DMA proposal: Should there be a greater role for the Member States?

One of the striking features of the DMA proposal is that it only grants a minimal role to the Member States, the Commission opting for the centralization of the implementation and enforcement of the DMA at EU level. The question is whether this approach is desirable. It seems that Member States such as Germany, Belgium, the Netherlands have already expressed the view that national authorities should have a greater role in enforcing the DMA.

Article 32 of the DMA proposal provides that the Commission will be assisted by a Digital Markets Advisory Committee, which is a “comitology committee” whose members will be representative from the Member States (usually coming from Member States ministries). The Commission will consult with this Advisory Committee before taking certain decisions. Thus, the role of the Member States in enforcing the DMA will be minimal, to say the least.

This centralized approach is rather unusual in the area of EU economic regulation. For instance, national authorities play a major role in the area of electronic communications where the implementation and enforcement of the European Electronic Communications Code is largely decentralized. A decentralized approach is also observed in the area of EU competition law, which as per Regulation 1/2003 can be enforced by both the Commission and the national competition authorities (“NCAs”), which have taken an active role in digital markets (with a variety of decisions against Apple, Google, Facebook, and Amazon, and multiple investigations pending against these companies).

Regarding the DMA, one of the rationales for a centralized approach is that digital gatekeepers are generally active throughout the EU and their practices will rarely vary from one Member State to another. That is a of course a difference compared to electronic communications markets where most operators are only active in one or a limited number of Member States, and where the effects of their practices are often felt locally. The same can be true for companies that may be subject to competition law investigations when they engage in local cartels or abusive practices whose effects are essentially limited to a Member State.

One way to address the issue of whether the DMA proposal should allocate a greater role to the Member States is perhaps to make a distinction between the implementation of the DMA and its enforcement.

I agree with the view that the DMA should be implemented at the EU level by a body that will be placed within the European Commission. For instance, it is obvious that the designation of gatekeepers should be made by the Commission as otherwise we could end up with a situation where a core platform service (“CPS”) provider is designated as a gatekeeper in one Member State and not in another while its activities may span across these two Member States. Moreover, the regulatory dialogue that should take place as part of Article 6 of the DMA proposal should also be led by the Commission as otherwise we could end up with different obligations applied in the different Member States for practices that are identical. The same remark should be made when it comes to the updating of the obligations contained in Articles 5 and 6 as per Article 10 of the proposal. Thus, as far as implementation is concerned, there is no question that the Commission should have the lead.

I find the absence of a role for the Member States in the enforcement process less ideal for two reasons: (i) the Commission may have insufficient resources to enforce the DMA obligations and (ii) granting an enforcement monopoly to the Commission creates the risk that enforcement will be insufficiently dynamic.

Insufficient resources

As far as resources are concerned, the explanatory memorandum preceding the DMA proposal indicates (page 11) that

“In order to optimally achieve the objectives of this initiative, it is necessary to finance a number of actions both at the Commission level, where the redeployment of 80 FTEs is envisaged, and at Member State level through their active participation in the Digital Markets Advisory Committee, composed of the representatives of Member States.”

80 FTEs is manifestly too small a contingent of Commission officials to implement and enforce the DMA. The DMA will place a heavy burden on the Commission, especially in its launching phase where an enormous amount of data-gathering and analysis will have to be made. It can be expected that CPS providers falling within the quantitative criteria of Article 3(2) will fight designation (sometimes for valid reasons) and, once designated, will likely resist the implementation of the conditions contained in Articles 5-6, especially if, as is currently the case, these provisions pursue a one-size-fits-all approach where the same rules apply independently of the CPS provided. The enforcement of these obligations in case of non-compliance will also mobilize significant resources.

Member States resources will be also mobilized but only for the purpose of participating in the Digital Markets Advisory Committee. That is not the best way to tap into the significant resources available at Member States level, especially considering that some national regulators have built teams comprising software engineers and data scientists for the specific purpose of dealing with digital platforms. Given the significance of the DMA, and the fact that it provides for full harmonization (preventing Member States from adopting copycat legislation), it is a pity not to tap into these vastly expanding resources at Member State level (or at least in some major Member States).

Risk of insufficiently dynamic enforcement

The risk of granting an enforcement monopoly to a given body, especially when the latter is insufficiently staffed, is that it may deliver a sub-optimal level of enforcement. This problem can be partly addressed when enforcement is shared between different authorities, either horizontally (e.g., in some countries, such as the United Kingdom, competition law can be enforced by both the dedicated competition authority, but also by sector-specific regulators) or vertically (as in the case of EU competition law, which can be enforced at both EU and national level).

In this respect, NCAs have brought significant dynamism in the enforcement of EU competition law in digital markets. First, they have made up for the limited resources of DG COMP, which always receives more complaints that it can chew. Thus, the presence of additional enforcers have allowed complainants to find alternative venues for their case. Second, NCAs have been less risk averse than the Commission in pursuing novel theories of harm, as well as pursuing exploitative cases (unlike DG COMP which with respect to digital markets has almost written off 102(a) TFEU). Finally, some NCAs have shown an appetite for interim measures.

For these reasons, I am worried that granting an enforcement monopoly to the Commission may lead to unsatisfactory results. It is indeed not hard to contemplate a scenario where the 80 FTEs could be totally overwhelmed by the massive workload that will be generated by the DMA and thus be unable to properly perform their enforcement mission.

This is not to suggest that the dual enforcement approach pursued in the field of EU competition can be transposed to the DMA, if only because the DMA is not competition law and the reasons why competition enforcement at the Member State level makes sense (in that many anticompetitive practices are adopted by local actors and have local effects) may not be present when it comes to regulating digital platforms. But I am disappointed that the Commission does not seek to tap into the valuable resources existing at the Member State level while it will have to handle one of the most complex pieces of legislation of its history and while it does not seem willing to allocate proper resources to it.

While I don’t have a specific proposal as to how the Commission could tap into Member State resources and benefit from their expertise (but for the one discussed below), I believe that it should be an area of priority when discussing the general architecture of the DMA.

In this respect, one of the things that is missing in the DMA proposal is a complaint procedure. Assume for instance that a digital gatekeepers fails to comply with its obligations. While the Commission will enjoy investigative powers and the ability to adopt decisions to remedy the situation (see Article 7(2) of the proposal), it is the business users of the gatekeeper’s services that will be the first to observe that failure. But what do they do then? How do they reach out to the Commission? As there is no process for this, I assume they will be able to approach the Commission informally; but such a lack of formalism is problematic as it could lead to non-transparent practices. Could Member State regulators play a role here (since they are closer to the action)? Would it make sense to give them the possibility to raise the matter with the Commission, gather the relevant information and help the Commission to investigate it? That would both bring dynamism into the enforcement process and offer some support to the Commission. Just a thought.

Image source: Wikipedia

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