Bachelor 'S Thesis European Competition Law

BACHELOR’S THESIS
EUROPEAN COMPETITION LAW
THE GOOGLE ANDROID CASE

Article 102 TFEU and the Abuse of Dominance in the (EU)
Digital Sector: Is the Google Android Case a Wake-Up Call for a
Different Approach by the EU Commission and the CJEU?
To obtain the degree of Bachelor of Laws (LL.B.) at Utrecht

University, the Netherlands
Name: M.N. (Nasir) Yousufzai

Student number: 4204468
Supervisor: Dr Andrea Minto
Second reader: Dr Bas van Bockel
Number of words: 14,647
Date: 12 July 2016
1
Acknowledgement
I would like to express my deepest gratitude to my supervisor, Dr Andrea Minto, for his
courtesy, enormous patience, useful tips and guidance.
2
Table of contents
Chapter 1: Introduction……………………………………………………………………p.
1.1 Structure of bachelor’s thesis………………………………………………………….p.
1.2 Methodology…………………………………………………………………………….p.
1.3 The challenges ahead…………………………………………………………………..p.
Chapter 2: EU competition law……………………………………………………….....p.
Chapter 3: Article 102 TFEU………………………………………………………………p.
3.1 Article 101 and 102 TFEU………………………………………………………………p.
3.2 Market definition: relevant market……………………………………………………..p.
3.2.1 Relevant product market…………………………………………………………..p.
3.2.2 Relevant geographic market………………………………………………………p.
3.3 The concept of “abuse”………………………………………………………………….p.
3.4 The concept of “dominant position”……………………………………………………p.
3.5 Anti-competitive foreclosure effects…………………………………………………..p.
3.6 Inter-state trade criterion………………………………………………………………..p.
3.7 Defences……………………………………………………………………………..…..p.
Chapter 4: Shortcomings of Article 102 TFEU………………………………………..p.
Chapter 5: The (EU) digital sector and its characteristics…………………………..p.
5.1 Rapid innovation………………………………………………………………………...p.
5.2 Network effects………………………………………………………………………….p.
5.3 Economies of scale……………………………………………………………………..p.
5.4 High fixed and low marginal costs……………………………………………………..p.
5.5 No lock-in effects and switching costs…………………………………………………p.
5.6 Interoperability…………………………………………………………………………..p.
5.6.1 Interoperability and the Microsoft case……………………………………………p.
5.6.2 Interoperability and the Google Android case……………………………………p.
5.7 Multi-sided……………………………………………………………………………….p.
Chapter 6: Solutions for the (EU) digital sector……………………………………….p.
Chapter 7: The Google Android case…………………………………………………..p.
7.1 The first and third allegations…………………………………………………………,.p.
7.2 The third allegation………………………………………………………………………p.
Chapter 8: Conclusion: Article 102 TFEU, the digital sector and the Google
Android case: a wake-up call?..................................................................................p.
3
1. Introduction
In what is undoubtedly the most high-profile antitrust case of this moment, tech giant
Google has been hit with a string of allegations with regard to its business practices.
These allegations led Europe’s highest competition authority, the European
Commission (hereafter: Commission), towards initiating formal proceedings against
Google. The Google saga has been keeping legal practitioners, academia, competition
authorities and courts busy since 2010. In November of that year, the first allegations
were made with regard to Google’s online search services. The allegations accused
Google of systematically favouring its own online search services (including its
comparison shopping service ‘Google Shopping’) to the detriment of that of its rival
providers by treating its competitors’ services unfavourably in Google’s search
results.1, 2 In April 2015, a second investigation was launched into Google with regard
to its mobile operating system, Android, and its applications suite, Google Apps. 3, 4
While these cases are still pending, it seems that Google’s legal woes are far from
over. The latest news suggests that the Commission is taking steps towards a third
investigation against Google, this time over its ‘AdWords’ advertising service. 5 What
all three investigations have in common is that the submitted allegations revolve
around Article 102 of the Treaty on the Functioning of the European Union (hereafter:
TFEU), which prohibits undertakings from abusing their dominant market position. The
focus of this bachelor’s thesis shall be Google Android case, as this is not only the
most recent still pending case, it also raises several thought-provoking and far-
reaching questions that lie at the core of EU competition law. These legal questions
shall therefore be carefully assessed from an EU competition law perspective. While
doing so, the particular challenges of the application of Article 102 TFEU by the
Commission and the Court of Justice of the European Union (hereafter: CJEU) shall
be highlighted. Special attention shall be given to the wider (EU) digital sector and its
significance in the field of EU competition law. The thesis shall be concluded by
evaluating whether the Google Android case is a wake-up call for a different approach
by the Commission and the CJEU.
1.1 Structure of bachelor’s thesis

The structure of the thesis shall be as follows: First, competition law in general and EU
competition law shall be discussed in light of its objectives. More specifically, the
meaning and scope of Article 102 TFEU shall be closely looked at. Secondly, the
shortcomings of Article 102 TFEU and their relevance to the case at hand shall be
analysed. Thirdly, the wider (EU) digital sector (of which Google is part of), its special
characteristics and the challenges it poses to the field of EU competition law shall be
thoroughly examined. Fourthly, the legal context of the Google Android case shall be
1
European Commission – Press Release, Antitrust: Commission probes allegations of antitrust violations by Google (Brussels, 30 November 2010),
<www.europa.eu/rapid/press-release_IP-10-1624_en.htm?locale=en>, retrieved on: 25 June 2016.
2
European Commission – Press Release Fact Sheet, Antitrust: Commission sends Statement of Objections to Google on comparison shopping services (Brussels, 15 April
2015), <www.europa.eu/rapid/press-release_MEMO-15-4781_en.htm>, retrieved on: 25 June 2016.
3
European Commission - Fact Sheet, Antitrust: Commission opens formal investigation against Google in relation to Android mobile operating system (Brussels, 15 April
2015), <europa.eu/rapid/press-release_MEMO-15-4782_en.htm>, retrieved on: 25 June 2016.
4
European Commisison – Press Release, Antitrust: Commission sends Statement of Objections to Google on comparison shopping service; opens separate formal
investigation on Android (Brussels 15 April 2015), <www.europa.eu/rapid/press-release_IP-15-4780_en.htm>, retrieved on: 25 June 2016.
5
Aoife White, Google Said to Face Ads Complaint in EU Antitrust Clampdown, <www.bloomberg.com/news/articles/2016-06-27/google-said-to-face-adwords-complaint-in-
eu-antitrust-clampdown-ipy09i47>, retrieved on: 27 June 2016.
4
assessed in light of EU competition law. Finally, the question whether the Google
Android case serves as a wake-up call for a different approach by the Commission and
CJEU shall be answered.
Thus, the main research question of this bachelor’s thesis is:

Article 102 TFEU and the abuse of dominance in the (EU) digital sector: Is the Google
Android case a wake-up call for a different approach by the EU Commission and the
CJEU?
1.2 Methodology
The aim of this thesis is to provide a satisfactory answer to the above-mentioned main
research question from a primarily legal point of view, while acknowledging the fact
that analysis in the field of EU competition law often requires the use of a plethora of
economic concepts, such as “market power” and “price”.6 It has been remarked that
no analysis of competition is complete without a thorough understanding of these
concepts.7 It is therefore understandable that complex cases in this field call for legal
as well as economic input.8 This strongly calls for a multidisciplinary and multi-faceted
approach in the field of competition law and policy. Nevertheless, this is a law thesis
and therefore its focus shall be law, not economics. Incorporating both disciplines
would be clearly beyond the scope of this research.
EU competition law does not operate in a vacuum. Rather it is interwoven into other
areas of law, such as general European Union law and intellectual property law.
Nonetheless, these other areas of law will not be analysed in-depth, as such is not
required for the purpose of this thesis. Aside from the letter of EU competition law, in
particular Article 102 TFEU, attention shall be given to its application in EU competition
practice and enforcement. Looking into legal practice is necessary for assessing
whether EU competition law is properly functioning as its drafters had envisaged it. Its
strengths, weaknesses, shortages and actual effects can only be inferred from actual
legal practice.
The focus of this thesis being EU competition law entails that national competition laws
of the individual EU member states shall not be discussed, nor will other competition
systems outside the EU be considered. The main research question shall be answered
through the use of primary and secondary EU law, EU Commission decisions, the EU
Commission’s Guidance on Article 102 TFEU Enforcement Priorities9, CJEU case law
and finally whatever is available in terms of legal literature and other relevant
documents.
1.3 The challenges ahead

6
Whish & Bailey (2012), p. 2.
7
Ibid.
8
Ibid.
9
Communication from the European Commission — (2009/C 45/02) Guidance on the Commission's enforcement priorities in applying Article 82 of the EC Treaty to abusive
exclusionary conduct by dominant undertakings (24 February 2009).
5
During the course of writing of this thesis, significant obstacles were encountered with
regard to its subject-matter. These obstacles made writing the thesis certainly
challenging. Since the Google Android case was only formally opened last year by the
Commission, legal literature and relevant materials on the issue at hand are, not
entirely unexpected, severely lacking. This paucity of legal sources is further
exacerbated by the fact that a final (as opposed to a preliminary) decisional conclusion
has not yet been given by the Commission. What is more is that an authoritative CJEU
judgment likewise has not (yet) been pronounced, as the case has not been brought
before the Court, and possibly might never be brought before it. To make matters
worse, only one, somewhat comparable, legally binding precedent exists. 10 These
limitations considerably complicated the determination of the actual legal bases upon
which the allegations against Google in this case rest. As such, the Google Android
case and its considerations reflected upon in this thesis, are as of yet unchartered
waters, urgently in need of scholarly attention.
2.1 Competition law in general and EU competition law
2.1.1 Competition law in general

In recent years, the field of competition law has seen an exponential growth in the
world. Globally, more than 120 distinct competition law systems and 100 different
competition authorities can be distinguished.11 Not only that, the scope of competition
law has been expanded as well. It now applies to many economic activities which were
previously considered to be the prerogratives of States (such as telecommunications,
energy etc.).12 Now there seems to be a general global consensus on the desirability
of competition, as opposed to policies such as state planning.13 The central objective
of competition law and policy is consumer welfare, since powerful undertakings and
firms with significant market power are seen as being capable of reducing output,
raising prices, degrading the quality of their products, suppressing innovation and
limiting consumer choice.14 Therefore, the main aim of competition law and policy is
the enhancement of consumer welfare through the prevention of such adverse
practices. The benefits of competition law are said to be numerous: it promotes
efficiency, lowering prices, incentivises innovation and offers consumers greater
choice. All of these benefits concern consumers and their welfare. Another key
objective of competition law is consumer protection.15 The protection of consumers’
interests is given priority, even over the protection of the competition process itself. 16
Aside from consumer welfare and consumer protection, a third possible objective is
directed at the redistribution of wealth and economic equity. 17 Democracy, the
individual freedom of choice and economic opportunity are said to be under threat by
powerful, (near-)monopolist multinational corporations aggregating key resources and
10
The only comparable case being: CJEU General Court Microsoft v Commission ECLI:EU:T:2007:289, Case T-201/04 [ 2007] ECR II-3601, 17 September 2007.
11
12
Ibid.
13
Ibid, p. 3-4.
14
Ibid, p. 1-2.
15
Ibid, p. 20.
16
Ibid.
17
Ibid, p. 21.
6
facilities.18 Linked to the notion of redistribution, is the protection of competitors,
especially small firms against their powerful rivals.19 However, the protection of the
competition process itself is considered a far greater priority than protecting individual
competitors and there is ample support for this position.20 Major policy areas of
competition law include anti-competitive agreements, abusive behaviour of
undertakings, mergers between undertakings and public restrictions of competition.21
Competition law, however, is also capable of being misused and abused for reasons
other than consumer welfare and protection.22 Direct interventions by competition
authorities in the market and subsequent price regulation may distort competition. 23
These are considered far-reaching measures and, as such, ought to be applied with
great sensitivity.
2.1.2 EU competition law

