Abstract
The digital economy forms a central driver to future prosperity: delivering waves of innovation, efficiencies and consumer welfare. It has revolutionized business models, products, services, communications and social interactions. A big challenge facing competition authorities in the digital era today, is how to apply the traditional tools of competition policy in these multi-sided platform environments. Since Article 102 TFEU has remained virtually unchanged ever since it was created, the question to be answered is to what extent the competition law framework on tying specifically, tackles presumed
anti-competitive conduct in the form of tying by Big-Tech companies. By analyzing the Microsoft decision (2004) and the Google Android decision (2018) this paper examines whether the EU competition law abuse of dominance framework suffices to protect innovation, and thereby enhances consumer benefit, on the market. With Microsoft, the Commission moved away from a per se approach as regards tying, adding more weight to the foreclosure effects of competition on the tied market. What exactly entail the factors to be taken into account by the European Commission and courts in this regard remains vague. The characteristics of the two-sided market, specifically indirect network externalities, are taken into account in the theory of harm in Microsoft, but remain untouched in Google Android. The Commission did not elaborate on consumer harm and focused primarily on reduction of choice in its Google Android decision. While an undertaking that is dominant in one product market can harm consumer benefit through tying by restricting competition on the tied market, the tie can also have consumer benefits. The Google Android decision shows a mere one-sided approach of assessing the effects of the tying, which promotes the need of a more adapted framework to current digital times. The high fine that is imposed on Google might actually have adverse effects, working against innovation by businesses. The traditional competition law framework does not adequately tackle presumed anti-competitive tying conduct by Big Tech companies.
Table of contents
TYING IN THE DIGITAL ERA
Abstract 1
Table of contents 2
Introduction 3
Tying and bundling 5
Microsoft (2004) 9
Google Android (2018) 15
Analysis 22
Conclusion 25
Introduction
The digital economy forms a central driver to future prosperity: delivering waves of innovation, efficiencies and consumer welfare. It has revolutionized business models,
products, services, communications and social interactions. Digitalization has also stimulated a shift in market dynamics, paving the way for the emergence of key platforms, networks and the proliferation of multi-sided markets.
A big challenge facing competition authorities in the digital era today, is how to apply the traditional tools of competition policy in these multi-sided platform environments. Some lawyers and economists think it’s time to move past conventional antitrust enforcement to consider harmful effects from increased concentration1 and the European Commission
investigates possibilities for intervention by way of ex ante regulation, forcing large platforms with gatekeeper roles for instance to stop favoring certain search results, even before abuse occurs.2
Given the recent focus of the European Commission on the high-tech sector, and the
landmark cases of Microsoft and Google Android, this thesis investigates to what extent tying practices of high-tech two-sided platforms are adequately tackled under Article 102 of the Treaty of the Functioning of the European Union (“TFEU”).
To that end, the following research question will be answered:
To what extent does the existing European competition law framework under Article 102 TFEU adequately tackle presumed anti-competitive behavior in the form of tying of Big Tech companies?
‘Adequacy’ in this sentence will be measured by examining whether the EU competition law abuse of dominance framework suffices to protect innovation, thereby enhancing consumer benefit, on the market.
The research question will be answered by analyzing the European Commission Decision in Microsoft3 (2004) and Google Android4 (2018), as those are landmark cases on tying in this context. I will analyze how tying is being handled in both cases and how it changed over time given their context. To come to this conclusion the literature on tying and bundling in the high-tech sector over the years will be reviewed and the conditions of Article 102 TFEU will be analyzed per case.
In the first chapter, the concept of tying and bundling will be explored. This chapter defines the concept and analyses the main doctrine behind this concept. Furthermore, this chapter looks at how the doctrine emerged in EU law and has broadened its scope over the years, especially since the emergence of the digital market. The second chapter analyses the
Commission’s Microsoft decision of 2004, upheld by the Court of First Instance in 20075. In
this case, the European Commission found that Microsoft abused its dominant position in the
1 David McLaughin, ‘Did Big Tech Get Too Big?’ Washington Post (26 July 2019)
2 European Commission, Policy Documents, The Digital Service Act Package (2 June 2020) available at: <
https://ec.europa.eu/digital-single-market/en/digital-services-act-package>
3 Microsoft (Case T-201/04) Commission Decision [2004] OJ L32/23 (hereafter: ‘Microsoft Decision’) 4 Google Android (Case AT.40099) Commission Decision [2018] OJ C9/11
(hereafter: ‘Google Android Decision’)
operating system market by tying its Windows Media Player to the Windows Operating System. First the relevant product market and the relevant geographical market will be defined. After this, a position of dominance is established and moreover the fact that
Microsoft has abused its position of dominance, with a main emphasis on the foreclosure of competitors. The third chapter focuses on the tying conduct in the Google Android decision of 2018, again with a specific emphasis on the theory of harm. Finally, the fourth chapter
compares both decisions and distinguishes the overlaps and differences in both cases. The main lessons from the comparison of these cases will be drawn considering the timeframe of each case and possible future strategies for addressing tying in the context of two-sided data-driven markets will be explored. After this, in the conclusion, the final chapter of this paper, the research question will be answered.
