TY - JOUR
AU - Fountoukakos, Kyriakos
AB - Key Points The Commission’s Google Search (Shopping) decision requires Google to choose a remedy that ensures equal treatment between its own and rival comparison shopping services. The decision does not preclude Google from charging rivals a fee for access to its ad space. This article reviews the case law on access remedies and finds that it consistently recognises an undertaking’s right to receive appropriate, commercially reasonable and market-based compensation for supplying rivals with non-discriminatory access to a valuable input. It concludes that Google’s non-discriminatory auction remedy fully complies with the decision read in light of the case law. I. Introduction On 27 June 2017, following a long-running investigation of close to seven years, the Commission adopted a prohibition decision against Google in its Google Search (Shopping) case.1 The Decision finds that Google has abused its dominant position in markets for general search services through the more favourable positioning and display, in its general search results pages, of its own comparison shopping service, Google Shopping, compared to competing comparison shopping services. It imposes on Google the largest fine ever imposed on a single undertaking, €2.42 billion, and requires Google to cease the infringement. Many aspects of the Commission’s case have been the subject of intense debate, not least the Commission’s novel and unprecedented theory of harm of ‘favouring’, the exclusion of merchant platforms from the allegedly affected market, and the correct legal test for assessing product improvements.2 This article focuses on only one element of the case: the remedy. The Decision’s remedy is limited to requiring Google to cease the alleged abuse. The Decision does not specify a specific remedy but instead leaves it up to Google to choose a remedy that will effectively bring the infringement to an end.3 The Decision provides, however, that any measure chosen must ensure that rival comparison shopping services are treated no less favourably than Google’s own comparison shopping service.4 On 27 September 2017 Google implemented its chosen remedy. It takes the form of an arms-length auction by which rival comparison shopping services and Google Shopping bid for ads to appear on Google’s general search results pages – more precisely in the Shopping Unit displayed at the top of the general search results pages – on equal terms.5 The remedy chosen by Google is therefore framed as an ‘access remedy’ in that, through the auction mechanism, Google is giving rival comparison shopping services access to the Shopping Unit. Complainants have criticised the remedy chosen by Google prior to publication of the non-confidential version of the Decision arguing that it would not be compliant with the Decision as it would not solve the alleged abuse.6 This article reviews Google’s remedy in light of a comprehensive analysis of the case law and decision-making practice on access remedies and concludes that, contrary to what complainants argue, the remedy entirely conforms with the Decision read in light of the case law. We look at various areas of competition law concerning access remedies, including refusal to supply/essential facilities, collective refusal to supply cases under Article 101 TFEU, SEP licensing, ex-ante regulation, merger control, as well as margin squeeze, and show that the Commission’s decisional practice and the jurisprudence of the EU Courts have clearly and consistently acknowledged an undertaking’s right to receive appropriate, commercially reasonable and market-based compensation for supplying rivals with a valuable input, and that an auction process ensures non-discriminatory and market-based compensation. The article begins by outlining the key facts of the Google Shopping case, and the main elements of the remedy (Section II). It then considers certain wider issues raised by the Commission’s remedial approach (Section III). The article then reviews the case law on the level of remuneration an undertaking can charge for access to an input (Section IV). It concludes by applying the relevant principles derived from the case law to the specific facts of the Google Shopping case and demonstrating why Google’s remedy is, in the authors’ opinion, entirely consistent with the proper scope of the Decision read in light of the case law (Section V). II. Background A. The facts in Google Shopping The Decision has had a contentious pre-history. It follows seven years of investigation, a preliminary assessment, three rounds of commitment negotiations, a statement of objections, a supplementary statement of objections and a letter of facts. Many aspects of the Commission’s case have raised debate,7 including the Commission’s approach to market definition and dominance, the novel and unprecedented theory of harm relied upon, and its assessment of the anticompetitive effects of the conduct on rivals and consumers, amongst others. The main findings of the Commission – which the authors do not endorse – are as follows. Google is said to be dominant in national markets for general search services across the EEA8 and to have abused its dominance through the more favourable positioning and display of its own comparison shopping service, Google Shopping, in its general search results pages over that of rival comparison shopping services.9 In particular, the Commission found that, when a consumer types a product-related query into the Google general search engine, Google’s product ad results are subject to different ranking algorithms and are displayed in rich format in a reserved space, known as the Shopping Unit, at the top of the search engine results page.10 By contrast, what the Commission considers to be rival comparison shopping services are displayed below in the generic search results as blue links, subject to Google’s generic search algorithms. According to the Commission, this conduct has the potential to foreclose comparison shopping services and may lead to anticompetitive effects by enabling Google to raise prices and diminish innovation.11 As a result, the Commission fined Google €2.42 billion, and required it to bring the infringement effectively to an end. B. The remedy The Decision’s remedy is limited to a cease and desist order. The operative part of the Decision simply requires Google to ‘bring effectively to an end the infringement’.12 How Google does this is up to Google. As the Decision explains:13 ‘As there is more than one way in conformity with the Treaty of bringing that infringement effectively to an end, it is for Google and Alphabet to choose between those various ways’. Similarly, Commissioner Vestager has stressed that the remedy ‘can be done in a number of ways. I will not judge on the method. We will look at the result’.14 Accordingly, the Decision does not seek to anticipate Google’s various options other than to acknowledge that Google may choose to display a Shopping Unit or another equivalent form of grouping of links to or search results from comparison shopping services.15 Another option, not suggested in the Decision, would have been to cease showing a Shopping Unit. The Decision does, however, seek to provide guiding principles as to the scope of an acceptable remedy. Chief among these is the equal treatment principle:16 ‘Any measure chosen by Google and Alphabet should, however, ensure that Google treats competing comparison shopping services no less favourably than its own comparison shopping service within its general search results pages’. The Commission has also acknowledged publicly that the remedy is not about mandating particular outcomes. What matters is that Google ensures equal treatment to rivals – ‘not more, not less’.17 That the equal treatment principle is not about outcomes, but about the process is also clear from paragraphs 700(a) to (d) of the Decision, which explain that any measure chosen must: apply to all devices, irrespective of the type of device on which the search is performed; apply to all Google users in the 13 relevant Member States, irrespective of the Google domain that they use; subject Google Shopping to the same underlying processes and methods for the positioning and display in Google’s general search results pages as those used for competing comparison shopping services (noting that such processes and methods should include all elements that have an impact on the visibility, triggering, ranking or graphical format of a search result in Google’s general search results pages); and not lead to competing comparison shopping services being charged a fee or another form of consideration that has the same or an equivalent object or effect as the infringement established by this Decision. Notably, the Decision departs from the Commission’s 2016 supplementary statement of objections, which was reported to have in mind that any charge for the display of product ads in the Shopping Unit would need to be set at a fixed nominal charge of €0.01 per click (i.e. the lowest reserve price for AdWords).18 No such requirement is included in the Decision and the Decision therefore acknowledges that charging a fee for companies to appear in Google’s ad space is legitimate. Paragraph 700(d) of the Decision, which deals with fees that may be charged to rivals, merely reflects the general equal treatment principle enshrined in the Decision since it only provides that fees should not have the same or an equivalent object or effect as the infringement identified in the Decision. As set out further below in this article, a market-based fee on the basis of an auction mechanism is compliant with the principles set out in the Decision, and in particular paragraph 700(d), in light of a proper reading of the Decision and the established case law on access remedies. Google was required to propose its remedy within 60 days from the