Recent Developments in Abuse of Dominance Concerning Online Platforms

December 2018 Can Yıldız
% 0

Introduction

As we delve deeper into the cyber era, we observe that vast online platforms, such as Amazon, Booking.com, and Google have a strong – and ever-increasing – presence throughout the globe. Indeed, we tend to utilize different online platforms in our daily lives, and there is a wide set of different businesses commonly categorized as online platforms, from marketplaces/online retailers (e.g., Amazon) to transportation intermediaries (e.g., Uber), from hotel reservation services (e.g., Booking.com) to search engines (e.g., Google), and from online advertising platforms (e.g., Google’s AdSense) to accommodation systems (e.g., Airbnb).

Although general competition law principles apply to such online platforms without any doubt, cases concerning online platforms give rise to many novel questions, especially in regard to the application of Article 102 of the Treaty on the Functioning of the European Union (“TFEU”) in Europe, as well as the corresponding rules in local competition law regimes.

Compared to traditional markets, or “analog markets” as some refer to them, the definition of the relevant market and the assessment of market power in online platforms differ considerably, and are fraught with uncertainties. Despite these uncertainties in the competitive assessment, competition authorities worldwide are increasingly focusing on online platforms. In this article, a more recent example of abuse of dominance allegation against Amazon will be examined, and the general principles of determination of dominance and abuse in online platforms will be briefly discussed.

Bundeskartellamt’s Recent Investigation of Amazon

One of the latest rings in the chain of interest of competition authorities in online platforms is the recent proceeding initiated by the German competition authority, Bundeskartellamt, against the online marketplace, Amazon, that commenced on November 29th, 2018. Bundeskartellamt claimed that Amazon is the largest online retailer and operates, by far, the largest online marketplace in Germany. Furthermore, in the press release for the investigation, it alleges that many retailers and manufacturers depend on the reach of Amazon’s marketplace for their online sales, and that Amazon functions as a kind of “gatekeeper” for customers[1].

Andreas Mundt, the president of Bundeskartellamt, emphasized that Amazon’s double role as the largest retailer and largest marketplace has the potential to hinder other sellers on its platform, and highlighted that they have received numerous complaints and, as a result, they have decided to thoroughly examine whether Amazon is abusing its market position to the detriment of sellers who are active on its marketplace. To that end, Bundeskartellamt will scrutinize Amazon’s terms of business and practices towards sellers.

This proceeding is not the first step that has been taken by competition authorities against Amazon on abuse of dominance allegations. The European Commission (“Commission”) has previously begun investigations based on European competition law into Amazon’s European marketplaces and, in particular, into Amazon’s collection and use of transaction data. In the summer of 2018, the Commission sent out extensive questionnaires to several hundred retailers throughout Europe to this effect. Bundeskartellamt’s proceedings appear to be a supplementary additional step taken in Germany, in addition to the Commission’s overall proceedings. That said, whereas the Commission’s investigations focus on Amazon’s use of data to the possible disadvantage of marketplace sellers, the Bundeskartellamt appears to be specifically examining Amazon’s terms of business and practices towards sellers in its German Amazon marketplace.

Although the outcome of the scrutiny will demonstrate whether Amazon’s practices, in fact, constitute abuse of dominance, the terms of business of Amazon that might be considered abusive appear to be the liability provisions to the disadvantage of sellers, in combination with the allegedly non-transparent termination and blocking of sellers’ accounts, and the withholding or delaying of payment[2].

It should be stated that although many online platforms have been scrutinized in Europe, such as Google and Booking.com based on abuse of dominance, 2018 has been the first year in which Amazon’s retail marketplace is facing serious abuse of dominance accusations.

Determination of the Relevant Market, Dominance, and Abuse in Online Platforms

In order to provide a glimpse of what should be expected from the process in the months to come, a brief overview of different aspects in determination of market definition and dominance is noted, below.

