Digital markets: recent competition law developments in the EU

August 2019  |  SPECIAL REPORT: COMPETITION & ANTITRUST

Financier Worldwide Magazine

August 2019 Issue

In recent years, the debate over antitrust enforcement in digital markets has intensified. Hefty fines levied on Google by the European Commission (EC) and multiple European probes into ‘big tech’ companies, including Google, Amazon, Facebook and Apple, have spurred a lively debate with regard to whether current competition law tools are appropriate for these markets. This article surveys the most important developments in competition law in digital markets in the European Union (EU).

Background

Digitisation has not gone unnoticed by competition authorities in Europe. The EC concluded an inquiry into the e-commerce sector in May 2017 and has conducted many investigations into alleged anti-competitive agreements and practices in the online sphere, including geo-blocking, most-favoured-nation (best price) clauses and resale price maintenance clauses. European national competition authorities (NCAs) have also investigated and prohibited anti-competitive practices in the online world (for example, the UK Competition and Markets Authority's (CMA) probes into online selling and pricing restrictions).

More recently, many NCAs have conducted sector-specific investigations in digital markets in order to identify possible antitrust concerns. In 2018, the German Federal Criminal Office (FCO) and the French Competition Authority (FCA) launched inquiries into the online advertising markets in Germany and France. The Slovak Competition Authority started an investigation in the e-commerce sector in August 2018, and the Netherlands Authority for Consumers and Markets (ACM) conducted market studies into online video streaming platforms in 2017 and mobile app stores in 2019. The CMA also launched a market study into online platforms and the digital advertising markets in July 2019, and the final report is expected to be published in July next year.

In April 2019, the EC published a report prepared by three special advisers appointed by commissioner Margrethe Vestager in March 2018 to explore how EU competition policy should evolve in the digital age. The report identified extreme returns to scale, network effects and the role of data as the key characteristics of the digital economy, while concluding that there is no need to rethink the fundamental goals of competition law. However, established concepts, doctrines and methodologies must be adjusted and refined to conform to the demands of the digital economy.

The Google saga

The EC has launched multiple probes into Google’s business practices, first looking into the company’s practices in 2010. In June 2017, it fined Google €2.42bn for abusing its dominance in the market for general search services by more favourably positioning and displaying Google Shopping compared to competing comparison shopping services in its general search result pages (the Google Shopping case). In July 2018, the EC fined Google €4.34bn after it found that the company had engaged in three types of illegal practices as part of a single strategy to cement its dominant position in general internet searches (the Google Android case). The illegal practices included tying, exclusivity payments and obstruction of the development of alternative versions of the Android operating system that were not approved by Google. In March 2019, the EC fined the company €1.49bn for abusing its market dominance by imposing a number of restrictive clauses in contracts with third-party websites that prevented Google’s rivals from placing their search advertisements on these websites (the Google AdSense case).

Google has appealed the EC’s decisions before the General Court of the European Union, with a possibility to further appeal on points of law to the Court of Justice of the European Union (CJEU). Court proceedings can take several years, so it may be some time before matters at hand are resolved. In the meantime, Google has to comply with the EC’s decisions and defend itself against private damage claims.

Google is also facing an ongoing investigation by the Italian Competition Authority (ICA), as it is suspected of abusing its dominant position by refusing to integrate the Enel X Recharge app, an app developed by Enel for information and services regarding the charging of electric-car batteries, into its Android Auto environment. The exclusion of the app from Android Auto allegedly reduces its usability and restricts users’ ability to use the features of the app. The ICA alleges that the refusal to integrate Enel’s app is because of Google’s interest in defending and strengthening the business model of its Google Maps app.

Amazon’s hybrid role

Amazon’s business practices have also come under antitrust scrutiny. The EC is investigating Amazon’s conduct in light of its dual role as a platform for retailers and as a retailer itself. The EC sent questionnaires to retailers in summer 2018 regarding the matter, but has not launched an official investigation yet. The EC’s investigation appears to focus on Amazon’s collection and use of transaction data.

In November 2018 and February 2019, the FCO and the Austrian Federal Competition Authority (BWB) also started looking at Amazon’s dual role due to an alleged conflict of interest stemming from the company’s two roles. The German and Austrian probes focus on the terms of business and practices toward sellers on its marketplace. The terms of business and practices under review include: liability provisions to the disadvantage of sellers, in combination with choice-of-law and jurisdiction clauses, unjustified loss of product rankings of sellers, the non-transparent termination and blocking of sellers’ accounts, withholding or delaying of payments, clauses assigning rights to use the information provided by a seller regarding products offered and terms of business on pan-European dispatch, the obligation to disclose purchase prices and the adding of incorrect delivery details by Amazon to the sellers’ accounts. The FCO and BWB investigations are supplementing, but not overlapping with, the EC’s ongoing investigation.

Amazon also faces an investigation in Italy by the ICA for allegedly abusing its dominant position in the market for e-commerce platforms’ intermediary services in order to significantly restrict competition in the e-commerce logistics market and potentially in the e-commerce platform market. According to the ICA, Amazon has allegedly discriminated in favour of third-party merchants who use Amazon’s logistics services, Amazon Logistics or Fulfillment By Amazon, by granting improved visibility of the sellers’ offerings, higher search rankings and better access to consumers on its website.

Apple’s app store

Apple’s practices concerning its app store have also triggered scrutiny by both the EC and the Dutch ACM. The EC is currently examining a complaint by Spotify, which claims Apple is undermining Spotify’s competitive position, among others, via its pricing policy and by restricting the degree of integration and interoperability of its app.

In April 2019, the ACM launched an investigation into Apple’s practices following complaints received by app providers during its market study into mobile app stores. According to the ACM, Apple’s hybrid nature raises antitrust concerns, as it has the opportunity to set unfair conditions to app providers while also serving as an app provider itself. The complaints received by app providers during the ACM’s study focused on Apple’s and Google’s payment systems for in-app purchases, the competition between app providers and Apple’s own apps and Google’s pre-installed apps, the commissions charged by app stores and the communication with Apple and Google about the application of their conditions.

Facebook’s data processing practices

Facebook was fined in February by the FCO over its data processing policy and the collection, use and merging of data in a user’s Facebook account. The FCO has concluded that using and actually implementing Facebook’s data policy, which allows the company to collect user and device-related data from sources outside of Facebook and to merge it with data collected on the site, constitutes an abuse of a dominant position on the social network market in the form of exploitative business terms, pursuant to Section 19(1) of the German Competition Act (GWB) and the case law of the German Federal Court of Justice. Facebook has appealed the decision to the Düsseldorf Higher Regional Court, but must comply with the FCO’s decision and amend its data processing policy in the meantime.

Takeaways

The EC and many NCAs have clearly established that digital markets are high on their agendas. Some of the recent investigations into digital platforms are based on ‘traditional’ theories of harm, such as tying and exclusivity payments. However, the agencies are increasingly relying on more ‘novel’ theories, such as self-preferencing or favouring, and theories focusing on the use of data obtained from customers and competitors. We expect the interest of competition authorities in the functioning of digital markets will increase going forward, in line with the conclusions of the three special advisers’ 2019 report to the Commission.

 

Stéphane Dionnet is counsel and George Zacharodimos is an associate at Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates. Mr Dionnet can be contacted on +32 2 639 4506 or by email: stephane.dionnet@skadden.com. Mr Zacharodimos can be contacted on +32 2 639 8568 or by email: george.zacharodimos@skadden.com.

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BY

Stéphane Dionnet and George Zacharodimos

Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

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