date of notification of the Decision and to implement it within 90 days.19 Google did so and, accordingly, introduced an arms-length auction remedy enabling rival comparison shopping services to bid for access to the Shopping Unit in competition with Google Shopping for the placement of product ads, on equal terms. Google Shopping gains no advantage from the auction: Google Shopping now operates as if it were a separate business, participating in the auction in the same way as competing comparison shopping services, and needs to be profitable in its own right.20 Google’s remedy is not subject to a formal approval process (although the authors would note that, by having presumably carefully reviewed, debated, and accepted Google’s 60-day and 90-day notifications, arguably the Commission has implicitly endorsed the remedy as a matter of principle). The remedy is, however, subject to on-going monitoring by the Commission, assisted by external technical experts, Mavens and KPMG, pursuant to the terms of paragraph 705 of the Decision,21 and Google is required to submit periodic reports on the remedy every four months for the next five years for these purposes.22 Should Google be found to have failed to comply with the terms of the Decision, it will be liable to substantial daily penalty payments of 5 per cent of its average daily turnover.23 III. Appropriateness of an open-ended remedial approach An open-ended remedial approach may at first sight appear perfectly unobjectionable and, moreover, advantageous to an addressee. As the case law explains, ‘it is not for the Commission to impose upon the parties its own choice from among all the various potential courses of action which are in conformity with the Treaty or with a decision imposing behavioural remedies’.24 An open-ended approach therefore provides leeway to the addressee as to how to comply with the obligation to put an end to the infringement. In practice, however, the open-ended approach has given rise to difficulties where the Commission has subsequently challenged the remedy proposed by the addressee. Whilst the addressee has the benefit of choosing its own remedy, it can suffer significant uncertainty as to whether its remedy is sufficient to effectively bring an infringement to an end due to the lack of formal approval by the Commission. Although the addressee’s proposal may be subject to some form of informal endorsement by the Commission, there is no formal approval process in contrast to the procedure for commitments under Article 9 of Regulation 1/2003.25 This approach has proved to be problematic where a remedy involves a pricing element. For example: In Microsoft, the Commission’s remedy required Microsoft to provide interoperability information to rival work group server operating systems suppliers. The Commission’s decision only gave Microsoft minimal guidance on what conditions could attach to the supply of the information, and just 60 days in which to outline the terms of its offer.26 Microsoft settled terms of its offer within the deadline, which incorporated certain ‘pricing principles’ to govern the remuneration it could charge, but in doing so ignored on-going serious objections by the Commission and third parties that the terms deprived the remedy of useful effect. A protracted battle appears to have ensued concerning Microsoft’s interpretation and application of those pricing principles, bringing Microsoft even to the point of pleading with the Commission to tell it what remuneration rate would be compliant with the decision.27 The Commission refused, but nevertheless went on to determine that the rate Microsoft had set for the period up to October 2007 was non-compliant with the decision, and as a result imposed a penalty payment of €899 million (almost double the original fine for the infringement of €497 million).28 In MasterCard, the Commission found that MasterCard’s multilateral interchange fee (‘MIF’) for cross-border payment card transactions infringed Article 101(1) TFEU, and ordered MasterCard to cease the infringement.29 The Commission did not require MasterCard to repeal the MIF, but gave it a six-month reprieve in which to propose an acceptable MIF.30 The Commission did not, however, provide MasterCard with any clear guidance on what that would look like. As a result, MasterCard found itself with no other choice than to temporarily repeal its MIF entirely (i.e. to set it at zero) to avoid the risk of non-compliance penalties.31 This afforded MasterCard further time to pursue discussions with the Commission on determining an acceptable MIF, and 10 months later, ultimately settled on applying the Commission’s restrictive approach (the ‘tourist test’ methodology), resulting in a substantially reduced maximum weighted average MIF level, pending the outcome of its appeal.32 The principle of sound administration dictates that the Commission should inform the undertaking during the negotiation period and afterwards whether it considers the proposed remedy to be appropriate and sufficient to remove the competition concerns or, on the contrary, inappropriate and/or insufficient and, if so, why (a fortiori where the remedy in question aims to remove concerns caused by a novel and unprecedented type of conduct as is the case in the Google Shopping case). It would be contrary to the principle of sound administration for the Commission to remain silent and to then impose a fine on the undertaking for non-compliance of the remedy with the decision. Further, the principle of sound administration requires that, in relation to remedies involving a pricing element, where several reasonable pricing levels are possible and one has been proposed by the undertaking concerned, the Commission cannot impose another reasonable level if the level proposed by the undertaking is also deemed reasonable. This has been clearly acknowledged by the General Court in Microsoft where it held as follows: ‘Microsoft is, on the other hand, right to maintain that several rates may be covered by the notion of ‘reasonable remuneration rates’. Nevertheless, that finding confirms the merits of the Commission’s argument that it is not for it to choose a particular rate of remuneration from among what are reasonable rates for the purpose of the 2004 decision and impose that rate upon Microsoft. […]. It follows that if the undertaking has chosen one of those potential courses of action, the Commission will not be in a position to make a finding of infringement or impose a periodic penalty payment on the ground that it prefers another of them. It is thus for Microsoft to grant rights of access to, and use of, the interoperability information at remuneration rates that are reasonable for the purpose of Article 5(a) of the 2004 decision and the Commission may not impose a periodic penalty payment on Microsoft should it take the view that the rates in question are reasonable but that other, possibly ‘even more reasonable’, rates should have been proposed. In those circumstances, the Court must reject Microsoft’s argument alleging infringement of the principle of sound administration’.33 It follows that an open-ended remedy is perfectly workable, provided the Commission provides certainty to the undertaking concerned about the compliance of its proposed remedy with the decision, and provided the Commission does not misuse the open-ended nature of the remedy: it is not a carte blanche for the Commission to impose a harsher remedy/a remedy that it would consider to be ‘more reasonable’ than an already reasonable remedy proposed by the undertaking concerned. For reasons specific to their cases, the principles of legal certainty or sound administration did not prove of help to either Microsoft or MasterCard in their respective appeals. Microsoft sought to argue that it had not been provided with sufficiently precise guidance and therefore that the Commission’s penalty decision should be annulled.34 The General Court disagreed: the pricing principles were sufficiently precise and in any event, the infringement decision, whilst embodying imprecise concepts, had provided sufficient clarity on what Microsoft needed to do to ensure compliance. The concept of ‘strategic value’ employed in the Commission’s decision was novel,35 but had been clear to Microsoft before the decision was adopted. Microsoft’s arguments were also likely weakened because it was only raising them in its appeal of the Commission’s penalty decision, whereas it had not contested the lack of sufficiently precise guidance in its appeal of the infringement decision.36 MasterCard first sought to challenge the Commission’s remedy not for breaching the principle of legal certainty but the principle of proportionality, in that the Commission had required MasterCard to repeal the MIF yet had acknowledged the potential applicability of Article 101(3) TFEU. The General Court side-stepped the issue by recourse to the fact that the burden for demonstrating fulfilment of Article 101(3) TFEU rested with MasterCard.37 Before the Court of Justice, Lloyds Banking Group, in cross-appeal, sought to argue that, irrespective of MasterCard’s burden to demonstrate fulfilment of Article 101(3) TFEU, neither the Commission nor the General Court provided any guidance on the precise methodology that MasterCard should follow in meeting that burden. But the Court of Justice considered this argument inadmissible because it could not point to an error in law by the General Court.38 Nevertheless, the Microsoft and MasterCard cases provide a reminder of the potentially severe procedural difficulties to which an open-ended remedial approach can give rise where the Commission subsequently challenges the remedy, and, in the authors’ view, the need for particularly careful consideration by the Commission, where it adopts an open-ended remedial approach, before taking any decision to fine an undertaking for non-compliance