The General Court in Case T‑612/17, Google Shopping: the rise of a doctrine of equal treatment in Article 102 TFEU
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.
Chillin'Competition 
The General Court should have assessed how much Google benefited from this alleged monopolisation (still alleged, until a definitive decision), at least for facilitating the claims for damages which the 18 claimants and other companies might ask in courts. Not only for that but at least because of that.
As to the ”equal treatment” this is the entrance of a political principle in the competition reasoning. If equality is relatively easy to asses and enforce in the society, things are much more different in the economy, where the competition requires a level-playing field (so, equality at the starting line) but no equality in the race itself.
The self-preferencing always looks tricky but in fact it is legitimate for business to expand their activities and their margins, as an expression of the freedom to enterprise.
I am looking forward to see the remaining of your analysis.
Valentin Mircea
10 November 2021 at 7:31 pm
Thanks for the quick analysis, Pablo. Just a few thoughts from my side and a response to Valentin. First as regards the principle of equality: this is presented at least also in part as a general principle of EU law, so not one restricted to public undertakings. The reference to Irish Sugar (which was only awarded the full quota, but had no downstream statutory monopoly to the best of my knowledge) and Arcelor (in which the principle of equality as a general principle of EU law was applied to EU secondary law) clearly take the principle outside the context of public undertakings. I really don’t see the problem with this. General principles bind everyone, private firms included. This merely moves the discussion to the next stage: who or what is equal and thus has a right to equal treatment? One way of answering this question would be to look at the effect on the dominant company’s profitability, resulting in the ability of the dominant company to differentiate between proprietary services and third party services on the basis of the effects on profitability. This is ruled out by the GC in categorical terms in para. 563.
Expanding the logic of net neutrality also seems sensible to me. Mind you, the GC only uses this argument ‘for the sake of completeness’ so only to further substantiate the applicability of a duty of equal treatment. Again, this makes good sense to me as an implication of the principle of equality especially in light of the facts of the case.
As to the link between the remedy and the harm to competition (and the corresponding legal standard) and the legitimacy of expanding business and activities: I think that the GC rightly points out that it is perfectly legitimate for businesses to expand their activities (paras. 160, 162 and 164). It’s just that they need to do so by means that constitute competition on the merits taking into account the Michelin-special responsibility. This is well-established case-law that some of us may dislike, but it is the law and the GC is therefore right to apply it. In this regard the commentary seems to ignore a rather big elephant in the room: Google’s dominance. Google has chosen not to dispute it in this case (para. 119), but is does constitute the frame for understanding any theory of harm in any 102-case. A situation of dominance, whether understood in the legal terminology or as market power using economic concepts, invariably means that competition is impaired or at least different from what we want it to be.
This brings me to the link between the remedy and the harm. I can see why the remedy can be instructive for understanding the harm, but the remedy can never be decisive for understanding the harm. If you allow me a rather gruesome parallel: someone gets their foot amputated. This is the remedy. But for what? For a foot that was severely infected, a foot that was crushed beyond healing, a foot with a tumour in it? The remedy is instructive, but only insofar that the harm probably wasn’t related to – say – the hands of the person involved. Moreover, in Google there was no duty to deal imposed as a remedy. Google was ordered to stop the self-preferencing. I can see why Google would want to frame this case (i.e., the assessment of the harm and the remedy) as a refusal to supply case, but this ignores that the case was pursued as a self-preferencing/discrimination case. Moreover, one that involved a dual action: promotion of the own product and demotion of the others products. Google has been at pains to separate these two issues because the individual actions could be construed as some form of competition on the merits: improving the quality of the product. However, taken together the quality improvement (that can be doubted given the failure of Google’s price comparison service prior to its promotion, see para. 402) is overtaken by the negative effects on competition. And that is due to that elephant in the room: Google’s dominance. A dominance derived from building a better mousetrap: a superior general search engine. Dominance that could have been extended by building another better mousetrap: a superior price comparison search engine.
Again, thanks for the analysis if only as it functions as a catalyst for further analysis and debate.
Hans Vedder
11 November 2021 at 9:21 am
Thanks, Hans! Wonderful to get the debate started!
Pablo Ibanez Colomo
11 November 2021 at 9:29 am
Thanks for the insightful comment.
