The Digital Markets Act: More Politics in Competition Policy?

The European Commission has promised to deliver a proposal for its flagship Digital Markets Act (DMA) by the end of 2020. Discussion is intensifying around its potential content. The competition conference season is in full swing (albeit virtually) and Europe’s leading regulatory experts are engaged in a highly technical debate on how the DMA should tackle current competition issues in Europe’s digital markets. What this debate overlooks, however, is that the DMA initiative won’t just be shaped in the technical environment of DG COMP, as is the norm, but also in a more political arena. This introduces a new set of rules to the game. Ultimately, businesses will have to re-evaluate their approach to engagement with the DMA.

Key questions raised by the Digital Markets Act

The DMA was born of concern that current competition enforcement is unable to react with adequate speed and effectiveness to the anticompetitive conduct of large online platforms. To this end, the European Commission is set to add two new measures to its enforcement toolbox:

  1. An ex ante regulatory tool, applicable to large online platforms with a gatekeeping role, which imposes prohibitions and obligations on these platforms; and
  2. A market investigation tool which would allow the European Commission to address structural competition problems that aren’t addressed under the existing EU competition framework.

Both tools imply a preventative, as opposed to curative, approach to competition enforcement. With them the European Commission would have the power to intervene in markets early, before it becomes too difficult to correct perceived problems. As things stand, there are still several critical questions that remain to be addressed in the final text. For instance, what constitutes a digital market? How do we define a gatekeeper platform? How will we establish which practices should be prohibited or obliged? How will we balance the welfare enhancing effects of certain practices with the welfare reducing effects?

These questions are not dissimilar to those posed by the existing EU competition law framework. For instance, if we consider Article 102 TFEU (abuse of dominance), we are confronted by questions like: what does it mean to be dominant? How do we define the relevant market in which a company is alleged to be dominant? And what types of behaviour constitute an abuse? What is different about the DMA, however, is the bodies that will be responsible for answering these questions.

Past and present: the role of EU institutions in competition policy

The European Commission’s competition arm, DG COMP, and the Court of Justice of the European Union (‘CJEU’) have historically played the key role in setting the substantive boundaries of EU competition law. Our questions on Article 102 have been answered through decades of European Commission enforcement, underpinned by economic analyses and refined by decisions of the CJEU.

In the case of the DMA, however, both the Council and the Parliament would have a key role in determining, among other things, how we should define gatekeepers and which practices should be prohibited or obliged. In addition, it is DG CONNECT that is taking the lead on drafting the initial proposal on behalf of the European Commission particularly with regard to the ex-ante regulation, albeit with input from their colleagues in DG COMP. The involvement of these different actors in the substance of this new development in competition policy will have direct and important consequences for the way that companies affected by the DMA must approach their stakeholder engagement.

Considerations for businesses engaging on the DMA

Traditional engagement on competition policy has, generally, been narrower than in other policy areas. It has focused on DG COMP, which has drafted the rules as well as enforced them. Comparatively limited time has been devoted to the Council and the Parliament. As a technical body driven predominantly by legal process and economic evidence, businesses have relied on presenting DG COMP with information that is focused heavily on the competitive dynamics of markets and underpinned by detailed economic analysis. Less attention has been paid to broader policy objectives like decarbonization or industrial policy, not least because they have not historically been considered relevant to the work of DG COMP.

With the Council and the European Parliament set to take a more significant role in the DMA and with DG CONNECT in the lead on the proposal, businesses must not only engage additional stakeholders but must also reconsider how they frame their messages. Whilst more traditional economic arguments around competition will still form a central pillar of communication, it will be critical to remember the broader policy ambitions of the European institutions and the political motivations of these players. For example, drive towards strategic autonomy and technological sovereignty will almost certainly play a role in DMA discussions. Party affiliations and national interests will also likely play a bigger role, as political groups and Member States seek to achieve outcomes that best suit their own agendas and mandates.

The DMA’s current direction of travel represents a fundamental shift in institutional responsibilities in the field of competition policy, creating a more complex landscape to navigate. Listening to, understanding and engaging with this wider group of DMA stakeholders will be essential, therefore, particularly where their concerns go beyond traditional economic and legal analyses.