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. Often these platforms also sell products on their own platform and thus compete directly with the online sellers using their platform. Usually no problem, unless the behavior of the online platform distorts the competition.
When online platforms are so large that they hold a so-called economic dominance, they have a special responsibility under the competition rules in how they compete. Having an economic dominance is not prohibited, and these online platforms may simply compete. However, they may not restrict competition in a way that goes beyond "normal" competition. In other words, the online platform may not unfairly increase 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 competes unfairly and possibly abuses its economic dominance is to favor its own services, also known as self-preferencing.
In the Netherlands, the Authority Consumer & Market ("ACM") and the European Commission ("Commission") supervise competition rules and the prohibition of abuse of a position of economic power (Article 24 of the Competition Act and Article 102 of the Treaty on the Functioning of the EU). Rights and obligations in relation to self-preferencing are additionally contained in the Platform-to-Business Regulation ("P2B") and the Digital Markets Act ("DMA").
This blog only and specifically discusses self-preferencing in the context of search results. Related to self-preferencing are several other behaviors 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, as the latter case for Apple's conduct with respect to the App Store.
Many online platforms operate on their own platform as sellers of products. In doing so, they compete with online sellers who sell through their online platform. An abuse of a position of economic power may occur when the online platform favors its own services or products.
For example, the online platform can make its own products appear higher than competitors' products in searches. Since consumers tend to click on the highest appearing links, competitors' products are disadvantaged.
For example, as recently as 2017, Alphabet (Google) was fined for more than €2.4 billion for favoring 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 modified the company's search algorithm in such a way that competitors' price comparison services were placed at the bottom.
In February this year, the ACM announced investigation into 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 those of certain entrepreneurs are being favored by Bol.
The P2B Regulation contains a number of rights (to information) for companies operating on online platforms. The P2B Regulation is relatively unknown in the Netherlands and The ACM has therefore 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 about:
The method of determining the order of search results;
The ability to pay for placement in search results;
Unequal treatment of the online seller's offer compared to the online platform's own offer.
In addition to 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.
The largest 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 March 7, 2024. To that end, see our earlier blog. Incidentally, the DMA does not apply to all services provided by these online platforms, but only insofar as they are so-called core platform services designated as such by the Commission. Core platform services include search engines, app stores, 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 self-preferencing, these online platforms must not rank their own products or services more favorably than those of similar products or services from a third-party online seller. Also, the terms they use in ranking must be transparent, fair and non-discriminatory. These obligations can be traced to the aforementioned Google Shopping case. Under the DMA, the relevant online platform services have a reporting requirement in which they must explain compliance with the obligations. Designated core platform services were required to comply with the DMA by March 7, 2024.
The Commission has since 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.
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. Also, the prohibition against abuse of a dominant economic position continues to apply in full. Companies that believe that an online platform may be distorting competition or failing to comply with its obligations can report this (anonymously) to the Commission or the ACM. Companies are also entitled to compensation for damages suffered as a result of abuse of an economic dominant position.