Competition law in the European context should be primarily seen in the context of the
overriding objective of achieving single market integration.24 To this end, Article 3(3)
TEU states that “the Union shall establish an internal market”. EU competition law is
concerned with ensuring free trade and fair competition in this EU internal market.25 In
pursuance of single market integration, numerous legal, technical and administrative
barriers to free trade between EU Member States have been abolished. 26 EU
competition law furthermore encourages trade between EU Member States and
facilitates cross-border transactions.27 Its aim can be best described by the
catchphrase “levelling the playing fields of Europe”.28 The overarching objective of
single market integration overrides everything, even the process of competition and
the protection of competitors.29
EU competition law is regulated in the Articles 101 to 109 TFEU. These Articles should
been seen in conjunction with Article 3(3) TEU which provides that one of the
objectives of the EU is achieving a “highly competitive social market economy”
(emphasis added).30 The establishment of an internal market (Article 3(3) TEU), must
include a system which ensures that competition is not distorted, in accordance with
Protocol 27 to the EU Treaties.31 Protocol 27 forms an integral part of the Treaty
provisions and has the same legal force on the basis of Article 51 TEU32.33 The EU
competition rules, necessary for the proper functioning of the internal market, are
governed by the EU itself.34 On account of Article 3(1)(b) TFEU, the Union has
18
Ibid.
19
Ibid.
20
In the United States in particular, the “Chicago School” of economists consistently rejected what it perceived as the “uncritical sentimentality” favouring small competitors,
or as American legal scholar Robert Bork would coin it as ‘’the uncritical sentimentality in favour of the small guy’. These views came to influence US competition law
significantly. See Whish & Bailey (2012), p. 21, 195.
21
Whish & Bailey (2012), p. 2-3.
22
Ibid, p. 20.
23
Ibid.
24
Ibid, p. 23.
25
European Parliament Briefing, Google antitrust proceedings: Digital business and competition (July 2015) p. 3.
26
European Union, One market without borders, <www.europa.eu/pol/singl/index_en.htm>, retrieved on: 25 June 2016.
27
28
Ibid.
29
Ibid, p. 23-24.
30
Ibid, p. 50.
31
Ibid.
32
Article 51 TEU reads: “The Protocols and Annexes to the Treaties shall form an integral part thereof.”
33
34
Ibid.
7
exclusive competence as regards EU competition rules.35 In other words: it is a
competence that the Union does not share with the EU Member States. Moreover,
Article 119(1) TFEU obliges both the EU and its Member States to align their activities
“in accordance with the principle of an open market economy with free competition”.36
The EU Commission’s role is at the very core of EU competition policy and

enforcement.37 It enjoys “broad discretionary powers as to the questions of whether
and when EU competition rules should be enforced”.38 Thus, the Commission is
authorised to take action againsts infringements of EU competition law. 39 To that end,
it can develop policy and legislative initiatives, conduct inquiries in certain economic
sectors, investigate mergers and state aid and impose penalties on undertakings in
violation of EU competition law.40 In recent years, EU competition law has seen a
significant overhaul.41 Starting with the modernisation process of the late 1990s and
early 2000s, several subsequent changes were made to EU competition law. 42 The EU
Merger Regulation (EUMR), which was introduced in 1989, was replaced with a revised
version in 2004.43, 44 The EUMR applies to concentrations (mergers, acquisitions, joint
ventures) that have a Community (EU) dimension.45 Even more far-reaching was the
introduction of Regulation 1/200346, which fundamentally altered the manner in which
the Articles 101 (prohibition of cartels) and 102 TFEU henceforth were to be applied in
practice.47 One of the most significant changes was the introduction of the Guidance
on the Commission’s Enforcement in Applying Article 102 [TFEU]48 or Article 102
TFEU Enforcement Priorities (hereafter: the Guidance) by the Commission in 2009.49
The Guidance paper aims to assist the Commission in its enforcement of Article 102
TFEU (prohibition of abuse of a dominant position). Given that the subject-matter of
Article 102 TFEU is quite complex to grasp, the Guidance is most surely a welcoming
contribution50, offering insights in the methodology of the Commission and elucidating
many of its decisions. It should, however, be remarked that the Commission had not
intended to reinterpret Article 102 TFEU in light of the Guidance, as matters of
interpretation are to be exclusively addressed by the CJEU.51
3. Article 102 TFEU

Before delving into the Google Android case, it would be appropriate to first discuss
Article 102 TFEU at great length, since understanding and contextualising the Google
Android case requires such a discussion. Article 102 TFEU is one of the most crucial
35
Ibid.
36
Ibid.
37
Ibid, p. 53.
38
Geradin (2010), p. 13.
39
40
Ibid.
41
Ibid, p. 52.
42
Ibid.
43
Ibid.
44
Slaughter and May, The EU Merger Regulation – An overview of the European merger control rules (June 2016), p. 1, <www.slaughterandmay.com/media/64572/the-eu-
merger-regulation.pdf>, retrieved on: 25 June 2016.
45
Ibid.
46
The Council of the European Union, Regulation 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 (now 101 and 102 TFEU).
47
48
49
50
Ibid.
51
Geradin (2010), p. 1.
8
provisions of EU competition law. It contains a far-reaching prohibition in its first
paragraph: the abuse of a dominant position by undertakings is considered to be
incompatible with the EU internal market. The second paragraph provides four
examples of ‘abuses’. However, it should be borne in mind that the list of examples
provided in Article 102(2) TFEU by no means exhaustive.52 The significance of Article
102 TFEU for the Google Android case, merits its full quotation. Article 102 TFEU
reads:
“Any abuse by one or more undertakings of a dominant position within the internal market or in a
substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect
trade between Member States.
Such abuse may, in particular, consist in:

a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
b) limiting production, markets or technical development to the prejudice of consumers;
c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby
placing them at a competitive disadvantage;
d) making the conclusion of contracts subject to acceptance by the other parties of supplementary
obligations which, by their nature or according to commercial usage, have no connection with
the subject of such contracts.”
3.1 Article 101 and 102 TFEU

The focus of this thesis is Article 102 TFEU (prohibition of abuse of a dominant
position). Nevertheless, Article 101 TFEU (prohibition of cartels) should be briefly
discussed since both Articles are closely linked and often mentioned together. The
similarities between the two Articles are clear: both concern the EU internal market
and practices that are incompatible with it, the addressees of both articles are
undertakings, both are only applicable to practices that affect ‘the trade between
Member States’ and both provide examples of prohibited practices in an almost
identical, non-exhaustive list (Article 101(1)(a-e) and 102(2) TFEU). There are,
however, differences as well. Whereas Article 101 TFEU concerns either bilateral or
multilateral conduct of undertakings, Article 102 TFEU exclusively oversees the
unilateral conduct of – dominant – undertakings. One clearly noticeable difference is
that Article 101(3) specifically mentions certain exceptions to the general prohibition
on the basis of which certain practices of undertakings could be justified that otherwise
would have been prohibited. The formulation of Article 102 TFEU lacks such an explicit
clause containing exceptions. Furthermore, unlike Article 102 TFEU, Article 101(2)
TFEU expressly declares that prohibited agreements and decisions under this Article
are null and void, nullity being the most severe (civil) law sanction that can be imposed
on illegal acts in any legal order.53 A further difference in liability exists: infringement of
101 TFEU can lead to the liability and subsequent punishment of both (or all)
undertakings involved in an exclusive dealing agreement, while infringement of 102
52
53
Two points deserve mention. First, nullity can only be declared with regard to acts which provide legal consequences, such as “agreements and decisions” as per 101(1)
TFEU. This explain why the nullity-clause (Article 101(2) TFEU) does not include “concerted practices” as these do not give rise to legal rights and obligations. Secondly,
the reason that Article 102 TFEU does not expressly declare practices contrary to it as null and void is because 101(2) TFEU also applies to 102 TFEU by way of analogy.
See: Jose Rivas (Bird and Bird), Why does Article 101(2) TFEU not list concerted practices? (Kluwer Competition Law Blog, Belgium), 23 April 2013,
<www.kluwercompetitionlawblog.com/2013/04/23/why-does-article-1012-tfeu-not-list-concerted-practices/>, retrieved on: 25 June 2016.
9
TFEU could only lead to the liability and punishment of the abusive dominant
undertaking. Finally, it seems that Article 102 TFEU generates considerably more
controversy than 101 TFEU does. This can be explained by the fact that the practices
prohibited under 101 TFEU (secret cartelisations and secret and concerted
agreements and practices) cannot possibly be adequately defended, except if they can
be justified on the basis of the exceptions provided in 101(3) TFEU. The conduct that
is prohibited in 102 TFEU, namely the abuse of a dominant (market) position by a
dominant undertaking gives rise to significant difficulties, since several factors have to
be taken into account. What exactly constitutes ‘abuse’? When is an undertaking
considered to be in a ‘dominant position’? What is the ‘relevant market’? Complex
questions all of which require extensive analysis. In this regard, Article 101 TFEU
clearly is the winner as it is more easily applicable and enforceable due to its
formulation being less vague, more precise and straightforward.
3.2 Market definition: relevant market

Every assessment under Article 102 TFEU by the Commission first requires the
delineation of the relevant market in which a presumably dominant undertaking is
operating. Defining the relevant market is a decisive consideration which influences
the outcome of a case.54 It is worth stressing that reaching the correct market definition
at times requires a “complex economic assessment” to be made.55 Even then, the
precise boundaries of the relevant market cannot always be clearly defined. It is also
possible that products from outside the relevant market can lead to competitive
constraint within this market and for this reason, where needed, such products may
need to be taken into consideration as well. Only after the relevant market has been
identified, may one proceed with assessing market power. This relevant market can
be as narrowly defined as constituting 574,000 World Football Cup tickets 56 or as
broadly that it would encompass a global market.57 The relevant market has two
dimensions: the relevant product market and the relevant geographic market.
3.2.1 The relevant product market

The following definition has been provided for the relevant product market: “a relevant
product market comprises all those products and/or services which are regarded as
interchangeable or substitutable by the consumer, by reason of the products’s
characteristics, their prices and their intended use”.58 Two practical examples of the
relevant product market follow. First: suppose the price of pears rise steadily, would
consumers then switch to buying apples or would they still purchase pears? If a
significant percentage of consumers subsequently switch to apples, then in such a
case pears and apples can be considered interchangeable and substitutable, both part
of the same product market. This is known as the demand-side substitutability. Second:
suppose pears become more expensive, would apple farmers/producers switch to
54
Commission’s Notice on Market Definition, para 4.
55
56
World Football Cup (1998) case.
57
Whish & Bailey (2012), p.
58
Commission’s Notice on Market Definition, para 7.
10
growing pears (and potentially make a larger profit)? Most likely not, since it is not a
simple matter to switch from apple trees to pear trees. Thus, for producers the two
fruits are not interchangeable or substitutable. This is referred to as the supply-side
substitutability.59 The demand-side substitutability is by far the most important element
in the assessment of the relevant product market, since the view of consumers is the
decisive factor, as per Continental Can60 and United Brands61.62 The United Brands
case elaborates further upon the legal test of interchangeability. 63
3.2.2 The relevant geographic market

The United Brands case was of the greatest influence for defining the relevant
geographic market. In this case, the CJEU laid down the legal test for defining the
relevant geographic market. The Court described the relevant geographic market as
“a clearly defined geographic area in which [the product] is marketed and where the
conditions are sufficiently homogeneous for the effect of the economic power of the
undertaking concerned to be able to be evaluated”.64 A simple example of the relevant
geographic market: suppose a bottle of milk at the supermarkets in the city centre is
10% more expensive that at the supermarkets in the outer districts. Would consumers
residing in the city centre be willing to drive or bicycle to the outer districts and purchase
their milk bottles from there, or would they prefer the convenience of buying milk closer
to home?65 Lastly, language barriers, diverging legal norms and transport are equally
relevant factor in the determination of the relevant geographic market.
3.3 The concept of “abuse”

The concept of “abuse” plays a major role in Article 102 TFEU and its application.
Given the sheer importance of this concept, it is remarkable that a definition of “abuse”
is lacking: neither 102 TFEU nor the Guidance provides one. Admittedly, both 102
TFEU and the Guidance do contain several examples of “abuse”, but the list of
examples is non-exhaustive as there many other types of abuses that have not been
mentioned. The closest thing to an actual definition of “abuse” was given in the
Hoffmann-La Roche66 case. Abuse is “an objective concept relating to the behaviour
of an undertaking in a dominant position which is such as to influence the structure of
a market where, as a result of the very presence of the undertaking in question the
degree of competition is weakened and which, through recourse to methods different
from those which condition normal competition in products or services on the basis of
the transaction of commercial operators, has the effect of hindering the maintenance
of the degree of competition still existing in the market or the growth of that
competition”.67 Though the CJEU’s ‘definition’ is helpful, be that as it may, it is not all-
59
BoomBasics + Commission’s Notice on Market Definition, para 20.
60
Continental Can, para 32.
61
United Brands, para 22.
62
Commission’s Notice on Market Definition, para 13. + Whish & Bailey (2012), p. 31.
63
Whish & Bailey (2012), p..
64
United Brands, paras 10-11. + Commission’s Notice on Market Definition, para 8.
65
BoomBasics.
66
CJEU Court of Justice Hoffmann-La Roche v Commission, ECLI:EU:C:1979:36, Case 85/76 [1979] ECR 461, [1979] 3 CMLR 211, 13 February 1979.
67
Ibid, para 91.
11
encompassing. One example suffices: exploitative abuses (see below) are not
covered by this ‘definition’. Another problematic aspect is that the CJEU’s use of
language is vague in nature. What exactly constitutes “recources to methods different
from those which condition normal competition”? Fortunately, the phrase “normal
competition” has been replaced by the term “competition on the merits” in more recent
case law, such as in the Deutsche Telekom68 case. The Guidance provides clear
examples of “competition on the merits”: undertakings compete on the merits when the
result is “lower prices, better quality and a wider choice of new and improved goods
and services” for consumers.
There are two main types of abuses: exclusionary abuses and exploitative abuses.
Exclusionary abuse refers to conduct of dominant undertakings that is aimed at the
prevention of competition and its development. Exploitative abuse is when
undertakings exploit their customers, for instance by reducing their output or by
increasing the prices of their products above the competitive level. The Continental
Can69 case made it clear that Article 102 TFEU applies to both exclusionary and
exploitative abuses. Nevertheless, for the purpose of this thesis and its main research
question, the focus shall be exclusively laid on exclusionary abuses, and in particular
those forms of exclusionary abuses that are of clear relevance to the Google Android
case. This is furthermore in line with the prioritisation of exclusionary abuses by the
CJEU in its case law regarding Article 102 TFEU and by the Commission in its
decisional practice on the same Article. Thus, by far most (alleged) infringements of
Article 102 TFEU primarily concern exclusionary abuses. Further confirmation of this
can be found in paragraph 7 of the Guidance: “For the purpose of providing guidance
on its enforcement priorities the Commission at this stage limits itself to exclusionary
conduct and in, particular, certain specific types of exclusionary conduct which, based
on its experience, appear to be the most common”.
A second (theoretical) distinction of lesser importance is that between non-pricing and

pricing abuses, the difference being that the price of goods or services as a relevant
factor does not play any role in non-pricing abuses. The focus shall henceforth be on
certain types of non-pricing abuses, given that the price of goods or services is hardly
a relevant factor in the Google Android case.
3.4 The concept of “dominant position”

