Having a large market share, or even a dominant position in a digital market, is not in itself a breach of competition law. It is often the reward for commercial success, innovation or judicious investment. What is prohibited, on the other hand, is abusing this position to restrict competition or exploit business partners and customers, practices that involve principles of unfair competition. Article 102 of the Treaty on the Functioning of the European Union and Article L. 420-2 of the French Commercial Code keep a close eye on this.
But when is a company considered to be dominant? And what practices, commonplace for an ordinary company, become abusive when they emanate from a dominant player? In the digital economy, which is characterised by network effects, economies of scale and the importance of data, factors that give rise to a number of problems, such as the lack of a single point of contact between companies, the absence of a single point of contact between companies, and a lack of transparency. numerous challenges for competition law on the internetWhen it comes to market power, some companies can rapidly acquire considerable market power. Understanding the risks associated with abuse of a dominant position is therefore essential not only for these players, but also for their competitors and partners. This article examines the main forms of abuse observed in the world of the internet and e-commerce.
Abuse of infrastructure and network access
Historically, many cases of abuse of a dominant position linked to the Internet have involved the incumbent telecommunications operators, who held a virtual monopoly over the physical infrastructure (the copper "local loop"). Their dominant position on this upstream market gave them the ability to influence competition on the downstream Internet access markets for businesses and individuals.
Discrimination in access
One of the most frequent abuses was discrimination. An incumbent operator could favour its own Internet Service Provider (ISP) subsidiary over competing ISPs. This could manifest itself in various ways:
- Differentiated rates : Offering competitors network access charges (interconnection, unbundling) that are too high to enable them to compete with its subsidiary's retail offerings ("price squeeze" effect).
- Technical information : Provide its subsidiary with technical information on the eligibility of lines for ADSL or on the equipment required, in advance or more fully than competitors.
- Deadlines and processes : Implement faster, more reliable processes for ordering or commissioning lines for its subsidiary than for third-party operators.
The French Competition Authority has intervened on several occasions to sanction such practices on the part of France Télécom (now Orange), ordering it to provide non-discriminatory and technically equivalent access offers to all players..
Denial of access to "essential facilities
In some cases, the abuse can go as far as simply refusing access to an infrastructure or resource that is essential for competing with the dominant undertaking. This is known as the "essential facilities" theory. For a refusal of access to be abusive, several conditions must be met: access must be indispensable (there is no real or potential alternative), the refusal must be likely to eliminate competition on a downstream market, and it must not be objectively justified. For example, the Autorité de la concurrence examined (but rejected at the interim measures stage) a complaint by 9 Télécom against France Télécom concerning access to the "virtual circuit" required to offer competing ADSL services.. The concept can also be applied to intangible resources, as we shall see below.
Tied sales and cross-subsidies
A dominant undertaking may also be tempted to link the sale of a product or service where it is in a strong position (e.g. telephone subscription on the incumbent network) to another product or service offered in competition (e.g. internet access, additional services). If this combination forces the consumer's hand and squeezes out competitors on the second market, it may be abusive.. Similarly, using the profits from a monopoly activity to massively subsidise a competitive activity and charge very low (or even predatory) prices may constitute an abuse of cross-subsidisation, distorting competition in the open market..
Technical lock
Imposing technical constraints that limit interoperability or consumer choice can also be abusive. The https://www.google.com/search?q=Wappup.com case illustrates this risk: the default locking of the first WAP phones to the mobile operator's portal made access to competing portals difficult. Although precautionary measures were refused in this case because of the rapid evolution of the market and a previous court ruling, the principle remains: a dominant player cannot use artificial technical barriers to drive out competition.
Abuse of online platforms and services
As the economic centre of gravity has shifted to the major digital platforms, new forms of abuse of dominant position have emerged, linked to controlling access to users, data or essential services.
Access and referencing control
Platforms that play an essential intermediary role (search engines, major marketplaces, operating systems, app stores, etc.) can abuse their power in terms of referencing or access. This can include :
- Refusal to register a domain name, the relevance of which is closely linked to the definition of the relevant market (AFNIC case).
- Opaque, arbitrary or discriminatory referencing rules on a dominant search engine, favouring its own services or penalising certain competitors (as Google has been accused of in several cases concerning its AdWords service).
- Imposing unfair conditions of access to third-party sellers on a dominant marketplace (abuse of economic dependence which may fall within the scope of Article L. 420-2).
Denial of access to content or interoperability
A dominant player controlling a key content or technology may abuse its position by refusing to make it accessible or interoperable, if this blocks the emergence of new and innovative products or services. For example, the European Commission has questioned the systematic refusal of certain sports rights holders to transfer their rights to the Internet in order to protect their traditional television revenues.. Similarly, Apple's refusal to license its FairPlay digital rights management (DRM) technology was the subject of a complaint (rejected by the French Competition Authority for lack of proof of indispensability and risk of elimination of competition) from VirginMega, which was unable to make its music compatible with iPods..
Unfair trading conditions
Imposing unbalanced conditions on one's partners can also constitute an abuse, a problem which, as in the case of the vertical restraints and cartelscontributes to market regulation. The emblematic case is that between French press publishers and Google concerning the application of the law on neighbouring rights.. The Autorité de la concurrence considered that Google had abused its dominant position by unilaterally imposing a principle of no remuneration for the display of protected content and by failing to negotiate in good faith with publishers, thereby imposing unfair trading conditions on them..
Customer lock-in
Strategies aimed at making it excessively difficult or costly for a customer to change supplier or to use several suppliers ("multi-homing") may be abusive if implemented by a dominant player. The French Competition Authority has expressed concern about the egress fees charged by some cloud service providers, which could create barriers to migration and lock in customers..
Abusive pricing strategies
Price is an essential tool of competition, but it can also be abused by a dominant company.
Predation
The most serious practice is predation: setting prices below cost with the deliberate aim of eliminating a competitor, in the hope of subsequently raising prices and recouping losses once the competition has been eliminated. Proving predatory intent is often difficult. The authorities generally analyse the company's costs (average variable costs, average full costs). Prices below average variable costs are presumed to be predatory. Prices above average variable costs but below average full costs may be predatory if they are part of a plan to eliminate a competitor.. The European Commission has condemned Wanadoo for predation on the ADSL market in France. The French competition authority had also examined this complaint, but dismissed it at the interim measures stage, noting the strong growth of the market and the ability of competitors to align themselves and gain market share despite Wanadoo's low prices..
Excessively high prices
Conversely, a dominant company may be tempted to impose prices that bear no relation to the economic value of the product or service. However, convictions for excessive pricing are rare.This is because the authorities consider that a price is abusive only if it is "manifestly excessive".This is difficult to establish. Competition is generally seen as the best regulator of high prices.
Minimum prices and discrimination
As we saw in the previous article, imposing minimum resale prices is generally an agreement. But if this is done unilaterally by a dominant company on its distributors, it can also be qualified as an abuse of a dominant position.. Similarly, applying different pricing conditions to partners in equivalent situations, without objective justification, may constitute abusive discrimination..
In conclusion, the power acquired on digital markets confers a particular responsibility. Dominant companies must ensure that their commercial practices, whether in terms of access to their services, their contractual conditions or their pricing strategies, do not serve to stifle competition by means other than simple competition on the merits.
Assessing whether your online practices could be considered abusive requires a detailed analysis of your market position and behaviour. Contact our firm for a personalised audit of your risks.
Sources
- Article 102 of the Treaty on the Functioning of the European Union (TFEU)
- Article L. 420-2 of the French Commercial Code
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