As the European Commission gets ready to embark on the complicated task of implementing the recently agreed-upon Digital Market Act, which would regulate Big Tech platforms, the establishment of robust dialogue and coordination mechanisms between public authorities and private stakeholders will be crucial for successful enforcement. Here are some ways to do so.
European lawmakers have now agreed to the Digital Market Act (DMA). This new law will regulate Big Tech platforms with the goal of making European digital markets more contestable and fairer, and ultimately, promote innovation in those markets. The DMA applies to digital platforms:
- that provide one or more so-called Core Platform Services—i.e., app stores, marketplaces, search engines, social networks, video sharing, communications apps, operating systems, cloud computing, web browsers, virtual assistants, and ad tech;
- and that are considered so-called gatekeepers because (i) either they have a European annual turn-over of at least €7.5 billon ($7.9 billion) or a market capitalization of at least € 75 billon ($79 billion) and, in addition (ii) have at least 45 million monthly active end-users and 10,000 business users.
This should amount to around 15 platforms—including Alphabet, Amazon, Apple, Meta, and Microsoft—that will be designated by the European Commission by the summer 2023. Six months later, at the beginning of 2024, those digital gatekeepers will be subject to obligations and prohibitions drawn from a list of 21 “do’s and don’ts” which aim:
- to prevent a variety of forms of anti-competitive conduct such as self-preferencing (as in the Google Shopping antitrust case), the imposition of Most Favored Nation clauses, or the use of business users’ data to promote the products sold by the gatekeepers (as in the ongoing Amazon Marketplace investigation);
- and to proactively open up platforms and data to competition through interventions such as imposing horizontal and vertical interoperability (for instance allowing firms such as Epic or Spotify to use alternative in app payment systems, and giving equal access to functionalities of an operating system), or requiring search engines to share search data with competitors.
Several jurisdictions across the world are also debating new regulations on Big Tech. For instance, the US Congress is discussing a series of bills that have similar aims as the DMA, and the UK is developing a new pro-competition regime for digital markets. But the European Union has moved faster, and so the implementation of the DMA will constitute an important experiment in regulating Big Tech that other jurisdictions will closely watch. It is thus critical that the implementation is successful. It will, however, be extremely complex, for several reasons:
- first, the DMA applies to firms with very diverse business models that operate in complex, fast-moving and not-always-well-understood markets;
- second, the DMA aims to change core dimensions of those business models, for instance by requiring closed platforms to be more open to rivals or by restricting the conditions around the collection and merging of personal data for targeted advertising; therefore, resistance from Big Tech against some of these obligations is to be expected;
- third, the DMA is a new regulatory endeavor for the Commission and the Courts with little past experience to draw upon as the digital industry is very diversified and different from the other industries that have been regulated so far.
Some claim that the implementation and enforcement challenge should not be overplayed because the list of “do’s and don’ts” are detailed and therefore self-executing. While detailed rules may be easier to enforce than broad standards, we expect that some will nonetheless not be easy to implement. As an example, look at the long dialogue between some tech platforms and European consumer protection agencies on how to interpret the list of detailed unfair commercial practices in the EU consumer protection law. Going forward, the emergence of new technologies and business models will inevitably lead to new questions regarding interpretation.
Thus, the idea that the DMA will be largely self-executing is overly optimistic. In practice, the effective enforcement of the DMA will require the establishment of robust dialogue and coordination mechanisms between public authorities and private stakeholders, as well as NGOs, think tanks, and universities. Below, we sketch some ideas that we think are helpful for an effective enforcement of the DMA.
The European Commission as the Digital Regulator
The European Commission is in charge of implementing the DMA: for the first time in its 70-year history, it will become a fully-fledged regulator. Thus, the Commission will have to develop new regulatory capabilities enabling deep and constant oversight of the regulated gatekeepers and the imposition of complex access and interoperability obligations. This is necessary because the DMA is closer to regimes such as banking supervision, where constant market monitoring is required, than it is to antitrust enforcement, where agencies sporadically intervene to stop anticompetitive conduct. At the same time, because many of the rules in the DMA are inspired by recent or ongoing antitrust cases, a smooth and effective handoff will be required between antitrust investigators and the new regulators. This requires close cooperation between the different departments of the Commission, so as to leverage existing knowledge and make the most of their comparative advantages and expertise.
The Commission will also have to develop the knowledge and technical capability to understand data and algorithms, which are the foundation of all the newly-regulated digital services. This may require the establishment of a specialist technology team (as has been built by the CMA), analogous to the long-established Chief Economist teams within antitrust agencies. Such a team would be closely involved in the oversight of the regulated gatekeepers, as well as any required enforcement. Effective oversight may also require access to extensive data of various forms, including both internal firm data and external, independent data.
“the idea that the DMA will be largely self-executing is overly optimistic. In practice, the effective enforcement of the DMA will require the establishment of robust dialogue and coordination mechanisms between public authorities and private stakeholders, as well as NGOs, think tanks, and universities.”
Orchestrating an Ecosystem of Compliance and Enforcement Around the European Commission
While the European Commission will be the cornerstone enforcer of the DMA, it cannot do the job alone—enforcement will need to be participatory. The Commission could usefully establish and orchestrate a new ecosystem of compliance and enforcement, including public bodies and the various private stakeholders. Some of this is already in the works, but more will be needed.
