Chillin'Competition

The first two instalments of the series focused, respectively, on the institutional and substantive contributions of the Court of Justice judgment in Android Auto. This third (and final) entry moves to the consequences of the ruling. There are three areas where the ruling may have a significant impact.

Product design and business models after Android Auto

As explained a while ago here, dominant firms’ choices in terms of product design and business models were, for decades (before Android Auto, that is), largely insulated from competition law scrutiny. This is true, for instance, of the degree of openness of an infrastructure. Absent evidence of indispensability, the decision by the operator about which features to open to third parties and which to keep for itself would be generally compatible with Article 102 TFEU.

Similarly, business models (that is, the strategies followed by firms to monetise the value they generate) was typically (if no presumptively) in line with EU competition law. As a rule, a dominant firm could keep for itself a feature of a partially open model as an aspect of its monetisation strategy. Again, this choice would have come under scrutiny only if the conditions set in Magill or Bronner had been shown to be met.

Following Android Auto, however, indispensability is no longer an obstacle to intervention where infrastructure operators (or input providers) decide to open their assets to third parties only partially. As soon as access is given in relation to one potential use of the input or infrastructure, indispensability ceases to be relevant across the board.

This shift in the case law is particularly consequential in the current economic and technological landscape. It expands authorities’ policy space significantly. One implication is that the design of products and the choice of business models may have to be reconsidered more often than in the past.

The analysis of effects becomes particularly relevant in the new legal landscape

The retreat of the indispensability condition strikes a new balance between short-term and long-term competition. It may well be the case that, in dynamic industries, indispensability sets too high a bar for intervention. This, in fact, was the point made by Advocate General Kokott and Mariya Serafimova in a recent piece addressing this very issue.

Whenever a new balance is struck, however, there is always a risk that the pendulum swings too far in the opposite direction. There is a risk, in other words, that the design of products and the choice of business models move from being (almost) presumptively lawful to being (almost) presumptively unlawful. A radical shift may not be the optimal one, whether from a substantive or an institutional standpoint.

In this new legal landscape, the analysis of effects emerges as a particularly relevant step in the assessment of potentially abusive conduct. The effects test will, in practice, act as the primary legal filter to strike the right balance between the static and dynamic dimensions of competition. It is not a surprise, against this background, that the Court stresses its importance in Android Auto.

In line with the preceding case law, the judgment emphasises that the analysis of the actual or potential impact of a practice cannot be a mere formality. As the Court put it, the assessment cannot be grounded in a ‘mere hypothesis’ (para 57). Instead, it must be based on ‘tangible evidence’ informed by the specificities of the case. Similarly, the ‘existence of doubt’ about the capability of a practice to produce actual or potential effects must ‘benefit the undertaking’.

Testing the meaning and limits of Android Auto

It seems likely, if not inevitable, that the meaning and limits of Android Auto will be explored in the coming years at the national and EU levels. With private enforcement on the rise (in particular in the context of Article 102 TFEU), national courts may be confronted with the sort of issues (imposing access obligations, determining the price of access, monitoring compliance) that only arose sparingly before them prior to the ruling.

This, it seems to me, is a third major consequence of the substantive innovations introduced in the judgment. There are many issues that are likely to be tested before national courts. One question relates to whether this judgment is confined to digital platforms. I do not believe it is (the key substantive innovation applies to all sectors, as I understand it), but I am aware that there is no consensus on this point.

A second obvious question relates to what ‘open to third-party undertakings’ actually means. The limits of this concept are not immediately apparent. If an operating system is open to third-party application providers but is not licensed to third-party device manufacturers, does Bronner apply where the latter seek access? Again, there is room for interpretation. For the same reason, this issue (and similar ones) may come back before the Court in the next few years.