in respect of the remedy. IV. Case law on remuneration in access remedies The following sections survey various areas of competition law that have concerned access remedies. It covers case law on refusal to supply/essential facilities, collective refusal to supply under Article 101 TFEU, SEP licensing, ex-ante regulation, merger control, as well as margin squeeze. It shows that the decisional practice of the Commission and jurisprudence of the EU Courts have consistently acknowledged an undertaking’s right to receive appropriate, commercially reasonable, market-based compensation for supplying rivals with a valuable input. It is in light of this case law that the parameters of the Decision in Google Shopping, and in particular the requirement set out in its paragraph 700(d), should be interpreted. A. Refusal to supply/essential facilities The most obvious reference on access remedies is the case law on refusal to supply/essential facilities under Article 102 TFEU. This case law has consistently established that, where an undertaking has committed an abusive refusal to supply, access to the indispensable input needs to be on non-discriminatory and reasonable commercial terms. This is apparent from a range of cases concerning services and tangible assets: Commercial Solvents (1972).39 The Commission found Commercial Solvents Corporation (CSC) to have abused its dominant position in respect of the supply of a raw material by refusing to supply Zoja, a manufacturer of a downstream product. By way of remedy, the Commission required CSC, first, as an interim measure, to immediately provide Zoja with specified quantities of the material ‘at a price not exceeding the maximum they currently charge’, i.e. at current market prices, and second, to submit a proposal to the Commission in respect of subsequent supplies.40 Sea Containers/Stena Sealink (1993).41 In a request for interim measures, the Commission reached the preliminary view that Stena Sealink, a ferry operator and the port authority at Holyhead, in Wales, had acted abusively by refusing access to the port to a competitor, Sea Containers, which wished to commence a rapid ferry service from the port. To resolve the Commission’s concerns, Stena Sealink agreed to offer access to Sea Containers at the slot times which it had said it regarded as essential for the operation of a commercially viable service, for a fee set on non-discriminatory terms. The Commission approved the offer, finding that it was ‘reasonable in the context of a port with limited capacity’.42 Irish Continental Group/CCI Morlaix (1995).43 In another interim measures decision concerning essential access to a port, in this case the port of Roscoff in France, the Commission, having reached the preliminary view that the port owner in question, CCI Morlaix, had committed an abusive refusal to supply, mandated it to offer access on ‘reasonable and non-discriminatory terms’.44 Bronner (1998).45 The Court of Justice held that Mediaprint’s refusal to grant Oscar Bronner, a competing newspaper, access to its nationwide home-delivery service for daily newspapers was not an abusive refusal to supply because access was not indispensable. Whilst the Court did not discuss on what terms access would need to be granted had it been indispensable, Advocate General Jacobs did do so, noting, in an approach consistent with the case law, that the undertaking in question must be ‘fully compensated by allowing it to allocate an appropriate proportion of its investment costs to the supply and to make an appropriate return on its investment having regard to the level of risk involved’.46 Flughafen Frankfurt/Main (1998).47 The Commission found that Frankfurt Airport had abusively refused to grant airlines or third parties the right to provide ground-handling services. The Commission required Frankfurt Airport to provide a detailed plan as to how it intended to open up the market. The Commission made clear that the airport could require ‘adequate payment for use of the facilities provided by it in the form of rents, as long as such amounts were within the limits imposed by the competition rules’.48 Trenitalia (2003).49 The Commission reached the preliminary view that Ferrovie dello Stato (FS), the Italian national train operator, had abusively refused access to the Italian rail infrastructure to enable other operators to provide cross-border passenger services into Italy. In particular, FS had refused to enter into an international grouping, provide access to the track or traction services to such operators. To remedy the Commission’s concerns, FS committed inter alia to provide traction services on the basis of ‘transparent and non-discriminatory tariff conditions’.50 The Commission’s decision also made clear FS’ ‘right to adequate remuneration under normal commercial terms’.51 Cases concerning IP licensing have involved greater specificity, with the Commission usually requiring recourse to an expert in the event of dispute in order to take into account relevant concepts from IP law. Nonetheless, the Commission and the Courts, consistent with the approach in regard to services and tangible assets, have generally required access on commercially reasonable and non-discriminatory terms: IBM (undertaking) (1984).52 In August 1984, IBM gave an undertaking to the Commission concerning its future behaviour in relation to mainframe interface disclosure and memory bundling. As part of its undertaking, IBM reserved the right to charge a reasonable and non-discriminatory fee for the information and IP that it agreed to provide to its rivals. Magill (1988).53 The Commission found that three TV broadcasters (ITP, BBC and RTE) active in Ireland and Northern Ireland had abusively refused to licence their weekly TV listings (subject to copyright protection) to Magill which wanted to publish a comprehensive weekly TV guide. The Commission required the broadcasters to provide advance access to their weekly TV listings, and to permit their reproduction, on a ‘non-discriminatory basis’. If they chose to do so by way of licences, the Commission stipulated that any royalty should be ‘reasonable’.54 The broadcasters were required to submit for the Commission’s approval their proposals on the terms to be offered. The Commission did not scrutinise the reasonableness of the royalty rates proposed, instead leaving the parties to agree the rate on a commercial basis, subject to any dispute being determined by a specialist IP tribunal (such as the Copyright Tribunal in the UK).55 IMS Health (2001).56 The Commission reached the provisional view that IMS Health had abusively refused to supply its ‘1860 brick structure’, a copyrighted format for processing regional sales data in Germany, which had become a national standard, justifying the imposition of interim measures. The Commission required IMS Health to grant a licence to the 1860 brick structure on ‘non-discriminatory, commercially reasonable’ terms.57 To that effect, the parties were required to agree the ‘appropriate royalty’ themselves, failing which the royalty determination would be put to an independent expert. The expert would then have to determine the appropriate royalty on the basis of ‘transparent and objective criteria’, and transmit its determination to the Commission for approval.58 Microsoft (2004).59 The Commission found that Microsoft had abusively refused to supply interoperability information to enable rival suppliers of work group server operating systems to fully interoperate with Windows PCs and servers. To remedy the abuse, Microsoft was required to make the interoperability information available to rivals on ‘reasonable and non-discriminatory terms’.60 As the Commission found that access to the interoperability information was indispensable to enable rivals to viably compete, and lack of access would eliminate all effective competition, the Commission also stipulated that any remuneration charged would need to be set at a level that would enable rivals to viably compete, and, in particular, should not reflect any ‘strategic value’ stemming from Microsoft’s market power in the PC operating system market or work group server operating system market.61 Microsoft was required to submit proposals compliant with these terms to the Commission within 60 days and to implement the remedy within 120 days.62 A monitoring trustee, an expert in the field of computer science, was also appointed to help the Commission monitor enforcement of the remedy.63 Microsoft accordingly submitted, and agreed with the Commission, a pro forma agreement by which it would grant access to the interoperability information, referred to as the Workgroup Server Protocol Program (‘WSPP’). The pro forma agreement included certain pricing principles (the ‘WSPP Pricing Principles’). The WSPP Pricing Principles were intended to help the monitoring trustee determine the reasonableness of the remuneration rate for access in the event of any dispute. In particular, they required the monitoring trustee (i) to examine whether the protocols were Microsoft’s own creations, (ii) to examine whether those creations constituted innovation, and (iii) to take into account a market valuation of comparable technologies, excluding the strategic value stemming from the dominant position of any such technologies.64 Following the agreement of Microsoft’s proposal, a protracted dispute appears to have ensued over Microsoft’s interpretation and application of the WSPP Pricing Principles. This ultimately resulted in Microsoft incurring a €899 million penalty for failing to charge a reasonable remuneration rate up to October 2007. The Commission found that almost all of Microsoft’s non-patented technologies could not be characterised as innovations and that comparable technologies offered by Microsoft, as well as others, were generally offered remuneration-free.65 On appeal, Microsoft argued that the