Abuse of dominant position explained
Google is in trouble with the EU which has imposed an enormous anti-trust fine. But what has brought this penalty about? Google has left consumers without a “genuine choice” in their shopping service, according to Margrethe Vestager, the EU’s competition commissioner. This is the conclusion drawn after seven years of investigation into the San-Francisco based search engine, which has been penalised with an anti-trust fine to the tune of €2.42bn due to abuse of their dominant position.
“Google’s strategy for its comparison shopping service wasn’t just about attracting customers by making its product better than those of its rivals. Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results and demoting those of competitors. What Google has done is illegal under EU antitrust rules,” Vestager explained.
What is abuse of a dominant position?
A company, such as Google, may have a dominant position in their market place. This in itself isn’t illegal, but when a company uses this advantage to further disadvantage their competitors, this is tantamount to abuse of position.
Examples of abuse might include:
- Charging prices which are too high or too low – too high and the company is exploiting the consumers, too low and they could be cutting out competitors by subsidising unrealistic offers.
- Conditional purchase – Two items may go brilliantly together, but the consumer should always have the final say, and shouldn’t be forced into purchasing one product to acquire another. This does not include limited edition free gifts.
- Obstruction – A business might intercept their competitors’ customers by offering them no choice but to use their product or service.
Is my company in a dominant position?
Defining your company as dominant is as cut and dry as measuring market share, although having 50% is normally a good indication. That said, some companies with only 40% market share can still be dominant.
Why is it illegal?
Competitive pressure among businesses breeds innovation, offers choice to consumers, and makes previously unattainable products or services more affordable. By taking away the competition, companies are having a negative impact on trading which can affect all of these benefits – to the detriment of consumers, competitors and potentially the marketplace as a whole.
Get in touch with Lockyers to review your business insurance.