My point on equality is that it need to be better specified to what it refers. In the competitive process, equality is needed at the starting line and as long as equality would be required all along the way, there will be, in fact, less competition. It is about equality of chances, not of the whole process, nor the outcome.
The ”net neutrality” concept is not, in my view, a workable one, rather hollow and with negative effects on competition.
I am sure the General Court acted with good intent but I also consider that the ECJ should at least refine further this concept for the sake of 1) legal certainty and 2) the robustness of the competitive process. We should never forget that the road to hell is always paved with good intentions.
Valentin Mircea
11 November 2021 at 9:38 am
Pablo, on issues such as excluding less efficient rivals (ie the need to even have a look at that outside pricing cases), counterfactuals, and competition on the merits, I am afraid you may have to rewrite most of your recent literature on “effects”, if this judgment (rather orthodox in my view) is to stay and you want to present the case law as it is (and not as you may wish it to be, which is also an option for academics).
Joan
11 November 2021 at 12:06 pm
Revising all my papers seems a bit premature! This said, I will definitely have to update my paper on product design and business models (on which your comments would be most welcome, by the way). If and when the moment comes, the rest will follow, to be sure.
The issues you identify are of the utmost importance and will write about them in the coming weeks on the blog: your views will enrich the debate, as they always do. Thanks again!
Pablo Ibanez Colomo
11 November 2021 at 12:17 pm
Hi Pablo, in the para. that you quote, the GC seems to fully endorse the EC’s distinction between “passive” refusals to supply, and “active” self-preferencing (see para. 240). This seems a bit contradictory given that self-preferencing is as a result treated more harshly than more restrictive conduct (an outright refusal). It also seems contradictory because the EC has argued that Google’s conduct essentially amounted to a constructive refusal to deal, by demoting the rankings of the competing Comparison Shopping Websites. But this is not the fist time that the Court has taken a restrictive approach on the scope of the essential facilities doctrine: they also did that in Slovak Telekom in relation to margin squeeze cases (See Slovak Telekom C-165/19 P at para. 53).
The other point that the GC makes in that paragraph is that the fact that the remedy for the leveraging conduct could be an access remedy, does not automatically mean that the abuse is a refusal to access to an essential facility.
The result of the above two points is that the EC now has more leeway to go after any form of leveraging, leaving the Essential Facilities doctrine a truly exceptional situation that is only applied for outright refusals to supply access to essential facilities only for new customers. It will be interesting to see whether the ECJ will agree with this on appeal (I presume there will be one).
Nikolaos
11 November 2021 at 1:14 pm
I am puzzled by Hans’ comments. The issue is not the special responsability of dominant companies. The issue is to understand from which point onwards the service a the dominant company provides becomes a ‘public good’, obliging the provider of the service to adapt its features to accomodate the business models of competitors (§ 319). In this regard, while remedy and abuse can be dissociated – for example, Google could exit the CSS ‘market’ to end the breach in this case) – given the very broad formulation of Art.102 TFUE, the role of the GC should be to provide guidance allowing undertakings to know in advance what is allowed and what is not. Given that adapting the design of its product to the needs of competitors is a quite intrusive obligation (also imposed in the Microsoft ballot box, but based on commitments), the GC should have clarified from which point onwards there is such an obligation, except if we would assume a general obligation of non-discrimination applicable to any company deemed dominant on a market, providing services in an adjacent market. The Bronner criteria constituted a major progress, by defining a ‘dominance +’ threshold bringing about a special+ responsability (on the legislative side, this is also one of the main issues at stake in the discussions of the DMA: to whom should it apply). By this judgment the GC blows up that certainty, which will remain only in the case of ‘merely’ passive refusals to deal (§244 quoted by Pablo). It would seem to me that the only reason for this is that the GC could have had to annul the Google shopping decision if the Bronner indispensability had been retained, given that (§448) “It is apparent from Table 24 in the contested decision that the proportions of traffic coming from Google’s generic results were quite variable depending on the comparison shopping service, ranging from a little over 20% (albeit with one exception of 13% in one year) to more than 80%, and that for a small majority of them (seven), those proportions declined over the years, the decreases varying from 5% to approximately 50%. The four comparison shopping services whose share of traffic from Google’s generic results increased, on the other hand, saw increases of between 5 and 65%”. But at the same time, the GC does also not want to extend such special responsability+ to any company found dominant. Some sort of indispensability seems required (the three features referred to in §196 including the fact that the traffic diverted cannot be effectively replaced, repeated in §226/7).
