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Antitrust in the Digital Economy—A Dive Into EU and UK Cases Alleging Self-Preferencing and Data MonopolisationDate: 10/03/2023 Type: Articles Topic: Competition | Law | Litigation |
Google Shopping, Amazon “Buy Box” and the “Privacy Sandbox”
Competition authorities in the EU and the UK are focusing on the digital sector with claims that technology companies including Apple, Google, Amazon and Meta (Facebook) are “gatekeepers” that control access to major technological platforms that other companies need in order to reach customers and to compete.
The competition regulators are adapting enforcement tools to the rapidly progressing digital age. They are finding that updated approaches are needed to determine whether digital-service companies possess market power and, if so, the potential effect of that power on competition and consumers in markets spanning from online shopping and music streaming to app store payments and social networking.
As a follow-up to our article “A List of the Big Technology Companies’ Multiple Antitrust Battles (For Those Who Have Lost Track),” this piece examines some of the common types of competition law infringements in technology markets alleged in regulatory investigations and court actions in the EU and UK.
1. Competition regulators’ investigations in digital markets
Digital markets exhibit characteristics which may facilitate concentration, erect entry barriers and enable the leveraging of market power into neighbouring market segments. In particular, such characteristics include:
- Network effects; i.e., the more people use a digital platform the more its value to customers increases; and
- The role of Big Data in the digital world; i.e. the substantial volume of user data gathered by digital platforms confers important advantages on incumbent tech companies.
These characteristics have resulted in a range of alleged commercial practices, as described below, being scrutinised by competition authorities.
1.1 Allegations of self-preferencing
Self-preferencing, at its simplest, refers to the favouring of a business’s own products over those of its competitors. In the digital sector, self-preferencing typically begins with a technology firm providing third parties access to a platform on which the firm is not only active, but also advantaged in some way. Self-preferencing can take a multitude of forms, depending on the nature of the service or the commercial model in question. For example, it can take the form of the platform owner: (i) enjoying a more favourable display and positioning in the platform’s search results; (ii) having exclusive use of data obtained via the platform; or (iii) imposing fees or trading conditions on rivals, but not itself.
a. Google Shopping
Self-preferencing was central to the European Commission’s (the “Commission”) seminal proceeding against Google. The Commission’s investigation of the search engine giant began in 2000, after receiving complaints from search service providers that observed that their rankings in Google’s search results were dropping as the rankings of Google’s products were rising. In June 2017, the Commission found that Google gave its comparison-shopping service, Google Shopping, an unfair advantage which distorted competition by rendering it difficult for other comparison-shopping sites to reach online customers. Accordingly, Google received a record 2.42 billion euro fine—the highest at the time.
In November 2021 the General Court of the EU rejected Google’s appeal, finding that “by favouring its own comparison-shopping service on its general results pages through more favourable display and positioning, while relegating the results from competing comparison services in those pages by means of ranking algorithms, Google departed from competition on the merits.” The General Court treated Google’s self-preferencing as “an abuse of a dominant position,” which “exists where the dominant undertaking, through recourse to methods different from those governing normal competition, hinders the maintenance of the degree of competition in the market or the growth of that competition ….” The General Court emphasized that such a standalone violation of EU competition law “may be established merely by demonstrating that [the dominant firm’s] conduct is capable of restricting competition.” Google has appealed the decision to the highest EU court, the Court of Justice, and the appeal is pending.
b. Amazon “Buy Box” and Prime
Alleged self-preferencing is also central to the Commission’s ongoing investigation of Amazon.
In a November 2020 press release (which primarily concerned allegations of misuse of data, discussed below), the Commission also announced an investigation into whether Amazon artificially favours its own retail offers and those of sellers using its “Amazon Prime” logistics and delivery services. Specifically, the probe revolves around two issues: (i) whether Amazon favours sellers who offer products via Prime; and (ii) Amazon’s criteria for selecting winners of the “Buy Box”—i.e., the default seller for a given product (although shoppers can scroll down to choose another seller). It is estimated that over 80% of the company’s sales occur through the “Buy Box”.
