News Update Competition
General Court confirms 2 billion fine for self-preferencing by Google
25 November 2021
In a highly anticipated judgment of 10 November 2021, the General Court ("GC") largely dismissed Google's action against the European Commission's ("EC") decision that Google abused its dominant position by favouring its own comparison shopping services over competing services on its general search engine. The GC also confirmed the EUR 2.42 billion fine imposed by the EC – where Google's parent company, Alphabet, is jointly and severally liable for over EUR 500 million of that fine.In its judgment, the GC applied the general principle of equal treatment under Article 102 TFEU, concluding that the differential treatment by Google between its own services and those of third parties is 'abnormal' and therefore has an anticompetitive nature. The GC also confirmed that the EC had sufficiently shown that Google's conduct is capable of restricting competition, without going into the actual restrictions of competition.
Anticompetitive nature of self-preferencingRegarding the appreciation of the facts, the GC confirmed the EC's finding that Google favoured its own service by means of: (i) a more favourable display and positioning of its own search results and (ii) a demotion of the results of competing services with the help of algorithms. In a nutshell, the GC ruled that Google's practice favours its own comparison shopping service over competing services rather than a better result or another result.
For qualifying this conduct, the GC underlined that even though self-preferencing in itself does not breach EU competition law, the potential harmful effects can constitute a breach. The GC developed its argument on the principle of equal treatment under Article 102 TFEU and found that Google's conduct in promoting its own comparison shopping services to the detriment of third parties is 'abnormal', as it is inconsistent with the "universal vocation" of Google's search engine. Regarding this universal vocation, the GC held that:
- A general search engine is in principle open;
- The value of it lies in its capacity to be open to results from external (third-party) sources; and
- The multi-source approach enriches and enhances the credibility of the search engine.
Based on these reasons, the GC confirmed that Google's self-preferencing has an anticompetitive nature.
Importantly, the GC rejected Google's argument that the case be assessed in light of the conditions developed in the Bronner judgment i.e. that the EC should have established that Google's general search engine is indispensable for providing comparison shopping services. The GC ruled that while "Google's general results page has characteristics akin to those of an essential facility", the conditions in the Bronner judgment do not apply to Google's conduct because Google's conduct does not relate to a refusal to supply but rather to the conditions of supply and therefore to a difference in treatment. Consequently, the EC was not required to actually establish that the platform is indispensable within the meaning of the Bronner case law.
The effects on competitionAs reiterated by the GC, the abusive nature of conduct can be determined by demonstrating that the conduct is capable of restricting competition. The EC does not have to identify actual exclusionary effects on the market.
Against this background, the GC ruled that in the present case, the EC had sufficiently demonstrated that Google's conduct is capable of restricting competition on the market for specialised search services for comparison shopping because the EC had:
- Measured the actual effects of the conduct on comparison shopping services' traffic from Google's general result pages;
- Showed that that the measured traffic accounted for a large share of their total traffic; and
- Showed that the identified share could not effectively be replaced by other sources of traffic, e.g. advertising or mobile applications.
Consequently, the GC ruled that the EC had sufficiently demonstrated that the potential outcome of the conduct was the disappearance of comparison shopping services, less innovation on their market and less choice for consumers.
In addition, Google unsuccessfully argued that the conduct could be objectively justified by pro-competitive product and service improvements. First, the GC ruled that there was no indication that any improvements required self-preferencing by Google. Second, the GC ruled that Google had not demonstrated efficiency gains that would counteract its negative effects on competition. Therefore, the bar for demonstrating any efficiencies, had been set very high.
Market delineation and dominant positionImportantly, the GC agreed with the EC's assessment that merchant platforms are not part of the market for comparison shopping services, thereby dismissing Google's argument that competition remains strong because of merchant platforms (such as Amazon) on the market. Thus, the EC's assessment also confirmed Google´s dominant position.
ObservationsIt cannot be denied that this judgment represents a major interim victory for EC's Competition Commissioner Vestager. However, it is to be expected that Google will appeal the judgment.
- First and foremost, the height of the fine will unavoidably push Google into an appeal.
- Second, the judgment might make it considerably harder for Google – and possibly other dominant digital platforms – to proactively decide what to show consumers and where to steer clicks.
- Third, the judgment is liable to appreciably extend the scope of applying Article 102 TFEU – especially on the applicability of the principle of equal treatment and the conditions developed in the Bronner judgment. After all, the GC seems to open the door to a new category of conduct that may result in abuse of a dominant position by digital platforms without establishing that the platform is essential for the services concerned. We note that the "universal vocation" of Google's general search page that is open and aimed at indexing any possible content may have made it easier for the GC to conclude this.
Notwithstanding the outcome of a likely appeal, the anticipated introduction of the Digital Market Act ("DMA") makes it clear that gatekeepers in digital markets such as Google have a special responsibility of equal treatment. The DMA specifically addresses the obligation to "refrain from treating more favourably in ranking services and products offered by the gatekeeper itself or by any third party belonging to the same undertaking compared to similar services or products of third party and apply fair and non-discriminatory conditions to such ranking." It remains to be seen if the DMA will be fit for purpose in this respect.