Suppose a certain undertaking not having a dominant position in the relevant market,
unilaterally raises the prices of its products.70 In such a scenario, consumers would be
inclined to simply switch and purchase their products from another undertaking,
thereby financially hurting the first undertaking.71 Some undertakings, however, are so
powerful and dominant that they can, independently from their competitors and
68
CJEU Court of Justice Deutsche Telekom AG v Commission, ECLI:EU:C:2010:603, Case C- 280/08 P [2010] ECR I- 000, [2010] 5 CMLR 1495, 14 October 2010, para
173.
69
CJEU Court of Justice, Europemballage Corporation and Continental Can Company Inc. v Commission, ECLI:EU:C:1973:22, Case 6/72 [1973] ECR 215, [1973] CMLR
199, 21 February 1973, para 26.
70
Ambtenbrink & Davies & Vedder (2010), p. 115.
71
Ibid.
12
customers, negatively affect and distort competition by abusing their dominant position
in the market.72 This is what the prohibition of Article 102 TFEU is in essence about.
It is important to note that having a dominant position in itself is not an offence, rather
the abuse of such a position is an offence. In its United Brands v Commission case,
the CJEU gave the following explanation of what constitutes a “dominant position”: it
“relates to a position of economic strength enjoyed by an undertaking which enables it
to prevent effective competition being maintained on the relevant market by affording
it the power to behave to an appreciable extent independently of its competitors,
customers and ultimately of its consumers” (emphasis added).73
Based only market shares alone, there seems to exist different degrees of dominance.
An undertaking with a market share of 40% is considered to be dominant under 102
TFEU. It seems that the CJEU likewise has drawn the line between dominance and
non-dominance at 40%, since there has been only occasion74 in which the CJEU
reached a finding of dominance under Article 102 TFEU. Similarly, the Commission
states in paragraph 14 of its Guidance75 “that dominance is not likely if the
undertaking's market share is below 40% in the relevant market”. However, the
Commission then continues by saying that certain cases below the 40% threshold may
deserve further attention. Thus, when it comes to market shares, there are no true safe
harbours for undertakings. Once dominance is established, undertakings have a
‘special responsibility’76 not to distort competition. The Commission stated in its
Deutsche Post AG77 decision that the actual scope of special responsibility is
dependent on the degree of dominance and the relevant market’s special features.78
Moreover, the CJEU concluded in Akzo Chemie79 that a undertaking having a market
share of 50% brings about a rebuttable presumption of dominance.80 The undertaking
in question bears the evidential burden to prove otherwise and thus avoid assuming
any ‘special responsibility’.81 At 80% market share, ‘super-dominance’ is established,
a position ‘approaching monopoly’82. At this stage undertakings “have a particularly
special responsibility not to indulge in abusive behaviour”.83 At 90%, an undertaking is
considered to be a ‘quasi-monopoly’. Thus, generally speaking, the larger an
undertaking’s market share, the more likely that it is found to be dominant.84
At this point, a word of caution with regard to market shares and dominance is
absolutely necessary. First of all, the Guidance85 explicitly mentions that market
72
Ibid, p. 115-116.
73
CJEU Court of Justice United Brands Company v Commission, ECLI:EU:C:1978:22, Case 27/76 [1978] ECR 207, [1978] 1 CMLR 429, 14 February 1978, para 65.
74
CJEU General Court British Airways v Commission, ECLI:EU:T:2003:343, Case T-219/99 [2003] ECR II-5917, [2004] 4 CMLR 1008, paras 183, 225-226.
75
exclusionary conduct by dominant undertakings (24 February 2009), para 14.
76
CJEU Court of Justice Michelin v Commission (Michelin I), ECLI:EU:C:1983:313, Case 322-81 [1983] ECHR 3461, [1985] 1 CMLR 282, 9 November 1983, para 57.
77
European Commission Decision, Deutsche Post AG – Interception of cross- border mail, OJ [2001] L 331/40, [2002] 4 CMLR 598, para 103.
78
79
CJEU Court of Justice Akzo Chemie v Commission, ECLI:EU:C:1991:286, Case C-62/86 [1991] ECR I-3359, [1993] 5 CMLR 215, 3 July 1991, para 60.
80
Whish & Bailey (2012), p. 47-48.
81
Ibid, p. 182.
82
Ibid, p. 189.
83
Ibid, p. 47-48.
84
Ibid, p. 181.
85
13
shares, in themselves, only serve as “a useful first indication” 86 for assessing the
market structure and the market power of an undertaking.87 Market shares alone are,
however, by no means sufficient to determine actual market power accurately. While
market shares may provide some useful information regarding the existing state of
competition, they do not and cannot take into account the likelihood of potential future
competitors entering the market and the barriers to entry that they might face, nor do
they tell anything about the barriers to expansion that existing competitors are currently
facing. The Commission interprets market shares in the light of various other market
conditions, such as the market dynamics and the differentiation of products. In volatile
markets, the fluctuation of market shares over time is also considered. Thus, the
assessment of market power cannot and may not under any circumstances be reduced
to mere numbers and percentages. Assessing the market power of undertakings is a
crucial part of the Commission’s analysis regarding possible abuses of dominance by
those undertakings. Market power comes in various degrees: “from none, to non-
appreciable, to substantial, to pure monopoly”. The main focus of EU competition law
is substantial or significant market power. Such power is said to be present when an
undertaking “is capable of profitably increasing [and maintaining] prices above the
competitive level for a significant period of time [usually two years]”. Such an
undertaking is to be regarded as dominant on account of not facing “sufficiently
effective competitive constraints”. Substantial market power, being the primary focus
of any assessment under Article 102 TFEU, is often equated with having a dominant
position. Determining such market power requires a comprehensive analysis that
addresses all relevant factors that affect the conditions under which competition takes
place.
Every finding of dominance has to pass a two-stage assessment. The first step is to
determine the relevant product and geographic markets (see Chapter 7). The second
step is to identify (the degree of) market power. The Guidance expands upon the
relevant factors for an Article 102 TFEU analysis. In every assessment of dominance,
the anticompetitive market structure must be taken into consideration. Such an
assessment essentially revolves around the constraints faced by the dominant
undertaking. Three such constraints are referred to in the Guidance as being relevant
factors in the assessment: constraints imposed by (the market position of) actual
competitors, constraints imposed by the prospect of expansion “by actual competitors
or entry by potential competitors” in the future and finally, constraints imposed by the
“countervailing buyer power”88 of the dominant undertaking’s customers. Thus,
dominance cannot be established by mere reference to the existing market situation.
The expansion of current competitors and entry of potential competitors could be
hindered by various barriers, including legal barriers, economic advantages enjoyed
by the dominant undertaking, costs and network effects and the dominant firm’s own
86
Ibid, para 13.
87
88
exclusionary conduct by dominant undertakings (24 February 2009), para 18: “Such countervailing buying power may result from the customers' size or their commercial
significance for the dominant undertaking, and their ability to switch quickly to competing suppliers.”
14
conduct. These barriers must likewise be taken into account in the assessment of
dominance.
The range of possibilities which may lead to the liability of undertakings under 102
TFEU has been extensively broadened by the CJEU. First, the Court seems to have
accepted the notion of per se rules for certain abuses of dominance in the Michelin II89
case. This means that these abuses, once established, automatically lead to
infringement of Article 102 TFEU, irrespective of the nature and severity of the abuses
committed. Secondly, the Court extended the scope of Article 102 TFEU when it ruled
on multiple occassions90 that dominance, abuse and its effects are not necessarily
restricted to a single relevant market, but could rather occur in different markets. The
following is a case in point. Suppose there are two markets, one for the “upstream”
product (the required raw material) and another for the “downstream” product (the end
product). An undertaking holding a position of dominance in the “upstream” market
could decide to take over the only supplier in the “downstream” market, a market in
which the undertaking does not (yet) have a dominant position. In other words: the
dominant undertaking decides not to deliver the raw materials required for the
production of the end products to the “downstream” supplier, and rather produce the
end products itself by manufacturing the raw materials. To express it differently, the
dominant firm attempts to extend its dominance over the market which it has not
dominated yet by using its dominant position and (economic) market power in the
market it dominates. Thirdly, the Court ruled more than once91 that, for an undertaking
to be held liable under 102 TFEU, no causation is required between its (economic)
market power and its abusive behaviour. To put in another way, no actual exercise of
or reliance on market power is needed in order to establish an undertaking’s abuse of
its dominant position. In the Continental Can92 case, the behaviour of Continental Can
amounted to abuse simply because it strengthened its market position and eliminated
effective competition by the acquisition of a rival firm.
3.5 Anti-competitive foreclosure effects

The main focus of Article 102 TFEU is on anti-competitive foreclosure effects. The
Guidance describes anti-competitive foreclosure as follows: “a situation where
effective access of [equally efficient] actual or potential competitors to supplies or
markets is […] eliminated as a result of the conduct of the dominant undertaking
[…]”93.94 Such anti-competitive foreclosure must be clearly distinguished from ‘mere’
foreclosure caused by the superior efficiency of a dominant firm, as the latter is justified
since its benefits on grounds of efficiencies are considered to outweigh the potential
harm caused the foreclosure.95 Protecting (small) firms from foreclosure is not the aim
89
CJEU Court of Justice Michelin v Commission (Michelin II), ECLI:EU:T:2003:250, Case T-203/01 [2003] ECR II-4071, [2004] 4 CMLR 923, 30 September 2003, para 56.
90
Such as in British Gypsum v Commission. See: CJEU General Court BPB Industries Plc and British Gypsum Ltd v Commission, ECLI:EU:T:1993:31, Case C- 310/93 P
[1995] ECR I- 865, [1997] 4 CMLR 238, 6 April 1995.
91
One example being the Continental Can case. See: CJEU Court of Justice, Europemballage Corporation and Continental Can Company Inc. v Commission,
ECLI:EU:C:1973:22, Case 6/72 [1973] ECR 215, [1973] CMLR 199, 21 February 1973, para 27.
92
One example being the Continental Can case. See: CJEU Court of Justice, Europemballage Corporation and Continental Can Company Inc. v Commission,
ECLI:EU:C:1973:22, Case 6/72 [1973] ECR 215, [1973] CMLR 199, 21 February 1973.
93
94
Geradin (2010), p. 4-5.
95
15
of EU competition law, rather it serves to protect the competition process as a whole,
even it might lead to foreclosure of (small) firms.96 Moreover, it is conceivable that rival
firms might face foreclosure simply due to lack of consumer interest in their products,
without any anti-competitive behaviour by the dominant undertaking being involved.
Therefore, it would be incorrect to exclusively lay the blame on the dominant
undertaking for every foreclosure.97 As part of the EU Commission’s shift from a form-
based approach to an effects-based approach, it now plays closer attention to actual
adverse economic effects caused by alleged abuses of dominance in its application of
Article 102 TFEU. The Commission’s Guidance on Article 102 TFEU Enforcement
Priorities likewise reflects this shift in approach. The Commission has made it clear
that it will only intervene in the market when there is “cogent and compelling” evidence
for actual anti-competitive foreclosure effects. Paragraph 20 of the Guidance lays down
the factors on the basis of which the Commission decides whether to intervene or not.
Relevant factors are: the position of the dominant undertaking, that of its competitors
and that of its customers, the extent of the putative abusive behaviour, the market
conditions and the strength of evidence of actual foreclosure. What is quite surprising
is that no specific mention is made of consumer welfare as a relevant factor, all the
more so given that consumer welfare is the single most important objective of EU
competition law.
Looking at the actual decisional practice of the Commission, one may genuinely
wonder whether it applies the law in a consistent manner. Given the Commission’s
recent shift towards an effects-based approach, one may reasonably expect its
decisions to reflect such a change of mind. However, nothing is more true. Recent
decisions, such as Intel (2009), raise serious doubts as to whether the Commission’s
practice is consistent with its newly-assumed approach. The Commission declared in
Intel that “for the purposes of establishing an infringement of Article [102 TFEU], it is
not necessary to demonstrate that the abuse in question had a concrete effect on the
markets concerned”.98 One cannot but conclude that this statement flatly contradicts
the effects-based approach which the Commission had presumably shifted towards.
A major problem with the application of Article 102 TFEU lies in the fact that it does not
make sufficiently clear as to where to draw the line between pro-competitive and anti-
competitive behaviour. This might lead to two types of errors which the Commission
will inevitably fall into: false positives (type I errors) and false negatives (type II errors).
The first refers to the Commission incorrectly concluding that a certain type of conduct
is abusive, while in reality it is not, thus harming both the undertaking in question and
consumers alike. The law in this case is over-inclusive. Similarly, the law can also be
under-inclusive: the Commission erronously assumes that anti-competitive behaviour
96
And more clearly in paragraph 6 of the Guidance: “[T]he Commission is mindful that what really matters is protecting an effective competitive process and not simply
protecting competitors. This may well mean that competitors who deliver less to consumers in terms of price, choice, quality and innovation will leave the market.”
Paragraph 23 of the Guidance further adds: “[T]he Commission will normally only intervene where the conduct concerned has already been or is capable of hampering
competition from competitors which are considered to be as efficient as the dominant undertaking”. While critics argue that the Guidance lacks the force of law, the view is
confirmed in CJEU case law as well, for example in Deutsche Telekom, paragraph 177: “Article [102 TFEU] prohibits a dominant undertaking from, inter alia, adopting pricing
practices which have an exclusionary effect on its equally efficient actual or potential competitors.”
97
Rato & Petit (2013), p. 49.
98
Commission Decision of 13 May 2009, COMP/37-990 Intel, available at http://ec.europa.eu/competition/sectors/ict/intel.html, at § 922.
16
is not abusive, thus benefiting the abusive dominant undertaking while harming
consumers.
3.6 Inter-state trade criterion

