Alternativlos!

‘Alternativlos!’ The deterministic slogan of the pensée unique in its English version, and proclaimed worst word of 2010 in Goethe’s language for not so different reasons, has been turned by Mathias Döpfner into the war cry of Google’s foes. Indeed, in a letter addressed to Mountain View that has gone down in history of antitrust yellow press, Axel Springer’s Chief Executive Officer came up with an apocryphal theory of harm that the eager EU trustbuster seems to have fallen for. In April 2015, Berlaymont took another shot at the tech leviathan aiming at a business that one would not consider precisely flagship: its comparison shopping service.(In)famous concerns formally raised were that Google’s horizontal (i.e. general) search services would be devised to favour its own vertical (i.e. specialised) search services (particularly, Google Shopping). This would be achieved by both displaying results retrieved by Google’s own vertical search service on the most prominent space of the results page, while placing those provided by rival specialised search engines on a less visible (if at all) part regardless of their relevance to the query, and biasing its algorithm to penalise rival vertical search services’ search engine optimisation (SEO) vis-à-vis its own.

This case represents another clear example of the need for a paradigm of contestability and dynamic market positions to be adopted at least in the abuse of dominance domain as a 2.0 version of the ‘more economic approach’, which was killed by Intel,[1] buried by Post Danmark II[2], and unlikely to be resurrected by Intel II. Since the market power dimension of this paradigm is presented in more detail in the post ‘Do androids dream of exclusivity?’, I’ll concentrate here on its abuse facet (no wonder, the weak point of the Commission’s case).

At first sight, it seems that the European watchdog is overstretching the ‘essential facilities’ doctrine to a point that the Microsoft judgement itself did not dare. Even this ruling, whose ghost looms over Android concerns (see ‘Do Androids dream of exclusivity?’) and which could be deemed to have brought the ‘essential facilities’ doctrine to its metaphysical limits, did not dispense with Magill ‘exceptional circumstances’.[3] In Microsoft the conditions set forth in Magill to make a duty to deal prevail over IP rights or trade secrets (i.e. prevention of the appearance of a product for which there is potential demand, lack of objective justification and elimination of competition due to indispensability) were reinvented into the limitation of technical development deriving from the risk of removal of competition posed by the withholding of an indispensable technology, without an objective justification unrelated to incentives for the dominant undertaking to innovate.[4]

Now, the Commission would be going a step further by postulating a full-fledged duty not only to deal but also to deal on an equal footing with rivals, as advocated by Nicolas Petit.[5] Nevertheless, putting to one side the outrageous consequences of bringing the special responsibility of dominant undertakings so far down the line as to deprive them from their right to compete ‘on the merits’ (whatever that means),[6] the first question is whether a dominant undertaking’s duty not to discriminate in favour of its own operations has a place under the essential facilities doctrine.

That said, I don’t agree with Bo Vesterdorf’s contention that an undertaking controlling an indispensable facility (thereby subject to a duty to deal) can’t be imposed the additional obligation to treat competitors on equal terms vis-à-vis its own activities in a related market.[7] In my opinion, this reasoning entails that competitors must be excluded and not simple put at a disadvantage and, thus, ignores the stance taken in Microsoft by the Chamber that Vesterdorf himself presided:[8]

‘Nor is it necessary to demonstrate that all competition on the market would be eliminated. What matters […] is that the refusal at issue is liable to, or is likely to, eliminate all effective competition on the market.’

Quite on the contrary, I believe that a duty not to discriminate in favour of the own products can perfectly be based on the essential facilities doctrine. However, that doesn’t mean that the duty to deal imposed on the undertaking controlling the indispensable asset necessarily implies an obligation not to discriminate, but only in so far as the discriminatory treatment deprives competitors (without an objective justification) of an indispensable element to compete on the related market, thereby risking eliminating effective competition on it. This argument finds an authorised backing in Jacob’s Opinion in Brönner:[9]

‘An essential facility can be a product such as a raw material or a service, including provision of access to a place such as a harbour or airport or to a distribution system such as a telecommunications network. In many cases the relationship is vertical in the sense that the dominant undertaking reserves the product or service to, or discriminates in favour of, its own downstream operation at the expense of competitors on the downstream market.’

