A Digital Market Regulator Fit For the Digital Age

“Competition enforcement has failed,” claim proponents of the Digital Markets Act (DMA), pushing for ex-ante regulation to achieve certain market outcomes without case-by-case assessment or effects-based analysis. If you trust that a regulation can miraculously solve complex competition issues, this may sound appealing. But even the wisest regulators can’t make good decisions without data. That is why a regulator that is fit for the digital age must engage with industry experts in a regulatory dialogue, to understand the effects that the regulation of platform services will have on consumers and business users, and to be able to adjust for unforeseen side-effects. 

What is “Regulatory Dialogue”?

Complaints about competition enforcement often revolve around the army of lawyers and economists lined up on the side of defendants, and how this can delay getting the “right” result (let’s ignore fundamental rule of law principles for the moment). But if European regulators really want to get the “right” result, replacing contentious competition enforcement proceedings with contentious regulatory proceedings won’t work. 

Regulatory dialogue is the solution. It’s about regulators listening to engineers and technical experts, to understand difficult product design decisions and find the right trade-offs to achieve policy objectives. It’s about regulators letting companies know what they expect in advance, so that companies can pursue those objectives without fear of punishment later. The European Commission understands the importance of this legal certainty, regulatory dialogue is already foreseen in the proposed DMA (see recitals 29, 33, 58 and 60), but the DMA’s Articles don’t quite match the aspiration. There’s no requirement on the Commission to engage.

Why is it necessary?

Digital markets are dynamic, they are fast moving and unpredictable, competition is innovation-driven, and the greatest challenger can come from something that was once just a feature or a complementary service. Competition authorities, with all their lawyers and economists, can still get it wrong. 

It’s unlikely that a regulator can get it right without looking at the facts, and listening to the experts on the ground. Ultimately, the technical solutions and business designs mandated by the DMA will need to survive in the market, if these interventions are to be credible. 

Says who?

Critics claim that “regulatory dialogue” is just a stalling mechanism (ignoring that it can be subject to strict timelines), and that technology companies can’t be trusted. But this isn’t about trust. It’s about developing regulatory capabilities and understanding of the markets subject to government control.  

The Body of European Regulators for Electronic Communications (BEREC), who have been policing similar regulatory frameworks for electronic communications for the past two decades understand this better than most. In their recent opinion on the DMA, they assert that “a constant regulatory dialogue is needed to develop hands-on experience and knowledge.” Far from raising concerns about delay or industry influence, they see regulatory dialogue “leads to a swifter implementation and decreases litigation.” Instead of relying on the pretence of knowledge, BEREC recognises the need for future DMA regulators to get up to speed: 

“[t]he regulatory dialogue should start at an early stage, i.e. immediately when the regulation is in place in order to build the relevant and necessary knowledge to make any regulatory intervention fit for purpose.”

When the most experienced European regulators recommend immediate and constant regulatory dialogue, one has to wonder whether lawmakers are really concerned about making a DMA that is fit for the digital age. Maybe some would rather prefer a regulator empowered to pick winners and losers, regardless of the consequences. In dynamic digital markets, the risk of getting it wrong is high. Regulatory dialogue is a missing ingredient to help make sure that doesn’t happen. That’s why the Commission should be required to engage with designated gatekeepers in regulatory dialogue to ensure the DMA achieves its objectives. By committing to this dialogue, the Commission can become a regulator fit for the digital age.