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EU regulation of tech and competition law

09 Feb 2022 / EU law Print

Shop till you drop

Competition law is aligning with upcoming EU regulation of the tech sector, says Maureen O’Neill.

On 10 November 2021, the General Court of the European Union upheld, almost in its entirety, the European Commission’s 2017 decision fining Google €2.42 billion for abusing its dominant position in the market for online general search services by favouring its own comparison-shopping service (CSS) over that of competing CSSs.

The commission’s decision followed the first in a series of investigations undertaken by its Competition Directorate, in a move that was seen by many as an attempt to regulate ‘Big Tech’ through competition law.

The judgment of the court in the Google Shopping case (Case T-612/17) may have put to bed (for the moment) the fundamental question of whether the competition law tools of the Treaty on the Functioning of the EU (TFEU) remain fit for purpose in the brave new world of Big Tech.

Notwithstanding, the judgment provides plenty of food for thought and speculation around the scope of article 102 of the TFEU, which prohibits the abuse of a dominant position. The court appears to endorse the commission’s extension of that prohibition in the direction of greater regulation of dominant firms, a development that is not necessarily limited to the tech sector.

Personal shopper

The commission would say that the Google Shopping case is not novel from a competition law enforcement perspective. It found that Google had a (very) dominant position in the market for general internet search services.

It has long been established that having a dominant position is not in itself a breach of competition law. However, concerns of abuse of Google’s dominance arose as it expanded to offer CSS in a neighbouring market in which it faced competition.

In very simple terms, a CSS collates and compares a product’s features, in particular price, from across different online retailers. The CSS does not sell the product itself, but rather directs users to the retailers’ websites to make a purchase. The retailer pays a fee to the CSS when a user clicks through to their website.

Following a seven-year investigation, the commission found that Google had used its dominant position in the general search market to give its CSS an advantage over competitors.

Users of Google’s general search engine would see results from Google’s own CSS listed prominently at the top of their results page, while links to competitors of Google Shopping were demoted.

The higher up on the results page that a result is placed, the more likely it is that users will click on the search result link, which generates revenue for a CSS. The commission found that this “self-preferencing” by Google, regardless of whether a rival’s services were better or more relevant, was an abuse of a dominant position.

The court agreed with the commission. It confirmed that neither holding a dominant position, nor seeking to extend that dominant position into a neighbouring market, constitutes abuse in and of itself. However, the court held that, on the facts of the case, Google’s practices in the general search market could result in a weakening of competition in the market for CSS.

User referrals from Google’s general search engine – the search engine of choice for most users – are key to CSS in generating both user traffic and user engagement.

The court noted the importance of Google’s general search-engine results page to rivals’ ability to compete effectively in the market for CSS. When Google demoted and reduced the visibility of the websites of CSS rivals on its general search-result page, the court agreed with the commission that Google was not competing on the merits.

Hey, big spender

It is worth noting the court’s reference to Google as holding an “ultra-dominant position” on the market for general search services, a term that has not been used in case law to date to distinguish levels of dominance. As a result, in the court’s view, Google had a “special responsibility” to uphold genuine and undistorted competition in the internal market.

The concept that there may be a duty on a dominant platform to give access and equal treatment to rivals active on its platform will resonate, for example, with those familiar with telecommunications regulation and energy regulation.

A quasi-regulatory obligation of access also exists under competition law, but only in very narrow circumstances when the services of a dominant entity amounts to what is known as an “essential facility” (Case C-7/97 Oscar Bronner GmbH & Co KG v Mediaprint Zeitungs und Zeitschriftenverlag GmbH & Co KG).

Google had argued that, at its core, the commission’s case was that it had refused to supply rivals, and that the commission had failed to apply the principles set down in Bronner.

For an abuse of dominance to be found based on the essential facilities doctrine, the commission would have had to establish that Google had refused its competitors access to “indispensable” services in circumstances where they had no access to an economically viable alternative, and that this would effectively eliminate competition.

Google argued that its general search engine was not “indispensable” within the meaning of the Bronner case law.

The court described the characteristics of Google’s general search-engine-results page as “akin” to an essential facility. It also spoke of the “universal vocation” of Google’s general search engine, which it referred to as open infrastructure, the credibility of which is enhanced by the fact that the results presented to users contain all possible content, including that of third-party sources. In these circumstances, the court found that there was a “certain form of abnormality” in Google favouring its own CSS over that of competitors.

In a significant development, the court held that Bronner was not applicable, as this case involved “an unjustified difference in treatment” by Google in the form of self-preferencing of its own CSS, rather than a refusal to supply, which is a different type of abuse.

Consequently, the court held, the commission was not required to meet the restrictive requirements of Bronner as regards indispensability.

Healthy competition

It would seem, therefore, that dominant firms are less likely to run afoul of article 102 if they outright refuse to deal with a competitor, than if they agree to supply such a competitor, but on less favourable terms to those on which they self-supply.

In the former case, the commission will be required to meet the more burdensome standards of Bronner in establishing an abuse of dominance.

In any case, the court was clear that the commission must conduct a robust assessment of the actual or potential anticompetitive effects stemming from any self-preferencing practices of a dominant company, which it was satisfied the commission had done in the Google Shopping case.

The commission’s recent decisional practice in the digital space is reflected in EU legislative initiatives, such as the proposed Digital Markets Act (DMA), which seek to regulate digital platforms and their ever-increasing influence on user behaviour and data.

Regulation and competition law, in principle, pursue different objectives. However, the court’s endorsement of the commission’s expansive approach to abuse of dominance in Google Shopping sees an alignment of competition law with the proposed DMA, at least in respect of self-preferencing by ultra-dominant companies – a key theme across the EU’s legislative initiatives in this space.

It remains to be seen whether Google will appeal the judgment to the Court of Justice of the EU and, assuming that it does, whether the ECJ will agree with the direction of travel that the commission has set, and that the court has now endorsed.

Look it up

  • Case T-612/17 Google and Alphabet v Commission
  • Case C-7/97 Oscar Bronner GmbH & Co KG v Mediaprint Zeitungs und Zeitschriftenverlag GmbH & Co KG [1998] ECR I-7791; [1999] 4 CMLR 112

Read and print a PDF of this article here.

Maureen O’Neill
Maureen O’Neill is the principal of MON Legal Consulting.