Avoiding a Gatekeeper Toothache
Imagine suffering from a toothache. You go to the dentist who, as a precautionary measure, immediately removes eighteen teeth. A targeted, uneventful and safe intervention suddenly becomes a major operation requiring weeks of painful, unnecessary recovery.
This damaging overreach is an allegory that describes what the EU’s Digital Markets Act (DMA) may do when it regulates Internet “gatekeepers.” There may be an issue, like a problematic tooth that should be filled or removed, but this should be done while also avoiding unnecessary treatment that will cause excessive damage and bring no benefit to the businesses or consumers.
The DMA obliges gatekeepers to follow 18 separate mandatory obligations and prohibitions. They range from allowing users to uninstall software from the core platform service, to mandating third-party access to all existing and future technological layers of the operating system, hardware, and software that a gatekeeper may want to develop for its own use. The Article 6 obligations are said to be subject to ‘regulatory dialogue’ but no explanation of such a dialogue is supplied.
This sequencing is as if the dentist removed all the teeth of every patient, without considering whether for specific patients, perhaps the treatment of a single tooth would suffice. The long list of strict prohibitions would hinder gatekeepers from investing in the best possible user experiences and offering new consumer services in new markets. The DMA risks neglecting this consumer value element.
One simple suggestion: Where obligations are ambiguous or could be counter-productive, have the European Commission – its capable teams have the experience from previous competition cases – determine what obligations are relevant, after listening to the company and if needed, others. Strict deadlines could be imposed to make this a speedy procedure. Ex-ante and time-limited analysis of predicted future effects is already common practice in the mergers context; it could be used here as well.
Additional amendments would improve the chances of the DMA achieving its goals. Under the Commission’s proposal, companies can be classified as a gatekeeper for certain “core platform services.” The gatekeeper’s noncore activities should be clarified and the gatekeeper allowed to enter new markets. The EU’s own regulatory scrutiny board itself criticised the DMA’s lack of a clear justification for the selection of these core platform services. Legislators should ensure that obligations apply only where a problem needs to be addressed, not over operate like a dentist pulling out healthy teeth.
It is also crucial that designated gatekeepers receive an opportunity to justify pro-competitive behavior. The European Commission’s own Joint Research Centre recommends this as does the report of the European Parliament’s think tank. At present, the DMA does not allow such a possibility.
These proposed amendments would help achieve a happy dentist visit. An infected tooth would be removed or repaired – while healthy teeth would stay in place.