Firstly, in its investigation, Bundeskartellamt will first assess whether Amazon is dominant, and establishing dominance requires defining the relevant market as a prerequisite to the finding of dominance. However, this will be challenging, since in the case of online platforms, the defining of the relevant product market is rather complex, as online platforms are two-sided (or rather multi-sided) markets[3]. Indeed, online platforms interact with two or more separate customer groups, and meet the demands of these groups by acting as an intermediary between them. Accordingly, demand-side substitutability for the platform can be assessed based on more than just one customer group, which would mean that the market definition assessment might result in multiple relevant markets. Consequently, in order to define the relevant market for online platforms, it must be established how many markets are required to be defined. Generally, the choice comes down to defining a single relevant market for the platform itself, or separate relevant markets with regard to the customer groups participating on the platform. The choice between these possibilities has significant consequences in terms of the scope of the relevant market. In the case of Amazon, given that it acts both as a marketplace and a direct online retailer, the market definition will be more difficult than it appears at first glance.

Once the market is defined, assessing the market power of the online platform is the next step. In relation to the assessment of market power, online platforms present some specific differences when compared to traditional markets that need to be taken into account. Firstly, possession of vast amounts of data by online platforms is a factor that might indicate market power, as pointed out for the first time in the Commission’s Facebook/WhatsApp decision[4]. On that front, the more detailed data that online platforms have, the more knowledge they will acquire about customers, thus enabling them to provide better services at a lower price, which in turn will increase their market power over time. Secondly, online platforms are usually the first movers[5] due to significant winner-takes-all effects[6], and this confers a certain degree of market power on them. Finally, market shares are a less reliable proxy of market power as compared to traditional markets, as market shares in these markets tend to shift greatly over a limited period. This is because the possibility of disruptive competition is possible and probable in the digital market space, and a very strong market position could be suddenly challenged if there are low barriers to entering the market, thus leading to dominant firms rapidly losing their ephemeral market power. All in all, there various nuances when determining dominance in a particular digital market concerning an online platform.

Finally, it will be assessed whether alleged practices constitute abuse in terms of Article 102 of the TFEU, which is a process requiring case-by-case evaluation. Various potential forms of abuse in regard to online platforms include pricing and ranking discriminations (the platform may charge different prices from trading parties within the same customer group, or alter the listings in a way that favors entries from a particular party) and price parities (commonly most-favored nation clauses where the trading parties that supply through the platform are required to provide the best conditions to the platform), amongst others.

In order to ascertain whether Amazon holds the dominant position in a given market, and whether its practices constitute abuse of dominance, we will have to wait for the decision of Bundeskartellamt in the coming months.

Conclusion

It is evident that dominant online platforms will be subject to the same scrutiny under Article 102 of the TFEU, as dominant non-platform undertakings, and perhaps even more so, due to the raising interest in online markets. Indeed, online platforms pose a number of interesting questions in relation to various aspects of competition law assessments. Competition authorities across Europe are still in search of an approach towards these issues, and such uncertainties raise criticism in light of the need for legal certainty. Significant caution will need to be taken when applying general principles to online platforms, also in light of the fast-moving nature of these businesses.

Bundeskartellamt’s investigation against Amazon has the potential to be an important milestone in modern competition law enforcement, as it will illustrate a prominent competition authority’s position in terms of many debated aspects concerning digital markets and online platforms.

As a concluding remark, the chairman of the Turkish Competition Board has emphasized on multiple occasions that they are closely observing Amazon’s activities in Turkey, as Amazon is now operating in the Turkish market, as well. The outcome of the current proceedings may loosely shape the future of competition law enforcement against Amazon in Turkey, among other jurisdictions.

[1] Official press release by Bundeskartellamt dated 29 November 2018; https://www.bundeskartellamt.de/SharedDocs/Meldung/DE/Pressemitteilungen/2018/29_11_2018_Verfahrenseinleitung_Amazon.html?nn=3591286 (Access date: December 2018)

[2] https://ecommercenews.eu/bundeskartellamt-investigates-abuse-of-dominance-by-amazon/ (Access date: December 2018)

[3] Two-sided (or, more generally, multi-sided) markets are roughly defined as markets in which one or several platforms enable interactions between end-users, and try to get the two (or multiple) sides “on board” by appropriately charging each side. (Rochet, Jean-Charles & Tirole, Jean. (2010). Two-Sided Markets: An Overview.)

