Three Missing Ingredients to make the Digital Markets Act fit for the digital age
If politics is like cooking, legislation is like making a cake.
Great cooking always involves a personal touch – an extra pinch of salt, grind of pepper or secret ingredient (ask a Sardinian about Bottarga, for example and you get the idea).
Making a cake, however, is precise. Too little flour, too much sugar or a few minutes too long in the oven can make the difference between triumph and dustbin.
As EU lawmakers enter a critical stage in finalising the recipe for the Digital Markets Act (DMA), the landmark legislation that seeks to ensure “fairness and contestability” in Europe’s digital economy, it is critical that they get the balance right.
And there are three key ingredients in the DMA that lawmakers should weigh with particular care, to get a final text that tastes as good as it looks.
Digital markets are dynamic, they are complex and evolve at great speed. That’s part of the enforcement challenge, how do regulators keep up-to-date? In fact, that’s precisely why the DMA proposal includes several references to “regulatory dialogue”.
With experimental regulation like the DMA, the impact on the many users of core platform services is difficult to predict. Allowing for dialogue can help the regulator clarify elements and intended market outcomes, especially given the technical complexity of the rules, and the potential side-effects for consumers and SMEs.
Instead of confrontational, combative, and drawn-out competition investigations, the DMA is an opportunity to reset the relationship, bringing engineers, technical experts, and regulators together to solve the most challenging problems of the digital economy with open eyes and with minimum unintended consequences. A commitment to this process needs to come from both sides, the companies to be regulated and the regulators.
Even with dialogue, new market developments may make obligations obsolete, or counter-productive. We don’t yet know the future, or how the regulation of core platform services could prevent new ways of value creation for consumers and businesses.
Forcing too much data-sharing may lead to privacy violations. The wrong kind of interoperability may expose millions of citizens to cybersecurity risks. Closing off digital markets from normal market forces could deprive consumers of accessing the best deals available. Dictating the technical infrastructure of core platform services could slow innovation or increase costs over time. These side-effects of the DMA’s catch-all, one-size-fits-all, and inflexible approach are likely to harm the very people the law seeks to protect.
For the DMA to maintain credibility and longevity, the legislation should keep harmful or unwanted side effects of the DMA to a minimum. This isn’t a question of delaying enforcement or changing the per se rules. Instead, the European Commission should designate the core platform services to which obligations apply ex-ante (as already in place for “foreseeable gatekeepers”), and be able to adjust or suspend obligations ex-post (as foreseen under Articles 8 & 9). The rules would remain per se and self-enforcing, but the worst risks of overregulation would be avoided.
A proportionate enforcement framework
Achieving the swiftest and most effective compliance possible is not a function of setting the shortest deadlines or the most punishing fines. It is about a proportionate enforcement framework that companies can comply with from day one.
Proportionality is already improved where companies and regulators can work together to achieve desired market outcomes (i.e. a regulatory dialogue), and rules are reasonably applied (i.e. adjustment mechanisms). But that doesn’t mean the enforcer won’t be under significant pressure to intervene to protect powerful vested interests facing digital disruption.
High fines and short timelines, combined with strict per se rules, will lead to conservative interpretations that could result in overcompliance. This is especially true for the DMA obligations that require far-reaching changes to technical infrastructure and business models that are intertwined with the delivery of core platform services. Getting those changes right, without introducing security gaps, malfunction or other unintended consequences, can take time. A punitive and rushed approach to compliance will only lead to half-baked outcomes, and unintended consequences.
A successful cake has three key ingredients: sugar, butter and flour. The DMA “cake” will soon go into the oven, but these three key ingredients are still missing. Hopefully legislators will find a way to include them, so that Europeans can enjoy a DMA that is fit for the digital age.