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Short Reads

No proof of competitive disadvantage? No abusive favouritism

No proof of competitive disadvantage? No abusive favouritism

No proof of competitive disadvantage? No abusive favouritism

04.06.2020 NL law

Companies claiming abuse of dominance in civil proceedings have their work cut out for them, as demonstrated by a ruling of the Amsterdam Court of Appeal. Real estate association VBO had accused dominant online platform Funda of favouritism. However, in line with the District Court’s earlier ruling, the Appeal Court dismissed the claim for insufficient evidence of negative effects on competition. The ruling confirms that the effect-based approach also applies in civil abuse claims, and that the standard of proof is high.

 

 

Companies claiming abuse of dominance in civil proceedings have their work cut out for them, as demonstrated by a ruling of the Amsterdam Court of Appeal. Real estate association VBO had accused dominant online platform Funda of favouritism. However, in line with the District Court’s earlier ruling, the Appeal Court dismissed the claim for insufficient evidence of negative effects on competition. The ruling confirms that the effect-based approach also applies in civil abuse claims, and that the standard of proof is high.

Funda owns the website www.funda.nl, which serves as an online real estate platform in the Netherlands. The Dutch Association of Real Estate Agents (NVM) is co-founder of the website and indirectly holds shares in Funda. Other real estate agencies such as VBO Makelaars (VBO) have agreements with Funda, which allow the members of those agencies to post property on the Funda website. However, NVM members receive preferential treatment in terms of cost, use of website functionalities, and the ranking of properties. VBO initiated civil proceedings against this favouritism.

Ruling by the Amsterdam District Court

In March 2018, the Amsterdam District Court dismissed VBO’s claim that Funda had abused its dominant position by applying unequal terms to VBO (see our April 2018 newsletter). Even though the District Court found, after court-appointed economic expert advice, that Funda held a dominant position in the online housing market in the Netherlands, it did not consider Funda’s conduct to be abusive.

In line with EU case law, the District Court considered that, before concluding on any abuse of dominance, the actual or potential effects of Funda’s conduct on VBO’s competitive position should be examined. According to the District Court, VBO failed to demonstrate that the discrimination in relation to the costs and the access to the site's functionalities distorted its competitive position. In relation to the preferential treatment of NVM agents' property listings, the expert advice also showed that there was no clear indication that this distorted VBO's competitive position. As a result, the District Court ruled that Funda had not abused its dominant position.

Ruling by the Amsterdam Court of Appeal

In May 2020, the Amsterdam Court of Appeal upheld the District Court decision. The Appeal Court ruled that Funda’s discriminatory conduct only constitutes abuse if it produces, or is capable of producing, a competitive disadvantage for VBO when compared to other trading partners active on the same downstream market. To determine whether this is the case, VBO should have provided the Appeal Court with a better understanding of the relevant competition parameters, such as a description of the affected downstream markets, the structure of supply and demand, the existence of barriers to entry, and any other relevant factors. VBO neglecting to do so led the Appeal Court to dismiss all claims.

Of note is that VBO’s comparison of Funda’s preferential ranking conduct with the Commission’s Google Shopping case did not hold. According to the Appeal Court, preferential ranking is of secondary importance in online house hunting, since it is unlikely that house hunters will assume that the highest ranked search result is automatically the best available option. Furthermore, the Court of Appeal found that there was insufficient evidence to conclude that the differentiated costs were so significant as to assume a competitive disadvantage for VBO agents. Similarly, the Court considered VBO failed to substantiate why access to the Funda site's functionalities was essential for VBO to be able to compete on the downstream markets.

Conclusion

The case confirms that the standard of proof is high in civil abuse claims. Before bringing abuse claims, companies must carefully consider how they intend to substantiate their claims, and convincingly prove the alleged conduct’s negative impact on competition.

 

This article was published in the Competition Newsletter of June 2020. Other articles in this newsletter:

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