The EU competition rules are only applicable if the trade between Member States is
affected, as per 102 TFEU. The Commission and the CJEU have interpreted the inter-
state trade criterion broadly. Nevertheless, only appreciable or noticeable effects fall
under this clause. It is not necessary that these effects are actual, rather what is meant
is that abusive behaviour by a dominant undertaking is capable of producing such
effects in violation of 102 TFEU. In this regard, the overall impact of effects is assessed.
Furthermore, “trade” is a wide concept term encompassing every sort of economic
activity with a cross-border element and not just the exchange of goods and services.
The Commission’s Guidelines on inter-state trade explicate the phrase “may affect
trade” as: “possible to foresee, with a sufficient degree of probability […] that the […]
practice may have an influence, direct or indirect, actual or potential, on the pattern of
trade between EU Member States”. Moreover and putting exceptions side, small and
medium-sized undertakings are rarely considered as being capable of affecting the
trade between EU Member States.99 As a rule of thumb, Article 102 TFEU is not
applicable if the aggregate market share of the undertaking in question does not
exceed 5 per cent and its total turnover is under € 40 million. Finally, what is quite
striking is that EU competition rules may apply to undertakings outside the territory of
the EU, if their (adverse) practices lead to effects within the internal market of the
European Union.
3.7 Defences
Undertakings that are being investigated by the Commission under Article 102 TFEU
on account of alleged abusive behaviour relating to their dominant market position can
put forward several defences that could justify their impugned practices. As mentioned
earlier, while Article 101(3) TFEU explicitly mentions possible grounds for justification,
the formulation of Article 102 TFEU lacks such grounds. The Commission came to the
realisation that something along the lines of the exceptions of Article 101(3) TFEU is
also needed when it comes to Article 102 TFEU. This led to the incorporation of similar
exceptions in the Guidance on Article 102 TFEU. Thus, the notion of objective
justification made its entry. Paragraph 28 of the Guidance expounds on this notion: a
dominant undertaking may put forward “that its conduct is objectively necessary or that
it produces substantial [economic] efficiencies that outweigh any anti-competitive
effects on consumers”. An additional condition is that the undertaking’s conduct must
be proportionate. Examples of objective justification are health and safety
considerations. More importantly, Paragraph 30 outlines four cumulative conditions
which must be met before any efficiency defence can succeed: 1) the efficiencies are
“likely to be realised”, 2) the impugned conduct must be indispensable to achieve the
efficiencies, 3) the efficiencies’ positive effects must outweigh their negative effects
99
European Commission’s Guidelines on the effect on trade concept contained in Article 101 and Article 102 TFEU (or: Guidelines on inter-state trade), para 50.
17
with regard to competition and consumer welfare and finally 4) the conduct may not
lead to the elimination of effective competition in its entirety. The burden of proofs rests
solely with the undertaking being investigated.100 Examples of efficiencies are quality
improvement of goods and production cost reduction.101 The CJEU in its case law has
affirmed the Commission’s stance on the permissibility of such efficiencies. One fairly
recent example would be the case of Lélos102 (2008). Thus, the principles of objective
justification and proportionality have become firmly part of every Article 102 TFEU
analysis.
4. Shortcomings of Article 102 TFEU

No discussion of Article 102 TFEU is complete without taking into consideration its
many shortcomings and lacunae, both in law and practice. One major criticism on
Article 102 TFEU is that it is not suitable for fast-moving and dynamic markets such as
the EU digital sector (of which Google is part of).103 The European Parliament has
recently acknowledged this in its Annual Report on EU Competition Policy104 and
recognised the need for review of EU competition law, including Article 102 TFEU. 105
See furthermore chapter 5.
A second major criticism directed at 102 TFEU is with regard to its formalistic and
legalistic manner of application, in particular by the CJEU. Such a form-based
approach is said to be entirely at odds with sound economic principles106, since it
places much greater emphasis on the form of a certain conduct by an undertaking
rather than on its actual (adverse) effects on the competition process.107 In line with
the modernisation of Article 101 TFEU in recent years,108 the Commission similarly
endeavoured to modernise Article 102 TFEU in order to realise a more economically
sound application of this Article. The culmination of the Commission’s efforts was the
Guidance. Despite the Commission’s efforts, Article 102 TFEU is still perceived as
being insufficiently aligned with economics. One way through which the much-criticised
formalism is illustrated is by the rather dogmatic adherence to per se rules for a wide
range of economic practices, without due regard to the facts of a particular case. Such
per se rules entail that certain categories of (allegedly abusive) economic practices by
undertakings always lead to the finding of abuse of dominance, regardless of the actual
or likely adverse economic effects (read: anti-competitive foreclosure effects) that the
impugned practices may have on the competition process.109 A clear example of the
CJEU applying a per se rule can be found in Michelin II where the Court said: “It is
apparent from a consistent line of decisions that a loyalty rebate […] is contrary to
100
Guidance, para 31.
101
Guidance, para 30.
102
CJEU Court of Justice Lélos Cases C- 468/06 etc Sot. Lelos kai Sia EE v GlaxoSmithKline AEVE Farmakeft ikon Proionton ECLI:EU:C:2008:504 [2008] ECR I- 7139,
[2008] 5 CMLR 1382, para 50. It reads: “the Court stated that, although the fact that an undertaking is in a dominant position cannot deprive it of its ri ght to protect its own
commercial interests if they are attacked, and that such an undertaking must be conceded the right to take such reasonable steps as it deems appropriate to protect those
interests”.
103
European Parliament, Briefing, Google antitrust procedures: digital business and competition (July 2015), p. 7.
104
European Parliament, Annual Report on EU Competition Policy (2014/2158(INI)), Committee on Economic and Monetary Affairs, Rapporteur: Morten Messerschmidt,
<www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+REPORT+A8-2015-0019+0+DOC+XML+V0//EN>, para. 44, retrieved on: 25 June 2016.
105
European Parliament, Briefing, Google antitrust procedures: digital business and competition (July 2015), p. 6-7.
106
107
Geradin (2010), p. 2.
108
Geradin (2010), p. 2.
109
18
Article 102 TFEU”. Earlier, the 2009 Intel110 case was mentioned in which the
Commission similarly showed a tendency towards per se rules.
The genuine concern that has been voiced by many is whether the Commission will
comply with its own Guidance and distantiate itself from the much-criticised form-based
approach, or whether it be tempted to fall back on its historical tendency towards a
legalistic and formalistic approach of Article 102 TFEU.111 Surely the Commission has
plausible reasons to do so, as it would make its decisions de facto “appeal-proof”, since
the CJEU would most likely uphold its decision in line with the CJEU’s own overly
formalistic and legalistic case-law.112 As Geradin points out, should the Commission
indeed fall into temptation, it would be highly problematic for two reasons. 113 Firstly,
this would clearly disincentivise the Commission to carry out a serious and sincere
effects-based analysis, as such applying such a rigorous analysis is not required to win
a case on appeal.114 Secondly, a form-based approach by the Commission would
surely put undertakings and firms at a significant disadvantage, since the CJEU almost
certainly tends to side with the Commission in cases in which the latter “finds” an abuse
of dominance.115, 116 Such course of events would entirely negate the lofty objectives
of the Commission’s Guidance by which it had sought to fuse law and economics in
the application of Article 102 TFEU.117 However, since the Commission cannot make
law and merely enforces the law, it is dependent on the CJEU to affirm its decisions
on Article 102 TFEU.118 As such, the obvious solution for the Commission would be to
henceforth justify its Article 102 TFEU-findings exclusively on the basis of actual and
demonstrable anti-competitive effects and to clarify its stance to the CJEU that it does
so believing that the CJEU’s old case law is out of touch with modern, more
economically sound notions regarding the enforcement of EU competition law. 119
Nevertheless, the suggested effects-based analysis is not free from criticism either.
Critics have pointed out that that such an analysis requires the irrefutable
demonstration of anti-competitive effects on the basis of a high standard of evidence
that is hard to meet, thus hampering the effective application of Article 102 TFEU. 120
Be it as it may, one thing is certain: the current dissonance between the Commission
and the CJEU is untenable in the long term as it creates legal uncertainty for all those
involved, especially firms and their legal advisers. 121 The urgency of the matter is
further underlined by the significant rise of cases brought against undertakings under
Article 102 TFEU in recent years.122 Concludingly, while it seems that a gradual shift is
taking place towards effects-based analysis,123 it remains to be seen how far the
110
Commission Decision of 13 May 2009, COMP/37-990 Intel, available at http://ec.europa.eu/competition/sectors/ict/intel.html, at para 922: “For the purposes of establishing
an infringement of Article [102 TFEU], it is not necessary to demonstrate that the abuse in question had a concrete effect on the markets concerned.”
111
Geradin (2010), p. 2, 12.
112
Geradin (2010), p. 12.
113
Geradin (2010), p. 14.
114
Geradin (2010), p. 14.
115
Geradin (2010, p. 14.
116
Geradin (2010), p. 2 - According to Neven, the Commission has a 98% success rate in Article 82 cases, DG COMP Chief Economist D. J. Neven, “Competition Economics
and Antitrust in Europe”, 21(48) Economic Policy (2006) 741, 761–2. Evans and Padilla point out that the Commission has not lost a single Article 82 appeal on substance
in twenty years. See C. Ahlborn and D. Evans, (2009) 75 Antitrust Law Journal, 887.2
117
Geradin (2010), p. 14.
118
119
Geradin (2010), p. 14.
120
121
122
123
19
Commission is willing to go in applying its Guidance, given the fact that the CJEU case
law provides it with a guaranteed “easy win”.124
Aside from the formalistic approach towards Article 102 TFEU both in law and practice,
the Article has been criticised for several other reasons. It has been said that Article
102 TFEU discriminates against, or at least puts at a clear disadvantage, larger, more
efficient firms that have managed to attain a dominant position in the market.
Competitive acts (such as bundling) for which dominant firms are often castigated by
the Commission are considered to be perfectly legal for smaller, often less efficient,
firms. The disadvantageous position of large, dominant firms is further exacerbated by
the fact that both the Commission and CJEU are more concerned about false negatives
rather than false negatives, thus benefitting further “bad” anti-competitive – small –
firms while harming consumers. Besides, efficiencies often contribute towards
consumer welfare, since it allows firms to reduces prices.125
Moreover, legal commentators have repeatedly criticised the Commission for its
“unduly interventionist” approach towards undertakings on the basis of Article 102
TFEU. They argue that such unnecessary, regular interventions by the Commission
destabilise the market and distort the competition.126 In addition, legal scholars
lambaste the CJEU’s for approaching Article 102 TFEU on a case by case basis, while
failing to provide any general conclusions regarding its application or exact scope.
Such a case by case approach creates futher legal uncertainty. Furthermore, the
Commission in its Guidance and the CJEU in its case law seem to favour the notions
of “normal competition” or “competition on the merits”. The legitimate concern that is
repeatedly aired is whether such notions are workable or practical. In other words:
does such vague terminology lends itself to translation into administrable rules suitable
for direct application by competition authorities, courts, legal professionals and
undertakings.127 To make matters worse, the Guidance itself, unlike its name suggests,
offers but little guidance to undertakings and their advisers in terms of what to expect
from the Commission.128 It contains numerous caveats and exceptions and it does not
provide any “safe harbours” for undertakings willing to self-assess their conduct, thus
adding to their legal uncertainty.129 Lastly, Comono rightly points out that the very broad
wording of Article 102 TFEU allows various interpretations to be made, as a result of
which the threshold for the Commission to “find” an abuse of dominance is significantly
lowered.130
5. The (EU) digital sector and its characteristics
The American tech giant Google is one of the major players in the (EU) digital sector.
It stands accused of infringement of Article 102 TFEU. However, what makes the EU
Commission’s investigation into Google’s business practices so interesting is that the
inadequacy of Article 102 TFEU is nowhere as evident as in the (EU) digital sector.131,
124
Geradin (2010), p. 14.
125
126
127
128
Geradin (2010), p. 10.
129
Geradin (2010), p. 10-11.
130
131
Kusters (2014), p. 2.
20
132 The primary reason for this is the digital sector’s highly dynamic and fast-paced
nature, as opposed to “traditional” static sectors.133 Various labels are used to describe
this sector: high-technology industry, innovative industry, technology-enabled market,
the New Economy.134 Throughout this thesis, this segment of the market shall be
referred to as the digital sector. First, what exactly falls under the digital sector? This
sector mainly consists of firms which are active in the field of (tele)communications,
internet, software, information and technology.135, 136 The digital sector has several
distinct characteristics that do not lend themselves for application under Article 102
TFEU.137, 138 Below, the focus shall be on some of the most important characteristics
of the digital sector.
5.1 Rapid innovation