[4] Case COMP/M.7217 - Facebook/Whatsapp.

[5] A market participant has first-mover advantage if it is the first entrant and gains a competitive advantage through control of resources. (Grant, Robert M. (2003). Cases in Contemporary strategy analysis.)

[6] A winner-take-all market is a market in which a product or service that is only slightly (1%) better than the competitors gets a disproportionately larger (90%-100%) share of or all revenues for that class of products or services. (Grant, Randy R.; Leadley, John C.; Zygmont, Zenon X. (2014). The Economics of Intercollegiate Sports.)

All rights of this article are reserved. This article may not be used, reproduced, copied, published, distributed, or otherwise disseminated without quotation or Erdem & Erdem Law Firm's written consent. Any content created without citing the resource or Erdem & Erdem Law Firm’s written consent is regularly tracked, and legal action will be taken in case of violation.

Other Contents

A Recent CAS Decision in the Scope of European Union Competition Law: FIFA vs. Agents
Newsletter Articles
A Recent CAS Decision in the Scope of European Union Competition Law: FIFA vs. Agents

At the meeting of the Fédération Internationale de Football Association (“FIFA”) held on 16 December 2022, the FIFA Council approved the FIFA Football Agents Regulations (“FFAR”). In the FFAR, various amendments have been made, such as the introduction of a maximum service fee limit that football agents are...

Competition Law 30.09.2023
CJEU Judgment in Super Bock: New Insight on Resale Price Maintenance
Newsletter Articles
CJEU Judgment in Super Bock: New Insight on Resale Price Maintenance

Resale Price Maintenance (RPM) is still considered a hardcore restriction under the recently revised Vertical Block Exemption Regulation (VBER), which means that it cannot benefit from a statutory exemption under Article 101(1) TFEU, unlike certain other types of vertical agreements. However, it has been debated...

Competition Law 31.07.2023
The Relationship Between Economic Entity and Family Ties in Light of Competition Board Decisions
Newsletter Articles
The Relationship Between Economic Entity and Family Ties in Light of Competition Board Decisions

In competition law, it is important to accurately determine the concept of undertaking, especially in terms of mergers and acquisitions. Therefore, the concept of economic entity aims to reveal the economic units covered by the undertakings. The relationship between the concept of economic entity and family ties comes...

Competition Law 31.07.2023
A New Breath of Fresh Air for Competition Investigations from the Constitutional Court
Newsletter Articles
A New Breath of Fresh Air for Competition Investigations from the Constitutional Court

In these days when the Competition Board (“Board”) frequently imposes administrative fines for preventing on-site inspections and both the Competition Authority (“Authority”) and undertakings take legal and technical measures regarding on-site inspections, a striking development has occurred. In its decision...

Competition Law 30.06.2023
Competition Law Practices in the Online Advertising Market
Newsletter Articles
Competition Law Practices in the Online Advertising Market

Online advertising has become an important source for businesses for promoting products and services and meeting consumers, as a result of the rapid development of information technologies and increase in the use of internet. Delivering targeted messages to consumers at the right time through the digital...

Competition Law 30.06.2023
Selective Distribution Systems
Newsletter Articles
Selective Distribution Systems

Selective distribution systems refer to a type of distribution system in which suppliers commit to selling the contracted goods or services directly or indirectly to distributors selected based on specified criteria, while the distributors commit not to sell the said goods or services to unauthorized...