To address the issues raised by the Commission’s probe, Amazon engaged in discussions with EU officials culminating in its proposal of commitments to change the way it: (i) grants sellers access to its Prime programme; and (ii) presents “Buy Box” offerings on its websites. Between July and September 2022, the Commission sought feedback from market participants on these commitments. In December 2022, the Commission announced that it had agreed to accept Amazon’s commitments including: (i) to allow retailers choice over their logistics providers and still be eligible for the “Prime” label, and to ensure that all other conditions for Prime are non-discriminatory; and (ii) to place a second “Buy Box” on its site, allowing a rival seller with a cheaper product or a different delivery time to appear more prominently. The settlement officially ends the Commission’s antitrust probe and will last 7 years.
Amazon’s commitments are binding and cover the European Economic Area with the exception of Italy, since the Italian competition authority (the “AGCM”) had already made a finding in relation to the conduct investigated by the EU. In April 2019, the AGCM launched an investigation into Amazon’s “Buy Box” practices, but focusing exclusively on the Italian market. Specifically, the Italian probe investigated whether Amazon gave more prominent visibility to sellers who subscribed to its logistics service. In December 2021, the AGCM fined Amazon over 1.1 billion euros for this conduct. Amazon is appealing this decision in the Italian courts. It has also separately appealed the exclusion of Italy from the EU’s investigation, the geographical scope of which appeared gerrymandered to permit the AGCM’s investigation of Amazon. If Italy were included in the EU investigation, the AGCM would lose its authority for its separate proceeding.
- Google “adtech stack”
Self-preferencing is also one of the practices currently being investigated by the UK’s Competition and Markets Authority (the “CMA”). In May 2022, the CMA opened an investigation into Google’s digital advertising practices, including, among other things, alleged preferential treatment of Google’s own services. The CMA considers that Google holds a position of market strength at various levels of the “adtech stack”—a set of services which enable the sale of online advertising space from website owners to advertisers.
The investigation lifts the lid on the complex process that determines which ads people see when they browse the internet. The CMA is investigating Google’s practices in three major parts of the stack:
- So-called demand-side platforms (“DSPs”) used by advertisers and media agencies that want to buy advertising space;
- Ad exchanges, which conduct automated real-time auctions of advertising space by collecting bids from multiple DSPs; and
- Publisher ad servers (“PASs”), which manage the website owners’ advertising space and decide which ad to display, based on the bids received from different exchanges and/or direct deals between the website owners and advertisers.
The CMA’s current concern is twofold; that Google may be:
- Giving an unfair advantage to its own PAS by limiting the interoperability of its exchange with rival PASs and/or contractually tying different stack services together, making it more difficult for rival PASs to compete; and
- Using its DSPs and PAS to give an unfair advantage to its own exchange.
1.2 Access to data
It is generally accepted that harvesting large volumes of data and creating locked-in user communities (e.g., on Facebook) confers strong competitive advantages on major digital platforms since they can use that data in order to enhance the quality of their products and services. This results in more customers being drawn in, thus generating more data and reinforcing their advantage. Data is therefore a feature that can curb competition in digital markets, which is encouraging antitrust regulators on both sides of the Channel to launch investigations into this area.
a. Google’s “Privacy Sandbox”
In January 2021, the CMA opened an investigation into Google’s “Privacy Sandbox” project (currently in development), which disables third party cookies on the Google Chrome browser, and substitutes them with a new set of tools that perform a similar function. While Google maintains that the “Privacy Sandbox” protects consumers’ privacy, there have been growing concerns by internet cookie owners that Google will monopolise data harvested by the tools for its own commercial advantage, thus strengthening its market power. According to the CMA, third-party cookies play a vital role in digital advertising by enabling companies to target advertising effectively and to fund free online content for consumers. However, the CMA also found that third-party cookies raise privacy issues, as they enable tracking of consumers’ internet behaviour.
