Favoring in Competition Legislation

By Diana Ivan

Theories of self-preferencing/ To favor myself or not to favor, that is the question

Self-preferencing is a hot topic that seems only to increase in popularity. The question it raises is as simple as it is complex: does a dominant undertaking that sells both its own products and those of its competitors breach competition rules if it favors its own resale business?  

It is uncontested that a dominant undertaking has the lawful right to compete on any given market and there is no legal obligation to offer equal treatment to all its portfolio products. In Post Denmark case, the European Court of Justice concluded “that the competition on the merits may, by definition, lead to the departure from market or the marginalization of competitors that are less efficient”. In simple words, the sanity of a market is mirrored by the fact that an under-performing undertaking will sooner or later disappear and such disappearance is not automatically the result of an abuse of dominance (presuming there is such a dominant undertaking on the market).

Establishing that competition is a question of merits, we further explore the self-preferring, as a competition infringement for a dominant undertaking based on the actual effects it may have on the market. Statistically, foreclosure effects of self-preferring are the most analyzed by competition authorities in their investigations to date. Foreclosure has been verified in case the action of self-preferring has harmed innovation. For example, UK courts came to the conclusion that Google’s behavior when it self-preferred Google Maps in the general search, detrimental to Streetmap, did not appreciable affect competition.

In conclusion, when a dominant firm is asking “To favor or not to favor myself”,it will need to take a closer look to all Commission’ decisions and European Court’ rulings regarding self-favoring in order to make a safe strategic move and to eliminate the possibility of competition law infringement. A hint, first question should be “does my self-preferring harm innovation?”.