Tying and bundling
Undoubtedly, the rise of the internet came along with an unseen broadening of the scope of legal doctrines from all fields of law. It remains a challenge for lawmakers to keep up with digitization. Consequently, judges are oftentimes forced to modify legal doctrines which were originally conceived for the analogue world. This holds particularly true for competition law, where the substantive law remained virtually unchanged ever since it has been created.6
Tying is a specific type of exclusionary abuse which refers to the situation where customers that purchase one product (the tying product) are also required to purchase another product from the dominant undertaking (the tied product). This is intended to provide the customers with better products in the most cost-effective ways. However, an undertaking which is dominant in one product market can harm consumer benefit through tying by foreclosing the market for other products.7
According to Art 102 (d) TFEU, “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”, may constitute an abuse of market power. Tying and bundling agreements may also fall within the ambit of Art 101 TFEU, which is explicitly mentioned in Art 101 (e) TFEU. However, the case law on tying in the context of Art 101 TFEU is rather limited compared to Article 102 TFEU.8
Tying is a common practice in the software market, since it is fairly easy and therefore persuading, to combine applications by commingling their codes.9 Technical tying, in which
two software products are tied together by commingling their codes, poses a challenge to competition law. Firstly, technical tying challenges the standard for identifying separate products. Prevailing consumer demand-oriented standards heavily rely on established
consumer demand, whereas technical tying affects both present and future consumer demand. Next to that, technical tying challenges assessment rules for analyzing tying practices.10
According to the Guidance on the Commission’s Enforcement Priorities in Applying Article 82 EC11, the Commission takes action against market dominant undertakings when (i) the
tying and the tied products are distinct products and (ii) the tying practice is likely to lead to anti-competitive foreclosure.12 Offsetting efficiencies are also taken into account.13
6 Stefan Holzweber, Tying and Bundling in the Digital Era, vol 14 (European Competition Journal 2018) 7 Eirik Østerud, Identifying Exclusionary Abuses by Dominant Undertakings under EU Competition Law
(Wolters Kluwer 2010) pg. 83
8 Stefan Holzweber (n. 6)
9 David Evans, Jorge Padilla, Michelle Polo, Tying in Platform Software: Reasons for a Rule-of-Reason Standard in European Competition law, vol 25 (Issue 4, World Competition 2002) 509-514; Case T-201/04 Microsoft Corp v Commission of the European Communities [2007] ECR II-3601, para. 941; Qiang Yu,
‘Technically Tying Applications to a Dominant Platform in the Software Market and Competition Law’ (2015) 36(4) ECLR 160;
10 Qiang Yu, ‘Market Power and Competition Law in the Software Industry’ (Doctoral thesis, Leiden University
2017)
11 European Commission, Guidance on the Commission’s Enforcement Priorities in Applying Article 82 EC Treaty to Abusive Exclusionary Conduct by Dominant Undertakings, OJ C45/7, February 2009, paras 50–51
(hereinafter, “the Commission Guidance Paper”)
12 The Commission Guidance Paper (nr. 11) para 47 13 The Commission Guidance Paper (nr. 11) para 62
Generally, consumers also have to be coerced to purchase the bundled and tied products together. This relates to the wording of Article 102 (d) TFEU which indicates that some level of compulsion may be required. In the Microsoft judgment of 2007, the Court of First
Instance clarified this condition by stating that neither Article 82 (d) EC (now Article 102 (d) TFEU) nor the case-law on bundling requires that consumers must be forced to use the tied product or prevented from using the same product supplied by a competitor of the dominant undertaking in order for the condition that the conclusion of contracts is made subject to acceptance of supplementary obligations to be capable of being regarded as satisfied.14 As
mentioned above, foreclosure of competitors constitutes the last step of a test that aims at dividing harmless or even pro-competitive business practices from harmful business practices resulting in a transfer of market power.
The first cases of tying and bundling were straightforward: In the London European-Sabena case, access to a market dominant reservation system was exclusively granted on condition that a handling contract was concluded. In Hilti, the Commission found that Hilti pursued a policy of supplying cartridge strips only when they were purchased with the
necessary complement of nails. The Commission took the view that Hilti was dominant in the three relevant markets of nail guns, Hilti-compatible cartridge strips and Hilti-compatible nails. It then concluded that tying the sale of cartridge strips to the sale of nails constituted an abuse of the dominant position: “These policies leave the consumer with no choice over the source of his nails and as such abusively exploit him. In addition, these policies all have the object or effect of excluding independent nail makers who may threaten the dominant position Hilti holds.”15
In Tetra Pak II, the SAIC found dominance by Tetra Pak in three relevant markets, after considering four sets of criteria: (1) market share and the competitive situation in the market, (2) market- control power, (3) the level of dependence of other operators, and (4) entry barriers of the relevant markets. The tying in questions had two components. The packaging materials were the tied product and both the packaging equipment and technical services were the tying products. The alleged harm was competition restriction in the packaging material market. The SAIC’s theory of harm was brief: it implicitly followed the four-condition logic for finding an abusive tying. The SAIC’s analysis highlighted the unjustified coerciveness of the tying.16 It focused on explaining the severability of the tying and the tied products, and the
unjustified limitation on customer choice. In that sense, the SAIC viewed the limitation on customer choice as a proxy concern for verifying the harm of competition restriction. By doing so, the SAIC refrained from engaging in any further exclusionary effects examination. For example, it did not discuss whether and to what extent Tetra Pak’s dominance in the tied product market, as it had established, contributed to the exclusionary effects of the tying. In that light, one could say that the SAIC’s examination under the fourth condition, namely “the effect of competition restriction in the tied market”, is largely presumptive.
In Tetra Pak II, the concept of tying and bundling was stretched beyond the limits of what is now Article 102 (d) TFEU. Tetra Pak argued that the tied products were complete and indivisible systems by their nature and commercial usage and therefore the tying practice should not fall within the ambit of Article 102 (d) TFEU. The European Court of Justice rejected this argument by stating that the list set out in the Article is not exhaustive. Even
14 Case T-201/04 Microsoft Corp v Commission of the European Communities [2007] ECR II-3601, para 970 15 Eurofix-Bauco v. Hilti, Commission Decision 88/138/EEC, 1988 O.J. (L 065) 19
where tied sales of two products are in accordance with commercial usage or there is a natural link between the two products in question, such sales may still constitute abuse within the mean of Article 102.17 Thus, cases in which the tied or bundled goods are connected by their
nature or according to commercial usage, also fall within the concept.
Both Hilti and Tetra Pak a theory of harm is used that is practically presumptive with their approach of using the proxy concern of customer choice limitation and do not assess the competition-restrictive effects in the tied market. The quasi-per se abusive test in these cases exemplified the initial hostile stance of the EU competition law towards tying.18
In the Post Danmark I case, the Court stated that foreclosure “seeks to determine whether the conduct of the dominant undertaking produces an actual or likely exclusionary effect, to the detriment of competition and, thereby, of consumers’ interests”.19 Therefore the requirement
of market foreclosure should involve an analysis of the business practice's effects on the market. It is up to the claimant or the competition authority to develop a well-developed theory of harm. First and foremost, according to the Continental Can judgement, it is not necessary to show that consumers are ultimately harmed by the business conduct;20 it is
sufficient to prove that a business practice harms competition. According to the Post
Danmark II judgement there is also no de-minimis threshold when it comes to the assessment of anticompetitive effects.21 According to the Court this is justified given that competition is
already weakened by the very presence of the dominant firm.22 On the other hand, the
European Court of Justice set down requirements for proving foreclosure. A basic principle that the Court of Justice put forward is that the assessment of the market foreclosure has to be carried out in light of all relevant circumstances.23 This principle may be interpreted as a
requirement for the completeness of a theory of harm: if the defendant can show that the theory of harm brought forward by the competition authority or the claimant did not include all relevant circumstances, the claim must be dismissed.24
The Microsoft decision, upheld by the Court of First Instance, was one of the earlier cases in the digital sphere. In this case it became clear that in order to ensure that the concept of tying and bundling is effective in the digital environment, competition law in this context had to be extended to the product design of market dominant undertakings in the digital environment. The Court of First Instance held that product integration may be equivalent to contractual tying and thus such a practice could constitute an abuse of market dominance.25
Investigations against Google were also initiated. The Google Shopping26 case led to a €2.4 billion fine for abusing dominance in the search engine market. In this case, the claim was that Google gave its own services an illegal advantage by placing them more favorably in the search engine results than other services. Google's own comparison shopping service was placed at the top of the search results and Google's competitors were on average placed on
17 Tetra Pak II (Case IV/31043) Commission Decision 92/163/EEC [1992] OJ L 72, para 37
18 Case C-333/94 P Tetra Pak International SA v Commission of the European Communities [1996] ECR I 5951,
paras 34–38
19 Case C-209/10, Post Danmark A/S v Konkurrencerådet [2014] ECLI:EU:C:2012:172, para 44 20 Case 6/72, Continental Can [1973] ECLI:EU:C:1973:22, para 2
21 Case C-23/14, Post Danmark A/S v Konkurrencerådet [2015] ECLI:EU:C:2015:651, para 73 22 Post Danmark II (nr. 24) para 72
23Post Danmark II (nr. 24) para 68; Case C-413/14P, Intel [2017] ECLI:EU:C:2017:632, para 142 24 Stefan Holzweber (n. 6)
25 Case T-201/04 Microsoft Corp v Commission of the European Communities [2007] ECR II-3601 26 Google Search (Shopping) (Case AT.39740) Commission Decision 38608 [2017] 4444
page four of the search results. This was considered tying of Google Search and Google’s comparison shopping service by both the European Commission and UK High Court.27 Thus, the concept of tying was extended to the prioritized display of one’s own services in a search engine ranking.
