Digitalisation is causing competition authorities to increasingly focus on prohibited abuse of a dominant position. The European Commission initially targeted only Microsoft and later Google, but is now turning its attention towards other tech giants, such as Apple and Facebook. The Netherlands Authority for Consumers and Markets (“ACM”) is now actively doing the same. Market players are increasingly calling for a less stringent dominance test. Legislation is in the pipeline aimed at curbing the market power of large platforms.
The Netherlands
The digital economy is high on ACM’s agenda. ACM is extra alert to situations in which large online platforms apply unfair access terms. ACM is currently investigating, for instance, whether the terms set by Apple for the inclusion of certain categories of apps in its App Store constitutes abuse of its dominant position. ACM expects to complete its investigation in Q3/Q4 of 2020.
ACM is also still active in the “old” economy. It has been investigating for some time now whether pharmaceutical company Leadiant has breached the prohibition on abuse of a dominant position by charging excessive prices for orphan drug CDCA: Leadiant charges more than €150,000 per year for the treatment of one patient. ACM recently closed an investigation into drug manufacturer AbbVie. According to ACM, AbbVie restricted access to the market. Although AbbVie does not endorse this conclusion, AbbVie made commitments to, amongst others, not to use exclusivity obligations and to strenghten its compliance policy. More information on competition law and patents in the pharma sector can be found in this blog.
PostNL, on the other hand, has just rid itself of an ACM investigation: ACM has put an end to its investigation of abuse of a dominant position by PostNL. The complaint had been filed against PostNL by Sandd, its competitor at the time. The merger between PostNL and Sandd has obviated the need for that investigation. Although the State Secretary’s decision to allow Sandd and PostNL to merge was annulled in court in July of this year, it is unlikely that ACM will resume that investigation. KPN can also breathe a sigh of relief: according to ACM, an investigation did not show that KPN had eroded Tele2’s margins.
The last word has not yet been spoken on the alleged abuse of a dominant position by NS. In 2017, ACM ruled that NS had abused its dominant position on the main rail network by submitting a loss-making tender in the tendering procedure for the regional public transport contract in Limburg. ACM imposed a fine of more than €40 million on NS. The Rotterdam Court found that it had not been demonstrated that NS had a dominant position on the main rail network. ACM has filed an appeal with the Trade and Industry Appeals Tribunal.
The Amsterdam Court of Appeal (and previously the Amsterdam Court) furthermore concluded that Funda had a dominant position on the house website market. However, there was no evidence of abuse of that dominant position. That again demonstrates that the conditions for abuse of a dominant position are not easily met.
The Dutch Supreme Court will be ruling in the near future in interesting proceedings on the question whether the prohibition on abuse of a dominant position set out in Article 102 of the TFEU is a matter of public order that the court must assess ex officio. The Advocate General recently found that there is no difference between a situation in which the court applies the prohibition on abuse of a dominant position ex officio and a situation in which the parties rely on it. The court is always dependent on the positions taken by the parties and on the resulting debate. The Advocate General has therefore again drawn attention to the burden of proof arising from the IATA judgment. In an advisory opinion, the Advocate General of the European Court of Justice found that a claim based on breach of the competition rules is in fact unlawful and comes under the jurisdiction of the court of the place where the loss occurred.
Europe
The digital economy is also one of the spearheads of the European Commission. To make it easier to curb the power of digital platforms, the European Commission (the “Commission”) has submitted two bills for consultation. By means of those two initiatives, the Commission is attempting to offer national competition authorities tools to curb the market power of large platforms at an earlier stage. Our blog on what exactly those initiatives entail can be found here. The Netherlands is also in favour of modernising the competition rules. State Secretary Mona Keijzer has already made a proposal to that effect in a Letter to the House of Representatives. The further detailing of the proposals after consultation will take place in 2021. Germany has already reached agreement on amendments to its Competition Act in order to better deal with the problems caused by data and large digital companies. European rules will have to prevent further fragmentation.
