Abuse of dominance EU

1. Abuse of dominance EU Article 102 TFEU: ‘Any abuse by one or more undertakingsof a dominant position within the internal market or in a substantial part [dominance of EU importance] of it shall be prohibitedas incompatible with the internal market in so far as it may affect trade between MS’ relevant market -> dominance -> abuse -> enforcement

2. 1. Relevant market dominant position held on a RELEVANT MARKET specific to the set of market circumstances assessed under competition law • RM might not be equivalent to a given company’s perspective on what constitutes its market • the are no ‘too narrow’ or ‘too wide’ RM – a RM must be ‘objectively correct’ for each case 3) To establish abuse → 2) dominance must be found first 2) To establish dominance → 1) the RM must be correctly defined first Eg Magill (IPRs), TP SA (interrelated markets), FT (asymetry)

3. 2. Dominant position NO DEFINITION IN THE TFEU !!! United Brands (case 27/76): "a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained in the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of consumers". • A market position that prevents effective competition within a relevant market from being maintained/created + • enable the company to act to a significant degree independently Qualitative criteria of dominance = Immunity from competitive pressures (can do whatever it wants without worry)

4. Market share + other factors • MARKET SHARE & DOMINANT POSITION - a company will usually be considered dominant if it holds a large enough market share It is assumed (a legal assumption that can be disproven) thata market share of over 40% confers dominance = quantitative criterium of dominance • Super dominance → monopoly: MS > 80% • Dominance likely: MS > 40% • Dominance possible but unlikely: MS 25% - 40% • Dominance very unlikely: MS < 25% • OTHER FACTORS INDICATING DOMINANCE: • economic, factual or legal entry barriers(eg large sunk costs) • superior technology/know-how & ‘deep pockets’ • economies of scale & overall size and strength • vertical integration • absence of countervailing buying power

5. 3. Abuse definition NO ABUSE DEFINITION IN THE TFEU !!! Hoffman La-Roche(case 85/76) ‘behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where as the result of the very presence of the undertaking in question, the degree of competition is weakened and which, through recourse to methods different from those which condition normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition there are no per se abuses • conduct with adverse effects on the market • only by a dominant company (not an ‘efficient’ competitor) • no object/effect feature & no conditions of exemption

6. Art. 102 TFEU open list • (a) IMPOSING UNFAIR PRICES OR CONDITIONS - directly / indirectly imposing unfair purchase / selling prices or other unfair trading conditions; • (b) LIMITING DEVELOPMENT - limiting production, markets or technical development to the prejudice of consumers; • (c)DISCRIMINATION- applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; • (d) TYING/BUNDLING- making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

7. Economic examples • EXPLOITATIVE:direct impact on customers (more expensive) • EXCUSIONARY:anticompetitive foreclosure leading to actual/very likely consumer harm (less choice) = prove foreclose + that it causes consumer harm (used to be ‘direct’ impact on market structure’ & ‘indirect’ consumer harm) • Unfair prices (bear no relation to the value of the good/service): • Predatory pricing:< average variable costs for a dominant firm or < average total costs for others & proof of intent (egFT) • Excessive prices: determined by the cost to price ratio incorporating a justified profit margin or based on price comparison (egUnited Brands) • Loyalty-inducing rebates: rebates due to stock size are not generally contested, rebates associated with acquisitions from the dominant undertaking only/primarily (egMichelin II, Intel) • Price discrimination: unjustifiably charging different prices for the same thing (egEmitel) • Tying: selling product B only with a best selling product A (egMicrosoft 2009) • Refusal to supply: refuse to give raw material such as information/refusal to deal: refusal to give access to wholesale services (egMicrosoft 2004) • Margin squeeze: vertically integrated operator supplying essential input leverages its upstream position by > its wholesale price (and/or drops its retail prices) to squeeze downstream competitors’ margins (egDeutche

8. Unconditional prohibition abuse prohibition is unconditional • generally ex-post/penal enforcement • no legal exemptions & no leniency but ... • a dominant company can try justifying any conduct and... • increasingly often the use of ‘commitments decision’ a ‘culprit’ can try proving that a practice was not an abuse by • show that it was objectivelly justified or • successfully use the competition meeting defence • prove that theobjective benefits for consumers/market & efficiencies clearly outweigh its anti-competitive effects

9. 4. Enforcement Article 102TFEU cases are dealt with by: an infringement decision (ID) • DECLARES that a given practice is in fact a breach of ARTICLE 102TFEU • An infringement decision is very detailed in its assessment & contains a duty to stop the practice • An infringement decision might impose a FINE • damage & other civil sanctions can follow or a commitments decision (CD) • do not declare that an infringement actually took place & thus, they do not impose a FINE • They are less detailed and thus make it more difficult to use private enforcement • They are rarely appealed so there is virtually no control over the EC • Companies often offer more than they would be forced in an infringement decision ‘to make the investigation go away’ There are no definite rules in the EU which type of decision will be used in which case. Infringement decisions should be issued in cases justifying a fine; about novel issues where a full assessment is necessary or where deterrence is essential