The digital sector is driven by continuous and rapid innovation. As a result of this
innovation, the digital sector is defined by rapid technological advancements. 139 This
in turn leads to new products and platforms on a regular basis.140 This fast-paced
innovation significantly contributes to the highly dynamic nature of the digital sector.
As one could imagine, regulating such a fast-paced sector is becoming increasingly
difficult.141 The law is in danger of lagging behind day-to-day practice. The position of
dominant firms in this sector considerably differs from dominant firms in the more
“traditional” sectors or markets. Dominant firms in the digital sector simply cannot afford
– not – to continuously innovate, irrespective of how dominant they might be. If they
cease to innovate, they will be simply replaced by other firms. As such, the main
competitive constraint that (dominant) firms in the digital sector experience is the fact
that they have to be constantly watchful of rival firms introducing new and superior
products and technologies in the market, the time of introduction being highly
unpredictable and mostly unexpected142. Should rival firms succeed in doing so,
consumer demand for the (dominant) firm’s products will collapse and it will be forced
out of the market.143 In order to keep ahead in terms of innovation, (dominant) firms
are forced to constantly invest in R&D.144 Accordingly, Alphabet (Google’s parent
company) spent almost 17% of its total revenues on R&D alone this year. 145, 146 Not
only that, existing (dominant) firms also face the constant danger of potential rival firms
entering the market.147 Entering the digital sector/market in itself is not difficult; what is
rather difficult is to survive in this highly dynamic and fast-paced sector.148 The primary
barriers to entry faced by potential firms in this sector are scale economies and network
132
Verhaert (2013), p. 38.
133
Verhaert (2013), p. 38-39.
134
Rato & Petit (2013), p. 1.
135
Verhaert (2013), p. 8.
136
Kusters (2014), p. 6.
137
Kusters (2014), p. 2.
138
Verhaert (2013), p. 45.
139
Verhaert (2013), p. 89.
140
Verhaert (2013), p. 89.
141
Verhaert (2013), p. 14.
142
European Parliament, Directorate General for Internal Policies, Policy Department A: Economic and Scientific Policy,
Challenges for Competition Policy in a Digitalised Economy, IP/A/ECON/2014-12, PE 542.235 (July 2015), p. 24.
143
Verhaert (2013), p. 45.
144
Verhaert (2013), p. 89.
145
Shira Ovide, Google Cheats on Diet with R&D (Bloomberg Gadfly, 9 May 2016), <www.bloomberg.com/gadfly/articles/2016-05-09/google-cheats-on-its-spending-diet-
with-r-d-splurge>, retrieved on: 25 June 2016.
146
Verhaert (2013), p. 14.
147
Verhaert (2013), p. 43-44, 46, 56.
148
21
effects149 and the high costs involved with entering and innovation. 150 Typical
constraints felt by (dominant) firms in “traditional” sectors, such as pricing and other
constraints based on the existing market situation, do not apply in the digital sector. 151
The rapid innovation in the digital sector also constantly redefines the boundaries of
the (relevant) market or even create new (relevant) markets.152 The challenges of ever-
changing boundaries are particularly noticeable with regard to the application of EU
competition law in this sector.153 How do you define a market which is continuously
being redefined?154 How must one determine dominance in the digital sector?155
Legitimate questions that lack clear-cut answers. In the digital sector, market share in
itself is not sufficient to determine market power.156, 157 This is because innovation that
takes place outside the relevant market can still affect the market and thus it must be
taken into account.158 With regard to innovation in the digital sector, the EU
Commission stated as follows in its Microsoft/Skype decision159: “The innovation cycles
in these markets are short. […] Innovators generally enjoy [only] a short lead in the
market”.160 The European Parliament has suggested that EU competition law in the
EU digital sector should primarily focus on the “potential forces of innovation, entry and
contestability”.161
5.2 Network effects

A second inherent characteristic of the digital sector is its network effects. Network
effects arise when increasingly more individuals make use of certain goods or services
as a result of which the value of these goods and services is increased.162 Consumer
or user demand is triggered once the network reaches a certain number of users. There
are two types of network effects: direct and indirect.163 Direct network effects occur
when users interact with each other.164 The usefulness of the network is increased
when significant number of users join the network. 165 The primary example would be
social networks.166 Indirect network effects occur when a particular network’s appeal
is increased for potential users outside the network due to its high rates of usage,
indirectly benefiting the already existing users.167 An example would be a fax
machine.168 A fax machine’s value is increased when more people own one, since fax
owners then have the ability to communicate with more users.169 Google’s Android
operating system (OS) and its Google Apps suite are likewise characterised by indirect
network effects. The value of Google’s Android OS and Apps suite increase in
149
Verhaert (2013), p. 39.
150
Verhaert (2013), p. 85, 89.
151
Verhaert (2013), p. 39.
152
153
Ibid, p. 49.
154
Ibid, p. 49.
155
Verhaert (2013), p. 89.
156
Competition Policy in the Digital Economy, European Policy Information Center EPIC (17 April 2015), p. 1-2.
157
Neither is market share in itself the only determinator of market power in all other sectors, See Whish & Bailey, p. 26, 28, 42, 45-46, 181.
158
159
European Commission Decision Microsoft/Skype, Case No Comp/M.6281, 7 October 2011, para 83.
160
Koerber (2014), p. 16.
161
162
Verhaert (2013), p. 17.
163
Ibid.
164
Ibid.
165
Ibid.
166
Ibid.
167
Ibid.
168
Ibid.
169
Ibid.
22
proportion to their rates of usage. Manufacturers and developers tend to choose
platforms that allow them to reach the largest audience. This in turn leads to significant
improvements of these platforms in terms of technology, availability and consumer
choice, thus making these platforms the most attractive to consumers/end-users.
Network effects in the digital sector tend to contribute towards a high market
concentration.170 This is due to what is known as the “first-mover advantage”.171 Such
an advantage occurs when there is a significant increase in the popularity and usage
rates of the network platform developed by the first firm to enter a new market.172 As a
result, potential entrants would face significant difficulties in challenging the position of
the (now) dominant firm.173 Hence, the first-mover advantage is crucial in obtaining a
leading market position.174 In such a context, the competition process is often decided
by a “winner-takes-all” outcome.175
Network effects, particularly when combined with economies of scale, are considered
to be powerful barriers to entry by potential rival firms since the combination of both
allows a single firm to obtain a large market share at negligible costs. 176 Network
effects likewise play a prominent role in the Google Android case: Google’s Android
OS platform and its Google Apps suite seems to exhibit similar network effects.
Concludingly, the network effects often found in the digital sector contribute
substantially to the sector’s dynamics.177
5.3 Economies of scale

Closely linked to network effects are economies of scale. Firms in the digital sector
significantly benefit from economies of scale as it allows them greater returns: the
higher the output and sales, the lower the average unit cost.178, 179 Just as network
effects, economies of scale are considered to be barriers to entry in a market by
potential new firms.180 Nevertheless, it has been argued that since economies of scale
lead to production cost reduction, this reduction might be translated into lower prices
for consumers, thus contributing towards consumer welfare.181 Finally, it is worth
mentioning that economies of scale play a huge role in the economic activities of
Google, and possibly in the Google Android case as well. On its Official Blog, Google
reveals that it purchases computer parts in “massive quantities”, that it minimises the
use of unnecessary components and that uses the optimal ratio of staff to machines to
operate its servers.182
170
Challenges for Competition Policy in a Digitalised Economy, IP/A/ECON/2014-12, PE 542.235 (July 2015), p. 7-8.
171
Ibid.
172
Ibid.
173
Ibid.
174
Ibid.
175
Ibid.
176
Verhaert (2013), p. 19.
177
178
Verhaert (2013), p. 19.
179
O’Donoghue & Padilla (2006), p. 122.
180
Verhaert (2013), p. 39.
181
Jim Riley (Economist), Economies of scale (2016), <www.tutor2u.net/business/reference/economies-of-scale>, retrieved on: 25 June 2016.
182
Jeremy Milo (Google Apps Marketing Manager), Google Apps and the cloud: Maximum economies of scale (Google for Work
Official Blog, 20 April 2010), <googleforwork.blogspot.nl/2010/04/google-apps-and-cloud-maximum-economies.html>, retrieved
on: 25 June 2016.
23
5.4 High fixed and low marginal costs
The digital sector is furthermore defined by high fixed costs and low marginal costs. 183
Fixed costs are those costs that firms always have to incur in order to produce or
provide (such as buying or renting land on which a factory is going to be build).184 Fixed
costs always remain the same, regardless of the amount of goods or services that a
firm produces or provides.185 A separate category of fixed costs are sunk costs: these
are incurred costs that, unlike the other fixed costs, that cannot be recovered (such as
advertising expenditure).186 Marginal costs are costs that firms incur for the production
of “an additional unit of output”.187 In the digital sector, new firms in any given market
are required to make significant investments (R&D costs) in order to develop and
introduce new and innovative products into that market.188 Once a firm has succeeded
in doing so, the additional costs of reproducing the products are insignificant.189 In other
words: “the products are costly to produce but cheap to reproduce”.190
An example would be the development of a online search engine. 191 To set it up,
massive fixed costs are involved, such as for the server infrastructure and research
and development, but the marginal costs (displaying search results) afterwards are
negligent.192 The high fixed and sunk costs required for market entry tend to lead to a
high market concentration in the digital sector.193 However, a more nuanced view is
necessary in the context of the Google Android case, since it seems that the fixed costs
or sunk costs involved are relatively low.194 Koerber argues that the development and
creation of a new mobile operating system and/or mobile app(lications) is far less
expensive and significantly more easier than creating a PC operating system or
program.195 According to Koerber, this is so because mobile operating system (OS)
developers are not required “to start from scratch” in order to build a new mobile OS,
as they can freely utilise Google’s Android open-source code and create unofficial
modified (“forked”) versions of Google’s Android OS.196 Koerber substantiates his
argument further by pointing out that numerous new mobile OS (mostly based on
Google’s Android OS) have been introduced in the market by Google’s rivals and that
millions of mobile apps by various developers are available to consumers for download
on Google’s Play Store.197
5.5 No lock-in effects and switching costs

The digital sector tends to exhibit another peculiar characteristic: consumers or end-
users can easily switch from digital platforms and networks while barely incurring
183
Verhaert (2013), p. 14-15.
184
185
186
187
Whish & Bailey (2012), p. 716-717.
188
Verhaert (2013), p. 89.
189
Verhaert (2013), p. 89.
190
Kusters (2014), p. 12.
191
Verhaert (2013), p. 14.
192
Verhaert (2013), p. 14.
193
Verhaert (2013), p. 89.
194
Koerber (2014), p. 19.
195
Koerber (2014), p. 19.
196
Koerber (2014), p. 19.
197
Koerber (2014), p. 19.
24
switching, if any.198, 199 An example would be a online search engine or mobile apps:
users constantly switch between different providers without incurring any switching
costs.200 This suggests that lock-in effects are entirely absent in the digital sector since
users are “one click away” from accessing rival platforms, networks and search
engines and since they are not restrained from switching in terms of costs. 201, 202 In
addition, price is hardly a reliable indicator in the digital sector,203, 204 given that most
digital firms freely distribute their (software) products and instead mainly generate
revenue from advertisements205, thus further indicating that neither lock-in effects nor
switching costs play any major role in the digital sector.206 Nonetheless, other
commentators contend that switching in the digital sector entails all sorts of other non-
financial costs, such as loss of time, convenience, acquaintance etc.207 Assuming that
lock-in effects and switching costs are not present in the digital sector, one could further
argue that there are no barriers to entry for potential firms in this sector.208 Indeed, one
could point to the rapid decline of Microsoft’s once dominant Internet Explorer PC
browser following the introduction of Mozilla Firefox,209 or to the demise of Myscape,
once the most visited social networking site, after Facebook made its entry.210, 211 With
regard to the Google Android case: it seems that lock-in effects and switching costs
are similarly absent for users of Google’s products/services, since users can freely
switch between operating systems and mobile apps without incurring additional costs.
5.6 Interoperability
Interoperability (or compatibility) refers to “the ability of a system or product to work
with other systems or products, without special effort on the part of the customer”.212
The need for interoperability is another key aspect of the digital sector. 213 The digital
sector is characterised by a high degree of technical complexity. This in turn
necessitates various standard-setting activities in order to prevent the fragmentation
and incompatibility of the plethora of digital systems, platforms and products214 and to
ensure a smooth day-to-day operation of the whole industry.215 Interoperability allows
competitors to effectively compete with well-established and dominant undertakings216
and prevents lock-in effects at both sides of any given digital platform, while a lack
thereof would prevent users from switching effortlessly between different platforms or
products.217 In its recent briefing on the Google Android case, the European Parliament
198
Verhaert (2013), p. 85, 90.
199
Rato & Petit (2013), p. 6.
200
Verhaert (2013), p. 85.
201
Verhaert (2013), p. 85, 90.
202
Rato & Petit (2013), p. 6.
203
Verhaert (2013), p. 39
204
European Parliament, Directorate General for Internal Policies, Policy Department A: Economic and Scientific Policy
Challenges for Competition Policy in a Digitalised Economy, IP/A/ECON/2014-12, PE 542.235 (July 2015), p. 56-57.
205
Rato & Petit (2013), p. 50.
206
Rato & Petit (2013), p. 6.
207
Rato & Petit (2013), p. 5.
208
Verhaert (2013), p. 85.
209
Rato & Petit (2013), p. 6.
210
211
Koerber (2014), p. 15.
212
Maraget Rouse, Definition Interoperability (TechTarget Network, SearchSOA, April 2006),
<searchsoa.techtarget.com/definition/interoperability>, retrieved on: 25 June 2016.
213
Kusters (2014), p. 2.
214
Carl Mair (PhD candidate), Paranoid Android: EU Commission vs. Google’s mobile Android OS (Universiteit Leiden Law Blog, Interdisciplinary Study of the Law, 21
April 2016), <leidenlawblog.nl/articles/paranoid-android-eu-commission-vs.-googles-mobile-android-os>, retrieved on: 25 June 2016.
215
Kusters (2014), p. 13.
216
Kusters (2014), p. 48.
217
25
stressed the need for interoperability and open standards for ensuring fair competition
in the digital sector.218 In addition, the EU Commission and CJEU likewise have
underlined the crucial role of interoperability in the digital sector: it attracts innovation,
brings down costs, stimulates competition and allows a maximum number of firms to
enter the market.219 In the digital sector, dominant undertakings might even be required
to supply their rivals with interoperability information in order to secure their ability to
compete effectively.220 Dominant undertakings refusing to do so, might be found guilty
of abusing their dominant position.221
5.6.1 Interoperability and the Microsoft case (2007)