Commission’s penalty decision should be annulled because, prior to its adoption (and having the benefit of the additional interpretation and application of the principles it provided) Microsoft did not have sufficient guidance on how to interpret the pricing principles. The General Court disagreed.66 First, the infringement decision, albeit embodying imprecise concepts, had provided sufficient guidance by itself. Second, the pricing principles were sufficiently precise. The first two principles, involving an evaluation of the innovative character of the protocols, were clearly concerned with identifying those protocols with ‘intrinsic value’ as a matter of intellectual property, as opposed to ‘value resulting from the mere ability to interoperate with Microsoft’s operating systems—in other words the strategic value’.67 The final principle, involving an appraisal of the market valuation of comparable technologies, clearly concerned assessing whether ‘commercial practice is to offer such technologies at substantially lower rates than those charged by Microsoft’ and thereby to assess the value of the protocols in the absence of any dominant operator.68 Despite the dispute over the interpretation of the remedy (and the procedural issues the Commission’s approach arguably raises – see further Section III above), the specific IP law context of the remedy, and the finding that much of the information in question ought to have been licensed at nominal cost, Microsoft is consistent with the prior case law in recognising that an undertaking is entitled to request appropriate remuneration reflecting the value of the product/service offered. Indeed, both the Commission and the Court clearly held that the value of the protocols needed to be assessed and market conditions analysed (to check what commercial practice was prevalent on the market) to determine appropriate remuneration. Microsoft (undertaking) (2009).69 In January 2008, the Commission initiated a formal investigation against Microsoft in relation to an alleged refusal to disclose interoperability information across a broad range of products.70 In July 2009, Microsoft gave an undertaking to the Commission whereby it committed to grant access to interoperability information to interested undertakings on reasonable and non-discriminatory terms. The Commission closed proceedings in June 2010. IBM Maintenance Services (2011).71 The Commission provisionally found that IBM had abusively hindered access by rival maintenance service providers to spare parts and technical information (some of which benefited from intellectual property protection). To remedy the Commission’s concerns, IBM committed to make spare parts and technical information available to rivals on ‘commercially reasonable and non-discriminatory market terms’.72 Overall, the above cases demonstrate that the Commission should be ready to accept access on reasonable, market terms, acknowledge the value of the essential facility to which access is granted and allow ‘adequate remuneration under normal commercial terms’. B. Collective refusal to supply under Article 101 TFEU The few collective refusal to supply cases under Article 101 TFEU in which access remedies were offered by the parties to resolve the Commission’s concerns also provide useful guidance. For example: In Fiat, DaimlerChrysler, Toyota, General Motors (2007), the Commission found that all four carmakers had given inadequate access to technical information to independent repairers such that the agreements they had with their authorised repairers were liable to infringe Article 101 TFEU. To resolve the Commission’s concerns, all four carmakers committed to provide full technical information to independent repairers on a ‘non-discriminatory basis’ and at a price equivalent to that charged to authorised repairers.73 In BA/AA/IB (2010), to resolve concerns about the planned joint venture between British Airways, American Airlines and Iberia, the airlines committed to offer to make landing and take-off slots available at London Heathrow airport to facilitate the entry/expansion of competitors on certain transatlantic routes. Whilst very specific circumstances applied to the implementation of the remedy, the case is noteworthy because the Commission did not exclude the possibility that the parties could obtain compensation for releasing the slots, having specific regard to the scarce nature of a slot. As the Commission explained, ‘[c]onsidering that slots are a particularly scarce resource, notably at Heathrow where slots are undoubtedly valuable, the Commission takes the view that there is no reason to exclude compensation as a matter of principle’.74 The Commission therefore confirmed that the parties could charge for divested slots even though the slots in question had originally been obtained for free. A similar remedy was also adopted in Continental/United/Lufthansa/Air Canada (2013).75 Overall, the above cases show that the parties could charge rivals for access to the input in question. The airline cases are particularly interesting in that they acknowledge the relevance of the scarce nature of the input to which access is sought in determining remuneration. C. SEP licensing The licensing of standard essential patents (‘SEPs’) provides a further reference point. Competition authorities typically require SEPs to be licenced on fair, reasonable and non-discriminatory (‘FRAND’) terms.76 At the outset, it is important to recognise the very specific circumstances that pertain to SEP licensing, namely that SEPs arise in the context of an agreement between competitors to form a standard. As a quid pro quo for an IPR owner to have its patents accepted to form part of a standard, standard-setting organisations and competition authorities typically require an IPR owner, prior to the adoption of the standard, to provide an irrevocable commitment to all third parties to license its essential IPR on FRAND terms.77 Nevertheless, despite these particular circumstances, a FRAND commitment, and in particular the ‘reasonable’ element of it, has generally been interpreted broadly under competition law: In general, the Commission has appreciated that a FRAND commitment should entail the appropriate remuneration of a SEP holder. As the Commission noted in Motorola (2014), FRAND commitments are ‘designed to strike a fair balance between the interests of technology owners to be appropriately remunerated for the use of their essential IPRs and the interests of technology implementers to have access to such essential IPRs’.78 The commitments offered by Samsung at the same time confirm the ability of SEP holders to charge FRAND royalties.79 The Commission’s 2010 guidelines on horizontal cooperation agreements generally equate the ‘reasonable’ element of FRAND to mean ‘not excessive’ within the meaning of the excessive pricing case law under Article 102 TFEU, and suggest that, in the event of dispute, any assessment should be based on whether royalties ‘bear a reasonable relationship to the economic value of the IPR’.80 The Commission has been very cautious to second guess a reasonable royalty rate. In Qualcomm (2009), the Commission investigated complaints that Qualcomm had abusively refused to licence its SEPs to the WCDMA standard for 3 G mobile telephony on FRAND terms. After four years of in-depth investigation Qualcomm settled with the complainants, who withdrew their complaints, allowing the Commission to close the case. The Commission noted that the type of assessment required in such cases ‘may be very complex, and any antitrust enforcer has to be careful about overturning commercial agreements’.81 There was, however, never any doubt that SEP owners are entitled to charge a FRAND royalty to implementers, and seek injunctions against implementers who are unwilling or unable to pay FRAND royalties. Indeed, this principle was endorsed by the Court of Justice in Huawei v ZTE.82 In that case, the Landgericht Düsseldorf requested a preliminary ruling by the Court of Justice in the context of an action for infringement brought by Huawei against ZTE before the referring court, seeking an injunction prohibiting the infringement, the rendering of accounts, the recall of products and an award of damages.83 The dispute was caused by the use by ZTE of Huawei’s SEP although no licensing agreement had been entered into between Huawei and ZTE for the use of that SEP, and ZTE was not paying any royalty to Huawei.84 The referring court queried whether Huawei’s action against ZTE could constitute an abuse of dominance given the irrevocable undertaking given by Huawei to the standardisation body to grant a licence to third parties on FRAND terms.85 The Court of Justice ruled that bringing an action for infringement seeking an injunction prohibiting the infringement of one’s patent or seeking the recall of products for the manufacture of which that patent has been used does not constitute an abuse of dominance, as long as (i) prior to bringing that action, the SEP holder has alerted the infringer of the infringement, and, after the infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, the SEP holder has presented to that infringer a specific, written offer for a licence on such terms, specifying, in particular, the royalty and the way in which it is to be calculated; and (ii) where the infringer continues to use the patent in question and has not diligently responded to that offer.86 In Rambus (2009), Rambus committed to make its DRAM interface technology patents available on FRAND terms to address the Commission’s provisional findings of an abusive patent ambush. In spite of having engaged in an abuse, and in spite of evidence that JEDEC expected the standard to be royalty-free and that royalty-free equivalent technologies were available when the standard was set (and that would have been chosen had Rambus disclosed its royalty demands in