Newsletter
Suscríbete a nuestro Newsletter y entérate de las últimas novedades.
https://centrocompetencia.com/wp-content/themes/Ceco
volver
In antitrust law, broadly speaking, the following conducts are sanctioned: collusions, vertical restraints, and abuses of dominant position.
In abuses of dominant position, there are two elements. On one hand, there is the structural element, the dominant position of a company, which is generally conceptualized as holding substantial market power (furthermore, in theory, it is possible for collective dominance to exist). On the other hand, there is the behavioral element, the abusive action.
Regarding the behavioral element, a distinction is generally made between:
This glossary reviews the structure of exploitative abuse. First, it reviews general aspects and foundations of the sanctioning of exploitative abuses. Then, it analyzes different modalities in which an exploitative abuse can be committed, reviewing, in particular, the sanctioning of excessive pricing, as well as exploitative conducts in digital markets.
As noted, exploitative abuses are those in which a company uses its power to impose unfair, excessive, or discriminatory terms on consumers or entities with which it negotiates directly (that is, without affecting the position of its competitors). Excessive pricing, as well as the determination of unfair trading conditions, can be considered exploitative abuses (figures that will be reviewed below).
These abuses are sanctioned in various jurisdictions, but their establishment is not universal. Thus, they are not sanctioned in the U.S., as that country operates on the premise that a deregulated economy is essentially competitive (Domper & Retamales, 2019, p. 116; Gal, 2013, p. 1). Furthermore, in said jurisdiction it is considered that the possibility of exploiting a dominant position is part of what drives entrepreneurship, an idea captured in the much-cited Trinko ruling:
“The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system. The opportunity to charge monopoly prices—at least for a short period—is what attracts ‘business acumen’ in the first place; it induces risk taking that produces innovation and economic growth.” (Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP (540 U.S. 398, 2004).
That being said, the sanctioning of exploitative abuses is established in other countries: in Chile, letter b) of article 3 of Decree Law 211 (DL 211) expressly establishes the figure of “abusive exploitation”; and in the European Union in article 102 of the Treaty on the Functioning of the European Union (TFEU); among other jurisdictions (Vergara, 2024, pp. 26-28).
It should be noted from the outset that the regulation of exploitative practices is complex and controversial (Gal, 2013, p. 9; Whish & Bailey, 2012, p. 716). For this reason, competition authorities have historically preferred to allocate their resources to the prosecution of exclusionary abuses (Whish & Bailey, 2012, p. 720), although this has varied with the rise of the digital economy (Botta, 2023, p. 102).
This figure occurs when a monopolist or dominant company, individually (or collectively), exploits its position by charging excessive prices (that is, supra-competitive prices) (Whish & Bailey, 2012, p. 718). This figure is more fully developed in the glossary of excessive pricing.
The analysis of digital markets has revolutionized competition analysis, something which has impacted the figure of abuse of dominant position. Thus, various jurisdictions have focused on a series of unilateral conducts carried out by major digital platforms (Abarca & Tapia, 2022, p. 127).
Several features of these platforms are worth noting. First, many of them operate two-sided markets, providing services, on one hand, to advertising companies and, on the other, to consumers (to which said platforms don’t always charge a monetary price, but rather ask for their personal data, as the more personal data a platform possesses, the greater its capacity to provide targeted advertising becomes) (Buiten, 2019, p. 2).
Second, the economic characteristics of many of these platforms produce high levels of concentration among a small number of companies, due to —among other things— network effects (related to their two-sided market nature), extremely high returns to scale, the importance of data, and competition for the market (which triggers a “winner takes all/most” logic) (O’Donoghue & Padilla, 2020, p. 1047).
Third, these platforms likely have more incentives to engage in exploitative conduct than exclusionary conduct. Since platforms typically operate two-sided markets where strong indirect network economies exist (the value of one side of the market increases if there are more people on the other side), there are no incentives to exclude actors from the various sides of the market; rather, there are incentives for there to be more of them. Consequently, platforms have incentives to appropriate the rents belonging to the users or businesses on their platforms, thus creating incentives to perform exploitative conducts (Budzinski & Stöhr, 2024, p. 9).
That said, applying to the digital economy the traditional logic of exploitative abuses, which is based on excessive pricing, is complex. First, the digital economy is characterized by very low marginal costs: the marginal cost a digital platform faces to provide a digital service to an additional user is insignificant. In this context, it is difficult to apply the United Brands cost-price test. Second, digital markets are generally characterized by “winner-takes-all” dynamics: the app market, for example, is characterized by a duopoly —Apple Store and Google Play. In such a scenario, it is quite difficult to identify an adequate benchmark to measure the “excessive” nature of the fee requested by the platform from its users. Finally, digital markets are often zero-price markets: end users “pay” for digital services either by transferring their personal data to the platform or through the attention given to online advertising. Both the United Brands test and the benchmarking approach (see CeCo’s entry on excessive prices) are based on the evaluation of prices, an approach that is not feasible in zero-price markets (Botta, 2023, p. 109).
