The Digital Markets Act : How should ex ante rules look like?

European Commission issues terms of reference for study on “platforms with  significant network effects acting as gatekeepers” – The Platform Law Blog

As we are now less than 6 weeks away from the expected publication by the Commission of its proposals on ex ante regulation for so-called “digital gatekeepers” and the New Competition Tool (“NCT”), rumours abound as to the exact scope and content of these proposals.

What seems clear now is that the ex ante regulation and the NCT will form the two pillars of the same legislative package, named “Digital Markets Act” or “DMA”. This approach makes sense. Initially, it was thought that the ex ante regulation would be part of the same package as the measures designed to revise the e-commerce directive, but they were strange bedfellows. Conceptually, it is more coherent to have the ex ante rules and NCT in the same act as they are interconnected in several ways.

In two earlier blog posts, see here and here, I shared some thoughts on the scope of ex ante regulation, i.e. what a digital gatekeeper is. In this blog post I would like to discuss the content of ex ante regulation, i.e. the substantive rules that would apply to digital gatekeepers. These two issues are closely related because the more companies are designated as gatekeepers (it seems that the Commission is considering 12 or more such gatekeepers), the greater the likelihood that the substantive rules will be diluted. From a personal standpoint, I would rather have strict rules applying to a small subset of companies than weak rules applying to many companies. The P2B regulation bears witness to the ineffectiveness of the latter approach.

A couple of weeks ago, a list of “unfair practices” was (voluntarily or involuntarily) leaked by the Commission. It comprised a blacklist, a grey list, but also referred to a whitelist. My understanding is that the blacklist would comprise a relatively short list of prohibitions that would apply to all the designated gatekeepers, whereas the whitelist would contain a list of list of affirmative obligations that would apply to the same platforms. The grey list would comprise a slightly longer list of prohibitions that would not necessarily apply to all the gatekeepers.

Assuming this understanding is correct – note that I cannot be sure it is, but it is based on my conversations with several people who are supposed to be in the know – one question is whether these different lists of prohibitions and obligations would apply to the designated gatekeepers as a whole (e.g., the whole of Alphabet to take an example) or only to some of their parts (e.g., Google Search or YouTube). The latter approach would make sense as some the companies that are likely to be designated as gatekeepers have a variety of businesses, some of which have no gatekeeper positions.

While I understand that the black list would comprise a relatively short list of prohibitions, which would make sense since these prohibitions would apparently apply to all the designated gatekeepers independently of their business model, the wider list of prohibitions contained in the grey list would only apply to these gatekeepers following an intervention of the entity that would be in charge of implementing the ex ante regulation. Such an approach would allow to apply different obligations to different gatekeepers depending, I assume, on their business model. One of the main challenges for the Commission is indeed that the broad category of gatekeepers may include companies that have little to do with each other, including for instance marketplaces generating revenues through commissions (app stores, Amazon, etc.), companies offering free services funded by ads (Facebook, Google Search) and software distribution platforms generating revenues through either ads, licensing fees, or direct payments (iOS, Android, etc.) From a general standpoint, these different categories of gatekeepers tend to raise different types of concerns, hence it would be rather odd to subject them to the same set of rules (except the narrow blacklist).

One thing that is slightly worrying is that many issues seem still up in the air, while we are only a few weeks away from the beginning of December, the deadline for the Commission to submit its proposals. There is strong support for the Digital Markets Act, but the Commission needs to get it right. In my view this requires two things:

  • First, the Commission needs to adopt a definition of gatekeepers based on a combination of quantitative and qualitative criteria. As to the quantitative criteria, the thresholds should be sufficiently high to avoid capturing platforms whose ability to create harm is limited. As to the qualitative criteria, they should be clear and simple to facilitate implementation and reduce the risk of litigation. As indicated in earlier posts, the key factor in my view is the ability of the platform to control access to a large number of users, which business users need to have access to in order to compete (i.e. bottleneck power). When business users can (effectively, not only theoretically) access users through several channels (and vice-versa), the platform is not a gatekeeper.
  • Second, I believe the blacklist should be short and focused. It should contain a small set of prohibitions that should apply to all gatekeepers. The same should be said of the whitelist. The grey list could be wider and contain prohibitions that should not be applied to all designated gatekeepers due to the presence of different business models, which in turn raise different types of concerns. It would also make sense for these lists to not strictly duplicate EU competition law provisions.

This is of course easier said that done, but I am hopeful that the Commission will come up with proposals that make sense and will ensure fair competition in digital markets. But as I noted previously, politics should stay away. Platforms should be designated as gatekeepers because they are true gatekeepers based on objective criteria, not because the Commission needs to broaden the list (to, for instance, some European companies) to make it more acceptable.

There is an issue that I have not raised yet, but which I may discuss in subsequent blog posts, which is the entity that should be in charge of implementing these ex ante rules. For reasons of consistency in the internal market, I believe this entity should be at the EU level. However, I don’t believe that it should be DG COMP, which is already extremely stretched and will be in charge of the NCT. Perhaps a Task Force comprising officials from different relevant DGs may be a solution. But I will comment on this latter. Let me know if you have suggestions.

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