Overview
Tying and imposing unfair trading conditions are two forms of conduct that are gaining importance in the European Union enforcement practice in digital platform markets, both under the general competition rules and the Digital Markets Act (DMA). While there is yet no decision with a fine under the DMA, the track record under Article 102 TFEU is constantly growing. This year, the European Commission finalized two investigations, one against Apple in March and another one, more recently, against Meta. These Commission decisions are subject to full judicial review by the EU Courts if the companies decide to contest them with an application for annulment.
On November 14, the Commission imposed a fine of almost €800 million on Meta for foreclosing the competitors of Facebook Marketplace. According to the Commission's press release, Meta was found to have abused its dominant position, in breach of Article 102 of the Treaty on the Functioning of the European Union (TFEU) in the EEA-wide market for social networks, and in the national markets for online display advertising in social media.
- Tying: The Commission found that Meta linked the online classified service, Facebook Marketplace, with Facebook, its social network and that Facebook Marketplace is only usable to a limited extent without a Facebook account, as the service is integrated into the Facebook app. Users can view and filter listings in the browser, but are unable to create their own listings or contact sellers as these functions require a Facebook account. The Commission found that this "substantial distribution advantage" for Facebook Marketplace could significantly disadvantage competitors.
- Unfair Trading Conditions: Meta was also found to have imposed unfair trading conditions on competing providers of online classified advertising on its platforms, Facebook and Instagram by using advertising-related data, generated by competing advertisers, to benefit Facebook Marketplace.
Meta has publicly stated that it will likely contest these findings before the General Court of the EU, who would then have to decide on the legality of the Commission decision. Such judicial review can include all elements of the decision, such as the definition of the relevant markets, the finding of a dominant position, the exact nature and extent of the alleged abusive conduct, and last but not least the calculation of the fine. For all these aspects of its decisions, the Commission applies various soft law instruments with wide discretion, but it is not uncommon that the EU Courts disagree with these findings and annul the Commission decision.
While tying under Art. 102 TFEU is certainly not new in the EU enforcement practice, it is currently seeing a certain revival. The ongoing Commission investigation into possible tying of Microsoft's Teams service with its popular suites for businesses (Office 365 and Microsoft 365) underscores this. Accordingly, the Commission’s recently published draft guidelines on the application of Article 102 TFEU on exclusionary conduct contain a separate chapter on tying (and bundling). Once the Meta decision is publicly available, it will be interesting to see how far the Commission applies this new standard, and whether this will become part of the judicial review.
Unfair trading conditions are explicitly mentioned in Article 102 TFEU as abusive conduct. In the digital platform markets, they are emerging as a theory of harm more frequently used by competition authorities. Unfair trading conditions may include various types of behavior by dominant companies that are deemed 'unfair' against their competitors. In the above-mentioned Commission’s draft guidelines, they appear as "access restrictions." In addition to the Commission’s own cases, national authorities have also investigated unfair trading conditions, e.g. in the Netherlands (2021) against Apple regarding its app store terms.
Although the DMA regulates specific forms of conduct by companies designated as digital gatekeepers, both types of conduct will continue to play a significant role in competition law investigations. The DMA aims to compel these players, with their vast user bases and established market positions, to adhere to fair and pro-competitive practices, in order to promote market entry and protect consumer choice. The DMA addresses negligent and intentional violations by designated gatekeepers of the substantive rules in Articles 5, 6, and 7. It also covers non-compliance with enforcement measures, remedies, interim measures, or commitments under Article 8(2). The sanctions are substantial, as the Commission can impose fines of up to 10% of a company's annual turnover, and even up to 20% for repeat offenders.
For designated gatekeepers under the DMA, it is therefore worth considering whether full compliance with the DMA could have led or helped the companies to avoid the fines. The DMA explicitly prohibits tying of services in its Article 5(8), obliging gatekeepers not to make the use of their core platform services conditional on the use of other services from the same company. Specifically, providers cannot require users to subscribe to or register for additional core platform services of the gatekeeper to use, access, sign up for, or register for a core platform service. This rule therefore directly addresses the behavior that led to some of the above-mentioned fines.
Moreover, Article 5(2) DMA limits the combination of personal data from core platform services with data from other core platform services, additional services of the gatekeepers, and services from third parties. Such practices would also have been prohibited by the DMA, which aims to prevent such violations through upfront prohibitions and obligations under continuous monitoring.
The DMA is not intended to replace competition law but to create uniform regulatory conditions across Europe to strengthen the competitiveness of smaller business users. Both legal frameworks apply equally alongside each other. A gatekeeper can in principle violate both the DMA and competition law with the same conduct.
The relationship between the DMA and Article 102 TFEU raises intriguing questions about the reach and scope of the ne bis in idem principle (no double jeopardy). Tying and imposing unfair trading conditions might lead the Commission to pursue infringements under both competition law and the DMA, and potentially, double sanctioning. The DMA does not pursue the same objectives as the competition rules and leaves the application of Articles 101 and 102 TFEU unaffected.
The case law of the Court of Justice of the European Union (CJEU) might sustain this view, since it clarified in its preliminary ruling in the bpost SA case (C-117/20) that double sanctions imposed by two different national authorities are not excluded if they are legally provided for and address different aspects of the same wrongful conduct. However, any potential double sanctions under Art. 102 TFEU and the DMA, two closely intertwined legal instruments, would be imposed by one and the same authority (i.e., the Commission), and it is highly questionable whether the EU Courts would endorse such outcome. This will be among the key aspects of the EU enforcement practice in the digital platforms sector going forward.
