EU investigation opened into software support practices

On 25 September, the EU’s competition authority announced that it has opened a formal investigation to examine whether SAP may have distorted competition by potentially abusing a dominant market position in relation to aftermarket maintenance and support services for on-premises ‘enterprise resource planning’ (ERP) software it supplies to business customers in the European Economic Area (EEA). ERP software helps a range of business operations teams to perform their functions, such as finance and human resources.

EU commissioner Teresa Ribera said the Commission is concerned that “SAP may have restricted competition in this crucial aftermarket, by making it harder for rivals to compete, leaving European customers with fewer choices and higher costs”. With its investigation, the Commission is examining compliance with Article 102 of the Treaty on the Functioning of the EU, which prohibits the abuse of a dominant position that may affect trade within the EU and prevent or restrict competition.

SAP said it takes the Commission’s concerns seriously but considers that its practices reflect global software market standards.

“These proceedings address some areas of our on-premise maintenance and support policies, which are based on long-standing standards that are common across the global software sector,” the company said in a statement. “SAP believes that its policies and actions are fully in line with competition rules. However, we take the issues raised seriously and we are working closely with the EU Commission to resolve them. We do not anticipate the engagement with the European Commission to result in material impacts on our financial performance.”

“As a major European player in a very dynamic global industry, SAP is committed to open competition. We trust the European Commission will aim for a quick and fair conclusion to these proceedings,” it said.

Four practices are under Commission scrutiny as part of its investigation, including those the Commission considers tie SAP’s on-premises ERP customers to using the company’s maintenance and support services on standardised terms, which the regulator said “may prevent customers from ‘mixing and matching’ maintenance and support services from different suppliers at different price and support levels despite it being more convenient for them”.

The Commission said it also has concerns over restrictions on customer termination rights and the imposition of “reinstatement and back-maintenance fees” by SAP.

Ribera said: “We want to have a closer look at SAP’s potentially distortive business practices, to make sure that companies that rely on SAP’s software can freely choose the maintenance and support services that best fits their business needs.”

Michael Reich, competition law expert in Pinsent Masons, said: “The Commission has indicated that its competition law concerns could potentially be addressed through legally binding commitments that modify the business practices in question, without the Commission having to conclude whether antitrust infringement had occurred. This is a fairly common approach in Article 102 cases. For example, another case involving software practices was recently resolved after the Commission accepted commitments from Microsoft that adequately dealt with its concerns, and made no findings as to infringement.”