W4(1) - art. 102 TFEU + digital platforms | Quizlet

W4(1)

• art. 102 TFEU + digital platforms

• Cases

structure of art. 102 TFEU (W4(1))

1. Market definition: On which market is the company active?

1.1. Product market

1.2. Geographic market

2. Dominance/Market power: Does the company have market power on that market?

3. Abuse: Does the conduct violate art. 102 TFEU?

- Does the conduct have anti-competitive effects? = affecting the performance on market, high prices, more or less innovation?

abuse on the digital market (W4(1))

1. Predatory pricing --> harder on digital markets bc price is 0, but possible (adobe subscription) (Akzo Chemi) (Tetra Park II)

2. Margin squeezing

3. Refusal to supply (Bronner, Microsoft)

4. Tying/bundling (Microsoft)

5. Exclusivity contracts (Google Android)

6. Rebates (Intel)

+ new forms of abuses:

7. Self-preferencing (Google Shopping)

8.  Excessive data collection? (Meta v. Bundeskartellamt

microsoft T-201/04 (W4(1))

--> apply to: art. 102 TFEU / tying

Facts

- tied Windows Media Player to the Windows OS: Windows Media Player comes preinstalled on the OS which computer manufacturers buy.  

- for competitors of media playing apps (VLC, itunes, quickfire etc.) it was more difficult to convince consumers to use a media player other than the one that is pre-installed.

rule: 4 criteria for assessing tying

1. The tying and tied products are two separate products 

2. The undertaking concerned is dominant on the market for the tying product

3. The undertaking does not give customers a choice to obtain the tying product without the tied product.

4. The conduct forecloses competition.

5. No Objective Justification

, owing to the bundling, the media player enjoys an unparalleled presence on client PCs throughout the world, because it thereby allows that media player automatically to achieve a level of market penetration corresponding to that of the dominant undertakings client PC operating system, without having to compete on the merits with competing products §18

step 1 tying criteria (W4(1))

The tying and tied products are two separate products §16

- complementary products can constitute separate products

- the fact that there are independent companies on the market specialising in the manufacture and sale of the tied product constitutes serious evidence of the existence of a separate market for that product

- technical integration of one product qualifies as the bundling of two separate products

- even when the tying of products is consistent with commerical usage or when there is a natural link between the two is it tying

--> Client PC operating systems and streaming media players are two separate products

step 1 tying criteria defenses (W4(1))

Microsoft's defence:

- media player is a feature of the windows operating system, not in separate markets.

-  Windows is now a better product: good for consumers, this is innovation

- Consumers want media player out-of-the-box

-Other operating systems have also tied media players (other competitors like Linex also doing it)

Commission:

-   Complementary products can still be in separate markets

-   Consumers do not always want media players and certainly don’t necessarily want Microsoft’s

-   Companies exist which only develop media players

-   Other OS aren’t dominant – special responsibility of Microsoft (Michelin)

-    Other OS do not pre-install their OWN media player (do so for third party media players). Microsoft is leveraging its market power.

Microsoft: tying product is windows and the tied product is the media player.

step 2 tying criteria (W4(1))

The undertaking concerned is dominant on the market for the tying product

- was not disputed that microsoft has a dominant position on the client PC operating systems market

Microsoft: windows is dominant.

step 3 tying criteria (W4(1))

The undertaking does not give customers a choice to obtain the tying product without the tied product.

Microsoft: cannot get windows without the media player

step 4 tying criteria (W4(1))

The conduct forecloses competition (has anti-competitive effects)

- conduct altered the balance of competition in favour of Microsoft and to the detriment of the other operators

- enabled Microsoft to obtain an unparalleled advantage with respect to distribution of its product and to ensure the ubiquity of Windows Media Player on client PCs throughout the world, thus providing a disincentive for users to use third-party media players and for OEMs to pre-install such media players on client PCs

step 4 tying criteria commission analysis (W4(1))

Commission:

-  Windows Media Player was ever-present on every Windows computer in the world. Market penetration.

- A competitor making an equally good media player will still loose out to Microsoft. --> comes pre-installed, consumers are unlikely to switch, manufacturers are unlikely to put in extra work.

- Advertising costs for competitors would be massive to get consumers to switch. Aggressive markets necessary to switch away from mediaplayer.

- Competitors can never be the only media player on a device.

-  Network effects --> windows media player started to become the standard, detriment to competitors.

nuances of microsoft case (W4(1))

so economic and legal uncertainty to the case:

- Was there (potential) foreclosure? – consumers can still choose another media player, doesn’t take long to download.

- Was there consumer harm? - consumers got the media player for free.

