The digital markets act: variations on the theme of competition policy
The European Commission’s Digital Markets Act proposal is set to reshape how digital businesses operate in Europe and reset the rules of the game for those providing and using digital services.
The new rules would regulate online “gatekeepers” that, in the words of Commissioners Vestager and Breton, are “systemically relevant”. But by overturning how digital gatekeepers can operate their eco-systems, deal with the businesses active on their platforms and provide access to key inputs and IP, the rules could impact all companies doing business in Europe’s digital economy.
The proposals have, unsurprisingly, generated significant controversy. The Commission suggests that the rules will deliver over €2 trillion of benefits in the next decade. The US Chamber of Commerce has expressed its concerns that the new rules “target American companies almost exclusively”. And academics have pointed to a significant break with existing economic regulatory policy towards a far more interventionist approach in digital markets.
We have already summarised the content of the rules and looked a bit more closely at the platforms which are likely to be caught.
But, when you scratch the surface, you see that the DMA raises a host of fundamental questions. What would be the practical implications for digital markets? How does the DMA fit with existing economic regulation and, in particular, competition law? How will the proposal impact digital markets policy in the EU and beyond?
We have prepared a more extensive Briefing Paper which discusses some of those issues in detail. The issues discussed are likely to form the basis of fierce debate on the proposed rules in the years to come and will shape what ultimately makes it to the legislative rulebook.
The three main points to note are set out in brief terms below:
Rethinking how digital markets would function
The DMA’s rules for the most important digital gatekeepers take inspiration from recent experience in competition enforcement, but in several instances go much further. They would, in particular, open up closed digital ecosystems, mandate (free) data access and significantly restrict gatekeepers from using the advantages of their core platforms to compete against their (business) users. The proposals have radical implications for digital advertising, mobile ecosystems and e-commerce. The DMA has potentially profound implications for any industry that deals with existing – or future – digital gatekeepers.
A new type of economic policy
More fundamentally, the DMA also signals a shift towards a new form of more interventionist regulatory policy. The DMA is, in the first instance, intended to address issues of “fairness” and “contestability” in digital markets, stretching the traditional objectives of competition policy in the EU any in many other parts of the world. This is providing the justification and conceptual space to adopt a significantly more interventionist policy stance than is currently the case, notably under competition law. It raises a host of practical questions over the merits of the new rules and how such rules would be administered in parallel with similar competition law rules, at EU and national level.
The DMA is also designed to become a uniquely strict and at the same time dynamic policy instrument. In contrast to the existing competition rules, the DMA would impose expansive ex ante rules with limited scope for challenge. But it would simultaneously confer significant regulatory discretion on the Commission to adjust, expand and enforce those rules. The combination of part ex ante rules and ex post discretion would give the Commission significant powers to shape digital markets.
The long arm of the European Commission
The DMA will have consequences both for the regulatory efforts of the EU’s Member States and regimes beyond the EU’s borders. First, the DMA raises potential question marks over whether similar national regulations will be compatible – in theory and practice – with the DMA’s objective of harmonising the regulation of digital gatekeepers. Second, the DMA’s rules would bind global platforms, raising the question of whether it will de facto set global standards for digital platforms in the years to come; a manifestation of the well-trailed Brussels effect.
What next?
The DMA has taken the first step of a legislative process that will unfold over the next 2-3 years. This is unlikely to be the last time that it hits the headlines.