That said, according to the CMA, the Sandbox raises its own concerns, including that it could impede the ability of publishers, such as newspapers, to generate revenue, and hinder competition in digital advertising.
To alleviate the CMA’s concerns, Google engaged in active discussions with the regulators to devise and implement adequate remedies so that the Sandbox initiative protects privacy without unduly distorting competition. The final commitments were accepted by the CMA in February 2022 and include, among other things, Google’s commitment not to share data within its “ecosystem” (i.e., between Chrome and other parts of Google), which would give it an advantage over its rivals after the removal of third-party cookies, or to engage in any other form of self-preferencing of its advertising services.
On the other side of the Channel, a probe by the Commission into similar areas of Google’s businesses, including the Sandbox tools, is also underway.
b. Amazon – Alleged Misuse of Seller Data
In November 2020, the Commission sent a Statement of Objections to Amazon, charging it with breaching competition law by misusing marketplace seller data. It is the Commission’s preliminary view that Amazon has been relying on commercially sensitive, non-public data of third-party sellers on its marketplace, to the benefit of its own retail business, which directly competes with those third-party sellers.
Amazon has a dual role in the marketplace: it acts as an intermediary (by providing a platform for independent retailers) and as an independent retailer on that platform. This provides Amazon with access to sensitive business data, such as competing sellers’ financial performance and the number of ordered products. According to the Commission, Amazon’s retail business employees have access to large volumes of such sensitive data, which may be used to adjust Amazon’s own retail offers and business decisions to the disadvantage of other market sellers. The Commission is also concerned that, by accessing and using non-public seller data, Amazon is able to focus on the best-selling items.
To address the Commission’s concerns, Amazon offered commitments not to use non-public data about other marketplace sellers in order to advantage its own business. The Commission accepted these commitments in December 2022, and made them legally binding for a period of 5 years.
2. Follow-on litigation
The conduct subject to some of the above investigations has also been the subject of litigation by those claiming to have suffered as a result.
Of particular note is the long-running private lawsuit filed against Google in the London High Court in 2012 by the very same company that convinced the Commission to start the Google Shopping investigation in the first place. Foundem, a UK-based shopping comparison service, filed a complaint with the Commission in 2009, which subsequently triggered a formal EU antitrust investigation in 2010, and led to the Commission’s infringement decision in 2017. Over time, Foundem’s damages action, which is still winding its way to trial, has become a “hybrid” claim—partly a follow-up to the Commission’s infringement decision and partly a stand-alone claim alleging competition law breaches not included in that decision.
Other price comparison websites have followed in Foundem’s footsteps and filed damages claims in the UK against Google’s shopping-comparison business, including Kelkoo in 2015, and Connexity and Pricegrabber in 2017.
Google is also facing a 2.1 billion euro damages claim filed by PriceRunner, a Swedish price-comparison service, at the Patent and Market Court in Stockholm. The lawsuit was filed in February last year and flows from the Commission’s 2017 infringement decision. The Swedish company also believes that Google has not complied with the Commission’s decision and is therefore still acting anticompetitively. PriceRunnner says that it expects the final damages amount to be significantly higher than 2.1 billion euros on the basis that the infringement is ongoing.
It was reported in November 2022 that the investigation of Amazon’s “Buy Box” had led to the filing of a class action in the UK’s Competition Appeal Tribunal. As of early February 2023, no such action was on the Tribunal’s website; but a website has been established by Julie Hunter, the proposed class representative.
Across the pond, Amazon is also facing an antitrust class action over its fulfillment services in the United States. Specifically, Angela Horgan, an Amazon Prime customer filed a complaint against the company in July 2021, accusing Amazon of various anticompetitive practices—including forcing sellers on the platform to use its fulfillment services as a condition to have their products displayed in the “Buy Box”—which she alleges resulted in overcharges to customers.