... generally very difficult to predict how markets will develop

microsoft remedies (W4(1))

outcome: 102 TFEU violation on two counts (refusal to supply and tying), €497.196.304,00 fine

Remedy: Refusal to supply, provide interoperability information to competitors who request it to develop their OS.

 

Remedy: Tying, offer a version of Windows without Windows Media Player. Still allowed to offer the complete version as well. The one without media player is not allowed to be more expensive.

-  the two versions are the same price. Customers will opt for media player because it’s the same price but includes more. Very few customers opted for Windows OS w/o media player.

- Objectively remedy did not do a lot but legally and economically made a difference.

Preinstalling exploits consumer inertia (W4(1))

- Integrating multiple products to form a coherent whole: “Windows is the product.” (Microsoft)

- “Android is the product.” (Google/Android)

- Ecosystem building: Consumers expect some level of integration!  - “there’s an app for that” (iphone’s tagline)

ecosystem building (W4(1))

- can be built in the confines of a device (e.g. apple)

- But online services can also be connected (e.g. google and Meta) through login features

--> Google using Youtube, google drive, google maps, google docs

--> Meta using insta, whatsapp, facebook, oculus

self-preferencing (W4(1))

A new form of abuse (more or less)

- Based on leveraging market power

- and discrimination (see art. 102(c) TFEU)

= refusal plus actively hindering competitors

in Google Shopping:

- Google promoted its own google shopping --> very privileged position, it is the only company with the first search position, has eye-catching pictures to draw attention

- Whilst demoting competitors (resulting in decreased network effects) --> competitors put artifically lower on the search results.

Google Shopping (W4(1))

--> apply to: art. 102 TFEU / self-preferencing / leveraging of dominant position / new form of abuse

Facts:

- Google integrated its ‘google shopping’ at the top of the search results

- Google argued by analogy to Bronner, that its conduct was refusal to supply (because proving that something is indispensable is very difficult)

rule: distinction from traditional refusal to supply (Bronner):

For the application of Bronner there must be: a request or, in any event, a wish to be granted access and a consequential refusal, and, second, that the impugned conduct lies principally in the refusal as such, and not in an extrinsic practice such as, in particular, another form of leveraging abuse. §82

the practices at issue were ‘active’ by nature, in the form of positive acts of discrimination between Google’s comparison shopping service and competing comparison shopping services and that those practices constituted an independent form of leveraging abuse from a dominated market §85

Google gives competing comparison shopping services access to its general search service and to the general results pages, but makes that access subject to discriminatory conditions §113

rule: self-preferencing as an abuse

violation of art. 102 by:

(i) the more favourable positioning and display of Google’s own specialised results within its general results pages than the positioning and display of results from competing comparison shopping services; and

(ii) the simultaneous demotion of results from competing comparison shopping services by the application of adjustment algorithms.

Bronner (W4(1))

--> apply to: art. 102 TFEU / refusal to supply

Facts:

-  physical products, concerning newspapers

-  Dominant company controlling newspaper distribution but also sold its own newspapers (active on two markets). Had competitors on the newspaper market, B being one of them.

-  B asked for its newspaper to be distributed on the company’s distribution network. Alleged ‘refusal to supply’.

Rule: an essential facility is more than just convenicence; must be indispensable to carrying out the undertaking’s business, inasmuch as there is no actual or potential substitute in existence for that infrastructure.

- not art. 102 violation, the distribution network was NOT indispensable (not an essential facility)

- other methods of distributing daily newspapers, such as by post and through sale in shops and at kiosks, even though they may be less advantageous for the distribution of certain newspapers, exist and are used by the publishers of those daily newspapers. §43

- no technical, legal or even economic obstacle making it impossible, or even unreasonably difficult, for any other publisher of daily newspapers to its own nationwide home-delivery scheme and use it to distribute its own daily newspapers §44

Google Shopping distinction from refusal to supply (W4(1))

Bronner; Microsoft: was just a refusal

Google Shopping: was refusal + actively hindering competitors

– code in the algorithm that artificially placed competitors lower in search results whilst google shopping was artificially placed higher on search results (i.e. always the 1st result)

- Demoting competitors esp. devious, bc of consumer inertia)

- essential facility: not the Shopping Block but the search results as a whole. To enter price comparison market have to be in the search results.

Bronner N.A. because there is no refusal to supply, google is supplying an essential facility but unfairly

Court of Justice notes that, where a dominant undertaking such as Google gives access to its infrastructure but makes that access subject to unfair conditions, the conditions laid down in the judgment in Bronner do not apply

Google Shopping product market (W4(1))

1. Market definition: On which market is the company active?

Market for online search (product market)

-   Difference between a general search engine (e.g. google) and specialised searched engine (for a specialised/specific product).