Competition Law 31.05.2023
Final Sector Inquiry Report of the Competition Authority Regarding Fast-Moving Consumer Goods Retailing
Newsletter Articles
Final Sector Inquiry Report of the Competition Authority Regarding Fast-Moving Consumer Goods Retailing

Fast-moving consumer goods is undoubtedly one of the sectors that the Competition Authority has been working most intensively since the COVID 19 pandemic. Among the most important developments of this period was the Sector Inquiry initiated on Fast Moving Consumer Goods (“FMCG”) Retailing...

Competition Law 30.04.2023
Constitutional Court's Evaluation of the Competition Board's Authority to Conduct On-Site Investigations
Newsletter Articles
Constitutional Court's Evaluation of the Competition Board's Authority to Conduct On-Site Investigations

In the decision of the Constitutional Court ("Constitutional Court" or "Court") dated 09.11.2022, numbered 2020/67 E. 2022/139 K. (the "Decision"), the annulment of certain articles of the Law Amending the Law on the Protection of Competition No. 4054 ("Law No. 7246") was requested...

Competition Law 30.04.2023
Gun Jumping in Turkish Competition Law
Newsletter Articles
Gun Jumping in Turkish Competition Law

In Turkish competition law, certain types of mergers and acquisitions are subject to Turkish Competition Board’s (“Board”) approval in order to gain legal validity. Pursuant to Article 7 of the Law No. 4054 on the Protection of Competition (“Law No. 4054”), the Board is competent to define mergers and acquisitions...

Competition Law 31.03.2023
The Problem of Returning the Data Obtained as a Result of Unlawful Notification in Light of the Competition Board Decision
Newsletter Articles
The Problem of Returning the Data Obtained as a Result of Unlawful Notification in Light of the Competition Board Decision

Recently, the Competition Board (the Board) had imposed administrative fines on banks and financial institutions for failing to respond to the request for information within the scope of a preliminary investigation.[i] The request for information that lays the groundwork for the administrative fine imposed by...

Competition Law 28.02.2023
The European Commission Accepts Amazon’s Commitments
Newsletter Articles
The European Commission Accepts Amazon’s Commitments

Amazon, a world-famous company, is an e-commerce company that operates the world’s largest online shopping platform. In the backstage, Amazon is a data-driven company whose retail decisions are mostly driven by automated systems, fueled by the relevant market data. That being said, Amazon has a dual...

Competition Law 31.01.2023
Deletion of WhatsApp Correspondence During On-Site Inspections
Newsletter Articles
Deletion of WhatsApp Correspondence During On-Site Inspections

The right to make on-site inspections is one of the Competition Board’s (“Board”) most important tools for revealing whether Law No. 4054 on the Protection of Competition (“Law No. 4054”) has been violated. The effective use of this authority is quite important in terms of obtaining fruitful results from...

Competition Law 31.10.2022
Amendment on the Regulation of Electronic Commerce: “The Fire of Mount Doom”
Newsletter Articles
Amendment on the Regulation of Electronic Commerce: “The Fire of Mount Doom”

“Harese” is an interesting Arabic word. There is a thorn that camels love very much in the desert. The camel eats the thorn with great greed. So much so that, its mouth bleeds as it eats, but it doesn't stop eating. The taste of the thorn is mixed with the salty taste of its own blood. This mixed taste drives the camel...

Competition Law 30.09.2022
Turkish Competition Board Fines Digiturk
Newsletter Articles
Turkish Competition Board Fines Digiturk

Turkey’s leading pay television service provider, Krea İçerik Hizmetleri ve Prodüksiyon A.Ş. (“Digiturk”), is frequently the subject of complaints made to the Competition Authority (“Authority”). In fact, the Competition Board (“Board”) issues a new decision about Digiturk almost every year. In these decisions...

Competition Law 30.09.2022
The French Competition Authority’s Decision on Meta’s Commitments
Newsletter Articles
The French Competition Authority’s Decision on Meta’s Commitments

The French Competition Authority (Autorité de la Concurrence), within the scope of the competition law proceeding initiated upon the complaint of Criteo SA (“Criteo”), accepted the commitments proposed by Meta Platforms Inc., Meta Platforms Ireland Ltd., and Facebook France...

