Dominance, Super-Dominance, and Gatekeeper Status ...

‘Dominance, Super-Dominance, and

Gatekeeper Status: Variable Shades of Market Power in Digital Markets’

16th Annual ASCOLA Conference

Petar Petrov

1 JULY 2021

The ‘gatekeeper‘ concept – a missing variable:

The traditional concept of dominance and market power;

Super-dominance in digital markets;

The gatekeeper concepts under the DMA and the ARC:

Qualitative and quantitative criteria;

Periodic review of the gatekeeper status;

Outlook: the parallel application of varying frameworks

‘DOMINANCE, SUPER-DOMINANCE AND GATEKEEPER STATUS: VARIABLE SHADES OF MARKET POWER IN DIGITAL MARKETS’PAGE 2

Overview

The “position of economic strength enjoyed by an undertaking, whichenables it to prevent effective competition being maintained on arelevant market, by affording it the power to behave to anappreciable extent independently of its competitors, itscustomers and ultimately of consumers” (EC Guidance Paper, point10);

A capacity to act independently while remaining “largely insensitive tothe actions and reactions of competitors, customers and […] consumers”;

Absence of effective competitive constraints;

Market shares provide an useful indication.

‘DOMINANCE, SUPER-DOMINANCE AND GATEKEEPER STATUS: VARIABLE SHADES OF MARKET POWER IN DIGITAL MARKETS’ PAGE 3

The traditional concept of dominance

Market power: “the power to influence market prices, output,innovation, the variety or quality of goods and services, or otherparameters of competition on the market for a significant period oftime.”

Power to exclude existing or potential competitors in the long run.

'DOMINANCE, SUPER-DOMINANCE AND GATEKEEPER STATUS: VARIABLE SHADES OF MARKET POWER IN DIGITAL MARKETS’ PAGE 4

Dominance vs. market power

• 100 % Monopoly

• 70 – 90 % quasi-monopoly super-dominance

• > 50 % presumtion of dominant position (Case C-62/86, Akzo)

• < 50 % dominant position only if other criteria are filled

• < 40 % dominance is less likely; relative market power is likely

• < 25 % no dominant position; relative market power is unlikely

PAGE 5

Spectrum of various degrees of market power

On the one side of the “rainbow” are firms with “some”,“appreciable” or “significant” market power whereas truemonopolists are on the other side of the spectrum.

‘DOMINANCE, SUPER-DOMINANCE AND GATEKEEPER STATUS: VARIABLE SHADES OF MARKET POWER IN DIGITAL MARKETS’

A missing concept at EU level;

Introduced in Austria, Belgium, Germany, France, and Italy;

This concept covers undertakings, which cannot be considered as dominantwhile enjoying considerable economic and bargaining power:

E.g. proscription of abuse of market power by other types of undertakingshaving contractual agreements with SMEs (Section 20 (1) ARC);

The ‘relative market power’ concept applies only to relation betweensuppliers and buyers, unlike the dominance test;

Various (cumulative) conditions: brand image of the product and thedifficulty for buyers to switch suppliers;

Counterfactual assessment (France).


Economic dependence

The Google cases – a super-dominance saga?

Super-dominance: Google Shopping and Google Android cases;

Various factors indicating dominance, including:

Barriers to entry and expansion;

Network effects;

Brand image;

Investment costs;

Multi-homing; and

Data.

Google’s super-dominant position allowed it to adopt the conduct of aprivate regulator in the Internet Search and Android licensing markets.


Super-dominance in digital markets (1)

Intermediation power and data access – major assets in the digitaluniverse;

The Commission’s approach is similar in Amazon Market Place (Case AT.40462):

Systematic infringement of antitrust rules by relying on non-public data collectedfrom independent sellers;

Access to a very large amount of non-publicly available retailer data;

Use of data to better target specific consumer groups;

Amazon abused its ‘must have’ sales infrastructure -> misuse of ‘essentialfacilities’;

Access to commercially sensitive data likely to distort competition:Apple/Shazam (Case M.8788);

Excessive data collection and data accumulation: Facebook (Germany).


Super-dominance in digital markets (2)

Limited scope of application of the DMA:

a number of “core platform services” where

competition concerns are “most evident and prominent”;

Article 2 (2) DMA: definition and list of “core platform services”;

Article 3 DMA sets down a number of qualitative criteria qualifying aplatform as a gatekeeper:

a significant impact on the single market;

operating one or more important gateways to customers; AND

an “entrenched and durable position” in its operations in the near future.


The ‘gatekeeper’ status under the DMA (1)

Article 3 (2) DMA lays down a number of quantitative criteria:

EEA revenues above EUR 6.5 bn in the last three financial years OR

average market capitalization of at least EUR 65 bn over the last financial year;AND

provision of core platform services in at least three EU Member States.

An online platform provider is deemed to operate as an important gatewayfor business users to reach their customers where it:

more than 45m monthly active end-users established or located in the EU(approximately 10% of the population of the EU-27) AND

more than 10,000 yearly active business users established in the EU in the lastfinancial year;

Identification of a very limited number of gatekeeper platforms.


The ‘gatekeeper’ status under the DMA (2)

A larger concept: undertakings with outstanding relevance across markets(‘ORAM’);

The new Section 19a ARC sets down only qualitative criteria. A platformprovider should:

have a dominant position in one or more markets;

enjoy considerable economic strength;

have access to other resources;

have access to competition-related data;

play a significant role for a third party’s access to upstream or downstreammarkets; or

be vertically integrated;

The ORAM status covers not only to dominant platforms but also to companieswith a significant market power.


The ‘ORAM’ status under ARC

Article 4 (1) DMA: the Commission may reconsider, amend or repeal “at anymoment” a decision designating a platform services provider as a“gatekeeper” on its own initiative;

The Commission has to reconsider or amend a previous decision upon request -substantial change in any facts and circumstances;

It may repeal or amend a decision where in the case of an incomplete, incorrector misleading information;

Article 4 (2) DMA: the Commission has the obligation to regularly review if adesignated gatekeeper satisfies the quantitative and qualitative requirementsat least every two years;

ARC also contains no obligations for the FCO to conduct a periodic review of aplatform’s ORAM status.


Periodic review of the ‘gatekeeper’ status

Neither the Commission’s decisional practice nor the case-law of the EUcourts has not offered a clear definition of the ‘gatekeeper’ concept;

DMA and Section 19a ARC provide important clarifications as to the‘gatekeeper’ concept;

The adoption of the final text of the DMA may take at least two years;

The quantitative thresholds laid down in Article 3 DMA may become obsoletegiven the dynamic structure of the platform services markets;

A number of Member States may introduce at national level diverging‘gatekeeper’ concepts based on various qualitative or quantitative criteria;

Risks of the co-existence of incoherent national regimes.


Outlook

Thank you for your attention!


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