time), Rambus was allowed to charge royalties. The Commission stated its standard of review in no more specific terms than that it would assess if the rates were ‘reasonable and non-discriminatory …having regard to all the circumstances’.87 Whilst respondents to the market testing of the commitments indicated that Rambus’ proposed rates were too high, the Commission considered that ‘in view of all relevant circumstances and in particular of the complex and difficult nature of the case’ further investigation was not warranted.88 Further clarification on the assessment of FRAND commitments under competition law has usefully been provided by the English High Court’s judgement in Unwired Planet v Huawei.89 The High Court considered that a rate higher than a FRAND rate might breach a FRAND commitment as a matter of contract, but would not necessarily constitute an abuse under competition law.90 Only an ‘excessive’ FRAND rate would be condemned by Article 102 TFEU. Along similar lines, Advocate General Wahl, albeit in the context of a copyright licensing dispute, has also emphasised that it would neither be ‘realistic nor advisable’ for a competition authority to intervene in the event of any difference between a benchmark competitive price and an alleged excessive price.91 Advocate General Wahl also suggested that, where there is any difference between a benchmark price and an alleged excessive price, only prices ‘significantly and persistently’ above the benchmark price should be deemed excessive.92 This view was endorsed by the Court of Justice.93 Overall, the above examples indicate that, even in the case of SEP licensing, where the licensed input is not scarce, remuneration must be appropriate and bear a reasonable relationship to the underlying economic value of the input. The Commission must also exercise special caution before overturning a commercial agreement and must have regard to all the circumstances of the case. D. Ex-ante regulation In contrast to ex-post competition law, ex-ante regulation pursues the explicit objective to facilitate market entry, which may have a bearing on the approach taken to access remedies in ex-ante regulation. Nonetheless, with that in mind, ex-ante regulation may still provide a relevant reference point. To take several high level examples from energy and telecoms regulation: The EU’s third energy package requires Member States to ensure third-party access to transmission and distribution systems and LNG facilities based on published tariffs, applicable to all eligible customers and applied objectively and without discrimination.94 Where national regulatory authorities fix or approve the tariffs or their underlying methodologies, they are required inter alia to ensure ‘adequate remuneration’ of the network assets and of any new investment, provided they are economically and efficiently incurred.95 In the UK, Ofgem has imposed price controls on gas and electricity transmission and distribution network operators at a level which covers their costs and a reasonable return, subject to meeting certain consumer satisfaction, investment efficiency, innovation and environmental objectives.96 The EU’s regulatory framework for electronic communications provides that access to electronic communications networks may be subject to cost-oriented prices but in order to ‘encourage investments by the operator, including in next generation networks, national regulatory authorities shall take into account the investment made by the operator, and allow him a reasonable rate of return on adequate capital employed, taking into account any risks specific to a particular new investment network project’.97 As regards access to digital television and radio service platforms, services must be offered by platforms to all broadcasters on a ‘fair, reasonable and non-discriminatory basis compatible with [EU] competition law’.98 In the case of technical platform services specifically, Ofcom noted that a provider should be entitled to recover ‘its allowable costs and make a risk adjusted return on its investment’.99 Overall, despite the specific context of ex-ante regulation, it remains the case that an undertaking must receive adequate remuneration for providing access to essential facilities, reflecting its costs and a reasonable rate of return, taking into account relevant circumstances of the market and relevant risks. E. Merger control A wide variety of access remedies have been agreed in (vertical) merger cases, in order to remove serious foreclosure concerns identified by the Commission and thereby to secure clearance. Although the exact terminology regarding the conditions of such access remedies varies from case to case, the Commission typically requires access to be granted on a non-discriminatory basis, and for ‘reasonable’ remuneration on ‘market’ terms (although there are some exceptions100). For example: In broadcasting mergers, remedies have included licensing channels to competing broadcasters on ‘fair, reasonable and non-discriminatory terms’,101 ‘under the same terms and conditions as it did before [the merger]’,102 or ‘on normal market conditions which are not less favourable than those provided to [a merging party’s subsidiary]’.103 In a case where the remedy involved access to music content, the Commission required access to be provided to downstream online platform competitors on a non-discriminatory basis.104 In telecommunications mergers, remedies have included, inter alia, the following: that roaming be ‘offered at the best available market terms and conditions for a comparable access service in the value chain’,105 and in a separate case ‘on a non-discriminatory basis’;106 that access to cable infrastructure be provided ‘at normal market conditions’;107 and in relation to access to innovation, that ‘timely access, against reasonable and market conform pricing, [be granted] to future evolutions’.108 A number of remedies have been agreed in relation to the licensing of IP: in Avago/Broadcom, Avago addressed the Commission’s concerns that it may withhold access to certain IP by granting access on ‘reasonable terms’.109 In ARM/Giesecke & Devrient/Gemalto/JV, the Commission required some software to be made available free of charge, whilst access to other software was on terms no worse than those received by the JV or other parent companies.110 In Google/Motorola Mobility, Google stated that it would honour Motorola Mobility’s pre-existing commitments to licence its SEPs on FRAND terms.111 Likewise, in an earlier case, Axalto had committed to license certain of its IT patents on FRAND terms.112 In remedies involving access to infrastructure, there are examples of the Commission requiring ‘fair and non-discriminatory access’.113 In a case where the remedy involved access to products, the Commission required access to be on a non-discriminatory basis, with conditions benchmarked against past agreements.114 However, in another similar case, it required that products be supplied on a cost basis.115 There are examples of mergers in the energy sector where parties committed to auction processes in order to address competition concerns.116 Auctions have therefore been used as processes ensuring that the input is provided on fair and commercial terms reflecting market conditions. Overall, it is clear that, in the context of merger control, the overriding provision in relation to access remedies is that access is provided on a non-discriminatory basis, under reasonable and/or commercial terms. F. Margin squeeze Although margin squeeze cases under Article 102 TFEU arise only in the context where access has already been granted, they may still provide relevant guidance on the terms of access prescribed by competition law. As the Court of Justice has affirmed, a margin squeeze abuse arises where a vertically integrated undertaking is dominant on a relevant upstream market, and where the spread between the dominant undertaking’s wholesale prices charged to rivals and the retail prices charged to its own retail customers is negative or insufficient to cover the product-specific costs which the dominant undertaking has to incur to supply its downstream products or services.117 In other words, the margin squeeze test is premised in principle on an ‘equally efficient competitor’ test: whether or not rivals which are able to provide downstream services as efficiently as the dominant undertaking would be foreclosed from the market.118 G. Principles derived from the case law A number of principles can be derived from the above case law on the parameters of access remedies: With the exception of ex-ante regulation (which is distinguishable by having an explicit objective to facilitate entry), the Commission does not impose a price for access. The Commission’s general approach is to leave parties to agree the exact terms for access themselves, subject to the terms being non-discriminatory and reasonable (and not such as to result in equally efficient rivals incurring an abusive margin squeeze). In practice, ‘reasonable’ typically just means commercial practice or market terms. Where ‘reasonable’ has been interpreted more strictly, specific circumstances have applied. For example, in Microsoft, a distinction was drawn between ‘intrinsic’ and ‘strategic’ value. Microsoft is also the only refusal to supply case where the non-patented input in question was considered to lack innovative value (although Microsoft was allowed to charge significant royalties for patents, to the extent applicable). It is clear, however, that Microsoft turned on very specific facts. In the first place, access to the input was found to be indispensable, and lack of access would eliminate all effective competition for rivals. In the second place, a distinction between intrinsic and strategic value of the input made sense because of the specific context of IP law, and more specifically information and