On April 24, 2020, the Commission announced that it is seeking to design and implement specific ex ante[1] and remedy tools[2] for digital markets. This follows earlier efforts related to the creation of a single data market and the proposed European approach towards artificial intelligence unveiled in February 2020.[3]

In the Commission’s view, current competition tools are insufficient to avoid the structural problem of tipping, described as the “tendency of one system to pull away from its rivals in popularity once it has gained an initial edge.”[4] This enables powerful (but not necessarily dominant) digital firms to profit from indirect network effects and maintain and/or increase their market position. Two initiatives are noteworthy.

First, the Commission aims at developing ex ante rules for companies that can control competitor access to a specific platform, known as “digital gatekeepers” (e.g., Amazon, Facebook, etc.). These rules shall include clear-cut prohibitions and obligations to remedy or prevent imbalances caused by the market structures. Second, the Commission would like to conduct market investigations and impose commitments to address a “tipping” market trend in a particular digital market, without the need to prove actual negative effects. The palette of intervening measures under consideration notably includes the breaking up of a company, albeit as a measure of “last resort.”

Ongoing investigations in digital markets

In addition, the Commission continues to actively scrutinize digital platforms, despite the challenges stemming from the COVID-19 pandemic. Three recent developments are noteworthy.

Facebook. As previously reported, the Commission has been investigating complaints that Facebook may have distorted the online classified advertising market by promoting its free Marketplace service to the 2 billion users of its social network.[5] On April 6, 2020, the Commission sent a third request for information (“RFI”) to third parties dealing with Facebook, to better understand Facebook’s business model and the importance of data for the success of the social media platform.[6]

Apple. The Commission has further progressed its probe into Apple’s alleged anticompetitive App Store policies, which allegedly favor Apple’s own music-streaming services to the detriment of its rival Spotify.[7] The Commission has recently sent out additional RFIs to various music streaming stakeholders that frequently distribute their services through the App Store.[8]

Amazon. The Commission also continues the Amazon probe, assessing whether Amazon’s dual role as retailer and provider of a market place, and related use by Amazon of sensitive data from independent retailers, violates EU antitrust rules.[9] The Commission has recently reiterated that the COVID-19 pandemic “doesn’t change [its] enforcement priorities” and confirmed it is accordingly progressing the Amazon case.[10]

[1]      See https://globalcompetitionreview.com/article/1226098/vestager-eu-may-introduce-competition-rules-for-%E2%80%9Cdigital-gatekeepers%E2%80%9D.

[2]      See https://globalcompetitionreview.com/article/1226094/dg-comp-official-eu-is-considering-%E2%80%9Crestorative-or-prescriptive%E2%80%9D- antitrust-remedies.

[3]      As reported in our February 2019 EU Competition Law Newsletter. See also 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, Article 19(2).

[4]      See Michael Katz & Carl Shapiro, “Systems Competition and Network Effects,” 8 J. Econ. Persp. 93 (1994), p. 106.

[5]      See https://www.silicon.co.uk/e-marketing/advertising/facebook-marketplace-european-commission-301613. See also, https://www.ft.com/content/ec0a3e7- c648-4ddc-9eef-64b2cf384073.

[6]      See https://www.reuters.com/article/us-eu-facebook-antitrust/eu-antitrust-regulators-raise-more-questions-about-facebooks-online-marketplace- idUSKBN21P22J.

[7]      As reported in our February 2019 EU Competition Law Newsletter.

[8]      See https://app.parr-global.com/intelligence/view/1956233.

[9]      See https://ec.europa.eu/commission/presscorner/detail/en/IP_19_4291.

[10]    See https://app.parr-global.com/intelligence/view/prime-3024956.