Notwithstanding all of this, there have been recent cases in which the doctrine is applied to the conduct of digital companies, as we will see below.
According to some, in extreme cases, the unilateral modification of privacy terms and conditions by platforms can constitute an abuse of dominant position, especially if the data requested is disproportionate or excessive (Cañas, 2023, p. 2). This is, among other reasons, because privacy considerations can affect consumer welfare (Buiten, 2019, p. 8). These considerations were discussed, above all, in the Facebook case (which will be reviewed below).
In this regard, excessive collection of personal data should be understood as the action of a dominant platform consisting of extracting a quantity of personal data from its users greater than what it could obtain under competitive conditions (Abarca & Tapia, 2022, p. 135). This action is, in principle, comparable to charging excessive prices: just as a traditional dominant actor can charge a significantly high price, a dominant digital platform is capable of collecting a large amount of data relative to a benchmark (Abarca & Tapia, 2022, p. 135).
Why could excessive collection of personal data be reproached? Said conduct has been associated with a decrease in the quality of services and an increase in the bargaining asymmetry between the platform and users, all of which would occur through an arbitrary degradation of the platform’s privacy policies (Abarca & Tapia, 2022, p. 135). Thus, the price of the good would not be affected here, but other relevant competitive variables would, such as quality and privacy (Abarca & Tapia, 2022, p. 135).
It is worth noting that this doctrine has been criticized for confusing competition protection with personal data protection and consumer protection. This is because reproaching excessive personal data collection by competition authorities could be interpreted as a disguised form of enforcement of those other regimes (Abarca & Tapia, 2022, p. 136). That said, it has been stated that, in order to prevent the antitrust regime from becoming responsible for the enforcement of other legal regimes, pursuing these cases must require the accreditation of a causal relationship between the abuse and the platform’s market power (Buiten, 2019, p. 9); this ensures that the imposition of these conditions is being prosecuted as an abuse stemming from a dominant position, rather than from other types of practices.
An important case in which another theory of digital exploitative abuse was promoted was that in which the European Commission fined Apple for certain restrictions it imposed in its App Store on music streaming applications (more details in: Sandoval, 2024). It should be noted that, although this case was treated as an exploitative abuse, it was not treated as a case of excessive pricing, but rather as a case of unfair trading conditions (this is another type of exploitative abuse provided for in Article 102 of the TFEU (Fröderberg, 2021, p. 29)).
To understand the case, one must bear in mind that Apple’s App Store is the only distribution channel for apps available on its operating system. It should be noted that the case began with a complaint from Spotify, a company that, along with other music streaming applications, had the following options if it decided to offer paid services: 1) use Apple’s payment system (In-App Purchasing systems or IAP) and pay a 30% commission, or 2) if it did not wish to use the IAP, it could disable it, but it could not offer alternative payment methods within the same app, nor could it advertise the existence of other payment systems (Abarca & Tapia, 2022, p. 137).
Initially, the case related to two aforementioned elements, as: 1) the Commission considered the 30% commission charged by Apple to be excessive, and 2) the Commission considered the anti-steering rules imposed by Apple to be abusive, insofar as they limited the ability of apps to inform their users about other payment methods. That said, in its final statement of objections, the case focused on only one of said strands: the rules that prevented app developers from informing their Apple users about other payment methods. Furthermore, the Commission’s focus was narrowed to consider only whether the “anti-steering” provisions were unfair to end users, and it did not consider whether they constituted an abuse by being unfair to developers (thus, while the imposition of these conditions on the applications was sanctioned, the focus was on the exploitative element of whether end consumers were harmed, not on the exclusionary element of how applications competing with Apple’s own companies in secondary markets were harmed) (Monti, 2024, p. 6).
The harms to the consumer, in Monti’s terms, were the following: (i) paying more because information on alternative payment options could not be accessed; (ii) suffering a degraded user experience: if an application chooses not to use integrated purchases, it cannot inform the consumer on how to make purchases in the application; (iii) some users fail to subscribe to their first-choice service because they cannot discover how to buy a subscription or they do not subscribe to any music service at all (Monti, 2024, p. 7).
Finally, it should be noted that this is not a case of excessive pricing. In Monti’s terms, the higher price paid “occurs because of the anti-steering provision, so the price increase is not an element of an excessive pricing abuse. It follows that it is not necessary to establish that the prices paid are excessive (…). On the contrary, the level of the price increase is legally irrelevant” (Monti, 2024, p. 7). In other words, the focus was not on the excessive price itself—therefore the specific requirements for that conduct were not applied—but rather on the fact that unfair conditions were imposed that resulted in higher prices (and the specific conditions of that test were not applied).
The paradigmatic case in the study of excessive personal data processing is that in which the German competition authority, the Bundeskartellamt, issued a prohibition order against Facebook for excessive data collection (Decision B6-22/16).
