Chillin'Competition

The first instalment of this series on the judgment in Android Auto discussed the metamorphosis of the case before the Court: a preliminary reference concerning the interpretation of the indispensability condition was turned into an analysis of whether the Bronner criteria were applicable in the relevant circumstances.

Beyond institutional issues, the judgment is notable in that it introduces a number of substantive innovations that represent a move away from Magill (which was the first providing a structured framework to refusals to deal), Bronner (which extended this framework to tangible property) and IMS Health. One may add to this list Slovak Telekom and Google Shopping, which did not depart from (in fact, they embraced) the same approach.

One can identify three main areas where Android Auto carves its own path and reframes the case law. To begin with, the judgment departs from the logic underpinning the legal framework introduced in Magill. Second, it changes the interpretation of a crucial point of law, which has the effect of significantly reducing the scope of Magill and Bronner. Third, it allows for more far-reaching intervention.

Android Auto and the logic underpinning the refusal to deal case law

The rationale underlying the refusal to deal case law and, specifically, the indispensability condition had been clear from the outset, and were effectively summarised by Advocate General Jacobs in his Opinion in Bronner. If anything, the Court has been more explicit about this logic in recent years.

There are two main reasons why Magill, and then Bronner, set the bar so high. The first relates to the fact that imposing a duty to deal on firms amounts to a major interference with their right to property and their freedom of contract. It should therefore only happen, the Court has consistently explained, in genuinely ‘exceptional circumstances’.

The second reason has to do with the consequences that such interference has on firms’ incentives to invest and innovate (that is, on dynamic competition). The fundamental premise behind Magill and Bronner is that dynamic competition is more beneficial for citizens and society than its short-term counterpart. Against this background, requiring evidence of indispensability was deemed to be a reasonable means to ensure that the latter does not impact negatively the former.

The Court moves away from this logic in Android Auto. Indispensability is not an element of the legal test even though intervention in the case amounts not just to compelling a firm to deal with a third party, but even to changing the operation of its platform.

The indispensability condition, therefore, is no longer universally applied as a filter to ensure that intervention does not affect dynamic competition. By the same token, the judgment strikes a new, different balance between static rivalry and firms’ incentives to invest and innovate.

How Magill and Bronner are reinterpreted in Android Auto

The Court, in Android Auto, attaches a great deal of importance to the fact that the platform had not been solely developed for the ‘needs of [Google’s] own business but with a view to enabling third-party undertakings to use that infrastructure’ (paras 44 and 49). Where the platform is a partially open one, the ECJ concludes, the indispensability condition is not an element of the legal test. This is so, the judgment suggests, even when access to ‘third-party undertakings’ has been given for purposes other than the one for which access is requested.

It is sufficient to take a cursory look at Magill to realise how this position departs from the preceding three decades of case law, including Bronner. The TV operators in Magill had enabled ‘third-party undertakings’ to use the programming listings at issue in the case. As explained by the Commission in its decision, RTE, BBC and ITV had not kept their inputs for their ‘own use’. They were already licensing their intellectual property to newspapers, free of charge, when the Commission started its investigation. What TV operators kept for the ‘needs of [their] own business’ was not the input generally speaking but a particular application of the input (the publication of weekly listings, as opposed to daily ones).

In spite of the above, indispensability was found to be an element of the legal test in Magill. What mattered was not whether the TV operators had licensed the listings to ‘third-party undertakings’ in a market unrelated to the one at issue in the case (daily listings), but whether the dominant firm had kept for the ‘needs of its own business’ the activity for which access was requested (weekly listings).

Android Auto introduces a new interpretation of Article 102 TFEU. It suggests that if access is requested for application A, indispensability will not be an element of the legal test when access is requested for application B. Once the platform is partially open to ‘third-party undertakings’, Magill and Bronner will no longer be the relevant framework to assess the abusive nature of a refusal, irrespective of the adjacent market concerned.

The implications of this rereading of the case law are significant. It necessarily reduces the scope of the Magill and Bronner doctrines, which are now confined to instances where the integrated dominant firm has not dealt with rivals in any market or in relation to any actual or potential use of the input or infrastructure to which access is requested.

Crucially, it is not obvious that this new interpretation is limited to digital platforms. It is easy to think of instances where an input or platform can be used for a variety of purposes, and nothing suggests that the new reading of Bronner will vary based on the relevant sector.

This interpretation was not expressly acknowledged or contrasted with the facts at stake in Magill, whether by the Court of by Advocate General Medina in her Opinion. It was treated as a novel point of law in the judgment. This technique reminded me of some recent refinements of the case law in the context of Article 101 TFEU (and discussed here).

How Android Auto goes beyond Magill and Bronner

It is worth mentioning, finally, that the judgment in Android Auto goes beyond Magill and Bronner, in the sense that it allows for a deeper and more significant interference with a dominant firm’s right to property.

In both Magill and Bronner, the Court ruled that there may be circumstances where a firm can be compelled to deal with rivals. Android Auto suggests that a firm may be forced not just to deal with third parties, but to change the operation of its infrastructure to accommodate rivals (and this, without the need to establish that the said infrastructure is indispensable).

The Commission had already suggested expanding the scope of Article 102 TFEU to require firms to invest to adjust their property and accommodate rivals (in particular in energy markets, as in ENI). Its approach is now vindicated. In a sense, in fact, the shift heralded in Android Auto has been decades in the making. I will elaborate on this issue in the next instalment. In the meantime, your comments would be very much welcome.