copyright, by regard to which it was clear that the input could only have value against one criterion, namely whether or not it was innovative. Other types of value, for example scarcity value, would play no role whatsoever. Notwithstanding the above, the Commission still had regard to commercial practice in evaluating the input’s innovative value. The entirety of the case law reflects the view that an access provider should be appropriately remunerated, reflecting the value of a product/service having regard to all the circumstances, including, inter alia, its scarcity and the opportunity costs associated with it. Scarcity value is clearly acknowledged as a relevant factor in the case law, as noted in Sea Containers/Stena Sealink (1993), as well as BA/AA/IB (2010).119 The Commission recognises that opportunity costs are a relevant factor in a competitive analysis, including on the question of whether a price would be below a company’s costs. For example: The Commission Article 102 Guidance states that, in a cost analysis, the Commission will consider whether ‘the dominant undertaking incurred a loss that it could have avoided’.120 Opportunity costs are avoidable losses (or avoidable costs). Indeed, a company could avoid the loss by doing something different. In Intel, the Commission held that Intel’s opportunity costs of not selling the CPUs at issue to another customer needed to be included in the calculation of Intel’s average avoidable cost.121 The Commission made it clear in that case that opportunity costs ought to be taken into account when calculating the predatory price threshold.122 Pricing below the opportunity cost would therefore in itself create legal difficulties by resulting in predatory pricing. In Port of Helsingborg, the Commission held that the cost of capital – i.e. the opportunity cost of making a particular investment – can ‘be viewed a priori as a charge for a company when setting the price for a product/service’.123 The Commission also noted that the forgone revenue for the City of Helsingborg in keeping land for ferry operations ‘is likely to represent an opportunity cost for the City of Helsingborg’ (the Commission however did not take this cost into account because it was a cost of the City of Helsinborg and not of the port authority that was under investigation).124 In Deutsche Börse/NYSE Euronext, the Commission found that the costs of trading included opportunity costs of posting collateral, which it took into account in its market analysis.125 In Olympic/Aegean Airlines, the Commission considered opportunity costs in assessing the probability of entry. It found that other airlines’ entry to the markets would ‘come with significant opportunity costs’ and was therefore unlikely.126 Overall, these case law principles suggest that an undertaking cannot be expected to provide access to a valuable product or service other than on appropriate, commercially reasonable/market-based terms, having regard to all the circumstances including for example the scarcity value of the product to which access is granted and the associated opportunity costs. V. Conclusion: Google’s remedy is consistent with the decision read in light of the case law A. Consistency with the Decision Google’s implemented remedy is an auction-based mechanism to appear in the Shopping Unit to which Google Shopping and competing comparison shopping services participate on equal terms. In the authors’ view, Google’s remedy is perfectly consistent with the terms of the Decision as they stand. The remedy clearly complies with the principle of equal treatment: Google Shopping and rival comparison shopping services must compete to place bids on equal terms. Google Shopping gains no advantage from the auction: Google Shopping now operates as if it were a separate business, participating in the auction in the same way as competing comparison shopping services, and it needs to be profitable in its own right127 (which mitigates the possibility of a margin squeeze). Revenues generated by the auction do not accrue to Google Shopping, but to Google Search.128 There is therefore no possibility for Google Shopping to outbid rivals through cross-subsidisation. Furthermore, the Decision does not specify the price at which Google must charge for access. The only provision concerning the level of an access charge is paragraph 700(d), which provides that any fee charged by Google should not have the same or an equivalent object or effect as the infringement. Since the infringement identified in the Decision is the alleged ‘favouring’ of Google Shopping over competing comparison shopping services, a fee that is applied in the same way to Google Shopping and rival comparison shopping services without advantaging Google Shopping does not have the same or an equivalent object or effect as the identified infringement. B. Consistency with the case law The case law overview provided in Section IV confirms the consistency of the above understanding of the parameters of the Decision. The case law categorically establishes an undertaking’s right to receive appropriate, commercially reasonable and market-based compensation for supplying rivals with non-discriminatory access to a valuable input. The Shopping Unit is a valuable input in terms of the ad technologies underlying it, which Google has developed and which ensure that users are shown ads they are likely to find relevant, thus improving users’ online experience and maximising the chance of conversion for the benefit of merchant advertisers. Further, the Shopping Unit appears in ad space, which is scarce. If Google did not show a Shopping Unit, it could show text ads in its place. By showing a Shopping Unit, Google therefore forgoes revenue it could generate from text ads. In other words, showing a Shopping Unit comes with an opportunity cost to Google. 1. An auction is an appropriate mechanism for determining the market value of the Shopping Unit In the authors’ view, an auction mechanism is an appropriate way to determine the market value of the Shopping Unit, in particular given the scarcity of the space. An auction will ultimately reflect the appropriate market price for access and allocate this scarce resource efficiently. The price will indeed inherently be bound by that process, and by market forces, which, in fact, is more meaningful and concrete than the ‘reasonableness’ criterion. The efficacy of auctions in allocating scarce resources is established in the economic literature. Auctions are also widely endorsed in the case law as a mechanism for establishing market prices. This includes merger cases, where auctions have been used as remedial mechanisms to ensure that an input is provided on fair and commercial terms reflecting market conditions,129 and State aid cases where sufficiently competitive, transparent, non-discriminatory and unconditional tender processes are recognised as an effective way to establish whether the sale of assets, goods and services by a State accords with the market economy investor principle.130 For example, in Land Burgenland, the General Court held that ‘the aid element can be assessed from the market price, which in principle itself depends on the offers actually made in a tender procedure’.131 It should also be recalled that an auction mechanism is the way in which ads have always been allocated on Google’s general search results page. It is even part of what the Shopping Unit actually is, namely a mechanism for choosing the ads that will best monetise Google’s general search results by showing relevant ads to users. An auction mechanism is also the industry-standard way in which search services allocate scarce page real estate. 2. Access terms other than market terms would be unprecedented and result in Google subsidising inefficient rivals In the 2016 supplementary statement of objections, it was reported that the Commission was minded to consider that access to the Shopping Unit would need to be set at a fixed nominal charge of €0.01 per click (i.e. the lowest reserve price for AdWords). As noted in Section II above, such a requirement did not find its way into the Decision and therefore the Decision does not endorse this approach. Moreover, the case law overview provided above demonstrates that such an approach would have been entirely unprecedented. Curiously, however, the tender document issued by the Commission on 28 June 2017 for advice on the compliance of Google’s proposed remedy with the Decision’s requirements, suggests that monitoring of the remedy would require ensuring that any fee imposed is ‘economically sustainable for competing comparison shopping services’.132 This document, of course, does not hold any legal status. The scope of Google’s remedy is only circumscribed by the Decision. It is clear in any event that Google’s remedy is economically sustainable for ‘equally efficient’ rivals – the applicable standard in this regard is in accordance with the case law.133 Indeed, as the Court of Justice recently recalled in Intel, ‘[c]ompetition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less efficient and so less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation’.134 The remedy provides for equal treatment between Google Shopping and rivals and therefore, by definition, enables equally efficient rivals to compete. Requiring Google to charge anything less than market terms would result in Google subsidising inefficient rivals, and undermining competition on the merits. The Commission appears to appreciate this, recognising that the principle of equal treatment may lead to unequal outcomes.135 C. Overall conclusion This article has sought to examine the compatibility of Google’s proposed remedy with the Decision and with the case law. Google is required to treat rival comparison shopping services and its own comparison shopping service equally. In the authors’ view, Google has done so by