The CJEU’s stance on the matter of interoperability is unmistakable. In its 2007
Microsoft222 judgment, the Court unequivocally condemned Microsoft’s refusal to
supply (license) interoperability information to software developer Sun
Microsystems.223 The Court held that the interoperability information which Microsoft
refused to share was indispensable for Sun Microsystems’ ability to effectively
compete on the neighbouring market of work group servers (not operating systems). 224
Without the vital interoperability information, Sun Microsystems’ work group servers
were unable to interact with Microsoft’s ubiquitous Windows operating system, as a
result of which Sun Microsystems feared it would lose many clients.225 The CJEU was
particularly harsh in its condemnation as it ruled that Microsoft’s refusal was contrary
to Article 102(2)(b) TFEU and directly prevented the introduction of new products
(group servers) on the market, products for which there was potential consumer
demand.226 The Court’s ruling was unforgiving as it additionally held that Microsoft’s
conduct limited “technical development to the prejudice of consumers” under Article
102(2)(b) TFEU.227 Thus, Microsoft was found to be guilty of the abuse of dominance
under Article 102 TFEU (more specifically vertical interoperability abuse228).
5.6.2 Interoperability and the Google Android case

In the context of the Google Android case, the benefits of interoperability for software
developers and consumers are apparent: software developers wish to reach as many
consumers as possible for their operating systems and mobile applications, while
consumers obviously want their Android devices to be compatible with as many mobile
applications as possible.229 What makes the above-mentioned 2007 Microsoft case all
the more interesting is that there seems to be a striking parallel between that case and
the current Google Android case. Google’s Android mobile OS platform is, unlike
Microsoft’s Windows PC OS platform, in essence an open-source project.230
218
219
Kusters (2014), p. 48.
220
Kusters (2014), p. 48.
221
Kusters (2014), p. 48.
222
CJEU General Court Microsoft v Commission ECLI:EU:T:2007:289, Case T-201/04 [ 2007] ECR II-3601, 17 September 2007.
223
CJEU General Court Microsoft v Commission ECLI:EU:T:2007:289, Case T-201/04 [ 2007] ECR II-3601, 17 September 2007, paras 332, 643, 648.
224
CJEU General Court Microsoft v Commission ECLI:EU:T:2007:289, Case T-201/04 [ 2007] ECR II-3601, 17 September 2007, para 332.
225
Kusters (2014), p. 55.
226
CJEU General Court Microsoft v Commission ECLI:EU:T:2007:289, Case T-201/04 [ 2007] ECR II-3601, 17 September 2007, paras 332, 643.
227
CJEU General Court Microsoft v Commission ECLI:EU:T:2007:289, Case T-201/04 [ 2007] ECR II-3601, 17 September 2007, para 648.
228
Kusters (2014), p. 55.
229
Koerber (2014), p. 45.
230
Ron Amadeo, Google’s iron grip on Android: Controlling open source by any means necessary (ArsTechnica, 21 October 2013), p. 1,
<www.arstechnica.com/gadgets/2013/10/googles-iron-grip-on-android-controlling-open-source-by-any-means-necessary>, retrieved on: 25 June 2016.
26
Nevertheless, its source code includes both open and closed elements.231 Up to this
day, Google has refused to disclose the closed elements of Android’s open-source
code to manufacturers.232 This would have allowed them to develop competing non-
official Android operating systems by modifying (“forking”) Google’s Android OS.233 In
legal terms, Google’s refusal clearly amounts to refusal to supply full interoperability
information to competitors, while such information is essential (or in the CJEU’s
terminology: “indispensable”, see Microsoft case) for their ability to effectively compete
with Google’s official Android OS on equal footing. One notable difference between the
two cases is that, while Microsoft was guilty of vertical interoperability abuse, Google’s
refusal seems to instead amount to horizontal interoperability abuse.234 On a final note,
it is worth mentioning that not everyone agrees with the above considerations. More
specifically, there are some that side with Google with regard to the latter’s refusal to
supply full interoperability information to its rivals.235 They fear that, if Google were to
supply its rivals with full interoperability information, the market would be flooded with
competing Androids, leading to interoperability problems.236 Thus, they would rather
prefer Google maintaining a certain degree of control over its Android operating
system.
5.7 Multi-sided
Markets and platforms the digital sector are unique in the sense that they are often
multi-sided, while their counterparts in the more “traditional” sectors tend to be one-
sided.237, 238 This adds to the digital sector’s dynamics. Competition between firms in
these markets takes place in highly integrated digital platforms and synergies which
are interconnected through user data.239 The multiplicity of integrated digital platforms
creates mutual interdependencies between all sides and parties involved. 240 This
poses several challenges to EU competition law. First, it complicates the assessment
of market definition, as more than one market may be relevant.241 Determining exactly
which markets are relevant and which are not, is anything but straightforward. 242
Secondly, as mentioned earlier, using price as an indicator of market definition and
competitive constraints in the digital sector is a highly unreliable method, given that
most digital services and products are freely distributed.243, 244 The SSNIP test245,
which is the traditional test for assessing the substitutability of products and services,
does not apply when such goods and services are zero-priced.246 Obviously, the
231
Ibid.
232
Ibid.
233
Ibid, p. 1, 4.
234
Kusters (2014), p. 48-49, 55.
235
Carl Mair (PhD candidate), Paranoid Android: EU Commission vs. Google’s mobile Android OS (Universiteit Leiden Law Blog, Interdisciplinary Study of the Law, 21 April
2016), <leidenlawblog.nl/articles/paranoid-android-eu-commission-vs.-googles-mobile-android-os>, retrieved on: 25 June 2016.
236
Ibid.
237
238
De Streel (2008), p. 13.
239
240
Ibid, p. 52, 54.
241
Ibid, p. 54.
242
Ibid.
243
Ibid, p. 54, 57.
244
Rato & Petit (2013), p. 50.
245
SSNIP stands for “Small but Significant Non-transitory Increase in Price” and the SSNIP test is also known as the “hypothetical monopolist test”. The SSNIP test determines
product (demand-side) substitutability (or interchangeability) by considering a hypothetical scenario. Suppose a producer slightly increases the price of its main product, for
example widgets. Would consumers simply switch to buying similar products (other brands of widgets or even blodgets) from other producers to such an extent that it would
render the price increase unprofitable? If yes, then this indicates that the relevant product market includes all brands of widgets and even blodgets. The SSNIP test can also
be utilised for defining the relevant geographic market by asking the same question. See Whish & Bailey (2012), p. 31.
246
27
SNNIP test was never intended for the digital sector and its multi-sided markets, since
its results can only be relied upon in the context one-sided markets and single prices.247
Thirdly, the boundaries of digital markets tend to be highly dynamic and fluid since new
products and services are continuously being developed and subsequently introduced
in newly-created markets.248 Such fluid market boundaries do not lend themselves to
analysis or assessment by the Commission under EU competition rules.249 How do you
delineate markets that are ever-changing? Is it even possible to capture this kind of
dynamism in mere static laws? These considerations have led several authors to the
conclusion that the standard principles and methods of EU competition law are ill-
suited for the digital sector’s dynamic and multi-sided markets, since they fail to take
into account the strong interaction between the various sides in such markets.250 Such
strong interaction is likewise present in the Google Android case, since it involves
various actors that interact with each other: Google, manufacturers, software
developers and consumers. One author, Stylianou, has his own take on multi-sided
markets. Stylianou argues that firms operating in multi-sided markets not only compete
with each other but also benefit from each other.251 In his view, these firms interact
with each other on the basis of, to use his words, “coöperative relationships”. 252
Stylianou suggests that the Google Android case should be seen in the same light. 253
He argues that Google’s rivals in the operating systems and mobile applications
markets not only compete with Google, but simultaneously benefit from Google
through the use of its Android OS and Google Apps suite.254 The same is true for
Google: it both competes with and benefits from its rivals.255
6. Solutions for the (EU) digital sector:

The Google Android case is symptomatic of the shortcomings of Article 102 TFEU,
particularly in the context of the highly dynamic and fast-paced (EU) digital sector with
its own unique set of characteristics. Article 102 TFEU is in great need of a systematic
overhaul. I expect the Google Android case to continue for years to come, as the
Commission needed years in previous high-profile cases before it reached a final
decision, for instance in Microsoft I256.257 The unfortunate current state of EU
competition law and enforcement is such that, by the time the Commission at last
reaches a final decision, its decision is likely to have become wholly irrelevant, 258 given
the ever-changing market conditions in the digital sector.259 Indeed, a dominant
undertaking under investigation by the Commission for alleged abuse of dominance
might have long lost its dominant position by the time the Commission reaches its
decision.260 The stark contrast between the digital sector’s highly dynamic and fast-
247
Ibid.
248
Ibid, p. 54, 57.
249
Ibid, p. 57.
250
De Streel (2008), p. 13.
251
Stylianou (2016), p. 7.
252
Ibid, p. 1, 7.
253
Ibid, p. 7.
254
Ibid.
255
Ibid, p. 7, 8.
256
257
258
Verhaert (2013), p. 38.
259
Verhaert (2013), p. 96.
260
Verhaert (2013), p. 38.
28
paced nature and the Commission’s lenghty proceedings reveals the significant
weakness and ineffectiveness of EU competition law and enforcement. As Kochar
rightly points out, the fact that the Commission’s investigations take an extraordinary
amount of time, is evidence of Article 102 TFEU’s modernisation having failed.261 Even
the European Parliament seems to regret the slow pace of EU competition law
enforcement in its Annual Report on EU Competition Policy262.263
Several ideas have been put forward in order to solve the inadequacies of EU
competition law in the digital sector. One solution in particular has been regularly
proposed by various authors: sector specific regulation. It seems to be most promising
solution as well. Among others, De Streel suggests that an exception ought to be made
for the digital sector. Rather than applying EU competition law to the sector, it should
be governed by sector specific regulation, i.e. tailored rules specifically created to fit
the needs of the digital sector. In addition, the European Parliament has considered
the installation of a sector specific regulator for the EU digital sector. Moreover, the
authorities could benefit from the expertise of the sector specific regulator. Other major
advantages of sector specific regulation include its anticipatory (ex ante) character
which allows timely interventions and its system of ongoing monitoring. De Streel
argues that in order for sector regulation to effectively regulate the digital sector, it
should be based on the following “good governance principles”: “flexibility, objectivity,
transparancy, harmonisation, proportionality and legal certainty”. Furthermore, De
Streel proposes that sector regulation should be decoupled from traditional antitrust
principles and rather be based on new and independent economic concepts.
The European Parliament (EP) recently suggested several additional measures in

order to improve the effectiveness of EU competition law in the digital sector. Firstly, it
calls for the establishment of a platform based on the principles of cooperation and
wide participation, which allows various competition authorities to exchange of ideas
and insights among themselves and with the EU Commission. Secondly, it proposes
that external expert advisers, with expertise in the fields of EU competition law and
digital markets, should be regularly invited at meetings with the competition authorities
and the EU Commission, as they are best positioned to inform the authorities on the
latest technological and economic developments. Thirdly, the EP suggests more
closely involving the digital sector and its actors and stakeholders, so as to improve
the coordinative processes. Fourthly, the EP underlines the need for greater research
into the dynamic processes of the digital sector, as such research would allow EU
competition law to be more closely aligned with the practices of the digital sector.
Similarly, there have been increasing calls for the abandonment of the traditional,
clearly insufficient concepts in EU competition law and for the subsequent
development of new (economic) concepts and instruments which take into
consideration the distinguishing features of the digital sector. Lastly, the EP considers
261
Kochar (2015), p. 2.
262
European Parliament, Annual Report on EU Competition Policy (2014/2158(INI)), Committee on Economic and Monetary Affairs, Rapporteur: Morten Messerschmidt,
<www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+REPORT+A8-2015-0019+0+DOC+XML+V0//EN>, para. 45, retrieved on: 25 June 2016.
263
29
the introduction of an entirely “separate category of EU competition law provisions”
specifically aimed at the (EU) digital sector.
Kochar instead calls for the more effective use of existing instruments in EU
competition law. He envisages a greater role for Article 9 Commitments264 in particular.
He asserts that more frequent use of Article 9 Commitments by undertakings being
under investigation by the Commission, will save the Commission “lengthy and costly
procedural efforts […] in proving a traditional infringement”. Nevertheless, others are
more critical regarding the use of Article 9 Commitments. One major concern is their
lack of transparancy. Rato and Petit point out that Article 9 Commitments are neither
publicised or accessible by the general public, nor are they subject to any kind of
judicial review. Finally, Kochar also refers to alternative approaches of enhancing the
effectiveness of EU competition law: co-regulation and a specialised agency regulating
digital firms.265
7. The Google Android case

