Why is ex ante regulation of systemic online platforms needed on top of competition law?

One of the hottest issues on the agenda of the European Commission with respect to Europe’s Digital Future relates to whether certain online platforms – generally referred to as “gatekeepers” or “systemic platforms” – should be subject to ex ante regulation designed to control their market power and ensure the contestability of digital markets. Speaking before the European Parliament’s Internal Market Committee on 4 May 2020, Commissioner Vestager reaffirmed the need to complement the EU competition framework with ex ante rules in order to ensure that large platforms remain fair and competitive, and to prevent the irreversible “tipping” of markets. The Commission is working full steam ahead on a proposal for an ex ante regulation as part of the Digital Services Act package set to be presented by the end of 2020. 

But why do we need ex ante regulation when we have EU competition rules which are zealously implemented by DG COMP and the national competition authorities?

Competition law is undoubtedly an important tool in preserving the contestability of markets. Solely relying on competition law however to deal with the conduct of large digital platforms is no longer sufficient for the following reasons:

  • First, ex post enforcement is is not always best suited to tackle anti-competitive practices in fast-moving digital markets. As shown by the Google probes, competition investigations are resource-intensive and lengthy, spanning several years. By the time an investigation has been concluded, the market may have irreversibly tipped in favor of the dominant firm and it may be very hard to restore competition.
  • Second, competition investigations are ad hoc, limited to the narrow facts of the particular case, and may do little to address the same issues arising in different contexts. When a problem is recurrent (e.g., self-preferencing) and affects a wide range of businesses, addressing it through ex ante regulation makes sense.
  • Third, even after the conclusion of lengthy investigations, the remedies imposed may do little to reinvigorate competition, as shown in the Google saga. Despite three decisions of the Commission (concerning Google Shopping, Google AdSense and the Android operating system), it is hard to see how competition has been restored in the markets that were affected by Google’s behaviour. 

While some of these issues can potentially be addressed by improving the efficiency competition law enforcement through procedural and/or organisational changes, or even by shifting the burden of proof in some instances, as suggested by a report commissioned by Commissioner Vestager, there are restrictions that cannot be overcome. Competition investigations will remain ad hoc, bound to the facts of each particular case, and rushing through complex issues will make any decision vulnerable to legal challenges. 

In this context, it is not surprising that both the Furman Report and the Stigler Report suggested that existing ex post enforcement should be complemented by ex ante rules, which would make up for the limitations of antitrust enforcement and ensure that EU markets remain fair and contestable to the benefit of consumers. This view is shared by various Member States, including Germany and France, which are considering updating their competition framework to tackle challenges of the digital economy. Yet individual interventions taken at the national level create the serious risk of fragmentation and threaten legal certainty across the internal market. With that in mind, the EU is prudent in taking proactive steps for the adoption of EU ex ante rules in order to ensure uniformity and consistency, and thus create a truly (regulatory) level playing field across Member States.

As the EU embarks on its journey towards ex ante regulation of systemic platforms, we will follow along with posts and commentary on this subject. Stay tuned!

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