Digital Markets Act: Member States weigh in
EU Member State ministers recently adopted the Council’s ‘general approach’ to the Digital Markets Act. Here is a quick analysis of the amendments Council added to the Commission’s original proposal and the extent to which ministers have addressed the three missing ingredients to make the DMA fit for the digital age.
Regulatory dialogue is an important mechanism under which the European Commission learns about market dynamics and the direct and indirect effects of the DMA on platform services as they evolve. It helps ensure that the obligations as enforced are appropriate to the nature of the services affected by the obligations, and minimises unintended consequences by making the trade-offs clear.
National governments have stopped short of making this regulatory dialogue mandatory for the Commission, though they do condition the Commission’s discretion with respect to equal treatment, proportionality and the principle of good administration. These are of course fundamental principles of EU law, so it’s questionable whether these amendments actually add anything. Hopefully, the Council is not yet entirely convinced by the anti-tech rhetoric that regulatory dialogue would only constitute a delaying tactic, and that it cannot be used to address one of the main concerns with antitrust enforcement itself, which is the complexity of markets and the regulators’ comparative lack of knowledge.
Adjustment mechanisms in the DMA are necessary to avoid and correct unintended consequences. The DMA applies inflexible rules on a one-size-fits-all basis, as if all platform services are the same. This is against the advice of competition policy experts and economists, because it is likely to lead to overregulation, prohibiting beneficial, value generating conduct, at the expense of consumers, citizens, SMEs and society more broadly.
Member states have helpfully addressed concerns around the “catch-all” problem, that all of a designated gatekeepers “core platform services” would necessarily be impacted. The problem is that even minor or nascent services would be stymied, meaning less competition overall (think Apple’s rumoured internet search engine, Google’s various social media forays, or Microsoft relaunching a mobile OS). The Council’s amended text now clarifies that the DMA’s obligations should only apply to the individual core platform services that the Commission also designates as “an important gateway for business users to reach end users”.
On the other hand, Member States have removed a clause that would have allowed the suspension or modification of gatekeeper obligations on grounds of public morality, further limiting ways in which negative side-effects of the DMA can be addressed.
Higher fines and shorter timelines have been part of the gamesmanship of DMA politics in Parliament, but in Council cooler heads have prevailed. Member states have left the original deadlines for compliance and the level of fines as originally proposed.
This is fortunate. High fines could lead to over compliance. Designated gatekeepers will not risk punitive penalties unrelated to actual harm, in conditions of considerable ambiguity (and with a lack of effective regulatory dialogue). This means that new services, features and innovations won’t be available in Europe. Given the scale of technical changes required, short deadlines exacerbate the situation. Short-circuited compliance could lead to technical bugs, security vulnerabilities, or even the pulling of services.
However, there are still concerns that the existing timelines for compliance are still too short. Thankfully, Member States will have more time to reflect on these and other concerns in the trilogue negotiations with Parliament and the Commission starting in early 2022.