While the concept of tying and bundling was originally developed for the combined sale of more than one product, the scope of the doctrine has broadened throughout the years, especially since the rise of the digital market. Digital markets are considered especially vulnerable when it comes to tying and bundling practices. It is frequently assumed that these markets are so called winner-take-all markets, in which a single firm or technology
vanquishes all others.28 Although the development of large global digital platforms generated
significant consumer benefits, it may have the potential to increase barriers to entry. The presence of economies of scale and the value of data play a role. Platforms can enter a virtuous circle of growth once they exceed a critical mass. The cost of writing new code can be shared across a larger use base. The availability of large data harvested from the user base and ability to process it allows larger platforms to be better than the smaller competition.29
Another significant characteristic of platforms in the digital roam is the two-sidedness of markets. Two-sided markets are characterized by network externalities between the two sides of the market. A network effect is said to be direct when consumers derive utility from the number of other consumers who choose the same product. Indirect network effects arise through the sale of complementary goods. Large networks create an incentive to develop a variety of complementary goods. In the context of software it is clear that the more
applications written for a particular operating system, the larger the benefit for consumers in choosing that operating system.30 Switching costs and network effects bind customers to
vendors if products are incompatible, locking customers or even markets in to early choices. The presence of network effects in high technology markets means that markets often “tip” to one supplier who controls a standard resulting in it obtaining a dominant position. These markets are therefore characterized by firms with large market shares or by monopolies as one supplier tends to dominate the market.31
Another factor at play in two-sided markets is the option for users to multi-home; that is, they can participate in multiple platforms in order to reap maximal network benefits. This on the other hand decreases the lock-in effects in these industries and the tendency of two-sided markets to tip in favor of one platform. Because platforms contain different features and quality levels, consumers are led to multi-home if the costs of multi-homing are not prohibitively high.32
27 Google Search (Shopping) (Case AT.39740) Commission Decision 38608 [2017] 4444 28 Carl Shapiro and Hal Varian, Information rules (Harvard Business Review Press 1998) 177
29 Derek Holt and Felix Hammeke, European Union – Two-sided Markets, Platforms and Network Effects,
E-Commerce Competition Enforcement Guide 2nd edition (Global Competition Review 2019) 30 Stefan Holzweber (n. 6)
31 Case T-201/04 Microsoft Corp v Commission of the European Communities [2007] ECR II-3601, para 228 32 Jay Choi, Tying in two-sided markets with multi-homing, vol. 58 (no. 3 Journal of Industrial Economics 2010)
Microsoft (2004)
In response to Sun Microsystem’s complaint that Microsoft’s refusal to share its OS interoperability information and the Workgroup Server OS needed, constituted abuse of a dominant position under Article 82 EC(now: 102 TFEU), the European Commission investigated Microsoft’s practice of technically tying Windows Media Player (WMP) to its Windows OS in December 1998.33 Following the investigation, the European Commission
issued a decision on March 24, 2004 which found that Microsoft had abused its dominant position in client operating systems in two ways. First, the Commission found that since October 1998 Microsoft had unlawfully refused to provide certain computer protocols that would enable competing server operating system vendors to interoperate with Microsoft’s Windows client and server operating systems.34 Second, the Commission found that since
May 1999 Microsoft had tied Windows Media Player35 to Microsoft’s Windows client
operating system.
Microsoft made an application to the European Court of First Instance for annulment of the Commission Decision. On September 17, 2007 the Luxembourg-based court rejected all of Microsoft’s grounds for annulling the abuse findings.36 Microsoft had to offer a
full-functioning version of the Windows client PC operating system which does not incorporate Windows Media Player. Microsoft did retain the right to offer a bundle of the Windows client PC operating system and Windows Media Player.37 On October 22, 2007, Microsoft put
forward that it would not appeal to the European Court of Justice, thereby ending the case. The Commission follows the steps of Article 102 TFEU in its analysis. The first step in establishing Microsoft’s dominant position is defining the relevant market. In order to establish a dominant position, the relevant product and geographical market on which it operates is defined. The relevant product market is the market that “comprises all those products and/or services which are regarded as interchangeable or substitutable by the consumer, by reason of the products' characteristics, their prices and their intended use”.38
The Commission distinguishes two product markets in its decision. The first market is the market for operating systems for personal computers (‘PCs’). Operating systems for PCs have special characteristics that make it suitable for a particular use, namely, to manage the PC hardware and to offer the user an interface to interact with the computer and run
applications.39 The Commission concluded that there are no substitutes for operating systems
for PCs on the demand side, nor on the supply side. Therefore, the market of operating systems for PCs constitutes a distinct market.
The second market is the market for work group server operating systems. Work group server operating systems are operating systems designed to deliver collectively file, print, group and user administration services to relatively small numbers of client PCs linked together in a
33 Press Release, European Commission, ‘Commission concludes on Microsoft investigation, imposes conduct
remedies and a fine’, IP/04/382 (24 March 2004)
34 Case T-201/04 Microsoft Corp v Commission of the European Communities [2007] ECR II-3601, para 970 35 In the following also referred to as “WMP”
36 Case T-201/04 Microsoft Corp v Commission of the European Communities [2007] ECR II-3601 37 Case T-201/04 Microsoft Corp v Commission of the European Communities [2007] ECR II-3601, 49 38 European Commission, Commission Notice on the definition of the relevant market for the purposes of Community competition law, OJ C 372, 9 December 1997 (hereinafter referred to as ‘Commission notice on the
definition of the relevant market’ )
small to medium-sized network.40 In order for a PC to work efficiently within a network, it is
required that the operating system of the PC, which keeps the PC running, is sufficiently interoperable with the work group server operating system. The information that a server software developer needs in order to establish interoperability between his product and the operating system is the interface information or interoperability information of the PC operating system. As such, the PC operating system and the interoperability information derived from it, are prerequisites for a PC to function within a network.
