European Commission v Google; Alleged Discrimination by a Dominant Firm
On 15 April 2015, the European Commission (EC) sent a Statement of Objections
(preliminary statement of case) to Google alleging the company has abused its
dominant position in the markets for general internet search services in the EU.
The EC has also formally opened a separate antitrust investigation into Google's
conduct as regards the mobile operating system Android.
On the search side, the allegation is that Google has been systematically
favouring its own comparison shopping product (Google Shopping) in its general
search results pages. The case therefore essentially concerns whether a dominant
firm is entitled to discriminate in favour of services it provides in a separate
On the Android side, the EC will assess whether Google has illegally hindered
the development and market access of rival mobile operating systems and
apps/services. The concern is that it has done this by requiring or
incentivising smartphone and tablet manufacturers to exclusively pre-install Google’s own apps/services,
by preventing smartphone and tablet manufacturers from developing and
marketing modified and potentially competing
versions of Android (so-called “Android forks”) and by >tying or bundling certain Google apps/services
distributed on Android devices with other Google apps/services.
While not entirely novel, the search case in particular raises difficult
legal issues. In any event, competitors of dominant providers in other online or
in offline industries now have more ammunition to use when those providers seek
to favour their own separate services or discriminate against competitors of
those services. This is arguably the case even absent any foreclosure of those
European Commission v Russia (Gazprom); Alleged Market Partitioning,
Unfair Pricing and Leveraging by a Dominant Firm
On 22 April 2015, the EC sent a Statement of Objections to Gazprom alleging
several abuses of its dominant market position in the EU. This is clearly a
highly politicised case and one which shows that the EC is willing to take
action against any potentially anti-competitive activities which have an effect
in the EU, regardless of the nationality or ownership of the company involved.
The EC’s preliminary view is that Gazprom is breaking EU antitrust rules by
pursuing an overall strategy to partition Central and Eastern European natural
gas markets, for example, by reducing its customers’ ability to resell the gas
cross-border. This may have enabled Gazprom to charge unfair prices in certain
EU Member States. Gazprom may also have sought to leverage its dominant market
into other markets.
The resale restrictions allegedly used include export bans and clauses
requiring the purchased gas to be used in a specific territory (destination
clauses). Gazprom has also allegedly used other measures that prevented the
cross-border flow of gas, such as obliging wholesalers to obtain its agreement
to export gas and refusing under certain circumstances to change the location to
which the gas should be delivered. All of these types of activities are equally
problematic whatever the industry concerned.
The unfair pricing and leveraging elements are also interesting and generally
applicable. In relation to pricing, the concern is that Gazprom has been
charging prices to wholesalers that are unfairly high compared to Gazprom’s
costs or to benchmark prices. In relation to leveraging, the concern is that
Gazprom is making gas supplies to Bulgaria and
Poland conditional on obtaining unrelated commitments from wholesalers concerning gas
transport infrastructure promoted by Gazprom. For example, gas supplies
were made dependent on investments in a pipeline project promoted by Gazprom or
on accepting Gazprom’s reinforcement of its control over a pipeline.
MFN Clauses and Online Sales
The competition authorities of Sweden, Italy and France have accepted
commitments offered by Booking.com, Europe's largest online travel agent (OTA),
concerning its use of so-called parity (or “most favoured nation”) clauses in
agreements with hotels. The parity clauses oblige hotels to offer Booking.com
the same or lower room prices as the hotel makes available on all other online
and offline distribution channels. This settlement with these competition
authorities provides a model for the use of similar clauses in this and other
sectors EU-wide and should be carefully studied.
Booking.com has agreed, amongst other things, to allow hotels to offer lower
room prices on other online hotel booking websites. Booking.com will still be
able to apply parity clauses in relation to hotels’ own publicly available
online room prices (but not hotels’ offline or online loyalty sites).
The particular concern was that the parity clauses eliminated competition
among OTAs. The intention is that the changes will put pressure on OTA
commission rates and the quality of service of OTAs, leading ultimately to lower
room prices and better services for consumers. The commitments are also intended
to make it easier for new OTAs to enter the market, and for innovative OTAs to
expand. The “exemption” for price parity clauses relating to hotels’ own public
websites is considered justified to prevent “free-riding” on Booking.com’s
investments, thus ensuring the continued offering of user-friendly search and
comparison services free of charge.
Commission to Investigate Online Selling Practices for Compliance with
Antitrust Law and to Inform Future Legislation
In a move relevant to all companies active in online sales, on 26 March 2015,
the European Commissioner in charge of competition policy announced a
forthcoming proposal to launch a competition inquiry in the e-commerce sector.
The inquiry, if confirmed (and it is very likely that it will be), will focus on
private and, in particular, contractual barriers to cross-border ecommerce in
the EU in digital content and goods.
As is normal in such inquiries, once the inquiry is launched, the EC will
gather information from a large number of stakeholders in all EU Member States.
Knowledge gained through the sector inquiry will be used to enforce competition
law in the e-commerce sector and also, the EC indicates, to facilitate
consideration of various legislative initiatives which the Commission plans to
launch to boost the EU’s Digital Single Market.
This latter point is particularly important; the inquiry will impact future
legislation. One practice which could be impacted is so-called “geo-blocking” of
websites based on exclusive territorial content licenses. That is currently a
difficult issue under EU competition law.
In any event, the inquiry and the questionnaires should be followed and
considered carefully by any company with an interest. Active participation, with
advice taken as necessary, is essential.
Additional European competition law news coverage can be found in our news section.
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