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Archive for November 10th, 2021

The General Court in Case T‑612/17, Google Shopping: the rise of a doctrine of equal treatment in Article 102 TFEU

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equal treatment

The General Court’s judgment in Google Shopping (available here) is finally out. There is much to unpack, and much that will be debated in the coming days and weeks. In this regard: the Journal of European Competition Law & Practice is planning a Special Issue devoted to the judgment. More details will follow in due course, but we will be open to proposed submissions, as we want to make sure that the issue is as balanced and diverse as possible.

The above said, it is immediately possible to get a clear idea of the logic underpinning the judgment. It is remarkable in a number of ways, which, if appealed and confirmed by the Court of Justice, may lead to a substantial expansion of the scope of Article 102 TFEU.

The rationale behind the judgment can be summarised as follows:

  • The General Court’s develops a principle of equal treatment, which is inferred from the case law applicable to public undertakings (and public bodies) and is now expanded to other dominant firms (para 155).
  • There is an element of ‘abnormality’ in the differential treatment of a search engine’s affiliated services, on the one hand, and third party ones, on the other (paras 176, 179 and 616).
  • Google’s search engine is a ‘quasi-essential facility’; in any event, it is not necessary to establish that the platform is indispensable within the meaning of the Bronner case law.

Equal treatment, abnormality and competition on the merits

When reading the judgment, one cannot avoid the impression that the General Court viewed the practice at stake in the case as inherently suspicious, that is, as a departure, by its very nature, from competition on the merits. To quote the judgment itself: ‘the promotion on Google’s general results pages of one type of specialised result – its own – over the specialised results of competitors involves a certain form of abnormality‘ (para 176).

The judgment concludes that the behaviour at stake is ‘abnormal’ for two separate reasons.

First, the General Court infers, from the case law, a general principle of ‘equal treatment’, which would demand, also in the context of Article 102 TFEU, that like situations be treated alike unless objectively justified (para 155). This paragraph is remarkable. The Court judgments cited relate to the behaviour of public authorities. The General Court appears to imply that dominant firms are also subject to the same principle (in Deutsche Telekom, the Court of Justice did not go this far, and confined the obligation of equal treatment to instances where the input is indispensable).

It is interesting (in particular for those who study telecommunications regulation) that the General Court refers, in support of its position, to Regulation 2015/2120, which enshrined the principle of network neutrality in the EU legal order. While net neutrality applies to Internet Service Providers, the General Court is of the view that the Regulation ‘cannot be disregarded when analysing the practices of an operator like Google on the downstream market‘ (para 180). Once the principle of neutrality introduced at one level of the value chain, it was bound to be expanded elsewhere (firms that lobbied for net neutrality rules have been reminded in this judgment that we should all be careful what we wish for).

Second, the judgment explains that the conduct is inconsistent with the ‘role and value‘ of a search engine, which, in the words of the General Court ‘lie in its capacity to be open to results from external (third-party) sources and to display these multiple and diverse sources on its general results pages, sources which enrich and enhance the credibility of the search engine as far as the general public is concerned, and enable it to benefit from the network effects and economies of scale that are essential for its development and its subsistence‘ (para 178). In this sense, it is argued, a search engine differs from the infrastructures or input at stake in precedents like Bronner or IMS Health.

Paragraph 178 of the judgment will be discussed at length by commentators. The General Court goes as far as to suggest that favouring the firm’s own services is ‘not necessarily rational‘ for a search engine (or rather, that it is only rational for a dominant firm protected by barriers to entry). Alas, it is sufficient to take a look at the wider world to realise that the conduct at stake in the case is pervasive, even in industries where dominance is rare (such as supermarkets, which, one would assume, are also interested in offering the most attractive products to end-users but have long engaged in similar self-preferencing).

More generally, digital platforms (and search engines are not an exception) are partially open and partially closed. In this sense, the fact that some features in a platform are not open to third parties does not necessarily go against its interests (or is not necessarily irrational). In the same vein, business models evolve, and may become relatively more open (or relatively more closed) over time (think of Apple, which has followed the opposite path).

Indispensability and the Bronner conditions

The General Court also advances two arguments in support of its conclusion that the Bronner conditions (in particular, indispensability) are not applicable in the case.

