GCR Digital Markets Guide: What Constitutes Self-Preferencing and its Proliferation in Digital Markets?

Economists Kadambari Prasad and Thomas Bowman recently authored a chapter in the fifth edition of Global Competition Review’s Digital Markets Guide on the topic of self-preferencing in digital markets.

Introduction

Regulators and lawmakers have expressed concerns that large digital platforms could distort competition by pursuing strategies that favour their own downstream products or services over those of third parties that operate on their platforms. These practices are commonly referred to as ‘self-preferencing’.

Regulators’ concern is that downstream competition requires a level playing field, but platforms may not provide one when they can play both ‘umpire’ and ‘player’. Consequently, efforts have been made to deter self-preferencing, both by investigating alleged conduct ex post under competition law and by regulating it ex ante. The latter has resulted in the Digital Markets Act (DMA) in the European Union and the Digital Markets, Competition and Consumers Act (DMCC) in the United Kingdom – both of which aim to prohibit certain types of self-preferencing by designated ‘gatekeeper’ platforms or platforms with ‘Strategic Market Status’, respectively.^[1]

Concern about self-preferencing has grown in the wake of the Google shopping case;^[2] however, the term ‘self-preferencing’ was not actually used in the Google shopping case at all. While the term is used extensively by the practitioner community, it has only recently been defined in a systematic way by the draft guidelines on Article 102 of the Treaty on the Functioning of the European Union (TFEU) (Article 102) (the Draft Article 102 Guidelines).^[3] In general, it has been a catch-all phrase, which is not used consistently across cases or regulators, and encompasses a variety of conducts and concerns. Many of those behaviours are already captured by existing theories of harm, such as refusal to supply and bundling. But some self-preferencing behaviours – such as those relating to prominence and visibility – are prevalent, difficult to capture with existing theories of harm and potentially more problematic in digital markets. Consequently, the precise meaning of the term and the substantive test for it remain unclear.

This chapter:

• provides an overview of what might be termed self-preferencing conduct in digital markets;
• explains why some of the concerns regarding self-preferencing are more pronounced in digital markets;
• summarises the recent economic insights into the effects of self-preferencing; and
• discusses the treatment of self-preferencing by competition agencies.

This article was originally published by GCR here. The views expressed are those of the authors only and do not necessarily represent the views of Compass Lexecon, its management, its subsidiaries, its affiliates, its employees, or clients.

References