The relevant geographic market is to be determined by considering the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be
distinguished from neighboring areas because the conditions of competition are appreciably different in those areas.41 The Commission concluded that both the market for PC operating
systems and the market for work group server operating systems are worldwide markets.42
In order to be caught under Article 102 TFEU, the firm in question must have a dominant position on the relevant market. A dominant position can be inferred from a multitude of factors, but as mentioned by the Court in the United Brands case, the core element is: “Maintaining a position of economic strength inducing the possibility to prevent effective competition by being able to behave to an appreciably extent independently from competitors, customers and ultimately consumers”.43 During the relevant period, Microsoft had a 90%+
market share on the worldwide market of PC operating systems.44. This market share had
been stable over the last ten years and there was no indication that Microsoft’s market position would change in the near future. Moreover, Microsoft’s closest competitor, Apple, only had a market share of 2,9%.45 Considering this and the network effects stemming from
the particular characteristics of the market, it can be concluded that during the relevant period, Microsoft held a dominant position on the market for PC operating systems.46 In its response
to the Third Statement of Objections, Microsoft recognized its dominance in this market.47
The Decision highlighted that the key to Microsoft's enduring dominance were the network effects relating to the applications that run on Windows. Applications that are written to Windows do not run on other operating systems. The main benefits that consumers derive from a PC operating system relate to the number and variety of applications that they can run on it. Similarly, system developers that write applications value operating system platforms that reach the greatest number of users. In this way, the higher the number of users of a given operating system platform, the greater the number of applications developers write for that platform and vice versa. Virtually all commercial applications were written first and foremost
40 Microsoft Decision paras 162, 345
41 Commission notice on the definition of the relevant market (nr. 33) 5 42 Microsoft Decision, para 427
43 Case 27/76, United Brands v. Commission [1978] ECR 207, para 65
44 Mattias Ganslandt, ‘New Rules for Dominant Firms in Europe’ (PhD Thesis, Research Institute of Industrial
Economics 2006)
45 Microsoft Decision, para 434 46 Commission Decision, supra note 2
47 N. Banasevic, J. Huby, M. Pena Castellot and O. Sitar, Directorate-General Competition, Unit C-3, and H.
Piffaut, Directorate-General Competition, unit C-4, Commission adopts Decision in Microsoft case, Competition Policy Newsletter, pg. 44
to the Windows platform. This strong network effect is called “applications barrier to entry”.48 Barriers to entry make it difficult to enter the market.
Microsoft made the availability of the Windows client PC operating system conditional on the simultaneous acquisition of the Windows Media Player software. After establishing
dominance on the market, the Commission considers the three other general conditions used by the Court to establish a tying abuse contrary to Article 102 TFEU. First, the tying and tied goods are considered two separate products, second, the undertaking concerned doesn’t give customers the choice to source the tying product without the tied product and finally, the tying conduct forecloses competition. After this, the Commission looks at whether there is an objective justification for the tying abuse.
The Commission found that client PC operating systems and streaming media players constitute separate products. Although Microsoft had been tying its media player with
Windows for some time, a consumer demand for stand-alone media players still remained that can be distinguished from the consumer demand for PC operating systems. Next to that, there are vendors that develop and supply media players on a stand-alone basis. Moreover,
Microsoft also develops and markets Windows Media Player for other PC operating systems, which further indicates that operating systems are not just part of the same product.49 It shows
that the condition of ‘separate’ products evolved into the examination of whether the products are ‘distinct’, as the products are virtually integrated in the digital sphere. Examining whether these intangible products are part of the same product or not does not pose a challenge on the Commission in this case.
Considering the coercion criterion, the Commission asserts that Microsoft does not give consumers the opportunity to buy Windows without Windows Media Player. Windows Media Player is pre-installed on a Windows PC and therefore consumers are unable to acquire the Windows operating system without simultaneously acquiring Windows Media Player. The product itself can’t be removed and the code remains instantly accessible on a user’s PC.50
In the classical tying cases outside of the digital sphere, the Commission and the Courts consider the foreclosure effect for competing vendors to be demonstrated by the tying of a separate product with the dominant product. Qualcomm, Hilti and Tetra Pak II decision showed this quasi-per se approach by the Commission. In its Microsoft decision, on the other hand, the Commission took an effects-based approach to establish foreclosure of competition and went into detail with regard to the effects that the tying conduct has on competition. As mentioned, users are often able to multi-home in the high technology sphere, which decreases the tendency of market-tipping. In the present case, users can obtain third party media players through the internet, often free of charge. 51 At first glance, one could argue that
the conduct is therefore not liable to foreclose competition. The Commission demonstrated however that the fact that Microsoft offered Original Equipment Manufacturers (“OEMs”)52
48 N. Banasevic, J. Huby, M. Pena Castellot and O. Sitar, Directorate-General Competition, Unit C-3, and H.
Piffaut, Directorate-General Competition, unit C-4, Commission adopts Decision in Microsoft case, Competition Policy Newsletter, pg. 44
49 Commission Decision, paras 800-825 50 Commission Decision, paras 826-834 51 Commission Decision, paras 840, 977
52 An Original Equipment Manufacturer (OEM) is a company that manufactures and sells products or parts of a
product that their buyer, another company, sells to its own customers while putting its products under its own branding. (Source: Corporate Finance Institute)
only the version of Windows bundled with Windows Media Player, had the inevitable consequence of affecting relations on the market between Microsoft, OEMs and suppliers of third-party media players by appreciably altering the balance of competition in favor of Microsoft and to the detriment of the other operators. Through the tied sale Microsoft ensures that Windows Media Player is as ubiquitous as Windows on client PCs, which is pre-installed on more than 90% of client PCs shipped worldwide.53
Users who find Windows Media Player pre-installed on their client PCs were found to be generally less inclined to use another media player, even when the other media player is inherently better than Windows Media Player. Microsoft’s argument that its success was the result of competition on the merits was not supported by the available evidence, because a clear-cut lead of Windows Media Player was not indicated in terms of product quality. The option of entering into distribution agreements with OEMs constituted a less efficient means that enabled Microsoft to obtain an unparalleled advantage with respect to distribution of its product and to ensure its ubiquity of Windows Media Player on client PCs.54 Owing to the
bundling, WMP enjoyed an unparalleled presence on client PC’s throughout the world without having to compete on the merits with competing products.