10. ID: TP SA abuse ‘Corporate culture’ 22/06/2011 Commission decision against TP SA for a single & continuous infringement of Art. 102 TFEU between 03/08/05 - 22/10/09 ABUSE = hindering wholesale broadband access by (LIMITING DEVELOPMENT): a) Proposing unreasonable conditions in the draft contracts, b) Delaying the negotiations, c) Refusing access to its network, d) Refusing access to subscriber lines; e) Refusing access to General Information; • Only a monopolist could have a reason to engage in such practices • Intentional since it did not ‘hinder’ its own subsidiary PTC • Conduct had no objective justification and no associated efficiencies • Abuse on an upstream market slowed down the emergence of competition downstream to the detriment of consumers • Classing infringement decision: • order to cease infringement/refrain from reengaging an equivalent practice • fine of EUR 127 554 194 (out of possible 393 396 250 = 10% turnover) minus 8 450 000 paid already to UKE for this practices

11. CD: Microsoft 2009 16 December 2009 Microsoft CD on tying Internet Explorer to Windows SUSPECTED ABUSE: Tying – making the sale of WINDOWS conditional on buying Internet Explorer to ensure dominance on the browser market • Internet Explorer enjoyed a distribution advantage & barriers to download alternative browsers existed & Created artificial incentives for web designer to optimise their products for IE CD: ABUSE was NOT established – there was NO FINE! Commitments imposed • only applicable to the EEA (100 mil users!) • 5 years duration (until 2014) • make it possible for Original Equipment Manufacturers (OEMs) and users to turn Internet Explorer off/on • Enable OEMs to pre-install any web browser and set if as default (Microsoft cannot retaliate) • SHOW users that subscribe to Windows updates or buy a new operating system a CHOICE SCREEN

12. Choice screen main view

13. CD: Non compliance Commitments are BINDING on the addressee(implementation is monitored) FINE FOR NON-COMPLIANCE is the same as for abuse (up to 10% turnover) despite the abuse not being proven NON-COMPLAINCE: Choice Screen introduced between March-May 2010 for Windows XP, Windows Vista, Windows 7 but ... Microsoft did not give the Choice Screen in Windows 7 service pack 1 (between February 2011-July 2012) depriving 28 mln users in EEA from seeing the choice 6 March 2013 – non-compliance with commitments decision FINES of 561 mil EUR NOTE: 1ST ever ECL fine for non-compliance was to Microsoft for failure to fulfil conduct remedies from the 2004 decision (2004 fine 497 ml + 280 mln 2006 + 899 mln in 2008 – CONFIRMED by General Court 27/06/12

14. EU ‘mobile phone wars’ 2 separate cases dealing with the same issue: 1) Samsung – Statement of objection 21/12/12 2) Motorola (owned by Google)- Statement of objection 6/5/13 SEP (standard essential patent) = patent access to which is essential to produce something complying with an industry standard (like a 3G mobile) Injunction = legal tool that helps protect IPR from patent infringements; submitted before national courts; stops production/sales of goods with the IPR; can result in goods being taken off shelves FRAND terms (fair, reasonable and non-discriminatory) – used by standard bodies (such as ETSI) to licence SEP

15. Novel form of ABUSE Seeking injunctions before courts is generally a legitimate remedy for patent holders in case of patent infringements -> seeking of an injunction based on SEPs may = abuse if • a SEP holder has agreed to use FRAND terms and • the other company is willing to accept FRAND terms Seeking SEP-based injunctions against a willing licensee could distort licensing negotiations and lead to anticompetitive licensing terms that the licensee would not have accepted otherwise. Such an anticompetitive outcome would be detrimental to innovation and could harm consumers.

16. Motorola: ID 29/04/14 Motorolaby seeking an injunction against Apple in Germany on the basis of a smartphone SEP = committed an abuse in light of the circumstances of the injunction (Apple agreed to pay FRAND royalties decided by the German court) • Motorola was ordered to eliminate the negative effects resulting from the abuse • but:NO FINE was imposed because: • this is the 1st case on 102 TFEU & SEP-based injunctions • national courts have so far reached diverging conclusions + it was also anticompetitive for Motorola to insist (threat of enforcing an injunction) that Apple gives up its rights to challenge the validity or infringement by Apple of Motorola SEPs - Implementers of standards (and consumers ) should not have to pay for invalid/non-infringed patents.

