Assessing Horizontal Non-Brand Bidding Agreements in Search Engine Advertising under Article 101 TFEU

As corporations invest more than ever in digital advertising, particularly search engine advertising, the incentives for anticompetitive agreements in these markets have never been stronger. A prominent example is the rise of so-called horizontal non-brand bidding agreements (NBBAs), where competitors agree not to bid on each other’s brand names in search engine advertising. These agreements can restrict competition in digital advertising in several ways, not least by reducing consumer choice and increasing search costs when consumers try to find the most suitable product or service. To combat this, European competition authorities have taken an aggressive stance that involves classifying NBBAs as ‘by object’ restrictions of competition and largely dismissing pro-competitive justification arguments. By contrast, the US and Turkey have both taken more lenient views on NBBAs, acknowledging certain trademark-related rights to stop competitors from bidding on a proprietor’s registered trademarks. This thesis argues that the EU’s stricter approach is largely warranted but proposes a narrow exception. NBBAs should not be justified by the goals of preventing free-riding or consumer confusion (Turkey), nor by the vague goal of “trademark protection” (US). Instead, for so-called narrow NBBAs only, the umbrella goal of “enforcing trademarks” (relevant where the underlying brand-bidding is illegal under EU trademark law) should be given priority over competition concerns in order to strike an efficient balance between European competition and trademark law. The assessment of this exemption should be done within the analysis of Article 101(3) TFEU, as opposed to the legal and economic context in Article 101(1) TFEU. Save for this narrow carve-out, this thesis argues that NBBAs are so harmful that they should almost always be classified as ‘by object’ restrictions. They are unlikely to be justified on other grounds, irrespective of whether the NBBA is “narrow”, “wide” or “negative matching”, or is part of a larger trademark settlement agreement, aims to save marketing or litigation costs, or is framed as preventing free-riding or consumer confusion. Ultimately, the comparative analysis of US and Turkish case law largely reinforces these conclusions.