This case was first decided by the Bundeskartellamt, then reviewed by the Dusseldorf Court —which sided with Facebook, staying the Bundeskartellamt’s order and referring certain questions to the Court of Justice of the European Union (CJEU)— and was finally reviewed by the Bundesgerichtshof (BGH), Germany’s Federal Court of Justice, which upheld the order against Facebook. The case concluded with Facebook’s acceptance of the decision following the CJEU’s opinion.
In this instance, the German Bundeskartellamt established that Facebook held a dominant position in the social media market and had committed an abuse by imposing exploitative terms and conditions on its users regarding privacy. Specifically, it was alleged that the degradation of its privacy policies allowed it to obtain an “abusive” and “excessive” amount of personal data that it would not have been able to obtain under competitive conditions (Abarca & Tapia, 2022, p. 136). The terms and conditions in question allowed it to collect data generated and gathered by “Instagram, WhatsApp, Oculus, Masquerade, and other interfaces on third-party websites or apps using ‘Facebook Products’ —including ‘Facebook Business Tools’— and combine them with those from the Facebook.com platform for its own use, without the free consent of the users” (Cañas, 2023, p. 3).
It is important to note that, to characterize such data collection as excessive, the Bundeskartellamt used sector-specific regulation as a benchmark, noting that said collection violated several articles of the European Union’s General Data Protection Regulation (GDPR) regarding consent in data processing (paragraphs 639-640 of the decision; for further details, see Cañas, 2023, p. 3).
Regarding this matter, it is worth noting that in its review of the case (on the proceedings, see: Abarca & Tapia, 2022, pp. 136-137; Cañas, 2023, pp. 3-5), the Dusseldorf Regional Court referred it to the Court of Justice of the European Union to resolve certain interpretive questions. In this regard, the CJEU stated that: 1) the dominant position of a platform may be a factor to consider when analyzing the conditions under which user consent for data processing was given (Cañas, 2023, p. 5), and 2) no provision prevents national competition authorities from concluding, in the exercise of their functions, that data processing carried out by an undertaking in a dominant position and liable to constitute an abuse of that position is not consistent with the data regulation (paragraph 43).
As for the conclusion of the case, it reached the BGH, which confirmed the competition agency’s prohibition order. That said, rather than focusing on privacy considerations, it centered on the harm Facebook’s practice caused to consumers by restricting their freedom of choice (Fröderberg, 2021, p. 34). Thus, it focused on the fact that:
“[Users] are not given the choice of whether they want to use the network with a more “personalised experience” that is associated with Facebook’s potentially unlimited access to information about their off-Facebook online activities, or whether they only want to consent to a level of personalisation that is based on data they reveal on facebook.com itself.” (paragraph 58).
Abarca, M., & Tapia, J. (2022). Abusos de posición dominante en mercados digitales: ¿nuevos trucos para un perro viejo? Revista de Derecho Administrativo CDA, 21, 126-145.
Botta, M. (2023). Exploitative abuses: Recent trends and comparative perspectives. En P. Akman, O. Brook, & K. Stylianou (Eds.), Abuse of dominance and Monopolization. Edward Elgar Publishing.
Budzinski, O., & Stöhr, A. (2024). Dynamic competition, exclusionary and exploitative abuses, and article 102 TFEU: Towards a concept of systemic market power? Ilmenau Economics Discussion Papers, 186.
Buiten, M. (2019). Reconfiguring Exploitative Abuses for Digital Markets. Borrador. https://www.cresse.info/wp-content/uploads/2020/02/2019_ps4_pa3_Reconfiguring-Exploitative-Abuses.pdf
Cañas, S. (2023). Explotación de datos personales como precio excesivo: Una revisión del caso Bundeskartellamt c. Facebook. Investigaciones CeCo.
Domper, M. de la L., & Retamales, S. (2019). Una mirada crítica a la jurisprudencia de precios excesivos en el mercado farmacéutico: ¿estamos en presencia de una sanción a la sola fijación de precios unilaterales excesivos? En V. Facuse & A. M. Montoya (Eds.), Desafíos de la libre competencia en Iberoamérica (pp. 115-132). Thomson Reuters.
Fröderberg, E. (2021). Excessive Data Collection as an Abuse of Dominant Position: The Implications of the Digital Data Era on EU Competition Law and Policy [Master of Law Thesis]. Stoclkholms universitet.
Gal, M. (2013). Abuse of dominance- exploitative abuses. En Handbook of European Competition Law (Versión SSRN). Edward Elgar Publishing.
Monti, G. (2024). Exploitative Abuse – Takeaways from the Apple App Store Practices Decision. Borrador. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4853304
O’Donoghue, R., & Padilla, J. (2020). The Law and Economics of Article 102 TFEU (3.a ed.). Hart Publishing.
Sandoval, T. (2024). Spotify v. Apple: La dura sanción de la Comisión Europea. Centro Competencia (Actualidad). https://centrocompetencia.com/spotify-v-apple-la-dura-sancion-de-la-comision-europea/
Vergara, E. (2024). Informe en Derecho [Informe en Derecho en causa C-447-2022].
Whish, R., & Bailey, D. (2012). Competition Law (7.a ed.). Oxford University Press.
