Competition enforcement in an increasingly digital world

The European Commission’s case against Google’s Android platform, the UK House of Lord’s report on online platforms and the Commission’s broader digital policy suggest a continued focus on competition enforcement in the digital space.

Commission sends Google formal antitrust charges in relation to Android platform

On 20 April 2016, the Commission announced that it had sent Google (and its parent company Alphabet Inc.) a Statement of Objections. The Statement of Objections alleges that Google may have abused its dominant position in relation to the Android mobile operating system and applications. The Commission considers that Google has over 90% in Europe of the markets for general internet search services, licensable smart mobile operating systems and application stores for the Android mobile operating system.

The Commission alleges that Google has abused its dominant position on these three markets by:

• Requiring manufacturers of Android devices to pre-install Google Search and to set it as the default search function on their devices, as a condition to license certain Google proprietary apps. Additionally, manufacturers who wish to pre-install Google's Play Store or Search, also have to pre-install Google's Chrome browser.
• Requiring manufacturers of Android devices to enter into an "Anti-Fragmentation Agreement" that prevents them, if they want to use Google’s proprietary apps, from selling smart mobile devices running on competing operating systems based on the Android open source code.
• Granting significant financial incentives to (some of the largest) manufacturers and mobile network operators provided that they exclusively pre-install Google Search on their devices.

The EU Competition Commissioner Margrethe Vestager stated on 20 April 2016 that: “the Statement of Objections finds that as a result of Google’s behaviour rival search engines, mobile operating systems and web browsers have not been able to compete on their merits, but rather have been artificially excluded”. Google and Alphabet now have the opportunity to respond to the Statement of Objections and to ask for an oral hearing.

Google posted a blog post in response to the Commission’s Statement of Objections in which the company states that it has designed the Android model in a way that’s good for competition and for consumers. It is expected that Google will strongly oppose the Commission’s preliminary assessment as the company is doing in relation to the ongoing investigation into Google’s comparison shopping services.

UK’s upper house calls for extra powers for Commission and UK probe into online travel platform

A UK House of Lord’s Select Committee recommended that the Commission be given extra industry wide binding powers to solve antitrust issues in e-commerce. This recommendation was made in its report on “Online platforms and the Digital Single Market”. The UK Competition and Markets Authority (CMA) is already able to take such measures and the Select Committee has called for a similar approach at EU level.

The Select Committee also suggested that the Commission, as well as the CMA, should use interim measures more often in order to speed up enforcement in relation to rapidly moving digital markets. Interim measures are short term orders to stop suspected antitrust conduct pending a full investigation. The Lord’s panel further stated that both EU and national regulators should restrict the period for discussion of commitments in order to encourage parties to offer serious proposals at the outset of a case and prevent delay. The Select Committee did however emphasise the need for any regulatory framework at EU level to be flexible and customised to individual antitrust cases. The Select Committee’s report also highlighted concerns in the online travel platform sector. The Select Committee’s inquiry found allegations that online travel agents are exploiting their bargaining power relative to their trading partners by engaging in numerous forms of aggressive and misleading practices. The report called for the CMA to “urgently” conduct an investigation into the sector. It further said that the Commission should support such a probe, including coordinating any related activity by other national competition authorities.

European Commission’s broader digital sector policy and activities

On 19 April 2016, the Commission set out its proposed path to digitise European industry. The Commission presented measures to support and link up national initiatives for the digitisation of industry and related services across all sectors, and to boost investment through strategic partnerships and networks. The Commission also proposed measures to speed up the development of common standards in priority areas, such as 5G communication networks or cybersecurity, and to modernise public services. The aim of the Commission’s proposal is to create scale as the EU develops new technologies, and to ensure that the new technologies work across the EU’s single market. The ultimate goal of these measures is to keep the EU globally competitive.

The Commission’s digitisation proposal forms part of its broader strategy of creating a digital single market. Another aspect of this strategy is the sector inquiry into e-commerce, which is ongoing. As part of the sector inquiry, the Commission published its initial findings on geo-blocking in March 2016 and a Preliminary Report is due to be published in the next few months.

Commentary

The developments this Spring signal a continued focus on competition enforcement in the digital space, something which is unlikely to go away as the EU moves towards a more digital economy. Indeed, the appetite for a focus on the digital sector is also echoed at national level. For example, the online hotel booking sector is under the antitrust microscope in number of EU jurisdictions including Germany, Austria, Denmark, France and Sweden. Additionally, the higher regional court in Frankfurt has referred a case between Coty, a perfume maker, and its distributor to the Court of Justice of the European Union. The German Court asks whether Coty’s selective distribution system infringes antitrust rules by restricting sales on Amazon’s online marketplace.

It will be interesting to see what further antitrust investigations or measures are launched in the near future, either as a result of the e-commerce sector inquiry or otherwise. One thing is clear: if “the industrial revolution of our time is digital”, as stated by Andrus Ansip, Vice-President for the Digital Single Market, this will inevitably mean a change in competition enforcement focus toward digital economies. Will the existing competition law enforcement toolkit be up to the challenge? The Commission certainly thinks so with it relying on established case law to pursue Google and Sky in relation to its contracts with US film studios for pay-TV. We watch with interest the further developments in this field and the potential challenges raised by competition enforcement activities in an increasingly digitised world.