At any rate, I have difficulties in viewing Google as the bottleneck which the General Court seemed to be thinking of when it considered in 2007 that Microsoft’s refusal to disclose its interface information would certainly marginalise rival server operating systems, which were incompatible with 90% of clients running Windows. At the end of the day, there are other horizontal search services providers (e.g. Bing! or Yahoo!), mobile apps, websites renowned enough to attract traffic straight to their vertical search engines (think of Amazon for instance), increasingly relevant social networks, etc. Googles quasi-omnipresence doesn’t mean lack of alternatives, since competition is just one click away.

Under the paradigm of contestability that I see as the only fit with digital economy, Mountain View’s giant can’t (or shouldn’t) get caught on the grounds of Article 102(b) (‘limiting production, markets or technical development to the prejudice of consumers’). The reason is that in fast-growing and highly contestable technological markets, the essential facilities doctrine is not at ease. Contrariwise, if the Commission were to adopt a bold and innovative approach to the digital world, it could bridge the analytical gap between the prohibitions on refusing to supply on the worn basis of Article 102(b) and ‘applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage’ under Article 102(c).

This change in the legal basis would allow to do without indispensability (a rare bird, if not an extinct species, in the Internet sky) drawing from the controversial notion of ‘superdominance’ (hinted at in classical judgements such as Tetra Pack II[10] or Compagnie Maritime Belge[11] and recently rediscovered in the suggestive form of the ‘unavoidable trading partner’ in Post Danmark II[12]). Such a concept bedevilled with mixed connotations should be outplaced once for all by the more realistic one of ‘gatekeeper’, defined by Almunia as ‘a specific type of dominant firm which holds a strategic position along the value chain.’[13]

In a nutshell, in the current state of EU competition law, I think that there is no legal or jurisprudential basis to order Google to treat rivals in the same way it treats its own vertical search services on the grounds of Article 102(b), assuming of course that the standard to apply that provision to a discriminatory treatment is set by the essential facilities doctrine. The reason is (depending on how bold or speculative you want to go) either that Google’s horizontal search engine is indispensable to compete in the market for specialised search services or that the essential facilities doctrine is absolutely ineffective in a digital one-click-away competition setting.

A different story is whether the technological colossus could be deemed to have a reinforced special responsibility as ‘gatekeeper’ to the market for vertical search services, due to its ‘more-than-dominant’ (rather than ‘superdominant’) horizontal search engine and the obvious link between both markets. In that case, it could be banned from exploiting such dominance in general search to leverage into specialised search. Finding such an anticompetitive outcome should depend on whether discrimination is liable to place rivals at a disadvantage intense enough to foreclose them, thereby justifying the move towards Article 102(c) lower standard. This would certainly take complex case-by-case assessment that should ideally be undertaken within the facts-based and more economic analytic framework required by the online jungle, where no market position lasts forever, competition is just one click away and nothing is ‘alternativelos’.

[1] Case T-286/09 Intel Corp. v Commission [2014] ECLI:EU:T:2014:547.

[2] Joined cases C-241/91 P and C-242/91 P RTE and ITP v Commission [1995] ECLI:EU:C:1995:98, §30.

[3] Case C-23/14 Post Danmark A/S v Konkurrencerådet [2015] ECLI:EU:C:2015:651.

[4] Case T-201/04 Microsoft Corp. v Commission [2007] ECLI:EU:T:2007:289, §§565, 593, 632 and 668.

[5] Nicolas Petit, ‘Theories of Self-Preferencing Under Article 102 TFEU: A Reply to Bo Vesterdorf’ (2015) University of Liege – School of Law .

[6]  John Temple Lang, ‘Comparing Microsoft and Google: The Concept of Exclusionary Abuse’ (2016) 39(1) World Competition 5.

[7] Bo Vesterdorf, ‘Theories of Self-Preferencing and Duty to Deal – Two Sides of the Same Coin’ (2015) 1(1) Competition Law & Policy Debate.

[8] Case T-201/04 Microsoft Corp. v Commission [2007] ECLI:EU:T:2007:289, §563.

[9] Case C-7/97 Oscar Bronner v Mediaprint [1998] ECLI:EU:C:1998:264, Jacobs AG, §50.

[10] Case C-333/94 P Tetra Pak v Commission [1996] ECLI:EU:C:1996:436, §24.

[11] Joined cases C-395/96 P and C-396/96 P Compagnie maritime belge and others v Commission [2000] ECLI:EU:C:2000:132, Fennelly AG, §137.

[12] Case C-23/14 Post Danmark A/S v Konkurrencerådet [2015] ECLI:EU:C:2015:651, §40.

[13] Joaquín Almunia, ‘Competition in the online world’, LSE public lecture, 11 November 2013.

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