The DMA has been published: Now the real challenges start

The Digital Market Act (“DMA”) has been published today. It is a remarkable instrument in many ways. Since the publication of the Commission proposal in December 2020, it took less than 1.5 years for the Council and the Parliament to agree on the final text. The supersonic adoption of the DMA was due to several factors, including: the quality of the Commission proposal; the desire from key Member States, such as France and Germany, to regulate digital gatekeepers; and the leadership of Andreas Schwab in the Parliament. The DMA is also one of the very few instances where the text adopted by the Council and the Parliament is stricter than the text initially proposed by the Commission.

Yet, it is now that the real challenges start with the implementation and enforcement of the DMA. The DMA will be as good as its implementation and enforcement, and it is expected that gatekeepers will fight their corner. The task of the Commission will not be easy, and it is questionable whether it will have enough resources. That is a key question considering that, unlike in the case of EU competition law, the DMA provides for centralized enforcement. Companies that rely on the core platform services (“CPS”) of a gatekeeper will get frustrated if implementation and enforcement are inadequate and they may resort to national courts to privately enforce them. The success of the DMA will also depend on the ability of the Commission to enforce the DMA in a timely manner, while at the same time respecting due process.

The DMA will also pose significant challenges for gatekeepers. The DMA follows a relatively rigid model, which does not (sufficiently) take into account the differences of the various business models gatekeepers may pursue. Some of the DMA obligations are not always clear and reasonable people may disagree over their interpretation. In some instances, these obligations will force gatekeepers to revisit their business model and in-house lawyers may find resistance from their business colleagues. Thousands of hours will have to be spent on preparing compliance with the DMA.

It is against this background that my co-bloggers and I will publish a series of posts on the DMA in the coming days. The topics we will deal with include:

  1. Designation metrics: The DMA sets quantitative thresholds, such as the number of (end and business) users of a core platform service, that if exceeded give rise to a presumption that the undertaking in question is a gatekeeper. However, calculating user numbers is easier said than done. Although the DMA includes an Annex that sets out how gatekeepers should make such calculations, the metrics identified are not always clear. For example, in the case of virtual assistants, the Annex states that gatekeepers should submit the “number of unique developers who offered at least one virtual assistant software application or a functionality to make an existing software application accessible through the virtual assistant during the year”. Does this mean that certification of a specific app by the gatekeeper platform is required for the software developer to qualify as “business user” or is that aspect not relevant? What is more, again according to the Annex, gatekeepers are responsible for identifying the metric that best reflects “engagement with the platform”. Combined with the fact that the DMA refers to several metrics that may be relevant for measuring engagement with a specific category of core platform services (e.g., a provider offering online intermediation services may rely on clicks, queries, transactions, etc.), this leaves significant room for designing different methodologies. What will be deemed acceptable and what not remains to be seen.
  2. Rebuttal: Another question relating to designation concerns the ability to rebut the presumption that, despite meeting the thresholds with respect to a core platform service, the undertaking in question is not a gatekeeper. Recital (23) limits the range and type of arguments that may be put forward when submitting a rebuttal to quantitative criteria (e.g., by how much the user thresholds are exceeded). However, Article 3(8), which enables the Commission to designate as a gatekeeper undertakings that do not meet the thresholds, refers to several qualitative parameters that can be taking into account when conducting this assessment (e.g., switching costs and multi-homing, network effects). The question then arises whether these diverging approaches expose designation decisions to legal challenge.
  3. Delineation of CPS: The delineation of the core platform service that will fall in scope is another complex matter that will determine the scope of designation. The DMA gives us a mixed message. On the one hand, according to the anti-circumvention rule, the gatekeeper should not artificially segment the core platform service. On the other hand, the Annex notes that, if services are offered in an integrated way and are of the same category (e.g., they are all online intermediation services), those services should be segmented if they are used for different purposes. As a result, how core platform services will be delineated for the purposes of designation decisions (and compliance plans) remains to be seen.
  4. DMA Litigation: One question is whether we should expect significant litigation. The answer is yes as companies that are designated as gatekeepers will likely challenge the designation decision. In the process, they may seek to challenge the DMA as a whole or some of its provisions. This will not delay the implementation of the DMA as appeals to the General Court do not have suspensive effects, but the judgments of that Court will have significant implications. The enforcement of the DMA is also expected to trigger litigation. The case-law of the EU courts will certainly shape the boundaries of the DMA in the years to come.
  5. Cooperation of the gatekeepers: It is hard to predict the attitude of the gatekeepers. Will they collaborate with the Commission or engage in obstruction? Probably a bit of both. Seeking to obstruct processes in a systematic manner is a dangerous strategy as the DMA is here to stay, hence this will be a long game. But at the same time, each gatekeeper will have some red lines over which they may engage in protracted fights.
  6. Enforcement resources: The Commission is aware that the DMA is an extensive and complex piece of legislation that will require significant resources. The initial number of 80 FTEs is not sufficient and even if this number is a bit extended, it will remain insufficient. There will be a clear asymmetry of resources between the Commission and the gatekeepers. One additional challenge relates to the availability of technical expertise. The Commission will not be able to match the salaries of the private sector for good engineers or data scientists. On the other hand, the model of the Chief Economist Team has allowed the recruitment of talented economists at all levels in that spending time with the CET enhances a CV.
  7. Enforcement: role of the NCAs:  The DMA provides for a centralized enforcement system in the hands of the Commission. The NCAs are allowed to have a role – for instance, they may launch an investigation into cases of possible non-compliance on their territory, but only the Commission will be able to take decisions. This raises the question of whether the NCAs will be willing to devote resources to this exercise where they have at best a secondary role. Time will tell.
  8. Enforcement: private actions: As noted, companies that rely on gatekeepers may resort to national courts to seek injunctive relief if the Commission inadequately implements and enforces the DMA. But in addition, DMA breaches – whether confirmed by the Commission or simply alleged – may form the basis for damages actions.
  9. Coordination with competition law: Many of the conducts addressed in the DMA find their basis in competition law (self-preferencing, MFNs, fair and non-discriminatory access conditions). Although the DMA regulates gatekeepers ex ante, where a breach of the DMA is established, this may also qualify as a competition infringement. How will the Commission and NCAs prioritize between these tools? Will the existence of ex ante regulation dampen competition enforcement (as happens in other regulated sectors) and stunt the development of the case-law on the concepts of “abuse” and “restriction of competition”?
  10. The interplay between the DMA and other regulatory rules: The DMA will not apply in a vacuum; it will interact with existing EU and national rules that establish obligations for (gatekeeper) platforms. The DMA explicitly provides that it will apply “without prejudice” to several instruments, suggesting that all legislative instruments that govern the conduct of platforms (in the EU and domestically) will harmoniously co-exist and complement each other. However, it is doubted whether the DMA will indeed apply without prejudice to (i.e., without detriment to any existing right or claim enshrined in) all the rules which have recently been revised or adopted to regulate platform practices. In certain cases, the DMA may qualify as lex specialis, thereby prevailing over other rules. In other cases, based on the principle of supremacy of EU law, the DMA may override national rules that pursue objectives other than fairness and contestability. In such cases, despite a “without prejudice” clause, the DMA would not necessarily complement (but could possibly endanger) the effectiveness of existing rules.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s