putting in place a non-discriminatory auction mechanism by which rivals and Google Shopping compete for access to the Shopping Unit on equal terms. The Decision provides that Google cannot charge rivals a fee that has the same or equivalent object or effect as the infringement. That does not prevent Google from charging for access per se; instead, it amounts to no more than a requirement to treat rivals non-discriminatorily, which is exactly what Google’s remedy does. Consistently, the case law categorically establishes an undertaking’s right to receive appropriate, commercially reasonable and market-based compensation for supplying rivals with non-discriminatory access to a valuable input, having regard to all the circumstances of the case, including, inter alia, the scarcity of the input in question and the opportunity costs associated with such scarcity. Google’s Shopping Unit represents a valuable input to which significant opportunity costs attach, and incorporates innovative ad technologies reflecting years of investment. A non-discriminatory auction mechanism is an entirely appropriate and lawful way to ensure Google is appropriately remunerated. Were the Commission to require access to the Shopping Unit to be for free, at nominal cost, or at a level designed to be economically sustainable for rivals below the level required for appropriate, commercially reasonable, market-based remuneration complying with the principle of non-discrimination vis-à-vis ‘as efficient’ rivals, it would undermine competition on the merits, have no basis in established case law, and constitute a disproportionate remedy going beyond the very requirements set out in the Decision. Footnotes 1 Case AT.39740 Google Search (Shopping), Commission decision of 27 June 2017 (the ‘Decision’). 2 These are some of the issues that Google has appealed to the General Court; see further Case T-612/17: Action brought on 11 September 2017—Google and Alphabet v Commission OJ C 369, 30.10.2017, p. 37–38. 3 Decision, Article 3. 4 Decision, ¶699. 5 Inside AdWords blog, Changes to Google Shopping in Europe, 27 September 2017 available at: https://adwords.googleblog.com/2017/09/changes-to-google-shopping-in-europe.html. 6 See e.g., MLex, Google should cap auction fees, Foundem says, 7 November 2017, available at: http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=933881&siteid=190&rdir=1; MLex, Google’s Shopping competition fix hasn’t stopped market abuse, rival Twenga says, 31 October 2017, available at: http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=932542&Alert=True&uid=3403. 7 See e.g., Joyce Verhaert, The challenges involved with the application of article 102 TFEU to the new economy: a case study of Google, European Competition Law Review (2014), 265–273, available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2340958; Robert H. Bork and J. Gregory Sidak, What does the Chicago School teach about Internet search and the antitrust treatment of Google?, Journal of Competition Law and Economics (2012) 663–700, available at: http://www.aei.org/wp-content/uploads/2012/10/-what-does-the-chicago-school-teach-about-internet-search-and-the-antitrust-treatment-of-google_132249480630.pdf; Herbert J. Hovenkamp, Competition Policy and the Technologies of Information, (2014) U Iowa Legal Studies Research Paper No. 14-18, available at: https://ssrn.com/abstract=2444349; Pablo Ibanez-Colomo, Exclusionary Discrimination under Article 102 TFEU, 51 CML Rev. (2014), 141–163; Christian Kersting and Sebastian Dworschak, Does Google Hold a Dominant Market Position? – Addressing the (Minor) Significance of High Online User Shares, (2014) Ifo Schnelldienst 16/2014, 7, available at: http://ssrn.com/abstract=2495300; Bo Vesterdorf, Theories of self-preferencing and duty to deal – two sides of the same coin?, Competition Law & Policy Debate, 1:1, February 2015, available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2561355. 8 Decision, ¶271. 9 Decision, Section 7.2. 10 Decision, ¶379. 11 Decision, ¶¶593 et seq. 12 Decision, Article 3. 13 Decision, ¶698. 14 MLex Comment, Never mind the cash, Google’s big challenge is compliance, 28 June 2017, available at: http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=898591&siteid=190&rdir=1. 15 Decision, ¶699. 16 Ibid. 17 PaRR, EC believes Google’s equal treatment remedy need not result in equal outcomes, 28 September 2017, available at: https://app.parr-global.com/intelligence/view/prime-2510305?src_alert_id=18036. 18 MLex Insight, Google contests EU’s antitrust claims in shopping, advertising, 3 November 2016, available at: http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=840546&siteid=190&rdir=1. 19 Decision, ¶¶698-702 and Articles 3 and 4. 20 MLex Insight, Google’s new shopping box aims to comply with EU antitrust order, 27 September 2017, available at: http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=923302&siteid=190&rdir=1. 21 PaRR, EC understood to believe Google’s equal treatment remedy need not result in equal outcomes, 28 September 2017, available at: https://app.parr-global.com/intelligence/view/prime-2510305?src_alert_id=3627. 22 Decision, ¶704. 23 Decision, Article 5. 24 Case T-24/90 Automec v Commission, EU:T:1992:97, ¶52; Case T-167/08 Microsoft v Commission, EU:T:2012:323, ¶95; see also the Decision, ¶696, and the case law cited therein. 25 Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ L 1, 04.01.2003, pp. 1–25. 26 Case COMP/37.792 Microsoft, Commission decision of 24 March 2004. See further Section IV below. 27 Case COMP/37.792 Microsoft, Commission decision of 27 February 2008, ¶75. 28 Ibid. On appeal, the penalty was reduced marginally to €860 million, to take account of the fact that, although Microsoft was obliged to make interoperability information available to third parties, the Commission had allowed Microsoft to await the General Court’s judgement on the Commission’s 2004 decision before allowing the actual distribution of interoperable products by open source developers (Case T-167/08 Microsoft v Commission, EU:T:2012:323). 29 Case COMP/34.579 MasterCard, Commission decision of 19 December 2007, Article 3. 30 Commission memo, Antitrust: Commission notes MasterCard’s decision to temporarily repeal its cross-border Multilateral Interchange Fees within the EEA, MEMO/08/397, 12 June 2008. 31 Ibid. 32 Commission press release, Antitrust: Commissioner Kroes takes note of MasterCard’s decision to cut cross-border Multilateral Interchange Fees (MIFs) and to repeal recent scheme fee increases, IP/09/515, 1 April 2009; See also Commission memo, Antitrust: Commissioner Kroes notes MasterCard’s decision to cut cross-border Multilateral Interchange Fees (MIFs) and to repeal recent scheme fee increases – frequently asked questions, MEMO/09/143, 1 April 2009. 33 Case T-167/08 Microsoft, EU:T:2012:323, ¶¶95-96. 34 Ibid., ¶88. 35 See R O’Donoghue and J Padilla, The Economics of Article 102 TFEU, 2nd Edition, Hart Publishing, 2013. 36 Case T-201/04 Microsoft, EU:T:2007:289. 37 Case T-111/08 MasterCard, EU:T:2012:260, ¶¶322–331. 38 Case C-382/12 P Mastercard, EU:C:2014:2201, ¶257. 39 Case IV/26.911 ZOJA/CSC–ICI, Commission decision of 14 December 1972. 40 Ibid., Articles 1 and 2. The Commission’s decision was also upheld by the Court of Justice, see Joined Cases C-6/73 and C-7/73 Istituto Chemioterapico Italiano S.p.A. et Commercial Solvents Corporation v Commission, EU:C:1974:18. 41 Case IV/34.689 Sea Containers v Stena Sealink, Commission decision of 21 December 1993. 42 Ibid., ¶79. 43 Case IV/35.388 Irish Continental Group v CCI Morlaix, Commission decision of 16 May 1995. 44 Ibid., Article 1. 45 Case C-7/97 Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs- und Zeitschriftenverlag GmbH & Co. KG and Others, EU:C:1998:569. 46 Case C-7/97 Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs- und Zeitschriftenverlag GmbH & Co. KG and Others, Opinion of Advocate General Jacobs of 28 May 1998, EU:C:1998:264, ¶64. 47 Case COMP/IV.34.801 Flughafen Frankfurt/Main, Commission decision of 14 January 1998. 48 Ibid., ¶92. 49 Case COMP/37.685 Ferrovie dello Stato/Georg Verkehrsorgani, Commission decision of 27 August 2003. 50 Ibid., p. 1 of the Commitments. 51 Ibid., ¶137. 52 Case IV/29.479 IBM (Undertaking). 53 Case IV/31.851 Magill TV Guide/ITP, BBC and RTE, Commission decision of 21 December 1988. 54 Ibid., Article 2. 55 The decision was upheld on appeal (see Case T-69/89 RTE, EU:T:1991:39, ¶¶93 and 97–99. See also the two companion cases concerning the same decision, Case T-70/89 BBC, EU:T:1991:40, and Case T-76/89 ITP, EU:T:1991:41; and Joined Cases C-241/91 P and C-242/91 P RTE and ITP, EU:C:1995:98). 56 Case D3/38044 National Data Corporation/IMS Global Services, Commission decision of 3 July 2001 on interim measures. 57 Commission press release, Commission imposes interim measures on IMS HEALTH in Germany, IP/01/941, 3 July 2001. 58 This in fact never happened because the President of the Court of First Instance immediately suspended the decision ordering access (see Case T-184/01R IMS Health v Commission, EU:T:2005:95). 59 Case COMP/37.792 Microsoft, Commission decision of 24 March 2004. 60 Ibid., Articles 2 and 5. 61 Ibid., ¶¶1003 and 1008(ii). 62 Ibid. 63 Commission press release, Competition: Commission appoints Trustee to advise on Microsoft’s compliance with 2004 Decision, IP/05/1215, 5 October 2005. 64 Case COMP/37.792 Microsoft, Commission decision of 10 November 2005, ¶¶104–107. 65 Case COMP/37.792 Microsoft, Commission decision of 27 February 2008, ¶280. 66 Case T-167/08 Microsoft v Commission, EU:T:2012:323, ¶87. 67 Ibid., ¶142. 68 Ibid., ¶144. 69 Case COMP/C-3/39.294 Microsoft (ECIS). 70 Commission memo, Antitrust: Commission initiates formal investigations against Microsoft in two cases of suspected abuse of dominant market position, MEMO/08/19, 14 January 2008. 71 Case COMP/39.692 IBM Maintenance Services, Commission decision of 13 December 2011. 