First, the regulated gatekeepers have (as is appropriate) the right to request clarity from the European Commission on the interpretation of measures in the DMA. To ensure meaningful dialogue, the regulated gatekeeping platforms should engage swiftly and constructively to provide the best chance to influence the interpretation of the new rules in a way that, while not weakening the impact of the rules, lets platforms reflect the design choices they prefer. This may imply a change of corporate culture for some Big Tech companies, from a libertarian ‘independent cyberspace’ culture promoted by John Perry Barlow to regulatory compliance. Conversely, platforms should expect losses and even sanctions if they do not engage and instead employ delaying or gaming tactics.
Second, the business users and the potential competitors of the regulated platforms should also have the ability and the incentive to get involved in the regulatory dialogue. Substantial benefits are likely to flow from consultations with these entities on the interpretation and specifications of the new obligations as well as on their compliance. To be effective partners, these stakeholders must have access to the relevant information. For effective engagement, this information should be as extensive and unredacted as possible. As there will be an incentive for a platform to compensate business users with a share of monopoly profits when they side with the platform against measures that would increase contestability; the Commission should keep this in mind when interpreting the submissions of these parties. Also, this dialogue requires an effective complaints mechanism that can be applied to without the fear of retaliation.
Third, as envisioned in the law, the authorities of the EU Member States will have the opportunity to actively support the Commission in enforcing the DMA. Those authorities, both antitrust and regulatory agencies, have valuable comparative advantages: they are closer to the markets—in particular to small and local business users—and they have expertise in intervening in digital markets or imposing access and interoperability obligations in non-digital markets. To ensure smooth cooperation between those national authorities and the Commission, as well as coordination across cases, joint supervisory teams for specific platforms or obligations could be established, along the lines of those in European banking supervision.
Fourth, the role of the non-profit sector and civil society could be very positive as the DMA is rolled out. The Commission could publicize outstanding issues and tradeoffs on which it would like to see more research. It could also make public relevant datasets, or encourage non-profits and universities to create and host such resources that could be used to investigate questions of policy importance. Because digital platforms have such a significant impact on consumers and on innovation, the research community is likely to respond positively if the Commission requests assistance.
Learning by Doing and Minimizing Regulatory Mistakes
Given the novelty of the DMA and the difficulty of implementing it, enforcers will inevitably make mistakes and errors; over- and under-enforcement will occur. The establishment of the DMA indicates that EU lawmakers have concluded that costs of inaction are higher than the costs of those inevitable mistakes.
The Commission’s challenge is to act while minimizing these risks and costs. To do that, the Commission may decide to start with the cases that are simpler or more self-evident because they involve observable policies or outcomes, and then learn from these before tackling harder problems. It is also key that enforcers constantly monitor the effects of their actions, learn from their mistakes and quickly adapt their actions accordingly.
Establishing a Global Forum for Big Tech Regulation
While the DMA is a European law, it will apply to global platforms. This raises the question whether the regulated gatekeepers would choose to extend their DMA obligations beyond the EU because it is cheaper and more efficient to run one version of their business, rather than tailoring it to each jurisdiction. By this route, which Anu Bradford describes as a de facto Brussels effect, the Commission would become the regulator for the world—including the US. At the same time, more jurisdictions across the globe are about to adopt their own Big Tech regulation. This raises the possibility of substantive conflict between those regulations and thus increased difficulties in starting and running digital businesses. Clearly platforms’ users would gain from regulatory coherence and convergence through coordinated legislative or enforcement actions.
All this may require the establishment of an international forum that can address the sharing of information and best practices to get better coherence of rules across the world on the one hand, and, on the other hand, the coordination on enforcement actions. Such international dialogue also holds the possibility of making the DMA more effective, as it would enlarge the amount of expertise participating in its enforcement.
Dislclosures
Alexandre de Streel is a Academic Director at CERRE, a Brussels based think-tanks whose some members will be regulated by the DMA. During the past three years some of his research has been funded by Vodafone and the Computer & Communications Industry Association.
Fiona Scott Morton engages in antitrust consulting for a variety of corporations and governments; current and recent corporate clients include Amazon, Apple, Sanofi, Pfizer.
Amelia Fletcher is a Non-Executive Director of the UK Competition and Markets Authority (CMA). The views expressed here do not necessarily represent those of the CMA.
Paul Heidhues, Professor of Behavioral and Competition Economics, Düsseldorf Institute for Competition Economics (DICE), Heinrich-Heine University of Düsseldorf. Within the last three years – in collaboration with E.CA Economics – he engaged in competition and consumer protection consulting for the Competition and Markets Authority of the UK as well as in the context of trucking, banking, elevator, and timber industries.
Jacques Crémer, Professor of Economics at the Toulouse School of Economics. Within the last three years he has engaged in consulting on matters unrelated to the topic of this paper for a marketplace platform with whom he has a nondisclosure agreement. He receives financial compensation from the Toulouse School of Economics who is supported by a large number of partners, some of them affected by the subject of this blog post – the complete list can be found at rapport-tse.2020_web.pdf (tse-fr.eu).
Giorgio Monti is Professor of Competition Law and Tilburg University and Research Fellow at CERRE. During the past three years some of his research has been funded by Vodafone and the Computer & Communications Industry Association.
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