The problem of the lack of clear description of what is required from dominant companies should also impact the level of gravity of the breach. The GC escapes the debate in §680 by stating that the conduct was intentional referring to §616 which does not clarify at all what Google should have done (what does refraining from ‘favouring its own shopping service’ mean: structural separation, functional separation, Equality of Inputs, Equality of Outputs..?). In the beginning of the century, DG COMP wisely downgraded the gravity of the margin squeeze by Deutsche Telekom on account that (AT.37451 Price squeeze local loop Germany, §206) “(…) an argument against ranking this as a very serious infringement is the fact that the weighted method applied in this decision to determine the margin squeeze has not previously been the subject of a formal Commission decision”. I see therefore a mismatch between the acknowledgment of the new application of the leveraging abuse requiring a kind of ‘net neutrality’ and the fining part.
Christian Hocepied
12 November 2021 at 5:46 pm
Christian, I trust all is well with you?
I have always thought the section of 102 that prohibits a dominant company from “applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage,” as any form of discrimination that is reasonably likely to exclude others. What do you think?
I was also unconvinced that that margin squeeze was very new at the time: but any discount of a fine would reduce the chances of appeal so as a way of establishing a new precedent I could see why it was done..
In order to find a margin squeeze the case usually also involves discrimination – the effect or outcome of the squeeze on third parties affect them more than the Domco’s own downstream business, so unless you are an authority with powers to obtain accounting information, and has always been easier to allege and prove discrimination since it only requires comparative evidence that is usually available to a private party, rather than accounting evidence which usually isn’t.
Is this from of leveraging/discrimination in Google search really new? Preferential promotion and display of products in search engine results pages is certainly a new application of the principle, and a new way to discriminate against rivals, but if every application of the principle is to be categorized as a new subset of the art 102 obligation then the principle would suffer from becoming irrelevant over time, as technology develops, wouldn’t it?
tim cowen
12 November 2021 at 6:44 pm
”dissimilar conditions to equivalent transactions with other trading parties” is not exactly the hypothesis in Google Shopping.
Otherwise the self-preferencing is as old as the humanity and the fact that it is coming under scrutiny in digital markets only confirms a certain bias regarding this area. Supermarkets regularly give preference to their private labels and this has never been considered as anticompetitive by a competition agency, although disputed by producers. Except for the sheer attention the digital platforms attract, there is really nothing new under the sun and supermarkets might be often more dominant than Google is, considering that relevant markets are local.
With all the discussion on what the General Court intended to say through ist decision, there is still no explanation why we would need a new ”law of the horse”, applicable only to digital or even to parts of it.
As a general rule, judges must be cautious and question anything in competition law matters, not endorse a certain view (e.g. Big Tech is bad) and then try to find arguments to support that view, twisting legal concepts (net neutrality, really?). It is difficult to remain calm and objective, in the flow of negative opinions about Big Tech, pushed by a media industry interested in switching rents back into its favour, but it is not impossible either and I wish judges at the ECJ to stand up to their roles.
These legal precedents pave the way for future innovation and as long as they establish a ”straitjacket” for businesses, a certain chilling effect is warranted. We should be mindful that a battle for the soul of the competition law is taking place and that many vested interests attempt to (un)level the playing field in their favour.
Disclaimer: I am not a fan of Big Tech, I use most often DuckDuckGo for internet search and I do not have a Facebook account. My views are my own and I am mindful only of the long effects of laws and legal precedents and only interested in the full respect of the rule of law, irrespective of the case.
Valentin Mircea
13 November 2021 at 11:12 am
For there to be a battle for the soul of anti trust is to recognise that it has a soul. That’s a good start because a judge has to seek justice in each case. This is the overriding principle in courts of law that of often overlooked.
The first thing that needs to be addressed is whether an outcome that is just in terms of “ the greater good for the greatest number” is the aim (Bentham) or whether the law is seeking to ensure a social contract is being observed ( Rawls). More recently Michael Sandel has eloquently suggested that it should be promoting public goods returning to an Aristotelian tradition.