The Commission based its theory on the fact that the market for streaming media players is characterized by significant indirect network effects.55 The greater the number of users of a
given software platform, the more content providers will invest in developing products compatible with that platform, which, in turn reinforces the popularity of that platform with users. Content providers and software developers indeed tended to primarily use Windows Media Player as that allowed them to reach the very large majority of client PC users in the world. In turn, customers preferred using Windows Media Player because of the wide array of complementary software and content that will be available for the product. The Commission stated that these feedback-loop effects created by the two-sided nature of the media player might make the media player market tip in favor of WMP.56 According to the Commission,
this self-reinforcing mechanism undermines the competitive process to the detriment of innovation and the consumer. This has spill-over effects on competition in other markets as well. For example, it strengthens Microsoft’s position on media encoding and management software.57 If Microsoft came to control the media player market, then its proprietary
technology could constitute a significant barrier to market entry, not only to the media player market but also to related markets in which streaming media technologies are used.58
Thus, the tying of WMP with the Windows OS increased WMP’s usage and shielded Microsoft from effective competition from potentially more efficient media players. Due to the indirect network effects in the market as well as additional costs of supporting several technologies, this gives content providers and developers of software based on media player formats an incentive to rely primarily on Windows Media technology. Consumers in turn will prefer to use WMP since there will be more complementary software and content available than for other streaming media players. The Commission stated that the abuse hindered
53 Commission Decision, para 979 54 Commission Decision, paras 980-981 55 Commission Decision, para 897 56 Commission Decision, para 1061 57 Commission Decision, para 982
58 N. Banasevic, J. Huby, M. Pena Castellot and O. Sitar, Directorate-General Competition, Unit C-3, and H.
Piffaut, Directorate-General Competition, unit C-4, Commission adopts Decision in Microsoft case, Competition Policy Newsletter, 2004, pg. 47
innovation in the streaming media player market and harmed the competitive process and consumers who ultimately would face less choice. The Court of First Instance concluded that the Commission was right to state that there was a reasonable likelihood that the tying
conduct would lead to a lessening of competition so that the maintenance of an effective competition structure would not be ensured in the foreseeable future.59 It concluded that the
bundle gave Microsoft a competitive advantage which prevented competition between Microsoft’s WMP and competition like RealPlayer to take place on the basis of the intrinsic merits of the two products.60
Microsoft attempted to objectively justify its conduct by putting forward a number of efficiency considerations related to distribution and to the protection of the coherence of Windows, which according to Microsoft, outweighed any anti-competitive effects from tying.61 The Commission rejected Microsoft's arguments to the effect that, first, the tying in
question produces efficiency gains capable of offsetting the anti-competitive effects62 and
second, Microsoft had no interest in anti-competitive tying.63 The Commission concluded that
Microsoft had not shown that the integration of WMP in Windows creates technical
efficiencies or, in other words, that it leads to superior technical product performance.64 As
for Microsoft’s argument that tying Windows Media Player would be efficient as it provided a ‘focal point’ for software developers whose products rely on media players, the Commission stated that this is not a legitimate argument under Community competition law as it distorts competition on the merits.65 In light of its analysis, the Commission found that Microsoft had
abused its dominant position in the client operating system by making its client operating system available only with its media player since May 1999. By way of remedy for the abusive tying Microsoft needed to offer within 90 days of the date of notification of that decision, a full-functioning version of the Windows client PC operating system which does not incorporate Windows Media Player. Microsoft retained the right to offer a bundle of the Windows client PC operating system and Windows Media Player.66
In many respects, the Commission followed the traditional analysis for the Windows Media Player abuse. The four-pronged test is broadly in line with earlier cases, such as Tetra Pak II and Hilti, and both cases were referred to in numerous places. However, while tying was subject to a per se prohibition under EC law in the past, the Commission followed an effects-based approach to tying in its Microsoft decision on the grounds that many media players could be downloaded for free and therefore foreclosure could not be presumed. In its press release the Commission emphasized that it took a “rule of reason” approach to tying.67 The
Commission engaged in an extensive analysis of whether Microsoft’s tying had foreclosed
59 Case T-201/04 Microsoft Corp v Commission of the European Communities [2007] ECR II-3601, para 1089 60 Case T-201/04 Microsoft Corp v Commission of the European Communities [2007] ECR II-3601, paras 971,
1034, 1040
61 N. Banasevic, J. Huby, M. Pena Castellot and O. Sitar, Directorate-General Competition, Unit C-3, and H.
Piffaut, Directorate-General Competition, unit C-4, Commission adopts Decision in Microsoft case, Competition Policy Newsletter, 2004, pg. 47
62 Commission Decision, paras 955-970 63 Commission Decision, paras 971 to 977 64 Commission Decision, para 1159 65 Commission Decision, para 1042 66 Commission Decision, para 1194
67 Press Release, European Commission, ‘Microsoft – Questions and Answers on Commission Decision’,
MEMO/04/70 (March 24, 2004) available at
<http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/04/70&format=HTML&aged=1&language= EN&guiLanguage=en>
competition in the market for media players. In its Enforcement Priority Guidelines the
Commission reaffirmed its effects-based analysis it had set out in its Microsoft decision.68 The
Court of First Instance did note that OEMs were still installing third-party media players and the use of multiple players were still increasing, but concluded that this did not invalidate the Commission’s conclusion that the impugned conduct was likely to weaken competition within the meaning of the case law.69
68 The Commission Guidance Paper (nr. 11), paras 46-61
Google Android (2018)
Google’s ad-funded products and services have shifted from a PC environment to a
smartphone environment, illustrated by Google’s acquisition and development of the Android mobile OS in 2005,70 in order to effectively compete with Apple’s iOs ecosystem. Today,
about 80% of smart mobile devices in Europe, and worldwide, run on Android.71
The European Commission found that Google violated Article 102 TFEU based on three types of contractual restrictions that Google imposed on Android device manufacturers and network operators to ensure that traffic on Android devices goes to the Google search engine.72 The European Commission identified the tying of the Google Search app with the
Play Store and Google Chrome with the Play Store and the Google Search app, together with conditional licensing and exclusivity payments.73 The types of abusive conduct were all found
to be aimed at protecting and strengthening Google’s dominant position in general search services, thereby increasing its revenues through search advertisements. Google was found
liable, jointly with its holding company Alphabet Inc. for a fine of €4.34 billion. 74
Again, the tying abuses will be focused on. Any manufacturer that wishes to pre-install any of the Google Play Store, Google Search app or Google Chrome browser, is required to install all of the apps in the bundle. Since the Play Store constituted a ‘must-have’ app for device manufacturers, the bundled licensing policy resulted additionally in a form of tying of Google’s search and browser products.75
Android is a multi-sided platform, on which different groups of users with interdependent demand (app developers, device manufacturers, mobile carriers, users and app-based service providers) interface with one another. Externalities produced by one group are captured and monetized in the form of marketing to other groups. Separate markets are defined on either side of the platform in which there is a group of users with independent (but interrelated) demand because of these indirect network effects.76 The Commission concluded that the
relevant product markets for the tying abuses in this case are the market for Android app stores and the market for the provision of general search services. The Commission based its considerations for most part on the demand- and supply-side perspective.77 As regards the
first market, the Commission concluded that other apps don’t belong to the same product market as app stores, as app stores serve different purposes than other apps.78 App stores for
other licensable smart mobile OSs and for non-licensable smart mobile OSs are also not considered to belong to this product market. Therefore, Google’s app store dominance is not
70 L. Eadicicco, The Rise of Android: How a Flailing Startup Became the World’s Biggest Computing Platform
(Business Insider, 27 March 2015)
71 Press Release, European Commission, Ricardo Cardoso, Giulia Astuti, ‘Antitrust: Commission fines Google
€4.34 billion for abuse of dominance regarding Android devices’, IP/18/4581 (18 July 2018)
72 A. Portuese, The rise of Precautionary Antitrust: An Illustration with the EU Google Android Decision,
Competition Policy International, November 19, 2019
73 Google Android Decision, recital 2
74 Press Release, European Commission, Ricardo Cardoso, Giulia Astuti, ‘Antitrust: Commission fines Google
€4.34 billion for abuse of dominance regarding Android devices’, IP/18/4581 (18 July 2018)
75 Alison Jones, Brenda Sufrin, Niamh Dunne, EU Competition Law: Text, Cases, and Materials (7th edn, Oxford
University Press 2019) pg. 480
76 Pablo Solano, EU Competition needs to install a plug-in, (World Competition, 40(3), 2017), pg. 393 to 420 77 Google Android Decision, paras 323-324
constrained by Apple’s App Store, which is only available on iOS devices. 79 The
Commission narrowly defined the market by excluding Apple as a competitor, thereby neglecting the competitive effects that firms like Apple impose on these markets, which can have profound impact on the outcome of the case.