Competition Law 31.07.2022
A Different Approach to Monetary Fines for Hindering On-Site Inspection: The Decision of the Ankara II. Administrative Court
Newsletter Articles
A Different Approach to Monetary Fines for Hindering On-Site Inspection: The Decision of the Ankara II. Administrative Court

While the scope of Competition Board’s (“Board”) power to conduct on-site inspections has increased with the introduction of Guidelines on Examination of Digital Data during On-site Inspections (“Guidelines”), nowadays the amount of monetary fines imposed on undertakings continue to...

Competition Law 31.07.2022
Hub and Spoke Cartel in Comparative Law
Newsletter Articles
Hub and Spoke Cartel in Comparative Law

The hub and spoke cartel, which is a relatively new type of violation in terms of Turkish competition law, is defined as the indirect exchange of information between two independent undertakings which are horizontal competitors on the supplier or retailer level, through another undertaking...

Competition Law April 2022
The First Settlement Case in Turkish Competition Law
Newsletter Articles
The First Settlement Case in Turkish Competition Law

The settlement mechanism has only recently been introduced to Turkish competition law practice. It entered into force with the amendment made to the Law on the Protection of Competition (“Law”) numbered 4054 on 16.06.2020, and has been in effect for less than two years. In this relatively...

Competition Law April 2022
The E-Marketplace Platforms Sector Inquiry Final Report and What It Brings
Newsletter Articles
The E-Marketplace Platforms Sector Inquiry Final Report and What It Brings

Due to their increasing share in the economy and rapid growth rate, e-marketplace platforms have come under the increasing scrutiny of the Turkish Competition Authority (“Authority”) as well as many competition authorities around the world...

Competition Law April 2022
Amendments Introduced to the Communique Concerning the Mergers and Acquisitions Requiring Competition Board’s Approval
Newsletter Articles
Amendments Introduced to the Communique Concerning the Mergers and Acquisitions Requiring Competition Board’s Approval

Pursuant to the Amendment Communiqué Concerning the Mergers and Acquisitions Requiring the Competition Board’s Approval (“Amending Communiqué”) published in the Official Gazette dated March 4th, 2022 and numbered 31768, certain amendments have been introduced...

Competition Law March 2022
A New Glance at Online Sales: The Competition Board’s BSH Decision
Newsletter Articles
A New Glance at Online Sales: The Competition Board’s BSH Decision

The Competition Board (“Board”) has recently published a reasoned decision in which it evaluated BSH Ev Aletleri Sanayi ve Ticaret A.Ş.’s (“BSH”) request for negative clearance or exemption with regard to its practice of prohibiting authorized dealers from making sales through online marketplaces...

Competition Law March 2022
E-Marketplace Platforms Industry Review Preliminary Report Part 2: “Shahmaran’s Story”
Newsletter Articles
E-Marketplace Platforms Industry Review Preliminary Report Part 2: “Shahmaran’s Story”

Shahmaran, a Mesopotamian myth, is believed to take place in Tarsus. According to the myth, the shah of snakes is the immortal and omniscient "Shahmaran." Shahmaran is described as a beautiful woman living in her cave with her snakes...

Competition Law February 2022
Online Sales Within The Framework Of Competition Law
Newsletter Articles
The Effects of the Recent Decision by the Turkish Competition Board on Market Chains and Their Suppliers
Newsletter Articles
The Effects of the Recent Decision by the Turkish Competition Board on Market Chains and Their Suppliers

During the COVID-19 pandemic, competitive concerns about the pricing behavior of chain markets, manufacturers, and wholesalers engaged in the retail trade of food and cleaning supplies led to an investigation by...

Competition Law January 2022
On-Site Inspections in Light of the Recent Decisions of the Competition Authority
Newsletter Articles
On-Site Inspections in Light of the Recent Decisions of the Competition Authority

When the past decisions and the recent decisions of the Competition Board (“Board”) are examined, a significant increase can be observed in the number of decisions where the Board found hindrance or obstruction of on-site inspections. This situation shows that...