72 Ibid., ¶73. 73 Commission press release, Antitrust: Commission ensures carmakers give independent garages access to repair information, IP/07/1332, 14 September 2007; and see e.g. Case COMP/39.141 Fiat, Commission decision of 14 September 2007, ¶19. 74 Case COMP/39.596 BA/AA/IB (2010), Commission decision of 14 July 2010, ¶188. 75 Case COMP/39.595 Continental/United/Lufthansa/Air Canada, Commission decision of 23 May 2013. 76 Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal cooperation agreements, OJ C 11, 14.1.2011, p. 1 (‘Horizontal Guidelines’), ¶285. 77 Ibid. 78 Case AT.39985 Motorola – Enforcement of GPRS SEPs, Commission decision of 29 April 2014, ¶77. 79 Commitments offered by Samsung to the Commission on 29 April 2014 in Case COMP/C-3/39.939 Samsung – enforcement of UMTS standard essential patents, available at: http://ec.europa.eu/competition/antitrust/cases/dec_docs/39939/39939_1502_5.pdf. 80 Horizontal Guidelines, ¶¶287 and 290. 81 Commission memo, Antitrust: Commission closes formal proceedings against Qualcomm, MEMO/09/516, 24 November 2009. See also the Commission’s review of Rambus’ proposed royalty rates offered by way of commitments to address the Commission’s provisional findings of an abuse patent ambush. 82 Case C-170/13 Huawei Technologies Co. Ltd v ZTE Corp. and ZTE Deutschland GmbH, EU:C:2015:477. 83 Ibid., ¶27. 84 Ibid., ¶¶25 and 26. 85 Ibid., ¶28. 86 Ibid., ¶71. 87 Commission memo, Antitrust: Commission confirms sending a Statement of Objections to Rambus, MEMO/07/330, 23 August 2007. 88 Case COMP/38.636 Rambus, Commission decision of 9 December 2012, ¶54. 89 Unwired Planet v Huawei [2017] EWHC 711 (Pat). 90 Ibid., ¶¶153 and 757. 91 Case C-177/16 Latvian Collecting Societies, Opinion of Advocate General Wahl, EU:C:2017:286, ¶102. 92 Ibid., ¶106. 93 Case C-177/16 Latvian Collecting Societies, EU:C:2017:689, ¶¶55, 56 and 61. 94 Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC, OJ L 211, 14.8.2009, pp. 94–136 (the ‘2009 Gas Directive’), Article 32; and Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC, OJ L 211, 14.8.2009, pp. 55–93 (the ‘2009 Electricity Directive’), Article 32. 95 2009 Gas Directive, Articles 41(1)(a), 41(3)(d), and 41(8); and 2009 Electricity Directive, Articles 37(1)(a), 37(3)(d), and 37(8). 96 Ofgem Factsheet 117, Price controls explained, available at: https://www.ofgem.gov.uk/ofgem-publications/64003/pricecontrolexplainedmarch13web.pdf. 97 Directive 2002/19/EC of the European Parliament and of the Council of 7 March 2002 on access to, and interconnection of, electronic communications networks and associated facilities (Access Directive), as amended by Directive 2009/140/EC, OJ L 108, 24.4.2002, pp. 7–20, Article 13. 98 Ibid., Articles 5 and 6 and Annex I. 99 Ofcom, Provision of Technical Platform Services, Guidelines and Explanatory Statement, 21 September 2006, ¶1.7. 100 In some cases, the Commission has required remedies where there was, or may be, no remuneration. This includes airline slot divestments (which are particular as they are divestment remedies) (see Case COMP/M.7541 IAG/Aer Lingus, Commission decision of 14 July 2015, ¶¶578–649) and licences to share certain IP for free where pre-transaction it had been provided on that basis (see Case COMP/M.7337 IMS Health/Cegedim Business, Commission decision of 19 December 2014, ¶¶314–322). Further, in some cases, the Commission has required that access be provided ‘at a level intended to enable the new player to compete as aggressively as [the merged entity] did as at the date of the notification’ (see Case COMP/M.7421 Orange/Jazztel, Commission decision of 19 May 2015, ¶¶838–969). This suggests that the remuneration may be below commercial terms so as to encourage competition. 101 Case COMP/M.7194 Liberty/De Vijver, Commission decision of 24 February 2015, ¶655; section B.1.a of the commitments. 102 Case COMP/M.5121 NewsCorp/Premiere, Commission decision of 25 June 2008, ¶¶103–130. 103 Case COMP/M.4504 SFR/Tele 2 France, Commission decision of 18 July 2007, ¶¶110–144. 104 Case COMP/M.2050 Vivendi/Canal + /Seagram, Commission decision of 13 October 2000, ¶¶70, 77–79. 105 Case COMP/M.7018 Telefonica Deutschland/E–Plus, Commission decision of 2 July 2014, ¶1362. Other remedies included lease of spectrum at a set price (¶1361), and of certain sites at no more than book value (¶1364). 106 Case COMP/M.1795 Vodafone Airtouch/Mannesmann, Commission decision of 12 April 2000, ¶¶58–60. 107 Case COMP/M.3916 T–Mobile Austria/tele.ring, Commission decision of 26 April 2006, ¶¶133–138. 108 Case COMP/M.7637 Liberty Global/Base Belgium, Commission decision of 4 February 2016, Annex 1, (I)(A)(2). 109 Case COMP/M.7686 Avago/Broadcom, Commission decision of 23 November 2015, ¶¶126–130. 110 Case COMP/M.6564 ARM/Giesecke & Devrient/Gemalto/JV, Commission decision of 6 November 2012, ¶¶211–212. 111 Case COMP/M.6381 Google/Motorola Mobility, Commission decision of 13 February 2012, ¶¶8–10, 112, 120–124, 134–149. 112 Case COMP/M.3998 Axalto/Gemplus, Commission decision of 19 May 2006, ¶¶82–90. 113 Case COMP/M.7449 SNCF Mobilités/Eurostar International Limited, Commission decision of 13 May 2015, ¶¶51–72. See also Case COMP/M.5655 SNCF/LCR/Eurostar, Commission decision of 17 June 2010, ¶¶65–80 where SNCF could ‘charge an access fee that would comply with the applicable EU directive and implementing French law. SNCF also indicated that such access fee would be applied in a fair, transparent and non-discriminatory manner to all competitors’. In Deutsche Bahn/English Welsh & Scottish railway holdings, access would be provided to facilities and services ‘on fair and non-discriminatory terms and conditions’(see Case COMP/M.4746, Commission decision of 6 November 2007, ¶¶114–116). 114 Case COMP/M.7353 Airbus/Safran/JV, Commission decision of 26 November 2014, ¶¶552, 565–575. The parties needed to objectively justify deviations from the benchmark conditions on the basis of substantiated changes of proven costs, technologies and customer requirements. 115 Case COMP/M.7292 DEMB/Mondelez/Charger OpCo, Commission decision of 5 May 2015, ¶¶664–666, 700–715. 116 Case COMP/M.3696 E.On/Mol, Commission decision of 21 December 2005, ¶¶768–819; Case COMP/M.1853 EDF/ENBW, Commission decision of 7 February 2001, ¶¶93–104; and Case COMP/M.3868 Dong/Elsam/Energi E2, Commission decision of 14 March 2006, ¶¶712–716, 733–747. In the latter case, the Commission noted that ‘[a]s regards the implementation of the Gas Release Programme [auction], it is important to ensure that all participants are admitted at transparent and non-discriminatory terms and the swap/sale is made under competitive conditions. The provisions governing the auction appear to be sufficiently clear and impartial (and safeguarded by the function of the Monitoring Trustee and the independent third party conducting the auction) as to ensure a successful non-discriminatory conduct of the auction’ (¶742). 117 Case C-52/09 Konkurrensverket v TeliaSonera Sverige AB, EU:C:2011:83, ¶32. 118 Ibid., ¶¶31–34; see also Case C-280/08P Deutsche Telekom v Commission, EU:C:2010:603, ¶¶200–204. The test is also based on the long run average incremental costs (LRAIC) of the dominant undertaking – see Case AT.39523 Slovak Telekom, Commission decision of 15 October 2014, ¶860 and case law cited therein; Communication from the Commission, Guidance on its enforcement priorities in applying Article [102 TFEU] to abusive exclusionary conduct by dominant undertakings, OJ C 45, 24.2.2009, p. 7–20 (‘Commission Article 102 Guidance’), pp. 11, footnote 2. 119 See further Section IV.B. 120 Commission Article 102 Guidance, ¶65. 121 Case COMP/AT.37.990 Intel, Commission decision of 13 May 2009, ¶¶1063 and 1149. 122 Ibid. 123 Case COMP/AT.36.568/D3 Scandlines Sverige AB v Port of Helsingborg, Commission decision of 23 July 2004, ¶224. See also ¶¶105 and 109, which include the cost of capital in the cost calculations. 124 Ibid., ¶209. 125 Case COMP/M.6166 Deutsche Börse/NYSE Euronext, Commission decision of 1 February 2012, ¶229. 126 Case COMP/M.5830 Olympic/Aegean Airlines, Commission decision of 26 January 2011, ¶1499. 127 MLex Insight, Google’s new shopping box aims to comply with EU antitrust order, 27 September 2017, available at: http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=923302&siteid=190&rdir=1. 128 Ibid. 129 See footnote 116 above. 130 See e.g., Joined Cases T-268/08 and 281/08 Land Burgenland v Commission, EU:T:2012:90, ¶¶69–73, upheld in Joined Cases C-214, 215 and 223/12P Land Burgenland v Commission, EU:C:2013:682, ¶¶94–95. 131 Joined Cases T-268/08 and 281/08 Land Burgenland v Commission, EU:T:2012:90, ¶70. 132 Call for Tenders COMP/2017/012 – Technical expertise to support the Commission on issues relating to an antitrust case in the IT Sector - Tender specifications, 28 June 2017, p. 9. 133 Case C-413/14P Intel, EU:C:2017:632, ¶136; Case C‑209/10 Post Danmark I, EU:C:2012:172, ¶25; Case C-52/09 Konkurrensverket v TeliaSonera Sverige AB, EU:C:2011:83, ¶¶31–34; and Case C-280/08P Deutsche Telekom v Commission, EU:C:2010:603, ¶¶200–204. 134 Case C-413/14P Intel, EU:C:2017:632, ¶134. 135 PaRR, EC understood to believe Google’s equal treatment remedy need not result in equal outcomes, 28 September 2017, available at: https://app.parr-global.com/intelligence/view/prime-2510305?src_alert_id=3627. © The Author 2017. 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TI - An Appraisal of the Remedy in the Commission’s Google Search (Shopping) Decision and a Guide to its Interpretation in Light of an Analytical Reading of the Case Law
JF - Journal of European Competition Law & Practice
DO - 10.1093/jeclap/lpx087
DA - 2017-12-20
UR - https://www.deepdyve.com/lp/oxford-university-press/an-appraisal-of-the-remedy-in-the-commission-s-google-search-shopping-vO0ibPQmLX
SP - 3
EP - 18
VL - 9
IS - 1
DP - DeepDyve
ER -