The relevant geographical markets are the worldwide market (excluding China) for Android app stores and national markets for general search services.80 Even though general search
services can be accessed by users anywhere in the world, the main general search services offer localized sites in different countries and in a variety of language versions. There are barriers to the extension of search technology beyond national and linguistic borders. The general search services are therefore national in scope.81
Dominance in Android app stores worldwide
During the facts of the case, the Commission concluded that Google held a dominant position in the worldwide market (excluding China) for Android app stores since 2011.82 Google Play
Store had been pre-installed on more than 90% of all smart mobile devices using Android and no other Android app store had achieved such distribution. The second most pre-installed Android app store was pre-installed on 30-40% of Google Android devices during 2014-2016, down from 40-50% in 2012-2013. Over 90% of all apps on Android devices had been
downloaded via the Play store and the market share of Amazon, the second largest player, had been decreasing since 2011 and in 2016 was only up to 5%.83
The Commission stated that Google’s economic strength in its market for Android app stores is reinforced by the quantity and popularity of apps available on the Play Store.84 Next to that,
the high development and commercialisation costs of an app store creates barriers to entry and expansion on the market. The establishment of a fully-fledged app store requires significant investment that makes it difficult to realize.85 Furthermore, the existence of indirect network
effects on both sides of the market creates an additional barrier to entry. This is shown in the fact that developers do not consider any other Android app store as substitutable for the Google Play Store because of the ability it grants to reach end consumers.86 Although
installation of apps directly from a website, without the use of an app store (so-called “side-loading”), is allowed on Android devices, the sideloading is technically complex and is considered not to constitute a satisfactory distribution channel for customers in this case.87
Dominance in national general search services
The Commission concluded that Google also holds a dominant position in the national markets for general internet search throughout the European Economic Area (EEA).88 Since
at least 2011, Google had enjoyed strong and stable market shares across the European
Economic Area (“EEA”) and there had been no effective entry by any new competitors in any EEA country. This provides a good indication of Google's economic strength in each national
79 Google Android Decision, paras 284-295, 306-322 80 Google Android Decision, para 402
81 Google Android Decision, paras 423-424 82 Google Android Decision, para 590 83 Google Android Decision, paras 596-597 84 Google Android Decision, paras 606-614 85 Google Android Decision, paras 627-630 86 Google Android Decision, para 638 87 Google Android Decision, para 634 88 Google Android Decision, para 674
market for general search services in the EEA. The only EEA country in which Google did not hold a market share above 90% was the Czech Republic. Google had, however, been the market leader in the Czech Republic since 2011.89
The Commission argued that this market is also characterised by high barriers to entry.90
Providers of other online services would need to undertake substantial investments in order to provide general search services. This is primarily due to the costs associated with the
development of general search algorithms. Furthermore, the network effects make it difficult for actual and potential competing general search services from offering competitive or innovative services in an economically sustainable manner.91 Research shows that only a
minority of users in the EEA that use Google’s general search service as their main general search service make use of other general search services as well. A survey found that only 12% of users in Germany, Italy and Spain multi-home. As for France and the United Kingdom, the percentage of users that multi-home was respectively 15% and 21%. The survey defined as a multi-homer a user that conducts at least 5% of all its queries on at least two distinct general search services and was performed between 2010 and April 2011.92 After
establishing dominance in both markets, the other three general conditions for the assessment of the two tying abuses were assessed.
Tying of Google Search and the Play Store
As regards the tying of Google Search with the Play Store, the Play Store and the Google Search app are considered distinct products. Firstly, the Play Store and the Google Search app provide distinct functionalities to users. Next to that, a number of undertakings supply general search services on a stand-alone basis, independently of Android app stores. Furthermore, Google develops and markets versions of the Google Search app that are designed to work on other smart mobile OSs and the Google Search app can be downloaded via other non-Android app stores as well. Lastly, OEMs still sought the installation of the Play Store on their smart mobile devices separately from the Google Search app. Google does not contest the
conclusion that the Play Store and Google Search app are distinct products.93
Furthermore, OEMs cannot obtain the Play Store without the Google Search app. OEMs can pre-install the Play Store on their Google Android devices only if they license and pre-install the GMS bundle, including the Google Search app. Also, users cannot obtain the Play Store without simultaneously obtaining the Google Search app. Next to that, OEMs that wish to install a different general search app on their GMS devices can do so only alongside the Google Search app. It is hereby irrelevant that OEMs may not be required to pay anything extra for the Google Search app. It monetizes that app through advertising via the general search service offered through the Google Search app. Similar to the judgment in Microsoft94, the tying does not depend on OEMs having to pay for the Google Search app.95
89 Google Android Decision, paras 676-682
90 Press Release, European Commission, Ricardo Cardoso, Giulia Astuti, ‘Antitrust: Commission fines Google
€4.34 billion for abuse of dominance regarding Android devices’, IP/18/4581 (18 July 2018)
91 Google Android Decision, paras 686-708 92 Google Android Decision, para 710 93 Google Android Decision, paras 756-761
94 Case T-201/04 Microsoft Corp v Commission of the European Communities [2007] ECR II-3601, paras
967-969
After this, the Commission assessed whether there is a restriction of competition. The Commission explicitly addresses the issue of whether tying practices require the finding of anticompetitive effects by stating that it now follows an effects based approach in tying cases.96 It states that the essence of such an effects based approach to tying is establishing
whether such practices are capable of restricting competition.97
Similarly to the first tying abuse, the Commission concluded that the tying of the Google Search app with the Play Store is capable of restricting competition based on two reasons. First of all, the Commission concluded that, via the tying, Google is able to ensure for its general search service a significant competitive advantage that competing general search services cannot offset by other methods of distributing general search services on smart mobile devices. The Commission shows that the number of general searches via smart mobile devices has grown significantly. Also, it is impossible to uninstall the Google Search app on GMS devices. Users can download competing general search apps next to the already pre-installed Google Search app but the Commission found that users are less likely to download alternative general search apps when there is a pre-installed app that already delivers the required functionality. Thus, competing general search services cannot offset the competitive advantage that Google ensures for itself through tying. The evolution of market shares supports this finding.98 The second reason for the Commission to conclude that the tying of
the Google Search app with the Play Store is capable of restricting competition, is that Google’s conduct helps to maintain and strengthen its dominant position in each national market for general search services, increases barriers to entry, deters innovation and tends to harm, directly or indirectly, consumers.
