The Distinct Idea of Super-Dominant Undertaking: Judgment of Google Shopping

[ByShubham Gandhi and Adhiraj Lath]

The authors are students of National Law University, Jabalpur.

 

Introduction

The Google Shopping Judgment (“Google Shopping”), passed by the General Court of the European Union, has once again brought to light the much-debated concept of the Super-Dominance of an undertaking. The judgment,while addressing how Google allegedly used its dominance in the overall internet search market to keep competitors out,     , meaning thereby that in the general internet search towards a product, Google was promoting its services or the services of the enterprise that paid Google in this behalf and was demoting the access links of other competitors, thereby abusing its dominance in the market and leading to violation of Article 102 of Treaty on the Functioning of the European Union (“TFEU”).

The judgment, though concluded upon the principle of the effect-based approach of an enterprise, which means that the effect of the abuse by the dominant undertaking in the market will be the considerate factor, interestingly discusses the scope of the concept of super-dominance, which was denounced by the European Court of Justice (“ECJ”) in its judgment of TeliaSonera, passed in the year 2011.

The authors, while dealing with the rationale of the judgment, will succinctly lie down the historical development of the concept of super-dominance in the European competition law jurisprudence, highlight the importance it may bring to the new advent of digital market and digital players’ dominance, and will finally comment whether roots of super-dominance can be interpreted from the existing Competition Act, 2002.

The Historical Development of Super-Dominance

In simple terms, the concept of abuse of dominance means that if an enterprise has a significant share of power in the market, it will construe that the enterprise dominates the relevant market. Suppose they abuse this power by conducting their practice against the principles in Article 102 of Treaty on the Functioning of the European Union; then, it will be liable for punishment for abusing its dominance in the market.

It becomes important to mention the four elements which may lead to abuse by a dominant enterprise as provided under Article 102, namely: –

(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) concluding 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.

It is interesting to note that Article 102 of TFEU nowhere distinguishes between a dominant enterprise and a super-super dominant enterprise, as the creation of this characterization is the result of the judgment passed in the case of Compagnie Maritime Belge SA v Commission of the European Communities by the European Court of First Instance.

However, the concept was briefly discussed for the first time in ECJ’s decision in Tetra Pak International SA v Commission of the European Communities, wherein the Court held that “the actual scope of the special responsibility imposed on a dominant undertaking must be considered in the light of the specific circumstances of each case.”

This new distinction implies that the same conduct may breach Article 102 when performed by a super-dominant but not by the “regular” dominant undertaking. Although this further differentiation might seem to follow from the distinction between dominant and non-dominant undertakings, the super-dominance concept sits uneasily with the text and the enforcement of Article 102.

The rationale is because it might impose obligations on super-dominant enterprises that regular dominant undertakings do not have, which would mean that obligations might be applied to undertakings based on their market position rather than their actual conduct, something that the treaty does not contemplate.

These two judgments succinctly described the concept of super-dominance, wherein the enterprise has a monopolistic or quasi-monopolistic position and that the undertaking with an exceedingly high degree of dominance has a “particularly onerous special obligation” towards the market and they shall not abuse the same.

The European Union commissions followed this position in cases such as Football World Cup and Deutsche Post. In the case of  Microsoft, the Commission deemed that Microsoft’s market share of over 90% in the client PC operating systems market put it in a “quasi-monopoly” and an “overwhelmingly dominant” position.

However, the transition towards a more “economic approach” soon occurred in the European Union Commission. After that, the TeliaSonera’s judgment soon ended this discriminatory concept by holding that there is no textual existence of such distinction.

In the opinion, it was noted that “…the degree of market power of the dominant undertaking should not be decisive for the existence of the abuse. Indeed, the concept of a dominant position arguably already implies a high threshold, so it is unnecessary to grade market power based on its degree.”

The inception of super-dominance in the digital market space

The judgment in Google Shopping discusses the scenario where Google acts both as a gateway to the internet space and a player in the market. It is in a super-dominance position, offering the platform to access the online market sphere and acting as a digital market player.

The platforms such as Meta, Google, Amazon, and Microsoft have taken a structure wherein they act as a quasi-monopolistic player and take a superior position that having a competitor does not necessarily affect their dominance.

The author argues in favor of bringing a separate class or distinction wherein the fintech platforms and the digital market player who holds ‘significant dominance’ must be viewed not as per the traditional approach of ‘effect-based principle’ but viewed from the sphere of super-dominance which may result in abuse if kept unregulated.

The court also highlighted their potential dominance of abuse in the market by referring to Google’s case. The general internet search market in the countries considered in the Commission’s investigation has almost entirely tipped towards Google; as there was minimal competition in that sector, the company could manipulate search results, allowing it to use its super-dominant position to enter the comparison-shopping services market.

Comparison shopping sites rely on traffic from Google’s main search engine and cannot properly replace diverted traffic due to Google’s actions. The broad internet search industry has significant entry hurdles and has shifted in Google’s favor, making its role as a gatekeeper particularly potent. The distinction is not arbitrary and is based on the sound principle of rationale, as these undertakings function in a far different market than the existing one.

Therefore, they have acquired the status of market enabler and market manipulator; they are not only one of the players but also enable access to the whole market.

Super-dominance vis-a-vis Competition Act, 2002

As prevalent in the Competition Act 2002, the concept of abuse of dominance is primarily based on Article 102 of TFEU. The Act lays down parameters on which an enterprise can be proven dominant under section 4(a) read with 19(4), which lays down objective criteria for when an enterprise holds dominance in the market.

Similarly, as to European law, the Act does not create any distinction between regular dominant enterprise and super-dominant enterprise, the threshold to identify remains the same. However, unlike European law, the factors laid down in the Act to determine an enterprise’s dominance hint towards the developing concept of supra-dominance.

As per section 19(4) of the act, factors such as: –

  1. market share of the enterprise
  2. size and importance of the competitors
  3. dependence of consumers on the enterprise
  4.  market structure and size of the market
  5. any other factor which the Commission may consider relevant for the inquiry.

The criteria mentioned above, if read by considering the digital market sphere, hints towards the idea of super-dominance, as the dependence of consumers on the services of Google, the market structure of the digital sphere, and the importance of Google over all other general internet search competitor hold super-dominance.

The authors argue that in the current Indian law, the Competition Commission of India (“CCI”) may envisage the concept of super-dominance, as per section 4 r/w section 19(4). Further, the act gives enough space for CCI to consider ‘any other factor’ apart from the one listed, which enables enough power to punish an enterprise because it holds more than significant power in the relevant market.

Conclusion

The concept of super-dominance is indeed worth pondering; the idea of distinction is based on sound principles, as in the digital market space, there are only a few players who hold significant dominance, and the old regulation of dominance and the effect of the abuse of dominance does not hold them accountable justly.

There is a need for distinct principles of competition to govern the functioning of digital market players, and the European Union introducing the digital market act is one of them. The Google shopping judgment, though concluded with the established principle of the ‘effect of the abuse of dominance,’ enhanced our understanding regarding the super-dominance and its impact on dealing with cases of digital market undertakings.

The existence of super-dominance in itself is not enough to show that abuse exists,     , it is to be proven that the undertaking was actually abusing its dominance, by offering unfair or discriminatory pricing, indulging into practise of predatory pricing, or denial of market. Nonetheless, once effects are established, the position of the dominant undertaking on the market can move the needle when it comes to finding an infringement. Greater responsibility not to impair effective competition is imposed on undertakings that are not only super-dominant but also have a gatekeeper position in the market, which can be due to a statutory monopoly, exclusive rights, or other market characteristics.

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