In competition law the prevailing philosophy has been a focus on a short term consumer welfare and industrial efficiency and that philosophy is based on a type of Benthamite rough justice. It ignores the role of work in people’s lives and the need for people to pursue their ends and aims as far as they can – in favour of an idea of industrial efficiency. This is a poor place to be for humanity and has arguably led to the refeudalization of society with small number of big companies running many markets for their own ends – paying lip service to consumers whenever necessary to keep regulators at bay. Te US bases debate about consumer welfar wen efficiency not being the aim of life is help going to invigorate debate about purpose here too.
More recently i woudl argue that the battle for the soul of anti trust has progressed to merit based competition – but something that is still avoiding the more recent thinking about just outcomes. By talking about “competition on the merits” justice in outcomes are assumed – not investigated. For true merit based competition to exist there needs to be greater discussion about starting points and an investigation into outcomes doesn’t there?
For example let’s take brand value. Online world men’s that brand recognition is vital. Google is one of the most widely recognised and valuable brands in the world. New entrants are by definition unknown. Looking at the practices in the Android case that value has been created by cross promotion under exclusive and anti competitive agreements. This aspect of the gains from abuse has never been addressed in any remedy. It’s long term value is enormous – and provides Google with an unmerited starting point from which to compete in many many markets.
This is clearly unjustified. If the fruits of illegal activity can be kept by the wrongdoer what is the incentive to comply with the law? Anyone with a soul should find that problematic.
Tim Cowen
14 November 2021 at 6:02 pm
Brand awareness can be in deed a barrier to entry but I never thought of this in the digital realm. If the problem as you say it, the remedy is simple: force Google to change its name (I start to understand what is all about Meta).
The soul of competition enforcement should be, well, the competition itself, which is now altered by vested interests, disguised in public interests clothes and hidden behind fancy words. As I notice, the consumer (the ”king”, as per Ludwig von Mises) is nowhere to be seen in this search and it is only about switching rents in favour of the most vocal.
You make some confusions and is difficult to argue with you. For instance, the starting point for Google in other markets is never an abuse (it is not abusive to just enter a new market) but its dominance, and as pointed out by Christian Hocepied in this thread, sometimes there is not even dominance. As to the alleged keeping of the ”fruits of the wrongdoing”, that is an issue of the administrative process and nothing stops the European Commission from introducing the disgorgement of profits in its arsenal, so I do not understand about who are you complaining.
I made it clear I have no skin in this game and I am only interested in the long-term effects of the current frenzy to put certain technology companies in a cage. It is interesting to note that you seems preoccupied of the short term vision of consumer welfare but you are ready to accept that the short term purpose of reining in some companies is OK. It never is. The European Union has been so far unable to foster the advent of any significant technology company, so it seems to recourse to putting brakes to those who changed the economic landscape, while not being raised in a cage, in the hope that the dwarfism of its companies will be less obvious.
That is what it looks to an external observer of this battle.
Valentin Mircea
14 November 2021 at 9:17 pm
Tim, you are right that Article 102(c)TFEU prohibits discrimination between trading partners. But as shown by Pinar Akman in her still very topical analysis of July 2016, the case law on that provision does not fit with Google Search. This being said, I assume that one of the reasons why Google’s lawyers dedicated – in vain – so much efforts to argue that there was no discrimination, but different treatment of different situations resulted from their interpretation that the alleged breach was that like you they interpreted the alleged breach as related to Article 102(c) and thought being able counter the findings of the Commission by arguments susceptible to rebut the allegations of breaching Article 102(c). As Pablo underscores, DG COMP and the GC have something very different in mind. The required equal treatment means an obligation to adapt the design of one’s platform, once dominant, to accomodate the needs of competitors in related markets in which the operator of the platform is also active. This obligation ends only when the platform ceases to operate on the concerned neighbouring market. The question is why DG COMP and the GC needed to resort to inventing this new category of breach (and corresponding obligations). The reason is likely that the claim that dominant search engines could constitute an ‘essential facility’ was already ridiculed 10 years ago (The Next Digital Decade: Essays on the future of the Internet , Manne, Geoffrey, The Problem of Search Engines as Essential Facilities: An Economic & Legal Assessment (January 17, 2011). Available at SSRN: https://ssrn.com/abstract=1747289). DG COMP did not engage in the uphill battle to show that this would now be the case, but circumvented the difficulties by designing the new (positive – ‘affirmative action like) ‘equal treatment’ obligation (hidden behind the qualification of prohibition of ‘self preferencing’), now confirmed by the GC, which by doing so gave a hostage to fortune.
