Platform antitrust/regulation in 2023: Our eleven predictions

Happy New Year to all! The authors of this blog wish you the best for what will be a thrilling year for those interested in platforms. It has never been more exciting to operate in the tech space.

To start the new year, we have put our heads together to make eleven predictions about 2023. As always, don’t hesitate to share your thoughts.

# 1: Digital Markets Act: A crucial year ahead

Companies that will be designated as gatekeepers for the purposes of the DMA will need to comply with the obligations it provides by March 2024. However, 2023 will be packed with action on the DMA front.

Companies that fulfil the quantitative thresholds set in Article 3(2) will need to notify the Commission by July 2023, using the Form GD currently provided as an annex to the draft Implementing Regulation and, in some cases, will  submit a rebuttal as per Article 3(5). The extent to which the Commission will be willing to seriously consider rebuttals is an open question. We expect designation to be a contentious process as, considering the matters at stake, some (if not most) of the designated gatekeepers will challenge designation for one or several core platform services (“CPSs”) before the General Court. Based on Article 3(8), the Commission may also decide to designate as gatekeepers companies that do not fulfil the quantitative criteria.

In parallel with designation, gatekeepers will discuss compliance with the obligations contained in Articles 5, 6 and 7 with the Commission, which will also take input from third parties. In this context, the Commission will likely organize additional workshops along the lines of the one that took place last December on self-preferencing. Companies that are dependent on CPSs provided by gatekeepers will certainly want to have their voice heard as there is a (considerable) risk that gatekeepers will try to implement the DMA obligations in a way that maintains the status quo. What happened with Apple in the Netherlands is a reminder of how things can go wrong.

#2: The Digital Markets Unit: A pivotal year in the UK’s newest regulated industry

It is rumoured that the relevant Bill to give the Digital Markets Unit (“DMU”) its powers will be laid before the UK Parliament in the week commencing 13 February, and a senior CMA official has been quoted as saying the legislation is scheduled to be in force in October. In the meantime, the DMU is starting to draft the detailed codes of conduct that will significantly affect the operation of the tech sector. 2023 is therefore a key year in which the new framework will be decided.

Big Tech lobbying may succeed in weakening certain provisions – for example, the DMU’s ability to police gatekeeper firms’ leveraging of market power from one market to the next. It may also succeed in stretching the timetable for the implementation of the regime – for example, by arguing that each phase must be done sequentially (publication of guidance documents, then designation of firms with strategic market status, then appeal, then rule-writing, then appeal, etc), and that the CMA’s market study analyses from 2020 and 2022 need to be updated, which would add significant additional time to the process. On the other end, there is a growing consensus that regulation should proceed swiftly.

#3: European Commission investigations against big tech: Still a busy docket

The European Commission ended 2022 by concluding its two investigations against Amazon by accepting Amazon’s commitments in December 2022. Well done, although the commitments seem to address only some of the anticompetitive practices of Amazon.

Now, the Commission has still a bunch of Big Tech investigations to deal with:

  • Apple: DG COMP has launched at least two formal investigations against Apple, one focusing on Apple Pay (Statement of Objections issued to Apple in May 2022) and one focusing on App Store rules for music streaming providers, prompted by Spotify’s complaint (the Commission addressed a Statement of Objections in April 2021, but the investigation seems to progress slowly).
  • Google: Google is facing an EU probe into its ad tech business. The Commission launched the investigation in June 2021 and is rumoured to be preparing a Statement of Objections. On the other hand, in December 2022 the Commission decided to close its probe into the so-called Jedi Blue agreement between Google and Meta.
  • Meta: Meta is facing an EU investigation into its online classified ads service, Facebook Marketplace. The Commission addressed to Meta a Statement of Objections shortly before the Christmas break in 2022. 

We also know there is at least one informal investigation against Microsoft (prompted by Slack, see here), and Microsoft’s cloud business is also under scrutiny.

Of these different cases, the cases against Apple should logically produce an outcome in 2023, unless the Commission decides, as noted below, to have these cases dealt with under the DMA. That would be unfortunate in our view as the Commission needs to set competition law precedents on the important issues raised by these cases.

