The Google Shopping Judgment
December 2021 Uría Menéndez
On 10 November 2021, the General Court issued its long-awaited ruling on the Google Shopping case, whereby it largely dismissed Google’s action for annulment of the European Commission decision finding that Google abused its dominant position by favouring its own comparison shopping service to the detriment of competing comparison shopping services. While the General Court does not set out a novel legal test for assessing self-preferencing, it does provide useful clarification on certain key concepts which are relevant for the application of Article 102 TFEU.
Competition on the merits
Not every exclusionary effect is necessarily detrimental to competition. Competition on the merits may lead to the departure from the market or the marginalisation of competitors that are less attractive to consumers from the point of view of price, choice, quality or innovation. Therefore, Article 102 TFEU is not aimed at preventing dominant undertaking from engaging in competition on the merits.
One of the main arguments brought by Google was that the European Commission failed to identify anything in its conduct, which it considers to be “making quality improvements in its online search service”, that would represent a departure from competition on the merits.
The conduct specifically identified by the European Commission as the source of Google’s abuse is, in essence, the fact that it displayed its comparison shopping service on its general results pages in a prominent and eye-catching manner in dedicated ‘boxes’, without that comparison service being subject to the adjustment algorithms used for general searches, whereas, at the same time, competing comparison shopping services could appear on those pages only as general search results (blue links) that tended to be given a low ranking.
The General Court sets at the outset that the mere extension of an undertaking’s dominant position (here, the market for general search services) to a neighbouring market (here, the market for comparison shopping services) cannot in itself constitute proof of a conduct departing from competition on the merits. In other words, ‘leveraging’ a dominant market position is not per se abusive, but only if an actual weakening of competition in the lights of each specific case has been established. In this case, the General Court considered that leveraging departed from competition on the merits due to three specific circumstances:
- the importance of traffic generated by Google’s general search engine for comparison shopping services and the associated network effects;
- user behaviour, as typically users pay attention to the first three to five results, while paying little to no attention to the remaining ones; and
- lack of credible alternative sources of traffic.
In addition to that, the General Court adds that the conduct involves “a certain form of abnormality”. This “abnormality” is grounded on the fact that Google’s general search engine initially had a universal vocation and is designed to index results containing any possible content. Against this background, the promotion of Google’s own services over the rest would not be necessarily rational, according to the General Court, save in a situation where the dominance and barriers to entry are such that no market entry within a sufficiently short period of time is possible in response to that limitation of internet users’ choice.
Inapplicability of the essential facilities doctrine
Google argued that the Decision in fact imposed on Google a duty to supply, consisting on providing competing comparison shopping services with access to its improved services without satisfying the conditions identified in the case-law and, in particular, those applicable to infrastructure qualifying as an essential facility. The essential facility doctrine set out in the Bronner case notes that a refusal to supply may be considered abusive solely with regard to infrastructure that is indispensable for carrying out a business on the market where there is no actual or potential substitute, so that refusing access may lead to the elimination of all competition. This qualified test is aimed at ensuring that a duty to supply is only abusive in very limited cases, as otherwise a duty to supply would ultimately impede competition by reducing a dominant undertaking’s incentive to build such infrastructure in the first place.
As a preliminary point, the General Court accepts that Google’s general results page has “characteristics akin to those of an essential facility” for the three reason stated above. Yet, it does not accept that the practice at stake amounted to a refusal to supply which required to comply with the essential facility doctrine. It recalls that most exclusionary abuses are liable to constitute implicit refusals to supply, since they tend to make access to market more difficult. The General Court notes that Google did not refuse to supply, but rather did supply but under discriminatory conditions between competitors and its own downstream service, and therefore the essential facility doctrine would not be applicable.
Finally, the General Court clarified that just because the remedy against Google’s conduct can be equivalent to the one applied in essential facilities cases, this does not mean that the abuse has to be of the same nature. There can be no automatic link between the criteria for the legal classification of the abuse and the corrective measures enabling it to be remedied.
Proof of anticompetitive effects: counterfactual analysis and as-efficient competitor test are not needed
Google argued that the European Commission had not established any causal link between the practices at issue and the (undisputed) fact that there was a correlative decrease in generic search traffic to almost all comparison shopping services on a lasting basis. In particular, Google contended that the European Commission should have conducted a counterfactual analysis to show how the market would have developed absent the investigated practices.
The General Court concludes that in Article 102 TFEU cases there is no need for the European Commission to systematically run a counterfactual analysis to establish actual exclusionary effects, not even in response to a counterfactual analysis put forward by the undertaking being investigated. In its judgment, the General Court explains that this would oblige the European Commission to demonstrate that the conduct at issue had actual effects, which is not required in the case of an abuse of dominant position, where it is sufficient to establish that there are potential effects.
Despite this lowered requisite standard of proof, this argument by Google was actually upheld by the General Court as regards the market for general search services. The General Court noted that the European Commission merely argued too imprecise considerations to show that there existed (even potential) foreclosure effects in this market, in which the regulator simply stated that Google was protecting the revenue from its general result pages that was generated by its own comparison shopping service, revenue which, in turn, financed its general search service. However, the at least potential exclusionary effects were appropriately established, in turn, in the market for comparison shopping services.
Finally, the General Court ruled out the need to establish that the exclusionary conduct affected as efficient competitors as Google. The use of the as-efficient-competitor test is required in case of pricing practices, but does not make sense in cases in which the competition issue was not one of pricing.
Outcome and next steps
Despite the limited annulment of the contested decision, the General Court did not amend the amount of the fine imposed. Now the parties may lodge an appeal to the Court of Justice within two months and ten days as of the notification of this judgment. If Google decides to appeal, it will be interesting to see how the points in law identified above, partially dealing with the case-law of the Court of Justice such as the essential facilities doctrine, will be dealt with.