UK and EU competition law alike prohibit competition abuse by a company in a ‘dominant position’. Broadly speaking, a company may be dominant with a market share of 40% or more and is presumed dominant when it has a market share in excess of 50%. An abuse of a dominant position occurs where a dominant company acts in way that is different to ‘normal competition’ (normal competition being essentially: profitably offering a better product or service than competitors and/or on better terms) to exclude competitors or exploit customers, unless it has an ‘objective justification’.
Companies abusing their dominant position are liable to fines of up to 10% of turnover, in addition to being open to actions for damages, the potential for Director disqualifications and substantial negative reputational consequences.
A recent decision by the European Court of Justice (CJEU) highlights that dominant companies need to be particularly careful with their behaviours to avoid abusing their dominant positions. This can include behaviours governed by other legislation, such as data protection.
In the UK, specifically with regard to data protection, the Competition and Markets Authority (CMA) and Information Commissioner’s Office (ICO) have recently released a joint position paper in relation to Online Choice Architecture (OCA) practices. The paperhighlights their respective concerns about how personal information is processed and how harmful OCA can undermine information and privacy rights, consumer rights and market competition. This is just one example of UK regulators working together through the Digital Regulation Cooperation Forum. Given our increasingly digital society and economy, this kind of cooperation between regulators on digital concerns seems likely to be a feature of enforcement going forwards.
In 2019 the German Federal Cartel Office (FCO) found that Meta was abusing its dominant position in the market for social networks.
The FCO found that Facebook had a market share of more than 95% of daily active users and more than 80% of monthly active users. The FCO decided that other services such as Snapchat, YouTube, Twitter, LinkedIn and Xing should not be considered Facebook’s competitors as they only offer parts of a social network and not the whole package.
Facebook’s general conditions required users to allow it to collect an almost unlimited amount of any type of data from third party sources, allocate these to the users’ Facebook accounts and use them for numerous data processing processes. The FCO found this to be a violation of the data protection rules under the GDPR which was to the detriment of Facebook’s users. This breach of GDPR, given its exploitative effects on customers and exclusionary effects on competitors, was the basis for the FCO’s finding of an abuse of dominance under the competition rules..
Facebook appealed this decision in the German courts. The German courts referred several questions to the CJEU, including whether the FCO as a competition authority could consider GDPR compliance when making a competition law decision.
The CJEU’s judgment rules that competition authorities can, subject to cooperating with data protection enforcement authorities, consider GDPR compliance when considering the question of abuse of dominance.
Despite being a judgement of the CJEU, the UK courts and competition authorities can be expected to pay a great deal of attention to it. Indeed, the CMA and ICO recent joint position paper in relation to OCA is in line with the CJEU judgment and builds on previous CMA and ICO expressions of concerns in relation to digital design and information and privacy rights, consumer rights and competition.
In wider competition law terms, the Meta case is particularly significant in two key respects:
Deciding whether conduct may be considered abusive (or even whether or not a company holds a dominant position) can be a detailed legal and economic exercise. Michelmores has over 20 years’ experience of pragmatically advising companies in managing such risks, so that they can get on with achieving their commercial objectives.
If it would be helpful to discuss any of the issues arising from this update, please contact Noel Beale or your usual Michelmores LLP contact.