17. Samsung’s likely abuse Samsung owns SEP to many mobile telecoms standards -> Samsung had agreed to license them on FRAND terms -> In April 2011, Samsung started to seek injunctions against Apple on the basis of its SEPs ( (ETSI) 3G UMTS standard) -> In December 2012, the Commission said that Apple is a willing licensee on FRAND terms for Samsung's SEPs -> Against this background, Samsung’s seeking of injunctions against Apple may have constituted an abuse of its dominant position

18. Samsung: CD 29/04/14 Samsung’s injunctions against Apple may have been an abuse but the case was closed with a CD Commitments: Samsung will not seek injunctions in EEA on the basis of its SEPs, present and future, for smartphones and tablets for 5 years -> against licensees who sign up to a specified licensing framework : • a negotiation period of up to 12 months • any dispute over what are FRAND terms for the SEPs in question will be determined by a court, or if both parties agree, by an arbitrator • An independent monitoring trustee will advise the Commission in overseeing the proper implementation of the commitments. the CD is meant to be a ‘safe harbour’ for all potential licensees of Samsung’s SEPs

19. Google start 2010 - ongoing • 11/10 official opening of antitrust proceedings into Google’s vertical searches (1st case) • 03/13 PA with the commitments procedure • 04/2013 market test of 1st set of commitments • 02/2014 2nd commitments accepted – decision was imminent Google is accused of abusing its dominance • displacing its own specialized searches services in a preferential way • using others’ content in its vertical searches without their consent • effectively imposing exclusive supply arrangements on website publishers if they wanted to use Google’s advertising • Hindering the transfer of advertising campaignsfrom Google’s AdWord to other platforms such as Microsoft’s AdCentre

20. 2014-2015 developments • 4/14 completion of the procedure by way of a commitments decision ‘in sight’ http://europa.eu/rapid/press-release_SPEECH-14-93_en.htm and yet … • 9/14 – the Commissioner declares that ‘new damning evidence came to light over the summer’ & suggests potential changes to the ‘negotiated’ procedure • 4/15 – opening of separate proceedings into ‘Google-Android’ (2nd case) – no more definite news since • 4/15 – SoO sent to Google concerning 1st case which has: • limited the scope of the case to shopping comparison services only • Suggested that it would act as a ‘precedent’ for other cases • fundamental changes to potential remedies • 08/15 Google responds rejecting the accusations

21. 2016 developments • July 2016 supplementary SoOsent to Google concerning 1st case for unduly favouring its own comparison shopping services in its general search result page (‘consumers might not see the most relevant search result’) • 14/07/16 - separate proceedings opened against Google concerning AdSense (3rd case) - separate SoO sent stating that Google might be abusing its dominant position in online search advertising by artificially restricting the possibility of 3rd party websites to display search advertisements from Google’s competitors (hindered competition by limiting the ability of other search providers and advertising platforms to place search adverts on 3rd party websites = Direct Partners), which stifles consumer choice and innovation; agreements between Google and large Direct Partners contain clauses that might breach ECL on exclusivity, premium placement of a min number of Google search ads, right to authorise competing ads

22. 2017 INFRINGEMENT DECISION of 27.06.2017 concerning shopping search results (1st case) RM: super dominance found in each national market for general internet search (90%+ ) vs. separate comparison shopping market WHY is that ABUSE?: because dominant companies have a special responsibility not to abuse by restricting competition ABUSE FORM: giving its own shopping search product an ILLEGAL ADVANTAGE (preferential treatment) ABUSE PLACE: general search market OBJECTIVE of ABUSE: to spread/leverage its dominant position in general search onto the sopping search market FINE: 2.4 Billion EURO (biggest in EU history; 2x of Intel)

23. 2018 • INFRINGEMENT DECISION of 18 July 2018 concerning Google Android (2nd case) • RM – Google is dominant on • a) general internet search services (90%+ in all EEA countries) • b) licensable smart mobile op system (95% market share world-wide apart from China) • c) app stores for the Android mobile operating systems (90%+ of apps downloaded onto mobiles with Android come via the Play Store) • Abuse: Contractual restrictions of mobile phone manufacturers + mobile network operators to ensure that traffic on Android phones goes to general Google search • tying Google Search app & Google Chrome • Illegal payments for exclusive pre-instalation • Illegal obstruction of the development of Android forks • FINE 4.34 billion EURO (90 days to comply or extra fines) + stop using/not re-use the illegal contractual clauses

24. Google vs Apple • 80% of mobile devices run on Android – where Google was pre-installed, 95% of searches went to Google; where it was not preinstalled (eg Windows Mobile) only 25% went to Google • Google and Apple do compete downstream for consumers buying a given mobile (iPhone vs ‘something else’) • Google and Apples do not compete upstream in the operating systems market - iOS does not compete with Android since it is not licensable ie it is only use by Apple • Q: is Google ‘restrained’ by Apple in its actions towards manufacturers?