Self-Preferencing and Competitive Damages: A Focus on Exploitative Abuses

• Author: Patrice Bougette,Frédéric Marty,Oliver Budzinski
• DOI: 10.1177/0003603X221082757
• Date: 01 June 2022
• Published date: 01 June 2022
• Subject Matter: Articles

https://doi.org/10.1177/0003603X221082757

The Antitrust Bulletin

2022, Vol. 67(2) 190 –207

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DOI: 10.1177/0003603X221082757

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1. EU Commission, AT.39740 Google Search (Shopping), June 27, 2017.

2. EU General Court, Judgment in Case T-612/17, Google and Alphabet v. Commission (Google Shopping), Nov. 10, 2021.

Article

Self-Preferencing and

Competitive Damages: A

Focus on Exploitative Abuses

Patrice Bougette*, Oliver Budzinski**,

and Frédéric Marty*

Abstract

Conceived as a theory of competitive harm, self-preferencing has been at the core of recent European

landmark cases (e.g., Google Android, Google Shopping). In the context of EU competition law, beyond

the anticompetitive leveraging effect, self-preferencing may lead to vertical and horizontal exclusionary

abuses, encourage exploitation abuses, and generate economic dependence abuses. In this paper,

we aim at characterizing the various forms of self-preferencing, investigating platforms’ capacity and

incentives to do so through their dual role, by shedding light on the economic assessment of these

practices in an effects-based approach. We analyze the different options for remedies in this context,

by insisting on their necessity, adequacy, and proportionality.

Keywords

self-preferencing, antitrust, regulation, European Union competition law, exploitative abuse, Digital

Markets Act

Conceived as a theory of competitive harm, self-preferencing has a specific status in European Union

competition law. This practice underpins the Commission’s decision in Google Shopping, which was

issued by the European Commission (the Commission hereafter) in June 2017.1 This decision was

upheld by the EU General Court in November 2021.2 Google was charged with privileging the results

of its Google Shopping price comparison service over competing comparators and applying only to the

latter a demoting algorithm that had the effect of degrading their positions in the natural search results.

*Université Côte d’Azur, CNRS, GREDEG, France

**Technische Universität Ilmenau, Ilmenau, Germany

Corresponding Author:

Patrice Bougette, Université Côte d’Azur, CNRS, GREDEG, 250, rue Albert Einstein, CS 10269, Sophia Antipolis Cedex,

06905, France.

Email: patrice.bougette@univ-cotedazur.fr

1082757ABXXXX10.1177/0003603X221082757The Antitrust BulletinBougette et al.

research-article2022

Bougette et al. 191

3. EU Commission, AT.40099 Google Android, July 18, 2018.

4. EU Commission, AT.40462 Amazon, Statement of objections, Nov. 10, 2020.

5. Autorità Garante della Concorrence e del Mercato (Italian Competition Authority), A528, Dec. 9, 2021.

6. Frédéric Marty & Julien Pillot, Cooperation, Dependence, and Eviction: How Platform-to-business Coopetition

Relationships Should be Addressed in Mobile Telephony Ecosystems, in challenges to assuMPtions in coMPetition law

2–21 (Michal gal & david Bosco, eds., 2021); Oliver Budzinski, Algorithmic Search and Recommender Systems: The

Brightside, The Darkside, and Regulatory Answers, coMPetition ForuM, No 0019 (2021), https://competition-forum.com.

For a discussion of the concept of complementors (third-party service providers), see Feng Zhu & Qihong Liu, Competing

with Complementors: An Empirical Look at Amazon.com, 39 strateg. Manag. J. 2618–42 (2018).

7. European Commission, case COMP/C-3/37.792 — Microsoft, Mar. 24, 2004.

8. Proposal for a Regulation of the European Parliament and of the Council on contestable and fair markets in the digital sec-

tor (Digital Markets Act), COM/2020/842 final, Dec. 15, 2020.

9. Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and

transparency for business users of online intermediation services, PE/56/2019/REV/1.

Self-preferencing also underpins part of the Android decision, issued in July 2018.3 In this case, the

practice takes the form of preinstallation of certain Google apps. For the company, preinstallation does

not prohibit the use of third-party applications, but is a way of cross subsidizing the free operating

system. In the Commission’s view, this is a way of favoring its own applications at the expense of those

developed by rivals.

Self-preferencing is also at the core of the European Commission’s ongoing case against Amazon,4

and a recent decision by the Italian competition authority against the same company.5 The Italian deci-

sion has something in common with the two European decisions in the Google case: Amazon is blamed

for using its dominant position to advantage one of its upstream activities. The need for independent

sellers to have access to the Buy Box leads them to contract with Amazon for their logistics services.

Indeed, opting for Fulfillment by Amazon (FBA) would make it more likely, in the eyes of independent

merchants that they would be eligible for this service, which is seen as critical to success on the mar-

ketplace. However, the more sellers entrust their logistics to the dominant platform, the less competing

logisticians benefit from a sufficient volume of business to amortize their fixed costs.

Self-preferencing can be an instrument of anticompetitive leveraging, as it may come from the

online search market to the price comparison market or from mobile operating systems to smartphone

applications. In this case, it can be from marketplaces to supply chains. It is a question of extending

dominance to an upstream market through a distortion induced on a dominated downstream market.

The objections against Amazon notified by the Commission in the fall of 2020 bring into play the

same logic. Amazon has a dual role being both a marketplace bringing together independent sellers and

a market player distributing its own products. Insofar as it has an informational advantage over sellers

and controls the recommendation algorithm, the platform can supplant its complementors by favoring

its own offers.6

As presented in this way, the self-preferencing strategy seems to be reduced to a leveraging strategy

as exemplified in EU case law by the tying practices implemented by Microsoft between the operating

system and the Internet browser.7 The tools they mobilize could distinguish current self-preferencing

strategies: they often rely on algorithmic manipulations that are particularly difficult to characterize.

They would raise questions about the contestability of dominant positions—by encouraging competi-

tive lock-in strategies—and problems of distortion of competition (e.g., fairness). They also appear in

the draft Digital Markets Act (DMA) presented in December 2020 in its blacklisted practices (e.g., its

don’ts).8 The manipulation of algorithms leading to unequal treatment of own and third-party offers

would be prohibited. Comparable requirements already exist in the P2B (platform-to-business)

Regulation of June 2019.9

However, is self-preferencing limited to leveraging strategies for dual role platforms and should it

be prohibited per se?