. J. 2618 (2018), finding that Amazon tends to enter into high-quality, popular products sold by third-party merchants and that such entry tends to lower prices and lead to the exit of third-party sellers; and Nan Chen and Hsin-Tien Tsai, Steering via Algorithmic Recommendations, (2021) https://www.tse-fr.eu/sites/default/files/TSE/documents/sem2021/tsai.pdf, arguing that Amazon tends to recommend products sold by Amazon Retail to consumers over products sold by third-party retailers, and that this steering is inconsistent with Amazon promoting consumer welfare.
[150] Hovenkamp, supra note 142, 2015-2016.
[151] European Commission, supra note 116.
[152] See Graef, supra note 18, distinguishing Google Shopping and Amazon Marketplace as pure self-preferencing cases (i.e., primary-line injuries whose key objective is to exclude rivals from the market) from the Italian Amazon Logistics case, which belongs instead to a hybrid category that includes a mix of exploitative and exclusionary elements.
[153] Australian Competition and Consumer Commission, supra note 66, 92.
[154] Colomo, supra note 15, 418.
[155] Updating Competition and Consumer Law for Digital Platform Services, Australian Competition and Consumer Commission (2022), 85, https://www.accc.gov.au/media-release/feedback-sought-on-potential-new-rules-for-large-digital-platforms.
[156] Tobias Kretschmer, Aija Leiponen, Melissa Schilling, and Gurneeta Vasudeva, Platform Ecosystems as Meta?Organizations: Implications for Platform Strategies, 43 Strateg. Manag. J. 405 (2022).
[157] Kevin J. Boudreau and Andrei Hagiu, Platforms Rules: Multi-Sided Platforms as Regulators, in (Annabelle Gawer, ed.) Platforms, Markets and Innovation, Cheltenham, Edward Elgar Publishing (2009), 163; David Evans, Governing Bad Behavior by Users of Multi-sided Platforms, 27 BTLJ 1201 (2012).
[158] See Hovenkamp, supra note 17, considering the pending U.S. self-preferencing legislation “an affront to both antitrust policy and intelligent regulatory policy.” See also Geoffrey A. Manne, Against the Vertical Discrimination Presumption, 2 Concurrences 1, 2 (2020), arguing that forcing platforms to allow complementors to compete on their own terms would affect platform incentives for innovation. Indeed, platforms have an incentive to optimize openness and mandating maximum openness is not necessarily optimal because it would disregard the trade-off faced by platforms. Consequently, any presumption of harm from vertical discrimination is not based on sound economics. In a similar vein, Jonathan M. Barnett, The Host’s Dilemma: Strategic Forfeiture in Platform Markets for Informational Goods, 124 Harv. L. Rev. 1861 (2011).
[159] See Australian Competition and Consumer Commission, supra note 155, 87, arguing that rules might need to be “specifically tailored to each digital platform service with a high level of precision, to target the specific conduct that causes anti-competitive harm.”
[160] See Patrice Bougette, Axel Gautier, and Fre?de?ric Marty, Business Models and Incentives: For an Effects-Based Approach of Self-Preferencing?, 13 J. Eur. Compet. Law Pract.136, 140 (2022). On the welfare effects of Amazon’s dual role and the welfare implications of proposed regulations, see Germa?n Gutie?rrez, The Welfare Consequences of Regulating Amazon, (2021) available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3965566, showing that interventions that eliminate either the Prime program or product variety are likely to decrease welfare. See also Guy Aridor and Duarte Gonçalves, Recommenders’ Originals: The Welfare Effects of the Dual Role of Platforms as Producers and Recommender Systems, 83 Int. J. Ind. Organ.102845 (2022), highlighting the importance of targeted restrictions on self-preferencing because of the ambiguity of the welfare implications of a policy remedy separating recommendation and production or imposing unbiased recommendations. However, with regards to app stores and device-funded gatekeepers, Jorge Padilla, Joe Perkins, and Salvatore Piccolo, Self-Preferencing in Markets with Vertically Integrated Gatekeeper Platforms, J. Ind. Econ. (forthcoming) find that consumer welfare would be increased by preventing the device seller from selling its own apps and associated services in competition with third-party apps. See also Morgane Cure, Matthias Hunold, Reinhold Kesler, Ulrich Laitenberger, and Thomas Larrieu, Vertical Integration of Platforms and Product Prominence, Quant. Mark. Econ. (forthcoming), studying the potential effects of self-preferencing in the online hotel-booking industry because of the integration between one of the major online travel agencies (Booking Holdings) and a meta-search platform (Kayak). According to their empirical findings, the horizontal ranking of sales channels for a given hotel indicate that sales channels of online travel agents by Booking Holdings are more often position leaders than price leaders and online travel agents affiliated to Booking Holdings have a higher probability than other online travel agents of being among the visible providers and of being the highlighted sales channel. Moreover, for the vertical ranking of hotels for a search request, hotels are ranked worse in the Kayak search results when an online travel agent of the Expedia Group is the cheapest sales channel.
[161] Colomo, supra note 15, 421; Id., Anticompetitive Effects in EU Competition Law, 17 J. Competition Law Econ. 309, 356 (2021).
[162] Case C-377/20, Servizio Elettrico Nazionale SpA v. Autorità Garante della Concorrenza e del Mercato, Court of Justice of the European Union (May 12, 2022), EU:C:2022:379.
[163] Ibid., para. 46.
[164] CJEU, supra note 20, paras. 133-134.
[165] CJEU, supra note 162, para. 73.
[166] Case C?377/20, Servizio Elettrico Nazionale SpA v. Autorità Garante della Concorrenza e del Mercato, Advocate General Rantos (Dec. 9, 2021), EU:C:2021:998, para. 43.
[167] Ibid., para. 45.
[168] See CJEU, TeliaSonera, supra note 38; Post Danmark I, supra note 82; Case C-23/14, Post Danmark A/S v. Konkurrencerådet (Post Danmark II), (Oct. 6, 2015), EU:C:2015:651; Intel, supra note 20; Case C-307/18, Generics (UK) and Others v. Competition and Markets Authority (Jan. 30, 2020), EU:C:2020:52; Case C-152/19 P, Deutsche Telekom v. Commission (Mar. 25, 2021) EU:C:2021:238.
[169] CJEU, supra note 162, paras. 84-85.
[170] Ibid., para. 75. See also Advocate General Rantos, supra note 166, paras. 48-50, arguing that demonstrating that a dominant undertaking used means other than those that come within the scope of normal competition is not a requirement that needs to be assessed separately from the restrictive effect of the conduct.
[171] See, e.g., CJEU, MEO, supra note 21, and Post Danmark II, supra note 168. See also Colomo, supra note 161.
[172] Advocate General Rantos, supra note 166, para. 62.
[173] Ibid., para. 68 and CJEU, supra note 162, paras. 77-79.
[174] CJEU, supra note 162, para. 79.
[175] Case C?23/14, Post Danmark A/S v. Konkurrencerådet, Advocate General Kokott (May 21, 2015), EU:C:2015:343, para. 4.