Google stated that the Commission had failed to conduct an analysis of the competitive effects of the tying by not taking into account the indirect network effects with respect to the Google Search app, a factor that had been taken into account by the Commission in the Microsoft tying judgment.The Commission stated that a finding of indirect network effects is not required with respect to the Google Search app. Nothing in the Microsoft judgment provides that it is generally required to make such a finding when analyzing the effects of tying, thus rigorously applying an identical framework of assessment in all tying cases is not required.99 The Commission concluded that it must rather make an overall assessment of the
facts in each given case and can take account of a range of tools for the purposes of that assessment.100 This shows that the competition authorities
The economics of two-sided markets are different from those of one-sided markets, primarily because of the complexities introduced by network effects. Specifically, pricing, contracting and sales practices that may raise anticompetitive concerns in traditional markets may be procompetitive and welfare-enhancing in multisided markets because they increase value on one or more sides of the market without decreasing value to the other sides. Under some conditions tying by a dominant producer may restrict competition without providing benefits to consumers in single-sided markets. However, in two-sided markets, tying may benefit consumers because the other side of the market may reap benefits from the tying.101 In the
96 Google Android Decision, para 749 97 Google Android Decision, paras 733, 749 98 Google Android Decision, para 776 99 Google Android Decision, para 854 100 Google Android Decision, para 857
101 Derek Holt and Felix Hammeke, European Union – Two-sided Markets, Platforms and Network Effects,
context of two (or multi) sided markets it has been shown that the profitability of tying depends on the degree of two-sidedness of the markets that are being tied. Therefore, when assessing the anti-competitive potential of such tying practices, one would expect that this factor will be taken into account to some extent.102 By not taking into account the indirect
network externalities, it can be doubted whether the Commission adequately tackles Google’s behavior in this regard, and whether it eventually enhances consumer benefit on the market. Tying of Google Chrome with the Play Store and the Google Search app
Google Chrome is considered a distinct product from the Play Store and the Google Search app. The Commission concluded that Google Chrome provides distinct functionalities to users. Also, a number of undertakings supply mobile web browsers on a stand-alone basis, independently of Android app stores and general search services. Google furthermore develops and markets versions of Google Chrome that are designed to work on other mobile OSs, and finally, Google Chrome can be downloaded via other non-Android app stores such as the Apple AppStore. Google did not contest the Commission’s reasoning.103
After this, the Commission concluded that OEMs cannot obtain the Play Store and the Google Search app without Google Chrome. OEMs can pre-install the Play Store and the Google Search app on their Google Android devices only if they license and pre-install the GMS bundle, including Google Chrome. Also, users cannot obtain the Play Store and the Google Search app without simultaneously obtaining Google Chrome. Moreover, OEMs that wish to install a different mobile web browser on their GMS devices can only do so alongside Google Chrome. And lastly, it is irrelevant that OEMs may not be required to pay anything extra for Google Chrome. Establishing the tying conduct does not depend on OEMs having to pay a certain price for the Google Chrome. Google neither contested this reasoning of the
Commission.104
As regards the condition that the tying conduct restricts competition, the Commission
concluded that the tying of Google Chrome with the Play Store and the Google Search app is capable of restricting competition based on two reasons. Firstly, the tying provides Google with a significant competitive advantage that competing non OS-specific mobile web
browsers cannot offset. The second reason that the Commission put forward, is that the tying conduct deters innovation and tends to harm, directly or indirectly, consumers of mobile web browsers and helps to maintain and strengthen Google’s dominant position in each national market for general search services.105 The Commission’s conclusion that, via the tying,
Google is able to ensure for its mobile web browser a significant competitive advantage that competing non OS-specific mobile web browsers cannot offset by other methods of
distributing mobile web browsers on smart mobile devices is based on the following reasons. First of all, pre-installation is an important channel for the distribution of mobile web
browsers on smart mobile devices. The Commission concluded that by tying Google Chrome with the Play Store and the Google Search app on Google Android devices, Google ensures that distribution of Google Chrome is as wide on smart mobile devices worldwide as the number of GMS devices. It is impossible to uninstall Google Chrome on GMS devices, only downloading another mobile web browser next to Google Chrome is possible. The
Commission stated that users are less likely to download alternative mobile web browser and
102 Federic Etro, Cristina Caffara, On the economics of the Android case, vol. 13 (European Competition Journal
2017)
103 Google Android Decision, paras 879-885 104 Google Android Decision, paras 887-895 105 Google Android Decision, para 896
Google’s competitive advantage resulting from the tying is consistent with the evolution of market shares.106 However, it must not be forgotten that platforms in one market may still
face competition from those in other markets. For example Apple’s iOS can still be regarded as a form of competition, as both compete to attract the attention of consumers. The
incentives to innovate remain strong even for platforms that have reached a large scale. 107
Limited switching costs and the ability to multi-home at low makes that incumbents need to continue to innovate and offer good service to maintain their customer base.108 Google offered
consistent innovative releases of Android year-on-year: i.e. swiping, security, cameras, fitness functions, facial recognition, payment systems. If Android were to provide a lower quality experience, or relaxes its innovative effort, compared to its rivals, smartphone users would switch to more up-to-date competitors.109
Also for this tying abuse the Commission stated that it is not required to make a finding of indirect network effects, in this regard with respect to Google Chrome.110 The Commission
mentioned consumer harm but did not elaborate on this in its decision. The focus of the Commission’s findings was mainly on the reduction of choice to manufacturers and end-users.111
Google claimed that the tying of the Google Search app with the Play Store and the tying of Google Chrome with the Play Store and the Google Search app was objectively justified on the basis of three reasons:
1. It is a legitimate way for Google to monetize its investments in Android and its non-revenue-generating apps;
2. It allows Google to offer the "consistent out-of-the-box experience that users expect, and facilitates competition with Apple and other vertically integrated or closed mobile platforms";
and
3. It allows Google to license the Play Store for free because the value of the Play Store to OEMs and users correlates with the value to Google of the promotion by OEMs of Google's general search service. By contrast, if Google were to charge OEMs a uniform up-front license fee for the Play Store, such a fee would make lower-end devices and decrease competition with Apple.112