The Commission has instituted two investigations to establish whether Apple is abusing its dominant position. First, the Commission is investigating whether Apple is abusing its dominant position via Apple Pay by not allowing everyone to integrate the technology into apps, web stores or cash registers. A second investigation is directed at the Apple App Store and focuses in particular on the mandatory use of Apple’s own in-app purchase system and restrictions on the ability of developers to inform iPhone and iPad users of alternative cheaper purchasing possibilities outside of apps. Spotify has complained to the Commission about the 15-30% cut that Apple takes from the income that Spotify earns from subscriptions that are taken out through Apple’s payment system. Telegram (a WhatsApp counterpart) and Kobo (an e-book distributor) have joined Spotify and have filed the same complaints against Apple. Apple had previously already been fined in France.
Fortnite, a free-to-play battle game (that can be used to make in-app purchases) believed it had found a way of circumventing the Apple in-app purchase system. Epic Games, the developer of Fortnite, introduced a new in-app payment system of its own (Mega Drop). But Fortnite was removed from Apple’s App Store only a few hours after the introduction of Mega Drop. Soon after that incident, Spotify expressed support for Epic Games. Apple’s actions have every appearance of abuse of a dominant position. Epic Games is of the same opinion: the developers of Fortnight responded to Apple’s actions in the form of a modern take on George Orwell’s dystopian novel “1984”. We are likely to hear more about this in 2021.
The Commission has also started an investigation into the Internet of Things, a system of remote controllable consumer products connected to networks, such as Google Home. Although this is a new market, a number of structural market objections have already arisen, such as data access restriction, strong network effects and economies of scale. The provisional report will be published in the spring of 2021.
In the Commission’s opinion, Aspen may be in breach of the prohibition on abuse of a dominant position by charging excessive prices for critical cancer medicines in the European Union. To obviate the Commission’s objections, Aspen has undertaken to reduce the prices of a number of medicines by 73%. Those prices will be the maximum prices for the next ten years. Aspen will also guarantee their supply for the next five years.
The hearings in the Google case were conducted before the General Court last February against the fine of €2.42 billion imposed by the Commission on the grounds of abuse of a dominant position. It is not yet known when judgment will be passed. Regardless of the outcome, one of the parties will most likely present the judgment to the European Court of Justice.
Economic dependence
There is a trend in the European Union towards relaxing the dominance test. In Belgium, for instance, rules on abuse of “economic dependence” entered into force on 22 August. The Belgian Parliament had adopted the act in 2019 already. The act provides that practices may constitute abuse if a company has a relative dominant position on the grounds of economic dependence (e.g. in the case of a small supplier and a strong customer). These developments will give rise to new cases in Europe in 2021 that cannot be addressed on the basis of abuse of a dominant position.
These developments have not come out of the blue. The “Anzapfverbot” has applied in Germany for some time already. Companies with relative market power are in breach of that ban if they exhaust the economic resources of dependent companies without any objective justification. A company is dependent on another if it does not have feasible and realistic alternatives in a vertical relationship to change business partners. A position of relative market power and the fact that the powerful company has requested benefits without any objective justification suffices. The Bundeskartellamt (“BKa”) is not required to demonstrate that the powerful company has actually relied on its market position to obtain or request the benefit. The BKa regularly investigates companies that have allegedly breached the Anzapfverbot, such as Amazon.
French commercial law also contains a provision that differs from (European) competition law and prohibits abuse of economic dependence on a trading partner. A company need not hold a dominant position in that case.
The Netherlands does not (yet) have a similar provision in place and is therefore lagging behind its neighbouring countries regarding economic dependence. For the time being, market parties and ACM will have to rely in the Netherlands on Article 24 of the Competition Act and Article 102 of the TFEU. This means that it will have to be demonstrated for instance on the basis of the market share that a company can act independently on the market (also independently of competitors). But this ban on abuse of a dominant position will nevertheless continue to play a prominent role in particular in the digital economy in the coming years.
Information on dawn raids by ACM can be found at invalacm.nl