First, the judgment introduces a doctrine of ‘quasi-essential facilities’. More precisely, the General Court notes that ‘Google’s general results page has characteristics akin to those of an essential facility‘. Even though several judgments are cited (para 224), there are no precedents supporting this position. It is, therefore, an innovation that would need to be confirmed by the Court if the judgment is appealed. It would seem that a facility is ‘quasi-essential’ where it cannot be duplicated (even if not objectively necessary to compete for firms on an adjacent market, which is the crucial consideration).

Second, the General Court engages with the Slovak Telekom judgment, which clarified that indispensability is an element of the legal test where an authority or court would have to ‘force’ a dominant undertaking to deal with third parties with which it has chosen not to deal.

In this regard, the judgment tries to distinguish between a refusal in the traditional sense and the behaviour at stake in the case. However, the General Court seems to concede that formal differences between the two are not decisive. The arguments against requiring indispensability in the case are ultimately drawn from the opinions of the Advocates General in TeliaSonera and Bronner. These opinions are cited (at para 239) in support of the proposition that exclusionary discrimination is a separate form of abuse.

A close look at these opinions shows that only Advocate General Mazak’s analysis in TeliaSonera is capable of substantiating the conclusion drawn from it in the judgment. Advocate General Jacobs’ in Bronner indeed mentions discrimination, but is clearly referring to exploitative conduct and therefore does not answer the question (the same is true, by the way, of the reference to discrimination in Irish Sugar).

In any event, Advocate General Mazak’s Opinion would still fail to address the criterion introduced by the Court in Slovak Telekom: would the key question not be whether intervention forces a firm to deal with rivals? If so, does it matter whether we call it discrimination or otherwise? One should not forget, in this sense, that Slovak Telekom came after the Opinion and that the latter was not followed by the Court in TeliaSonera, which struck a different balance.

The General Court dismisses the idea that a remedy forcing a firm to deal with rivals means that indispensability should be an element of the legal test. It does so in the following terms:

244. However, the obligation for an undertaking which is abusively exploiting a dominant position to transfer assets, enter into agreements or give access to its service under non-discriminatory conditions does not necessarily involve the application of the criteria laid down in the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569). There can be no automatic link between the criteria for the legal classification of the abuse and the corrective measures enabling it to be remedied. Thus, if, in a situation such as that at issue in the case giving rise to the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), the undertaking that owned the newspaper home-delivery scheme had not only refused to allow access to its infrastructure, but had also implemented active exclusionary practices that hindered the development of a competing home-delivery scheme or prevented the use of alternative methods of distribution, the criteria for identifying the abuse would have been different. In that situation, it would potentially have been possible for the undertaking penalised to end the abuse by allowing access to its own home-delivery scheme on reasonable and non-discriminatory terms. That would not, however, have meant that the abuse identified would have been only a refusal of access to its home-delivery scheme‘.

Your thoughts on the above would be very much welcome. My impression is that the paragraph fails to engage with the question, which remains unanswered. The General Court explains, in essence, that, in a case like Bronner, the dominant firm may have breached Article 102 TFEU in a different way, and that remedying the additional abuse may or may not have required the firm to deal with third parties (think of an exclusivity obligation). That seems correct and unquestionable.

However, the fact remains that indispensability would have been an element of the legal test in relation to the refusal. Whether or not there might have been an additional abuse does not alter this conclusion. And, as the Court explains in Slovak Telekom, the reason why indispensability would have been an element of the legal test in relation to the refusal is because intervention would interfere with the firm’s freedom of contract and would amount to forcing it to deal with rivals.

The General Court’s interpretation of Slovak Telekom will give rise to some controversy and will be widely discussed. This is only normal, as there is much uncertainty around the meaning of the case law. Paragraph 246 shows the extent to which the relationship between remedy and legal test needs to be clarified. As cases like Bronner show, they are two sides of the same coin: it is artificial to distinguish between both. When pondering whether a refusal to deal should be abusive, we are acutely aware that intervention would involve mandating a firm to deal with rivals (and we are cautious about such a remedy). It is difficult to pretend otherwise.

Since this post is already too long, I will be addressing other questions (in particular in relation to effects) in other entries. If there was any doubt: still nothing to disclose.

Written by Pablo Ibanez Colomo

10 November 2021 at 6:44 pm

Posted in Uncategorized