#4: CMA antitrust investigations against big tech: Time for major milestones

A visit across the Channel reveals that the UK Competition and Markets Authority (CMA) is just as busy (and that a few case pages need updating). The CMA has its own Amazon investigation, focusing on the same issues as the European Commission. However, although the current stage of its investigation was due to end in December 2022, there has not yet been any public indication that Amazon and the CMA are discussing commitments along the lines as those accepted by the Commission…

In parallel, the CMA is investigating many of the same practices as the European Commission, with a few notable differences:

  • Apple: The CMA is investigating Apple’s conduct in relation to the distribution of apps on iOS  devices in the UK, in particular, the terms and conditions governing app developers’ access to Apple’s App Store. The next milestone in the case timetable is this month. For a case that has been running for almost two years, it would seem that a statement of objections is the logical next step. Unlike the Commission’s case, the CMA has not limited its investigation to music streaming apps.
  • Google: Google is the subject of three ongoing CMA investigations, as well as working with the CMA on its commitments in relation to the Privacy Sandbox. The CMA is investigating Google’s conduct in ad tech (like the Commission), Google’s Play Store rules which oblige certain app developers to use Google Play Billing for in-app purchases, and the so-called Jedi Blue agreement on header bidding between Google and Meta (the Commission closed its investigation into the same agreement last month).
  • Meta: In addition to the Jedi Blue case, the CMA is investigating whether Meta might be abusing a dominant position in the social media or digital advertising markets through its collection and use of advertising and single sign-on data. An update on this case was expected for Autumn 2022, but the case page remains unchanged. It is unclear what the next step in this case will be. Again, for a case that has been open since June 2021, a statement of objections would be a logical next step (particularly since the Commission issued a statement of objections to Meta last month).

Antitrust watchers should also keep an eye on the Competition Appeal Tribunal, which will rule on a number of important cases in the pharmaceutical sector. Since some of these cases are about the analytical framework that applies to excessive pricing, they may set important precedents for the question whether commission rates charged by Apple and Google on the App Store and Play Store are excessive.

#5: DMA and competition law: More of the former, less of the latter

The DMA will not supplant competition law. Executive VP Commissioner Vestager has stated clearly the Commission views the DMA as a complement to competition law. Now, the reality is that the DMA offers the Commission a much easier path compared to antitrust enforcement. The DMA adopts a per se approach that removes the need to define relevant markets, establish dominance, and demonstrate anticompetitive effect. Therefore, the Commission may have an incentive to rely on the DMA to the maximum extent possible instead of launching antitrust investigations. In practice, this could mean the Commission may not open new antitrust probes against Big Tech in 2023 (or open fewer investigations than it would normally). The Commission may also be tempted to not conclude its pending investigations (or conclude them with commitments) and instead address them through the DMA once the latter’s obligations kick in.

#6: Big Tech mergers: the bigger picture or each case on its merits?

Competition authorities have been threatening to intervene in Big Tech acquisitions for several years, but so far they have rarely done so. They have allowed Amazon to buy MGM Studios; they have allowed Google to buy FitBit (with some light behavioral remedies). In fact, they have allowed every Big Tech deal except the acquisition of a GIF library by Meta.

Will Microsoft now pay the price for regulators’ past failings? Its $70 billion acquisition of Activision is now in Phase 2 in both London and Brussels, and the US Federal Trade Commission has sued to block it. It is a difficult one to call.

Regulators will feel a little foolish to make so much noise about Big Tech mergers and then clear the biggest of them all, but do they have a basis on which to block it? They will be afraid of future criticism if it results in a near-monopoly of subscription gaming and that potentially becomes the biggest sales channel. However, that is not a good reason for using a lower threshold for intervention (and/or tolerating more uncertainty) than in non-tech cases. Each case should be considered on its own merits. Also, unusually for a big Phase 2 merger, Microsoft has a proven pro-competitive rationale for the deal, which would obviously be lost if the deal were blocked. There is jeopardy for regulators on both sides of this important decision. Decisions on Broadcom’s $61 billion acquisition of VMware will follow soon afterwards, but with less media attention and political heat.

#7: Private litigation against Big Tech: The beginning of a new trend

Private litigation against Big Tech is likely to continue to be a focus in 2023, especially for class actions. The UK CAT should host certification hearings in Gormsen v Meta, Gutmann v Apple, Neill v SonyHunter v Amazon and potentially Pollack v Google. It certified opt-out class actions in Which v Qualcomm, Kent v Apple and Coll v Google in 2022.

The Netherlands is proving attractive as a venue for EU versions of claims against Big Tech and is also popular for data related claims (see for example claims against TikTok for GDPR breaches). The Portuguese opt-out regime is also gaining traction for consumer antitrust claims against Big Tech.

Given the rapid growth of the UK’s nascent opt-out regime we expect more new claims to be filed this year. Complementary cases in the Netherlands, Portugal and elsewhere are also likely.