The EU Commission initiated its investigation into Google on 15 April 2015.266 As of
yet, the proceedings are still ongoing. Commission proceedings do not have any legal
deadline.267 The duration of the proceedings depends, among others, on the
complexity of the case, on the extent of cooperation between the undertaking under
investigation and the Commission and on whether any justifications or defences are
put forth by the undertaking in question.268 The Google Android case offers the
Commission, being the primary enforcer of EU competition law, an opportunity to
enuncidate its current stance on the correct implementation thereof.269 It will be of
particular interest to see how the Commission strikes the balance between the various
rights and objectives at stake: the rights of dominant undertakings on the one hand,
and the objectives of fair competition and consumer welfare on the other hand. 270
Should Google found be guilty of infringing Article 102 TFEU (abuse of dominance),
the EU Commission could impose a maximum fine of up to 10% of Google’s total global
revenue.271 Google’s total revenue in 2015 was $ 75 billion (or € 68,3 billion), so the
fine could cost Google $ 7,5 billion (or € 6,83 billion).272
The facts and legal bases of the investigations are very scarce: the Commission’s Fact
Sheet273 in which it announces the formal proceedings against Google consists merely
of two short pages, with only a few lines on the actual allegations that Google stands
accused of.274 As one could imagine, this leaves Google and all those to wishing to
scrutinise the case with regard to its proper legal bases with only guesswork. As long
264
The Council of the European Union, Regulation 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 (now 101 and 102 TFEU), Article 9.
265
Kochar (2015), p. 16.
266
2015), <europa.eu/rapid/press-release_MEMO-15-4782_en.htm>, p. 1, retrieved on: 25 June 2016.
267
Ibid, p. 2.
268
Ibid.
269
European Parliament Briefing, Google antitrust proceedings: Digital business and competition (July 2015) p. 1, 7.
270
Ibid.
271
Ibid, p. 3.
272
Ibid.
273
274
Ibid.
30
as the exact legal bases upon which the Commission’s allegations against Google rest
are not identified, one cannot properly assess their actual legal merits. 275 The legal
bases are key determinants that define the applicable standards and the scope of
analysis.276 The three allegations against Google seem to revolve around Article 102
TFEU and all three make mention of “hindering the development and market access
[of rivals]”,277 most likely alluding to Article 102(2)(b) TFEU. In this chapter, the
Commission’s allegations shall first be identified and translated into actual legal bases.
Afterwards, they shall be assessed from an EU competition law perspective. Below
shall follow a discussion of the three allegations upon which the Google Android case
rests.
7.1 The first and third allegations

The first allegation against Google should be read in connection with the third
allegation as both allegations relate to either tying or bundling:
1. “Whether Google has illegally hindered the development and market access of
rival mobile applications or services by requiring or incentivising smartphone
and tablet manufacturers to exclusively pre-install Google’s own applications or
services”.278
3. “Whether Google has illegally hindered the development and market access of
rival applications and services by tying […] certain Google applications and
services distributed on Android devices with other Google applications [and]
services […] of Google”.279
Both allegations are closely connected as they both condemn Google’s business
practices which result in either ties or bundles (packages). As regards the first
allegation, Google is accused of requiring manufacturers to exclusively pre-install
Google’s Apps suite on their devices, a practice which inevitably results in bundling,280
more specifically pure bundling.281 Pure bundling refers to the practice of selling two
products together without the possibility of buying them separately, while mixed
bundling refers to two products being sold separately and offered at a discount price
when bought together.282 The third allegation mentions tying. Tying refers to the
practice of requiring consumers of one product, the tying product, to also buy a second
product, the tied product (which they do not actually need).283 It seems that for the
manufacturers, Google’s Android OS is the tying product, while Google’s pre-installed
Apps suite is the tied product. One can certainly expect that manufacturers would want
to install their own apps on mobile Android devices rather than Google’s Apps suite.
The effects of tying and bundling are indeed so similar that they are often mentioned
together.284 Two main types of tying can be distinguished: contractual tying, whereby
275
276
Ibid.
277
2015), <europa.eu/rapid/press-release_MEMO-15-4782_en.htm>, p. 1, retrieved on: 25 June 2016.
278
279
Ibid.
280
281
282
Ibid.
283
Ibid.
284
Ibid.
31
the tie is based on a specific contractual obligation, and technical tying, whereby the
tied and tying products are physically integrated without the possibility to separate
them,285 as was the case in the Microsoft286 case.287 Based on the facts of the Google
Android case, it seems that the third allegation seems to be referring to technical tying:
Google’s Apps suite is tied with Android devices without the possibility of uninstalling
or removing the suite, since both products are physically integrated. While tying and
bundling are not explicitly mentioned in Article 102 TFEU, it is generally understood
that both practices fall within the ambit of Article 102(2)(d) TFEU which prohibits
subjecting contracts to unconnected supplementary obligations.288 It seems that
Google is indeed subjecting its contracts with manufacturers to unconnected
supplementary obligations by requiring manufacturers to pre-install its Apps suite on
their Android-run devices and by tying its Apps suite with their Android devices.
Not every practice amounts to tying and/or bundling. In its Microsoft289 case, the CJEU
provided four cumulative criteria that have to be met before a certain practice amounts
to tying/bundling.290, 291 Firstly, both (tied or bundled) products must be “separate” and
“distinct” products.292 Whether the tied or bundled products are to be considered as
separate and distinct products, primarily depends on consumer demand. 293 If
significant consumer demand separately exists for either one of the tied or bundled
products, then the tied or bundled products ought to be considered as separate and
distinct.294 Secondly, the undertaking in question must be in a dominant market
position in the relevant product market(s).295 Thirdly, consumers would have to be
deprived of their choice (coerced) to separately purchase one of the two products that
are tied/bundled.296 Fourthly, the impugned practice must lead to anti-competitive
foreclosure effects, i.e. foreclosing any meaningful and effective competition.297
All four criteria seem to have been met in the Google Android case. Firstly, needless
to say, consumers most likely do not regard Google’s Android OS to be a similar
product to Google’s Apps suite, but rather as clearly separated and distinct products.
As such, it is entirely conceivable that separate consumer demand exists for Android-
run mobile devices and/or for Google’s Apps suite.298 Secondly, having regard to
market share alone, it is highly likely that Google enjoys a dominant position in the
markets of operating systems and mobile applications. Based on the latest figures,
Google has a market share of over 80% in the global markets for smartphone and
tablet operating systems, while its closest rival, Apple, stands at a mere 13-14%.299, 300
285
Ibid.
286
287
288
Ibid, p. 690.
289
CJEU General Court Microsoft v Commission, ECLI:EU:T:2007:289, Case T-201/04 [ 2007] ECR II-3601, 17 September 2007.
290
CJEU General Court Microsoft v Commission, ECLI:EU:T:2007:289, Case T-201/04 [ 2007] ECR II-3601, 17 September 2007, paras 842, 844.
291
Rato & Petit (2013), p. 44-45.
292
Ibid.
293
Ibid, p. 45.
294
Ibid.
295
Ibid.
296
Ibid.
297
Ibid.
298
Ibid.
299
Global market share held by the leading smartphone operating systems in sales to end users from 1st quarter 2009 to 1st quarter 2016 (Statista, The Statistics Portal,
2016), <www.statista.com/statistics/266136/global-market-share-held-by-smartphone-operating-systems>, retrieved on: 25 June 2016.
300
Smartphone OS Market Share, 2015 Q2 (International Data Corporation (IDC), Analyse the Future, 2015),
<www.idc.com/prodserv/smartphone-os-market-share.jsp>, retrieved on: 25 June 2016.
32
Google enjoys similarly high market share rates in the global market for mobile
applications, both in term of available apps and in number of downloads: it has 2.2
million available apps while Apple only has 2 million301 and its apps are downloaded
twice as much as that of Apple (200 million versus 100 million). 302 However, as
repeatedly mentioned throughout this thesis, market share alone is not a sufficient or
reliable indicator of market power and dominance,303, 304 all the more so in the digital
sector.305 For it to be an accurate and reliable indicator, other relevant market
conditions have to be also taken into account.306 Thirdly, customers have to be
deprived of their choice (coerced) to separately purchase one of either tied/bundled
products, i.e. either Android OS or Google Apps suite.307 The fact that Google’s
Android OS and Apps suite are physically integrated, suggests that customers are
indeed deprived of such choice.308 Fourthly, it can be argued that Google’s alleged
tying/bundling practices lead to the foreclosure of any meaningful or effective
competition by its rivals (manufacturers) in the marketd for both operating systems and
mobile applications.309 Google stands accused of requiring (or incentivising)
manufacturers to pre-install its Google Apps suite on their Android-run devices and of
tying its Google Apps suite with their Android devices. It also requires manufacturers
to prominently display its Google Apps suite in the home screen of their Android
devices.310 As a result of such practices, it is very likely that only Google’s Apps will
attract the attention of customers, not because Google’s Apps are superior to those of
its rivals but simply because Google’s Apps are more easily accessible.311 It may very
well be that the mobile apps of Google’s rivals (the manufacturers) are left aside by
consumers for reasons of convenience, thereby financially hurting them. 312 As earlier
mentioned, the actual assessment of foreclosure effects by the Commission requires
a complex analysis of several factors which have been elaborated upon in the
Guidance.313, 314
To counteract the allegations of which it stands accused out, Google has at its disposal
several means. On the basis of the CJEU’s case law315 and the Commission’s
Guidance316, Google can resort to the doctrine of objective justification.317 Google may
contend that its practices are objectively justified and necessary. 318 More specifically,
it can argue that its tying and bundling practices produce (economic) efficiencies which
301
Number of apps available in leading app stores as of June 2016 (Statista, The Statistics Portal, 2016), <www.statista.com/statistics/276623/number-of-apps-available-in-
leading-app-stores>, retrieved on: 25 June 2016.
302
Ben Woods, Google Play has twice as many app downloads as Apple’s App Store in 2015 (The Next Web, February 2016),
<www.thenextweb.com/apps/2016/01/20/google-play-had-twice-as-many-app-downloads-as-apples-app-store-in-2015>, retrieved on: 25 June 2016.
303
Whish & Bailey (2012), p. 26, 28, 42, 45-46, 181.
304
305
306
307
Rato & Petit (2013), p. 45.
308
309
Rato & petit (2013), p. 45.
310
311
Ibid, p. 4.
312
Ibid.
313
314
315
CJEU General Court Microsoft v Commission, ECLI:EU:T:2007:289, Case T-201/04 [ 2007] ECR II-3601, 17 September 2007, paras 1144-1167.
316
exclusionary conduct by dominant undertakings (24 February 2009), paras 28-31.
317
318
exclusionary conduct by dominant undertakings (24 February 2009), paras 28-29, 31.
33
outweigh any potential anti-competitive foreclosure effects.319 However, under no
circumstances may these efficiencies cause net harm to consumers. 320 Reduction in
production and distribution costs are primary examples of such efficiencies. 321 There
is, however, one crucial condition attached to it: the benefit of these efficiencies have
to be passed on to consumers.322 Given that consumer welfare is the primary objective
of EU competition law,323 it is highly unlikely that the Commission would accept any
efficiency grounds on Google’s part when consumers would not benefit. 324 Moreover,
Google’s conduct must be proportionate and indispensable to the realisation of the
efficiencies.325 In addition, the efficiencies must be likely to be realised and Google’s
conduct must not lead to the elimination of all effective competition.326 The evidentiary
burden rests with Google.327, 328 Thus, it has to demonstrate that the tying/bundling of
its Google Apps suite to its Android OS will benefit consumers and increase consumer
welfare.329 For instance, Google could demonstrate that sufficient consumer demand
exists for both of its products.330 It could then argue that tying/bundling both products
is justified as it saves consumers unnecessary costs, since they can purchase both
products together, saving them transport costs.331 Additionally, Google may argue that
the efficiencies reduce production and distribution costs, allowing it to pass on the
reduction directly to consumers.332 Fortunately for Google, the Commission seems to
have acknowledged that tying and bundling are prevalent practices intended to
increase the quality of products and reduces their production costs to the benefit of
consumers.333, 334
7.2 The second allegation

