Vestager once again takes aim at digital giants

The European Commission has also warned it will seek “more imaginative solutions” to ensure fair markets, including using measures aimed at forcing abusive companies to “recreate” competitive markets.

Margrethe Vestager, European commissioner for competition, warned in a speech Nov. 29 that the European Union will continue to monitor and investigate the criteria regarding how (and why) search engines, online marketplaces, social media networks, and app stores direct consumers to some Websites and products and not others—and what impact that has on fair competition.

“The power to make those choices is also the power to define our understanding of the world,” Vestager told attendees. “And as digital connections become an ever more important way to bring together buyers and sellers in a market, platforms get more power to shape those markets—power that allows them to act almost as regulators.”

One of the key concerns for the Commission is that technology-based companies can act as both player and referee—they run a platform that provides the necessary infrastructure that allows the digital economy to work and then compete (unfairly) with other companies that rely on it.

“In the years ahead, one of the greatest challenges that we’ll face, as competition enforcers, will be to stop Big Tech companies from wiping out competition by nudging markets past the point of no return.”

Margrethe Vestager, European Commissioner for Competition

“When a platform business also operates in markets that rely on the platform—so it’s both regulator and regulated at the same time—the temptation can be strong to run the platform in a way that favors its own services,” said Vestager.

The European Union, therefore, wants companies like Google and Amazon to be more transparent about the online marketplaces they operate to gain greater assurance that other businesses that use their platforms can compete on equal terms.

From July 2020, new rules will apply across the European Union to make online platforms treat their business customers fairly. Vestager, however, admits “there are limits to what competition enforcement can do.”

Google has already had several run-ins with the EU’s executive body over the past few years, and there appears to be little sign the company is mending its way to pacify EU regulators. In June 2017, the Commission hit Google with a €2.42 billion (U.S. $2.68 billion) penalty for abusing its dominant position by promoting its own comparison shopping service in its search results (while demoting those of competitors).

This March, the Commission slapped Google with a €1.49 billion ($1.65 billion) fine—its third penalty in three successive years for breaching competition rules—for blocking rival online search advertisers from getting a foothold in the market. The Commission ruled Google had abused its market dominance by imposing a number of restrictive clauses in contracts with third-party Websites that prevented Google’s rivals from placing their search adverts on these Websites.

Currently, the search engine has more than a 70 percent share in Europe’s online advertising market through leveraging its position as a leading advertising broker through its own platform.

The Commission is looking at whether other parts of Google’s business break EU competition rules, like its job search business known as Google for Jobs, which the EU fears could favor Google’s own service above those of competitors paying for similar services on Google’s platform.

Meanwhile, Amazon is being investigated over concerns the company’s use of data gathered from independent retailers that sell on its marketplace breaches EU competition rules. The Commission announced its investigation in July, saying that since Amazon acts as a marketplace as well as a retailer, it may be using sensitive data it has gathered about retailers’ activities, their transactions, and their products to unfairly give itself a competitive advantage. Some competition lawyers expect another colossal fine. Amazon denies wrongdoing.

In her speech, Vestager warned tech giants are largely defining the markets they operate in, as well as the rules companies that use them have to comply with. For example, she pointed out policies regarding refunds and faulty products “can be as important as legal rules in defining consumers’ rights.”

“Their decisions about when to remove a product from the platform can effectively decide what can and can’t be sold. And their choices about the way they rank different businesses can determine which companies have a chance to compete,” Vestager said.

Another concern for the European Union is there is a significant risk Big Tech firms will monopolize customer and market data to drive out competition. Vestager conceded that in today’s digital markets “competition can be fragile,” adding that “we can find ourselves facing a serious risk that … one company gets so big that it’s practically impossible for others to compete.”

“In the years ahead, one of the greatest challenges that we’ll face, as competition enforcers, will be to stop big tech companies from wiping out competition by nudging markets past the point of no return,” said Vestager.

The European Union has said it will “act fast” to prevent a market stitch-up between the biggest players, and Vestager has warned that remedies—such as the use of “interim measures” against Broadcom to stop it from engaging in suspected anti-competitive behavior before the outcome of an investigation—will likely be used much more frequently than just twice in 18 years.

“We need to look for imaginative solutions,” said Vestager. “We need to accept that just fining someone, or ordering them to stop what they’re doing, may not be enough to restore competition. And we need to be willing to tell companies, not just to stop breaking the law, but to take positive action to recreate a competitive market.”