#8: Beyond the DMA: Regulatory initiatives to protect media pluralism

The Commission has recently made several regulatory proposals affecting the supply and consumption of media content. Notable initiatives include the proposal for a European Media Freedom Act (“EMFA”) and the proposal for a Regulation on political advertising.

The EMFA proposal tackles a series of challenges facing the media sector, including the political independence of public service media, media concentration and editorial freedom. Though the EMFA is a political priority, it is not clear whether the EU institutions will reach an agreement on the file soon. This is because the text would benefit from improvement in several areas, especially as regards the role of platforms in determining the variety and quality of media content we access and engage with, which is not reflected in the Commission’s proposal. Moreover, the Commission’s proposal labels the EMFA as an instrument that would seek to complete the internal market and only some of the EMFA provisions pursue that objective. Put differently, this is a noble initiative but the EU will need to overcome several hurdles before it is adopted as the first review of the proposal by the Council has illustrated.

The Regulation on political advertising, which will inter alia establish a series of transparency obligations to address the spread of disinformation is likely to be adopted earlier than the EMFA. The Czech Presidency has recently managed to secure a general approach and it has been reported that the Swedish Presidency is keen to advance the negotiations on the file, for the geopolitical tensions with Russia have underscored the risk of disinformation.

#9: Beyond the DMA: Other regulatory initiatives completing the digital single market

The EU has undoubtedly been one of (if not the) most active jurisdiction(s) in proposing regulation for data-driven markets. In 2023, some of those proposals may become law which in certain cases may have a significant impact on how data-driven markets work. Notable examples include the Data Act, the AI Act, the Data Governance Act and the regulation to build a European Health Data Space.

Clearly, we cannot ignore the proposal for an ePrivacy Regulation (otherwise known as the “EU cookie law”) which has been stuck in a negotiating deadlock since 2017. 2023 may be the year in the course of which a compromise is reached on this legislative text which addresses important aspects affecting the digital economy (e.g., privacy-compliant cookie management).

#10: Amazon moving into the spotlight in the UK and elsewhere

Amazon has thus far escaped much of the antitrust attention, but that is unlikely to continue. In preparation for the DMU regime, the CMA will need to undertake a market study into e-commerce of a similar depth to its two previous tech market studies (online platforms & digital advertising and mobile ecosystems). Various controversial practices will therefore move into the spotlight, such as its alleged self-preferencing conduct on its e-commerce platform, and the way it ties and bundles different services. As mentioned above, the CMA will also need to decide how to handle its antitrust investigation into Amazon’s use of third-party seller data and its Buy Box and Prime eligibility practices, now that the Commission has settled its parallel cases. At the same time, the Bundeskartellamt’s two antitrust investigations into Amazon will make significant progress this year while it also fights Amazon in court over its designation as an undertaking of paramount significance under Germany’s new digital gatekeeper regime.

Across the Atlantic, the California and DC Attorney General cases against Amazon’s use of most-favored nation clauses will make progress, and there may be legislation to prohibit self-preferencing along the lines of the bi-partisan American Innovation and Choice Online Act, S. 2992.

#11: To the Metaverse, and beyond!

We also expect that we will see many law firms’ newsletters and briefings on the Metaverse (and even the opening of a Metaverse competition agency) this year, but don’t fall for anyone claiming they understand precisely how competition law will function in this new way of experiencing the internet. Whether the same or new questions of dominance will arise in a (hopefully open) Metaverse is unknown. At the early stages, a key question from a policy perspective is whether new “walled gardens” will emerge (or existing ones remain), or whether the Metaverse develops in a more open way.

Competition law and policy will have a role to play in this respect, and competition authorities and policymakers are better equipped to deal with these issues now than they were when the current dominant ecosystems arose. Through merger control, the timely designation of new gatekeepers and, where necessary, strict and innovative enforcement, competition law and policy can try to avoid the mistakes made in the lead-up to the dominant positions that were created on the mobile internet, in search and in advertising. So far for the good news. However, it is much harder to prevent dominant positions from being obtained, particularly when the companies involved are developing something unique and innovative – a process that should be respected and protected. The technology underpinning the Metaverse is highly complex and will span cloud service providers, telcos, game engine builders, GPU companies and a financial infrastructure that may be decentralized. The number of small developers will skyrocket. More experiences will be virtual and can be monetized online. Keeping track of all of this will be a mammoth task, but an enjoyable experience all the same.

Photo by Moritz Knöringer on Unsplash

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