Contrary to what the GC suggests ‘for the sake of completeness’ the Open Internet regulation does not provide any assistance in understanding the scope of the newly defined obligation resting on dominant undertakings. The Open Internet regulation requires Internet access providers (ISP) to treat all data the same way, which would be the equivalent, for search engines, to use an algorith that does not demote without objective justification some relevant results in comparison to others. But the Open internet regulation allows ISPs to reserve capacity for their specialised services (which may be compared to CSS), as long as not to the detriment of the open internet. In Google search presenting or not own CSS results more prominently in the shopping units, would NOT constitute a breach of the ‘equal treatment’ obligation that should only apply to the search results. By using the prohibition of self preference to tackle the leveraging risk/problem, both DG COM and the GC therefore extend the ‘equal treatment’ obligation beyond what we are used to in network undustries. Was there an alternative? In Google Search, the issue at stake seems a classic constructive refusal to deal (§346 and following). However, the difficulty faced by DG COMP was that Google is not dominant in the CSS market. How could one allege that Google abuses its dominant position by refusing to negotiate with competing CSS the possibility to have their search results appear in the shopping units, without changing their business models? Instead of working on the market definition and put into question the distinction between general search and specialised search in favour of a broader attention market consisting of the web-pages returned by general search queries on Google search, and encompassing all information that is provided to the viewer (including those on top of the general search result), COMP and the GC preferred to fidlle around with the definition of the abuse. The outcome of that ‘trick’ is as Valentin rightly notes, a chilling effect for an operator of a dominant general serach engine to launch an innovative service and enter into competition with dominant providers of specialized search services (weatherforecast, real estate, second hand cars etc) and thus paradoxically reduce the level of competition on these markets as well as innovation at the expense of the consumers. Neelie Kroes liked to remind that competition law was there to protect the interest of the consumers. The Google Search judgment suggests that competition law seeks to protect some competitors, i.e. the CSS operators who need Google search engine to be found by internet users as opposed to the alternative CSS whose share of traffic from Google’s generic results increased, according to § 448. Given that the legal test is the existence of effects in general (affecting a majority of the 361 competing comparison shopping services identified by Google – see §386), the GC can conclude that a behaviour has anticompetitive effects, without having to find out why the general trend does not apply in the cases of certain – likely more efficient – competitors (in the case of DK and PL, the comparison shopping services PriceRunner and Ceneo had respectively to be removed from the calculation, in order to find a decrease). The shift to protect competitors instead of competition will only be accentuated by statements as those in § 540 exempting DG COMP from comparing “the actual efficiency of several undertakings by studying in depth the various parameters of their business”, comparison that would be expected in any academic publication, claiming an anticompetitive effect of a behaviour but acknowledging that certain competitors – be it a minority – were not harmed by the behaviour.
Christian Hocepied
13 November 2021 at 6:16 pm
Christian,
Different treatment for different situations is always a way for avoiding the discrimination tag – but the GC explains clearly that the situations are not that different to warrant the argument that the justify different treatment. I also think an attention market is an unreasonably broad boundary and there are clear differences between general and specialised search so I support the Commission in market definition.
What puzzles me – Pinar Akman’s analysis included – is why the idea that a dominant company’s duty to alter its behaviour is only engaged when dealing with essential facilities.Put simply, the duty on a dominant operator has always been not to discriminate between those that it is supplying. The dominant company can chose not to supply at all, but once it does so then the obligation not to distort the market by supplying some on different terms to others is imposed. Whether the dominant entity is supplying something that is essential or just important, it is still dominant. That dominance can foreclose downstream and upstream competition and/ or leverage for gain by domco. Justice for market participants requires, and the law seeks to prevent, foreclosure or market distortion arising from excessive market power from occurring. It’s a simple question for a judge of whether to recognise that the level of market power in issue is sufficient to justify the imposition of the duty.
The Bronner case is an issue. It’s logic is looking more and more like an aberration. The idea that investment and innovation is likely to be adversely affected if the fruits of labours need to be shared is a very physical asset based and narrow 19th century idea. Increase use of tech assets by non discriminatory downstream users tends toward higher volumes of sales and greater profit maximisation for Dom co in modern technology markets. The freedom to abuse brigade look to me to be unnecessarily influenced by the common law “freedom of contract” (aka Scalia) and a right wing bei liberal schumpeterian doctrine that is simply out of date. That doctrine is a monopolists charter as it does’t take into account the high fixed costs low variable costs high network externality global and constantly refreshed nature of tech markets and ignores relative bargaining positions. So under the banner of freedom seeks to justify the absence of an obligation to others. 1984 double speak.
