Product design in EU competition law

Transcription

1 Product design in EU competition law Pablo Ibáñez Colomo LSE & College of Europe Chillin Competition ELEA Symposium, 21 June 2017

2 What is product design?

3 What is product design?

4 What is product design?

5 What is product design? Product design comprises business decisions, including: Vertical integration Interoperability Conditions of access by third parties Relative openness of the platform

6 How are product design issues different? Where competition law interferes with the design of a product, it is arguably more intrusive: As a rule, competition law interferes with how products are sold or offered (exclusivity, tying, predatory pricing) When product design issues are at stake, intervention relates to how products are made

7 How are product design issues different? As a result, questions that are typically not relevant (or far less prominent) in competition law analysis become central Is the activity of the firm viable once the business model changes? Would the product had been offered in the first place? Given the trade-offs involved in the activity, can we trust courts and authorities to get the balance right, or to improve the existing balance?

8 Prima facie unlawful Case-by-case effects analysis Indispensability condition Prima facie lawful Exclusive dealing Tying Selective pricing Margin squeeze Refusal to deal Quantity rebates

9 It is not unreasonable to construe product design issues as tying matters (product A is not accessible without product B) If that is the case, it would not be unreasonable to claim that product design is prima facie unlawful under Article 102 TFEU Intervention is justified when the tie-in gives the dominant firm a competitive (or distribution) advantage (Microsoft) By definition, any product design choice that favours affiliated products against competing ones meets this test

10 1054. It follows from the foregoing that in the analysis set out at recitals 843 to 878 to the contested decision, which is the first stage of its reasoning, the Commission demonstrated to the requisite legal standard that the bundling of Windows and Windows Media Player from May 1999 inevitably had significant consequences for the structure of competition. That practice allowed Microsoft to obtain an unparalleled advantage with respect to the distribution of its product and to ensure the ubiquity of Windows Media Player on client PCs throughout the world, thus providing a disincentive for users to make use of third-party media players and for OEMs to pre-install such players on client PCs (emphasis added). Case T-201/04, Microsoft

11 Smartphone and tablet manufacturers should of course be able to provide consumers with an out-of-box experience by selling their devices with a bundle of apps pre-installed. The Commission seeks to ensure that manufacturers are free to choose which apps they preinstall on their devices. This is especially important since the Commission s analysis has shown that consumers rarely download applications that would provide the same functionality as an app that is already pre-installed (unless the pre-installed app is of particularly poor quality) (emphasis added). MEMO/16/1484, Android

12 Prima facie unlawful Case-by-case effects analysis Indispensability condition Prima facie lawful Exclusive dealing Tying Selective pricing Margin squeeze Refusal to deal Quantity rebates

13 It is also reasonable to argue that design choices made by firms should be presumptively lawful Typically, design choices are not capricious; the rationale can be expected to be efficiency-enhancing Insofar as the efficiency gains entailed by the choice are plausible, there is no reason to second-guess them through intervention The point of competition law is not to design markets or to reach optimal outcomes This is the approach that is favoured in the US

14 [T]he FTC concluded that the introduction of Universal Search, as well as additional changes made to Google s search algorithms even those that may have had the effect of harming individual competitors could be plausibly justified as innovations that improved Google s product and the experience of its users. It therefore has chosen to close the investigation. FTC, Google press release (3 January 2013)

15 Prima facie unlawful Case-by-case effects analysis Indispensability condition Prima facie lawful Exclusive dealing Tying Selective pricing Margin squeeze Refusal to deal Quantity rebates

16 Many commentators would argue that the most natural approach is to look into the effects of the practice on a case-by-case basis This would involve considering the actual or potential anticompetitive effects of the practice Since Post Danmark II, intervention appears to be subject to a standard of likelihood In an Article 102 TFEU case, appreciability would, on the other hand, not be a relevant consideration

17 The analysis of effects in this context gives rise to unique challenges: What if the relevant counterfactual is one in which the product would not have been produced? What if rivals exist only because of one product has been created by the dominant firm? What if rivals would have left the market anyway? What is the relevant timeframe for the assessment of effects, in particular when looking at its potential impact?

18 The competition in question must be understood within the actual context in which it would occur in the absence of the agreement in dispute. In particular it may be doubted whether there is an interference with competition if the said agreement seems really necessary for the penetration of a new area by an undertaking. Case 56/65, Societe Technique Miniere

19

20 Prima facie unlawful Case-by-case effects analysis Indispensability condition Prima facie lawful Exclusive dealing Tying Selective pricing Margin squeeze Refusal to deal Quantity rebates

21 Finally, it would make sense to apply the legal test set out in Magill/IMS Health and/or Bronner Essentially, these cases are about regulating the terms and conditions of access to a platform The legal test introduced in these cases is a way to address the practical difficulty of balancing the pro- and anticompetitive effects of access issues If that is the case, intervention would require, at the very least, evidence of indispensability and that lack of access would eliminate all competition

22 If indispensability is a precondition to intervene, the threshold would make intervention unlikely in most cases The complaint in many product design cases is not so much about lack of access but about discriminatory access In many of these cases, access to the platform is not indispensable, but convenient for competitors on the related market

23 Dominance Abuse Remedy