Chillin'Competition

I have uploaded on ssrn (see here) a new paper on product design and business models in EU antistrust law (that is, Articles 101 and 102 TFEU). I will have to review the piece when the first instance ruling in Google Shopping comes out later this year, but I would very much welcome, in the meantime, your comments on it (if there was any doubt: nothing to disclose).

I have been thinking about these topics for a long time (as I suspect regular readers, and certainly my students, know). The key point I make in the paper is that there are fundamental differences between product design and business model cases, on the one hand, and more traditional competition law ones, on the other. It is difficult to argue that forcing a firm to redesign its product and/or to develop an alternative monetisation strategy is just enforcement as usual and that is has no implications from a legal standpoint.

Why product design and business model cases are different

The paper addresses the various ways in which product design and business model cases are different, including the following factors:

• Intervention is more intrusive and far-reaching, as already pointed out above (banning a contractual tie-in is not the same as asking the firm to redesign its products; it seems difficult to pretend otherwise). For the same reasons, the conception, implementation and monitoring of remedies is also far more complex (the experience of the past few years is there for all to see).
• The design of a product or a monetisation strategy can give rise to pro-competitive gains that are not manifested in more traditional cases: the integration of a camera in a smartphone allows it to interact at a deeper level with the rest of the phone’s functionalities, and this in ways that contractual tie-ins cannot (and never will).
• The assessment of the counterfactual is more complex: because the pro- and anticompetitive aspects of a product design or a business model are so closely intertwined (the very restraints that appear to restrict competition also create it), the evaluation of the effects is also more complex (as I explained here by reference to the Apple App Store case).

How the case law accounts for the specificities of product design and business model cases

The case law does not ignore the specificities of product design and business model cases. These are and/or can be taken into account in a number of ways, in particular the following:

• Where intervention amounts to forcing a firm to deal with third parties with which it has chosen not to deal, a finding of infringement demands evidence of indispensability and elimination of all competition: Slovak Telekom (in line with the relevant precedents) clarified this fundamental point.
• A practice that is objectively necessary and/or a clause that is ancillary to a pro-competitive transaction is not restrictive of competition. This principle, which flows from the need to establish a restriction against the relevant counterfactual, is manifested, inter alia, in two ways:
  • Sometimes, it is embedded in the legal test: Metro I and Pronuptia are the go-to examples in this regard.
  • Sometimes, objective necessity/ancillarity is evaluated on a case-by-case basis. The lesson to draw from Intel and similar cases is that any arguments in this sense are to be carefully pondered by an authority when invoked by a firm.

The tension between the case law and common carrier antitrust

It seems difficult to dispute that there is, in some respects, tension between the case law and the most recent administrative practice (some examples of which I review in the paper). The Commission’s practice is an expression of what I have called ‘common carrier antitrust’, which is characterised by the following features:

• The tendency to equate anticompetitive effects with a competitive disadvantage: I have discussed this point extensively on the blog (see for instance, here and here) as well as on a paper published earlier this year (see here). The Commission, in its most recent practice, seems to be embracing a very low threshold of anticompetitive effects, which would not be immediately obvious to reconcile with the case law (or indeed with the analytical framework laid down in the Guidance Paper).
• The blurring of lines between exploitation and exclusion: are the Apple App Store and Amazon cases about exclusion? Are they about exploitation? Both? These cases may be marking a comeback to the days of Michelin I and British Airways, where exploitation and exclusion were conflated in individual decisions.
• The formalistic approach to the ‘exceptional circumstances’ test: as explained elsewhere on the blog (see here), the Commission has advanced the view that the applicability of the indispensability and elimination of all competition conditions depends on what the decision formally demands (as opposed to what it involves in effect). A practical consequence of this interpretation of the case law is that any agency would be able to circumvent the ‘exceptional circumstances’ test by avoiding the specification of the remedy.

It remains to be seen how the tension between the case law and common carrier antitrust will be resolved and, by extension, what the relationship between competition law and sector-specific regimes (in particular the Digital Markets Act) will be. I very much look forward to hearing from you. Bon week-end a tous!