Competition Law December 2021
The European Commission Fines Banks for Participating in a Forex Cartel
Newsletter Articles
The European Commission Fines Banks for Participating in a Forex Cartel

The European Commission began investigating the collusive behavior of Credit Suisse, UBS, Barclays, RBS, and HSBC in the Foreign Exchange (forex) spot trading market in 2019. With the recent press release dated 02.12.2021, the Commission announced that the case is now closed...

Competition Law December 2021
Hub and Spoke Cartels
Newsletter Articles
Hub and Spoke Cartels
Competition Law November 2021
E-Marketplace Platforms Industry Review Preliminary Report Part 1: “Captain, an object is approaching”
Newsletter Articles
E-Marketplace Platforms Industry Review Preliminary Report Part 1: “Captain, an object is approaching”

Digitalization, in particular, necessitates the rewriting of competition law rules. Competition law is at the center all questions regarding e-commerce and digital platforms. The aforementioned platforms, which have become prominent due to innovations in...

Competition Law November 2021
Coca Cola’s Commitments in the Recent Competition Investigation
Newsletter Articles
Settlement Regulation Enters into Force
Newsletter Articles
Settlement Regulation Enters into Force
Competition Law July 2021
Competition Law Concerns Regarding Human Resources Practices
Newsletter Articles
The New Cartel Decision of the Competition Board
Newsletter Articles
The New Cartel Decision of the Competition Board
Competition Law September 2020
Amendments in the Law on the Protection of Competition
Newsletter Articles
Setting Legal Grounds for On-site Inspections
Newsletter Articles
Evaluation of COVID 19 Outbreak in Terms of Turkish Competition Law
Newsletter Articles
The File of Sahibinden.com; A Phoenix Story
Newsletter Articles
The File of Sahibinden.com; A Phoenix Story
Competition Law February 2020
Final and Interim Decisions of the Turkish Competition Board
Newsletter Articles
Second Stage in Facebook File
Newsletter Articles
Second Stage in Facebook File
Competition Law September 2019
European Commission’s Foreign Exchange Spot Trading Cartel Decisions
Newsletter Articles
Expected Second Half of Competition Authority’s 12 Banks Decision
Newsletter Articles
Turkish Competition Board’s Sahibinden.com Decision
Newsletter Articles
New Horizons in Competition Law; Diesel Emissions Scandal
Newsletter Articles
Recent Developments in the Right of Access to Files
Newsletter Articles
Cards are being redistributed in the Turkish Beer Market
Newsletter Articles
The Recent Motor Vehicles Insurance Decision of the Competition Board
Newsletter Articles
Selective Distribution Systems under the Light of Coty Decision
Newsletter Articles
Competition Authority’s Sector Inquiry Report on Television Broadcasting
Newsletter Articles
Excessive Pricing
Newsletter Articles
Excessive Pricing
Competition Law June 2017
Amazon Decision and E-Book Commitments
Newsletter Articles
Amazon Decision and E-Book Commitments
Competition Law June 2017
Umbrella Effect within the Framework of Private Competition Enforcement
Newsletter Articles
Tüpraş Decision and the Rebate Systems
Newsletter Articles
Tüpraş Decision and the Rebate Systems
Competition Law September 2016
Important Reason in Terms Of Share Transfer Restrictions
Newsletter Articles
Booking.com Decision
Newsletter Articles
Booking.com Decision
Competition Law January 2017
Price / Margin Squeeze
Newsletter Articles
Price / Margin Squeeze
Competition Law November 2016
Recent Problems in Electricity Distribution Sector: ELDER Decision
Newsletter Articles
Intellectual Property Rights As Capital in Kind
Newsletter Articles
Right To Request Information Of The Shareholders in Joint Stock Companies
Newsletter Articles
Affected Market
Newsletter Articles
Affected Market
Competition Law August 2015

For creative legal solutions, please contact us.