Shall we see a scaled-down version of the New Competition Tool?

On 24 July 2018, Margrethe Vestager, Member of the EC in charge of Competition, gave a press...

Yesterday, Commissioners Vestager and Breton confirmed via a funny tweet that the Commission’s proposal for a Digital Markets Act (DMA) and a Digital Services Act (DSA) will come out on 15 December, instead of 9 December as was originally scheduled. We will therefore have to be a bit more patient.

The other DMA-related news was that the Commission’s “market investigation tool” (also referred to as “New Competition Tool” or “NCT”), would be scaled-down and DG COMP powers would be limited, after the Commission’s internal review panel raised concerns over its operation as reported by EURACTIV.

In its original version the NCT would have allowed DG COMP to conduct market investigations and address the competition issues it might have uncovered through remedies. The parallel was regularly drawn between the NCT and the UK Market Investigations tool, which allows the CMA to adopt remedies to address the concerns identified during its investigation. But now it seems that following criticism from the regulatory scrutiny board, DG COMP would no longer have the power to impose remedies due to concerns over the legal basis of the tool. The outcome of the market investigations run by the Commission via the NCT would be that some “new services [could be] added to the scope of ex-ante rules, new companies [could be] designated as gatekeepers, and certain new practices [could be] regulated.” Still according to the same source, the Commission would like to ensure that market investigations would be conducted swiftly and last “only” between 18 months and two years.

This is, of course, second-hand information and we will have to wait until 15 December to have a clear view about the scope of the NCT. But this apparent re-orientation of the instrument raises some questions:

  • A first question is whether this scaled-down version of the NCT brings much added value to the existing arsenal of DG COMP. The most valuable aspect of the NCT as it was initially presented was that it would allow the Commission to identify structural competition problems and adopt remedies when necessary to address them. This would enable the Commission to address such problems effectively in circumstances where it may not have had the ability to do so through, for instance, the application of Article 102 TFEU and, importantly, without the need, once the investigation would have been completed, to initiate formal proceedings. Under the current rules, the Commission can launch sector inquiries (which may last 2-3 years) and if it identifies competition concerns that need to be addressed, it can then launch formal proceedings (which may last another 3-4 years). The NCT would have allowed the Commission to proceed faster and in a more decisive manner. With the ability to adopt remedies gone, it is not clear what the new version of the NCT would bring compared to the existing ability of the Commission to run sector inquiries.
  • Second, one could of course say that the new approach clarifies the link between the NCT and the ex ante framework as the former would be used to “inform” the latter. The market investigation conducted under the NCT could, for instance, be used to identify possible new digital gatekeepers or practices that need to be regulated. It would thus allow the ex ante framework to remain current and address the competition concerns that may arise from new practices, business models or companies. But that seems to me a very heavy instrument for doing so. In my mind, it would be better to allow the EU body in charge of implementing the ex ante framework to update the list of digital gatekeepers and the list of practices to be regulated on a regular basis. If one needs to wait the outcome of a market investigation (lasting between 18-24 months) to update the framework, I am afraid that the latter will always lag behind market developments. If one wants the framework to stay current, faster and more flexible tools are needed.

There will certainly be more to say on this topic once the Commission proposal is out on 15 December, but — based on the information currently available (and assuming this information is correct) — I am sceptical as to the usefulness and effectiveness of such a scaled-down NCT. Is this new version only there to give a role to DG COMP in the ex ante framework?

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