In a modern economy the “sharing” that the court requires on domco on equal or FRAND terms will make Google better off (in the short term). Why does that reduce innovation incentives? It will also prevent degradation of service and means that search results will be more relevant – making ads more useful that accompany the results. This increases their value and the money that can be charged for them. Tim Wu calculates that Google’s promotion of its own products that are less useful than those of rivals was costing it $100’s of millions in lost advertising. That profit sacrifice was nevertheless valuable as it restricted competition.
So the outcome is one where Google does not get to discriminate – it makes more money and stops foreclosing specialised search rivals. One reason it was probably doing that is because really high quality specialised search from Newspapers or Maps or Shopping attracts advertising on a more frequent and highly refreshed basis than access to loads of websites that are occasionally useful.
From an advertising perspective walling off or foreclosing key categories of frequently refreshed sites ( call them the “golden websites”) was worth doing for Google as they can represent a meaningful source of constraint over the pricing of its ads. Since the ruling means that Google should treat all equally that can’t now happen – so much the better for both users and advertisers.
Best,
Tim
Tim Cowen
14 November 2021 at 5:36 pm
”The idea that investment and innovation is likely to be adversely affected if the fruits of labours need to be shared is a very physical asset based and narrow 19th century idea”.
Well, the fruits of labour and innovation are protected by an old-fashioned concept, known as ”ownership right”. Mandated sharing of ownership may look nice. It is not.
Otherwise, it seems you claim now that even the special responsibility of the dominant companies must be revisited and enhanced, so that not just Bronner is stupid but also Michelin I is obsolete. The finding of ECJ in Michelin that dominance itself is not a recrimination should be amended.
As Christian Hocepied point out, if your reading of the GC decision in Google Shopping is correct, competition law is from now on intended to protect certain competitors to the detriment of others, portrayed, rightfully or not, as the ”bad guys”. As justified as this might look, it is called socialism and it never worked. If there is indeed a problem, this is not the solution.
Returning to the long-term chilling effects of such a restrictive stance to innovative technology companies, the solution to the problem of bigness is not a ”Procrustean bed”, but an environment in which innovation can thrive and challenge the supremacy of the current dominant companies. Building a cage for the later is hardly such a frame.
Valentin Mircea
14 November 2021 at 9:49 pm
You misunderstand me. I do not suggest that the dominance or monopoly itself is a problem at law. Nor do I make any suggestion that competitors need protection – but I do think – as is clearly spelled out in the Telia Sonera decision that there is more to the court’s philosophy than a mere focus on (short term) consumer welfare. EU law is not US Law and thankfully the Article 86 paper was contradicted by the court in Glaxo – so what Neelie had to say about things is now a footnote in history .
On sharing and access remedies. There are over 100 examples in OECD’s paper on how assets can be shared under different forms of functional or structural separation. Many are anti trust or quasi anti trust remedies. Access remedies of all types involve the sharing of assets.
Under the EC/ EU treaties property ownership is never a full answer to the issues raised by the exercise of the rights. This is a core piece of Court thinking “. The existence/ exercise issue is central to judicial control over the way that the rights in that property are exercised – the exercise of the rights or the misuse of market power can and are frequently controlled by law. The ownership is not the issue – it’s the misuse of market power that triggers intervention on behalf of society.
Shouting “socialism” is strangely in apt. The true socialist would not trust the systems of law and regulation to resolve any distribution problem.
On the contrary I would support what Hayek suggested about both the date and monopoly being a road to serfdom. What is often needed when dealing with dominance of network industries is access in the wider public interest. We do impose such sharing in telecoms water energy etc. That way the downstream businesses can thrive and compete without hindrance from the network owner.
Tim Cowen
15 November 2021 at 1:05 am
Tim, central to socialism is the (re) distribution of virtually everything through law and regulations.
We might not realise and I am sure most of us do not intend to bring in socialism but most bad things in history happened one step at a time and people realised it when it was already too late.
Valentin Mircea
17 November 2021 at 5:48 pm