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A Dynamic Digital Markets Act for a Dynamic Market

· November 10, 2021

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Much has been said about the strict, one-size-fits-all, and catch-all approach of the proposed Digital Markets Act (DMA). Numerous economists and legal experts have pointed to the per se, and form-based approach to platform regulation, and how it risks reducing the value that platforms create. Legislators have been hard at work trying to fix these issues. But how to do so while maintaining the benefits of faster regulatory enforcement? The answer is hiding in the DMA itself: enhancing the existing adjustment mechanisms to avoid overregulation.

A Tailored Approach

It’s a bit of an open secret that the DMA’s prohibitions and obligations, inspired by competition law complaints in particular market contexts, are not narrowly tailored to competitive harms. The risk of regulatory overreach is high when applying competition remedies out of context. An operating system is not the same as an app store, a marketplace, a social media service, or a search engine, but the DMA would impose the same obligations across each. Treating them the same is a risky experiment

European consumers and smaller business users of platform services will be most harmed by overregulation of platform services, unless the obligations can be tailored to the business context of the different platform services. 

The Need for Speed

There are legitimate concerns over enforcement speed, which led to the DMA in the first place. The DMA already does away with the evidentiary requirements of competition law, like market definition, market power, or any effects-based assessment. But critics of a more tailored approach, some of which are self interested, claim that any customisation would frustrate the DMA’s purpose. This doesn’t need to be the case. The DMA can be tailored, avoiding harmful side-effects, without slowing down enforcement.

Proof is in the Pudding

If the DMA is meant to be workable regulation, and not punitive, it requires some degree of specification and tailoring to avoid unintended consequences. That’s why, under Article 15, the DMA already requires an ex-ante selection of applicable obligations, for “foreseeable” gatekeepers. This is to avoid unnecessarily degrading platform services through overregulation, but the same principle should apply to all gatekeepers.

The DMA already includes some rather limited provisions on regulatory dialogue; under Article 7 the Commission should specify how designated gatekeepers are meant to comply. This would be strengthened, if the Commission were required to specify obligations not only in light of the specific market context of the gatekeeper and platform service, but also with respect to the quality, functionality, and integrity of the particular service in question.

Similarly, the DMA already includes provisions under Article 8 and 9 to modify existing obligations where they would have harmful consequences as markets evolve. These provisions could be strengthened, giving the Commission the discretion to modify obligations if they prove to be counterproductive, like where the openness obligations would make the services more vulnerable to cybersecurity threats. 

If legislators agree to enhance these existing adjustment mechanisms, the DMA could become more future-proof, adapting to changing market circumstances, and avoiding the risks of overregulation. That would help make the DMA truly fit for the digital age.

European Union

DisCo is dedicated to examining technology and policy at a global scale.  Developments in the European Union play a considerable role in shaping both European and global technology markets.  EU regulations related to copyright, competition, privacy, innovation, and trade all affect the international development of technology and tech markets.