Large online platforms such as Amazon, Booking, Zalando and Bol are now an integral part of our society. On these platforms, consumer demand for products is brought together with the supply of products by online sellers. A win-win situation, usually. These platforms often also sell products themselves on their own platform and thereby compete directly with the online sellers using their platform. Usually no problem, unless the online platform’s behaviour distorts the competition.
Unfair competition by large online platforms
Platforms that possess such a large position that they are dominant, have special responsibilities thereto-related under competition law on how they ought to compete fairly. Having a dominant position is not prohibited, and these online platforms are allowed to compete. However, they may not restrict competition in a way that goes beyond “normal” competition or competition on the merits. In other words, the online platform may not unfairly enlarge its position, which generally leads to less choice, lower quality and higher prices for the end consumer. One of the ways in which an online platform may compete unfairly and possibly abuses its economic power is to favour its own services, also known as self-preference.
In the Netherlands, the Authority for Consumers & Markets (“ACM“) and the European Commission (“Commission“) oversee competition law and the prohibition of the abuse of a dominant position (Article 24 of the Dutch Competition Act and Article 102 of the Treaty on the Functioning of the EU). Rights and obligations in relation to self-preferencing are additionally set out in the Platform-to-Business Regulation (“P2B“) and the Digital Markets Act (“DMA“).
This blog specifically discusses self-preferencing in the context of search results. Related to self-preferencing are several other forms of illegal behaviour for dominant companies such as (technically) restricting the use of third-party services or imposing unreasonable conditions for the use of third-party services. This will be discussed in a subsequent blog, such as the recent case for Apple’s conduct in relation to the App Store.
Favouring own services by platforms (self-preferencing)
Many online platforms are on their own platforms active as sellers. In doing so, they compete with online sellers who also sell through their online platform. If a dominant company favours its own services or products above those of its competitors, it may constitute an abuse by the dominant company of its dominant position. For example, an online platform may put its own products higher in the search results than those of its competitors. Since consumers tend to click on the highest appearing links, competitors’ products are disadvantaged.
For instance in 2017, Alphabet (Google) was fined more than €2.4 billion for favouring its own price comparison service Google Shopping, and disadvantaging those of its competitors. Google placed its own price comparison service (virtually) at the top of search results when a consumer used Google’s search engine, and changed its search algorithm in such a way that competitors’ price comparison services were placed at the bottom.
In February this year, the ACM announced it was investigating possible self-preferencing by Bol. Several companies have complained to the ACM that their offerings are less visible on the platform and that the company’s own offerings and that those of certain entrepreneurs are being preferred by Bol.
Right to information
The P2B Regulation contains a number of rights (to information) for companies operating on online platforms. The P2B Regulation is fairly unknown in the Netherlands, so the ACM has called on companies this year to check whether the online platforms on which they operate are acting in line with the P2B Regulation.
An online seller operating on an online platform is entitled to information on:
- The main parameters for determining the order of the search results;
- The possibility to pay an (in)direct fee for a place in search results;
- Unequal treatment of the online seller’s offer compared to the online platform’s own offer.
Besides information related to search results, an online platform must also provide information about the access it has to the online seller’s (sales) data. In addition, an online platform must also inform the online seller about access to information about its consumers and reviews of products and any restrictions on the sale of products on other websites when using the online platform.
Additional obligations for largest platforms
Very large online platforms such as Alphabet (Google), Amazon and Apple are subject to a number of specific rules to ensure fair competition in digital markets. These rules are contained in the DMA, which came into force on 7 March 2024. See our earlier blog to that effect. The DMA does not apply to all services provided by these online platforms, but only insofar as they are so-called core platform services and are designated as such by the Commission. Core platform services include, for example, search engines, appstores, and web browsers. Currently, Google Play and App Store, Meta Marketplace, Amazon Marketplace and Google Shopping, among others, have been designated as core platform services.
Under the rules on self-preferencing, these online platforms may not rank their own products or services more favourably than those of similar products or services from a third-party online seller. Also, the conditions they apply when ranking must be transparent, fair and non-discriminatory. These obligations can be traced back to the aforementioned Google Shopping case. Under the DMA, the designated online platforms have a reporting obligation in which they have to explain compliance with the obligations. The designated core platform services had to comply with the DMA by 7 March 2024.
The Commission has now launched non-compliance proceedings against Alphabet (Google) for possible self-preferencing in the Google search engine and against Amazon for possible self-preferencing of its own products in the Amazon Store.
What lies ahead?
Both the ACM and the Commission actively monitor fair competition in digital markets. It is advisable for both online platforms and online sellers to check what their obligations and rights are under the (new) regulations of the DMA and the P2B Regulation. In addition to self-preferencing, this also applies to other rights and obligations under the DMA and P2B Regulation. The prohibition on abuse of a dominant position continues to apply in full. Companies who believe that an online platform is competing unfairly or fails to comply with its obligations can report it (anonymously) to the Commission or the ACM. Companies are also entitled to compensation for damages suffered as a result of abuse of a dominant position.
SOLV has considerable expertise in the (recent) regulation of online platforms and in advising companies to act against unfair competition. For questions, please contact Kim van Haastrecht, Jelle van den Biggelaar or Berend van Unnik.