Market for price comparison services (product market)

-   Distinct from search – search queries put into a search engine are different

-  distinct from advertising – consumer cares about which options are available to then make their own decision vs advertising directly targets the consumer

Google Shopping geographic market (W4(1))

1. Market definition: On which market is the company active

-   Nationally based because of language issues

-  Narrowed down quite significantly, commission looked at dominance country by country

Google Shopping dominance/market power (W4(1))

2. Dominance/Market power: Does the company have market power on that market? - Market for online (general) search

- Market share by volume: how many searches are done with google compared to everyone else?

- was close to >90%

-  Barriers to entry: very difficult to set up search engine to the same level google has

-  Positive feedback loop: i.e. network effects. Bc google already has so many users, people trust the platform for the best search results and trust that every website is on google

- No multi-homing: to what extent do consumers use multiple products at the same time? How many consumers use more than one search engine at the same time (e.g. between google and bing). Commission found not a lot of overlap.

On the market for general search google is a dominant undertaking and subject to art. 102.

Google Shipping anti-competitive effects (W4(1))

losing internet traffic (competitors)

· Network effects decrease if you have fewer people on your website, less data, less advertising

·  Lower revenue

·  Fewer user reviews – seen as less trustworthy

that traffic produced positive network effects, in that the more a comparison shopping service was visited by internet users, the greater the relevance and usefulness of its services and the more merchants were inclined to use them.

the loss of that traffic could lead to a vicious circle and, eventually, to market exit. §159

Google Shopping potential anti-competitive effects (W4(1))

Foreclosure

- Google Shopping traffic increased dramatically

- Competing price comparison declined

- Competitors getting pushed out of the market

- Preventing competitors from existing in the market in the first place (they did exist during google’s failed price comparison service)

Higher prices for product sellers

- if google shopping is the only effective and relevant price comparison service, then google can ask for more money.

Lower incentives for innovation

- why innovate when you can never beat Google Shopping?

- Also no incentive for google to innovate – already won, it is always the first result that consumers will click on anyway

Consumers lose out on potentially relevant results

- not good for consumer welfare, consumers expect that the google search results are ranked on relevance but this is not the case, other services are being demoted --> overlooked

Google Shopping defenses (W4(1))

Google: “This is competition on the merits. We’ve made Google Search better.” (product quality)

--> then why demote competitors, how does this improve search?

--> network effects: Google drawing traffic to its shopping block, more sellers will then want to be on the shopping block, actively reducing the traffic that Google’s competitors get.

 

Google: “We didn’t intend to restrict competition”.

--> “Abuse is an objective concept.” (Hoffman la Roche)

 

Google: “Our results are based on relevance. Google Shopping is just more relevant than other results.”

--> competitor's results can be just as relevant, so why can they never get top spot? Google artificially placing itself above competitors at all times.

 

Google: “The Commission has not proven anti-competitive effect.”

--> Only potential anti-competitive effect is required. Does not have to be definitively proven that the market will be worse.

Google Shopping Objective Justifications (W4(1))

Google: “We have an objective justification!”

- conduct leads to pro-competitive effects

- Namely, reliability of the results. Google Search is now a better product. Google can verify the sellers are legitimate.

--> doesn’t outweigh the anti-competitive effects. Besides, how does it help anyone that competitors are demoted?

Google Shopping Significance (W4(1))

Crated new form of abuse: favoring + demoting / self-preferencing

issue of legal certainty - Could Google have foreseen this? Then again, special responsibility of dominant undertaking

Integration of online services can be abusive.

shift away from the Bronner criteria (the strict indispensability criteria)

art. 6 DMA (W4(1))

self-preferencing is prohibited:

“The gatekeeper shall not treat more favourably, in ranking and related indexing and crawling, services and products offered by the gatekeeper itself than similar services or products of a third party. The gatekeeper shall apply transparent, fair and non-discriminatory conditions to such ranking.”

- Could also apply to Amazon product rankings, etc.

- Does this still require demoting competitors? --> does not mention ‘demoting’ whereas google shopping established that self-preferencing AND demoting is necessary for conduct to be illegal.

potential examples of self-preferencing (W4(1))

From google:

-  Video blocks (youtube)

--> But does not show up on top of the page.

--> But shorts are also competitors (insta, titktok)

--> so, this could be based on relevance

-  Google maps block

- Google reviews block

-  AI summary block

--> No other AI summaries included, It is the first result

Maybe DMA violations rather than google shopping?