The Commission concluded that Google had not demonstrated that the tying conduct was objectively justified. The Commission stated that in the first place, the tying conduct is not necessary to monetize its investment in Android and its non-revenue-generating apps. Google would still have been able to substantially monetize the Play Store. Second, the Commission stated that Google had not demonstrated that the tying conduct is necessary in order to provide a consistent out-of-the-box experience for users. While users may benefit from having a general search app or mobile web browser pre-installed on their Google Android
106 Google Android Decision, para 898
107 Derek Holt and Felix Hammeke, European Union – Two-sided Markets, Platforms and Network Effects,
E-Commerce Competition Enforcement Guide 2nd edition (Global Competition Review 2019)
108 Derek Holt and Felix Hammeke, European Union – Two-sided Markets, Platforms and Network Effects,
E-Commerce Competition Enforcement Guide 2nd edition (Global Competition Review 2019)
109 Fiona Carlin, Grant Murray, ‘Android: Error 404 “Theory Not Found”’ (Kluwer Competition Law Blog, 18
July 2018) < http://competitionlawblog.kluwercompetitionlaw.com/2018/07/18/android-error-404-theory-not-found/?doing_wp_cron=1595590995.8499209880828857421875> accessed 28 May 2020
110 Google Android Decision, paras 899, 966
111 Google Android Decision, paras 899-1005, A. Portuese, The rise of Precautionary Antitrust: An Illustration with the EU Google Android Decision (Competition Policy 2019)
devices, they do not benefit from Google requiring OEMs to pre-install the Google Search app and Google Chrome. On the contrary, the Commission stated, users would benefit if OEMs had the flexibility to pre-install competitive products for their devices, allowing them to differentiate their products. Furthermore, according to the Commission, Google had not demonstrated that the tying conduct was necessary to avoid the need for Google to charge OEMs a fee for the Play Store, as Google achieves substantial revenues through the Play Store.113 The Commission decision required Google to bring its illegal conduct to an end in an
effective manner within 90 days of the decision.
In its decision, the Commission views network effects again unequivocally as barriers to entry rather than phenomena that could be pro-competition. The Commission maintains the
Microsoft concept of indirect network effects creating a “positive feedback loop” that reinforces the exclusionary effects in its assessment of dominance. This ignores the
ambiguous nature of indirect network effects in the digital economy, which can also work as catalysts for the dissemination of innovation in a multihoming environment in which
differentiated products may swiftly gain a critical user base. Competition is one swipe away.114 The Commission only focuses on reduction of customer choice instead of
elaborating on consumer harm in its theory of harm. The consumer benefits and
procompetitive effects that result from the tying conduct are not taken into account. The Commission decision does not appear to be a sufficiently sound foundation for heavily censoring Android’s tying conduct by imposing the highest fine in antitrust history. This may actually have adverse effects on innovation.115 There is little legal certainty for businesses
whether their conduct and business model are allowed or not. Considering this, it can be put to question whether the Commission made the right considerations in Google Android.
113 Google Android Decision, paras 994-1008
114 Pablo Solano, The Android decision: Is the EU blade runner seeking to retire the more-economic replicant?,
Global and Business Law (Law Ahead), available at <https://lawahead.ie.edu/the-android-decision-is-the-eu-blade-runner-seeking-to-replace-its-more-economic-replicant/>
115 Derek Holt and Felix Hammeke, European Union – Two-sided Markets, Platforms and Network Effects,
Analysis
In the early tying cases of Hilti and Tetra Pak the Court of First Instance did not require the finding of anticompetitive effects. This left the impression that tying practices constitute per se abuses. In Microsoft the Commission extensively addressed the effects of tying practices in the case in order to establish foreclosure of competition. As noted in the Microsoft decision, the circumstances in the case at hand, in which users can and do obtain third party media players through the internet, sometimes for free, are indicators that further analysis is needed to establish that tying WMP is liable to foreclose competition. As mentioned by the
Commission, there are good reasons to assume that the tying conduct is no longer by its nature liable to foreclose competition. The Google Android decision follows the judgment in Microsoft by concluding that the Commission now follows an effect-based approach in tying cases.
Looking at the facts pattern of both cases, the cases come across rather similar. The Google Android decision follows the earlier Commission decision of Microsoft for the main part. In many respects, the Commission used the traditional analysis for the Windows Media Player abuse. The four-pronged test is broadly in line with earlier cases, such as Tetra Pak II and Hilti. To establish an abuse of dominance contrary to 102 TFEU, and in particular a tying abuse, the Commission first establishes a position of dominance. After this, it looks at
whether the products in question are separate (distinct) products and investigates whether the tied product can be obtained without the tying product. Furthermore, the Commission
examines whether the tying forecloses competition and develops a theory of harm. After this, possible objective justifications and efficiencies are analyzed. These could offset the harmful effects of abusive conduct.
In Microsoft, the Commission demonstrated that Microsoft offered OEMs only the version of Windows bundled with Windows Media Player, which had the consequence of appreciably altering the balance of competition in favor of Microsoft and to the detriment of its
competitors. As Microsoft had a market share of more than 90% on the worldwide market of PC operating systems on which Windows Media Player was pre-installed, the tied sale ensured that Windows is as ubiquitous as Windows on client PCs.
In Android, the Commission identified the tying of the Google Search app with the Play Store and Google Chrome with the Play Store and the Google Search app, which was found to be aimed at protecting and strengthening Google’s dominant position in general search services, thereby increasing its revenues through search advertisements. The Commission narrowly defined the market for “licensable” mobile operating systems, thereby neglecting the
competitive effects that firms like Apple impose on these markets. Clear guidance on how to define the market in a multi-sided market nature is missing.
The Commission concluded that the tying of Google Chrome with the Play Store and the Google Search app is capable of restricting competition based on two reasons. Firstly, the tying provides Google with a significant competitive advantage that competing non OS-specific mobile web browsers cannot offset. Second, the tying conduct deters innovation and tends to harm, directly or indirectly, consumers of mobile web browsers and helps to maintain and strengthen Google’s dominant position in each national market for general search
services. The Commission also concluded that the tying of the Google Search app with the Play Store is capable of restricting competition based on two reasons. First of all, the Commission concluded that, via the tying, Google is able to ensure for its general search