The second allegation against Google reads:
“Whether Google has prevented smartphone and tablet manufacturers […] from
developing […] modified […] versions of Android on [their] devices, thereby illegally
hindering the development and market access of rival mobile applications or
services”.335
The legal basis of the second allegation against Google is quite clear. It appears that
Google is accused of engaging in (vertical) exclusive dealing agreements in relation to
manufacturers.336, 337 These agreements are capable of infringing Article 102 TFEU.338
319
Ibid, paras 28, 30.
320
Ibid, para 30.
321
Ibid, paras 30, 62.
322
Ibid.
323
Whish & Bailey (2012), p. 1-2.
324
325
Ibid, paras 28-29.
326
Ibid, para 30.
327
CJEU General Court Microsoft v Commission, ECLI:EU:T:2007:289, Case T-201/04 [ 2007] ECR II-3601, 17 September 2007, para 185.
328
Whish & Bailey (2012), p. 213, 696.
329
exclusionary conduct by dominant undertakings (24 February 2009), para 30-31.
330
Rato & Petit (2013), p. 45.
331
332
Ibid, para 30, 62.
333
Koerber (2015), p. 28.
334
335
European Commission – Press Release Fact Sheet, Antitrust: Commission sends Statement of Objections to Google on comparison shopping services (Brussels, 15
April 2015), <www.europa.eu/rapid/press-release_MEMO-15-4781_en.htm>, p. 1, retrieved on: 25 June 2016.
336
Stylianou (2016), p. 3, 4, 7.
337
338
34
There are two types of exclusive dealing agreements: exclusive supply agreements
and exclusive purchasing agreements.339 The former denotes an agreement which
restricts a supplier from supplying to anyone else save for one specific “downstream”
customer.340 The latter refers to an agreement by which a “downstream” customer is
prohibited from purchasing products from others aside from a specific supplier. 341
Google’s practice of prohibiting manufacturers from developing modified versions of
Google’s official Android OS, seems to amount to exclusive purchasing agreements
(by far the most common exclusive dealing agreements342). The specific supplier is
Google and the “downstream” customers are the smartphone and tablet
manufacturers. Google’s main fear is that these manufacturers succeed in developing
competing versions of Google’s official Android OS that are capable of becoming
successful alternatives to Google’s Android OS, potentially ousting Google from its
dominant position in the market for operating systems.343 The Commission’s primary
concern is that Google’s conduct might lead to anti-competitive foreclosure effects in
the market for operating systems, as manufacturers and developers are barred from
developing competing Android versions.344 Moreover, exclusive purchasing
agreements are either contractual or de facto.345 Google’s agreements with
manufacturers are clearly contractual, since manufacturers who wish to obtain
Google’s Apps, are contractually barred from developing modified versions of Google’s
official Android OS on the basis of the MADA346 and AFA347.348 Thus, the primary goal
of manufacturers is to get hold of Google’s widely popular Apps349 (Stylianou even
refers to Google’s Apps as “golden nugget”350), without also being contractually barred
from developing modified versions of Android.351 Given the popularity of Google’s
Apps352, most manufacturers acquiesce and sign the MADA and AFA in order to secure
their access to Google’s Apps.353
The CJEU’s case law suggests a per se approach towards exclusive purchasing
agreements.354 In Michelin II355, the Court seems to hold the view that exclusive
purchasing agreements by dominant firms automatically violate Article 102 TFEU.356 It
stated that: “[For a] customer to obtain his stock exclusively or almost exclusively from
an undertaking in a dominant position, is contrary to Article [102 TFEU]”.357 A similar
per se approach can be found in Hoffmann-La Roche358 where the Court considered
339
Whish & Bailey (2012), p. 682-683.
340
Whish & Bailey (2012), p. 682-683.
341
Whish & Bailey (2012), p. 682-683.
342
343
Ron Amadeo, Google’s iron grip on Android: Controlling open source by any means necessary (ArsTechnica, 21 October 2013), p. 1,
<www.arstechnica.com/gadgets/2013/10/googles-iron-grip-on-android-controlling-open-source-by-any-means-necessary>, retrieved on: 25 June 2016.
344
345
346
MADA stands for “Mobile Application Distribution Agreement”. The MADA, on the one hand, allows manufacturers to freely use Google’s Apps, while on the other hand,
obliges them to install the entire Google Apps suite on their Android-run mobile and smartphone devices. Manufacturers wishing to sign the MADA must also sign the AFA.
See Stylianou (2016), p. 2-3.
347
AFA stands for “Anti-Fragmentation Agreement”. The AFA contractually bars manufacturers from developing modified versions of Google’s official Android operating
system. See Stylianou (2016), p. 2-3.
348
Stylianou (2016), p. 2-3.
349
Stylianou (2016), p. 3, 7.
350
351
352
Stylianou (2016), p. 3, 7.
353
Stylianou (2016), p. 3-4.
354
Whish & Bailey (2012), p. 683-684.
355
CJEU Court of Justice Michelin v Commission (Michelin II), ECLI:EU:T:2003:250, Case T-203/01 [2003] ECR II-4071, [2004] 4 CMLR 923, 30 September 2003.
356
Whish & Bailey (2012), p. 199-200.
357
CJEU Court of Justice Michelin v Commission (Michelin II), ECLI:EU:T:2003:250, Case T-203/01 [2003] ECR II-4071, [2004] 4 CMLR 923, 30 September 2003, para 56.
358
CJEU Court of Justice Hoffmann-La Roche v Commission, ECLI:EU:C:1979:36, Case 85/76 [1979] ECR 461, [1979] 3 CMLR 211, 13 February 1979.
35
that: “An undertaking which is in a dominant position on a market and ties purchasers
[…] to obtain all or most of their requirements exclusively from the said undertaking
abuses its dominant position within the meaning of Article [102 TFEU] […]”.359, 360
Similarly, the Commission tends to view exclusive purchasing agreements
negatively.361 In its Guidance362, it voices many of its concerns on exclusively
purchasing agreements,363 particularly when conducted by dominant firms.364 In
particular, paragraph 36 of the Guidance refers to the concepts of “unavoidable trading
partner” and “must stock item”.365 Indeed, Google could be deemed as such an
“unavoidable trading partner” of manufacturers since its Google Apps are “must stock
item[s]” (or as Stylianou would call it “golden nugget[s]”366) for manufacturers since
they are “preferred by many […] consumers”.367 In addition, what is clearly noticeable
in the Guidance368 is that it, aside from one exception369, does not contain any
efficiency grounds on the basis of which exclusive purchasing agreements could be
justified. This stands in stark contrast with the Guidance’s elaborate reference to
efficiencies with regard to tying/bundling practices.370 The above considerations do not
bode well for Google. While Google has several means at its disposal to justify its
tying/bundling practices on the basis of numerous efficiency grounds in the
Guidance371, it frankly cannot do so as regards its exclusive purchasing agreements
with manufacturers. Assuming that Google is found to be holding a dominant position
in the market for operating systems, it most likely will increase the Commission’s
suspicion. As regards the second allegation, all the odds are unfavourably stacked
against Google. It is inevitably set to lose the argument.
It is worth mentioning that Stylianou offers an alternative theory. 372 He argues that the
second allegation against Google has been mistakingly identified as referring to
exclusive purchasing agreements.373 In his view, it rather constitutes a refusal to supply
on Google’s part.374 Stylianou argues that manufacturers wishing to develop modified
versions of Google’s Android, are basically requesting Google for access to its Google
Apps (on account of them being widely popular with users).375 According to Stylianou,
Google is refusing to separately license its Google Apps to manufacturers and such a
refusal must be treated on par with the refusal to supply doctrine.376 Other authors
359
CJEU Court of Justice Hoffmann-La Roche v Commission, ECLI:EU:C:1979:36, Case 85/76 [1979] ECR 461, [1979] 3 CMLR 211, 13 February 1979, para 89.
360
361
362
363
364
365
exclusionary conduct by dominant undertakings (24 February 2009), paras 36.
366
367
368
369
370
exclusionary conduct by dominant undertakings (24 February 2009), paras 28-31, 62.
371
372
373
Stylianou (2016), p. 4-5, 8.
374
Stylianou (2016), p. 4-5, 8.
375
376
36
similarly argued that the CJEU’s Microsoft377 case was in fact a refusal to supply case
under the guise of tying.378 Should the Commission (and possibly the CJEU) follow the
lead of Stylianou et al., Google might be left with a degree of leeway, considering that
Paragraph 89 of the Guidance provides several efficiency grounds in refusal to supply
cases.379 It seems that all is not (yet) lost for Google.
8. Conclusion: Article 102 TFEU, the digital sector and the Google Android case:
a wake-up call?
The Google Android case can only be properly understood in light of the shortcomings
of Article 102 TFEU and the special characteristics of the digital sector. The
complexities that arise as a result of these two considerations most definitely serve as
a wake-up call for Commission and CJEU alike. To begin with, both the Commission
and Court must immediately abandon their overly formalistic and legalistic approach
towards Article 102 TFEU. Such an approach is counter-productive to the very aims of
EU competition law: serving consumer welfare and protecting competition. An effects-
based approach is more appropriate and suitable for assessing complex competition
processes, all the more so with regard to the digital sector. The digital sector requires
a drastic change of attitude from the Commission and Court. The traditional competitive
constraints do not properly reflect the dynamics of the digital sector. Therefore, the
focus should be laid on the dynamic “forces of innovation, entry and contestability”.
Moreover, static indicators of competitiveness, such as market shares and prices,
cannot possibly capture the highly dynamic nature of the digital sector.
Secondly, the special characteristics of the digital sector poses enormous challenges
to the application of Article 102 TFEU. Article 102 TFEU seems to be have been
primarily designed for “traditional” sectors and markets that do not exhibit the kind of
dynamics that the digital sector does. While the Guidance is a welcome addition for
the implementation of Article 102 TFEU in the digital sector, it nonetheless has its own
weaknesses and pitfalls. More importantly, the Guidance is not law. The rapid changes
in the digital sector even affect the “traditional” markets, since such regular markets
are likewise increasingly digitalised. To add to the urgency, the number of antitrust
cases has risen significantly in recent years. Soon, the Commission will not be able to
afford delaying its investigations for many years. A wake-up call and reality check is
what the Commission is in urgent need of. Several solutions have been proposed for
tackling the challenges of the digital sector from an EU competition law perspective.
Of these, the sector specific regulation seems to be the most promising one.
Nevertheless, the solutions that have been offered should only be seen as
complementary means of enhancing Article 102 TFEU. To fully bridge the gaps
between law and the realities of the digitalised world, more is needed than mere
alternative, complementary approaches. What is actually needed is a complete,
377
378
Kusters (2014), p. 47.
379
37
thorough and systematic overhaul and review of the law and practice of Article 102
TFEU.
Likewise, the Google Android case is a wake-up call, primarily for the Commission.
The Commission’s allegations against Google are not only brief but also vaguely
formulated, thus leaving substantial room for interpretation as to what legal bases are
applicable to the case at hand. Even with the addition of the Guidance, much remains
unclear, as a result of which we are left with guesswork. This again illustrates that
Article 102 TFEU is in need of serious adjustment. The Google Android case is a
reminder for the Court to fully abandon its formalistic and legalistic approach towards
Article 102 TFEU and embrace the effects-based approach. Should the Google
Android case be brought before the CJEU, the Court would most likely condemn
Google in line with its strict case law on tying/bundling (Microsoft II) and exclusive
purchasing agreements (Michelin II, Hoffmann-La Roche). The Court’s case law fails
to sufficiently take into account the special characteristics of the digital sector in which
Google plays a major role.
38
Bibliography
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(Publisher: Boom Juridische uitgevers, sixth edition, October 2010).
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Konstantinous Stylianou, Help Without Borders: How the Google Android Case
Threatens to Derail the Limited Scope of the Obligation to Assist Competitors
(University of Leeds, School of Law, 17 April 2016).
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Verhaert (2013)
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Jurisprudence
• 2000/12/EC: Commission Decision of 20 July 1999 relating to a proceeding
under Article 82 of the EC Treaty and Article 54 of the EEA Agreement (Case
IV/36.888 - 1998 Football World Cup) (notified under document number C(1999)
2295).
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ECLI:EU:C:1978:22, Case 27/76 [1978] ECR 207, [1978] 1 CMLR 429, 14
February 1978.
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Case 85/76 [1979] ECR 461, [1979] 3 CMLR 211, 13 February 1979.
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ECLI:EU:C:2010:603, Case C- 280/08 P [2010] ECR I- 000, [2010] 5 CMLR
1495, 14 October 2010.
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Company Inc. v Commission, ECLI:EU:C:1973:22, Case 6/72 [1973] ECR 215,
[1973] CMLR 199, 21 February 1973.
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T-219/99 [2003] ECR II-5917, [2004] 4 CMLR 1008.
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November 1983.
• CJEU General Court BPB Industries Plc and British Gypsum Ltd v Commission,
ECLI:EU:T:1993:31, Case C- 310/93 P [1995] ECR I- 865, [1997] 4 CMLR 238,
6 April 1995.
• CJEU Court of Justice Lélos Cases C- 468/06 etc Sot. Lelos kai Sia EE v
GlaxoSmithKline AEVE Farmakeft ikon Proionton ECLI:EU:C:2008:504 [2008]
ECR I- 7139, [2008] 5 CMLR 1382.
• CJEU General Court Microsoft v Commission ECLI:EU:T:2007:289, Case T-
201/04 [ 2007] ECR II-3601, 17 September 2007.
Other documents
Websites
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BACHELOR’S THESIS

EUROPEAN COMPETITION LAW

THE GOOGLE ANDROID CASE

To obtain the degree of Bachelor of Laws (LL.B.) at Utrecht

Name: M.N. (Nasir) Yousufzai

1.1 Structure of bachelor’s thesis

Thus, the main research question of this bachelor’s thesis is:

1.3 The challenges ahead

2.1 Competition law in general and EU competition law

2.1.1 Competition law in general

2.1.2 EU competition law

The EU Commission’s role is at the very core of EU competition policy and

3. Article 102 TFEU

Such abuse may, in particular, consist in:

3.1 Article 101 and 102 TFEU

3.2 Market definition: relevant market

3.2.1 The relevant product market

3.2.2 The relevant geographic market

3.3 The concept of “abuse”

A second (theoretical) distinction of lesser importance is that between non-pricing and

3.4 The concept of “dominant position”

3.5 Anti-competitive foreclosure effects

3.6 Inter-state trade criterion

4. Shortcomings of Article 102 TFEU

5.1 Rapid innovation

5.2 Network effects

5.3 Economies of scale

5.5 No lock-in effects and switching costs

5.6.1 Interoperability and the Microsoft case (2007)

5.6.2 Interoperability and the Google Android case

6. Solutions for the (EU) digital sector:

The European Parliament (EP) recently suggested several additional measures in

7. The Google Android case

7.1 The first and third allegations

7.2 The second allegation

Ambtenbrink & Davies & Vedder (2010)

Rato & Petit (2013)

Whish & Bailey (2012)

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