ICYMI: Event on the Digital Markets Act – Protecting the Consumer Interest

On 19 November 2021, Kreab hosted a roundtable event on the Digital Markets Act (DMA) titled “Protecting the Consumer Interest”.

The event welcomed experts Gareth Shier, Principal at Oxera, and Professor Annabelle Gawer, Chaired Professor in Digital Economy at the University of Surrey and Director of Centre of Digital Economy (CoDE). David Reed, Senior Partner, Kreab Worldwide, moderated the discussion.

The discussion was structured around four key themes appearing in the DMA obligations, as amended by the European Parliament committee on Internal Market and Consumer Protection (IMCO), and in advance of its upcoming plenary vote: data separation, integrations and default-setting, interoperability, and business model choice. This post serves as a condensed recap of Kreab’s event summary. Kreab’s longer event summary can be found here, a highlights video clip of the discussion is available here, and the full recording is available here.

Data separation

Art. 5(a) of the Commission’s draft DMA, as amended by IMCO, would prevent gatekeepers from cross-using or combining personal data generated across different products and services unless the user has given their explicit consent. After some debate, IMCO finally kept the option for users to consent to their cross-service data being used. However, the amendments IMCO proposes to recital 36 state that platforms must ensure that the non-personalized service offered to users that do not give their consent should be of the same quality compared to the personalized service (i.e., the one making use of cross-service data). Mr. Shier argued that the language being added to recital 36 makes unrealistic demands of platforms, as “it fundamentally misunderstands how platforms create value for consumers through the use of their personal data.” Platform operators combine information generated by different services to improve services, or create new services for their users. It is hard to see how users can receive the benefits of these service improvements, if the same services must be provided to those who do not consent to such data analytics. What should be strived for, Professor Gawer observed, is making end-users aware there is a trade off between personalisation and privacy, and that the decision must be up to users, not prescribed in law.

Integrations and default setting

IMCO’s amendments to Article 6.1(d) would prohibit gatekeepers from favouring their own products and services in ranking or ‘other settings’. However, the broad blanket prohibition of “favouring” ignores the benefits that this practice can bring in terms of delivering a high-quality and integrated user experience. In addition to this, IMCO’s amendments to recital 48 stipulate that ‘…embedded display of a separate online intermediation service shall constitute a favouring…’, effectively prohibiting gatekeepers from integrating their own complementary services within a core platform service. For users, this could mean the loss of beneficial integrations — such as including local business information and reviews within search results — ultimately leading to lower quality digital services in Europe.

Mr. Shier and Professor Gawer agreed that the DMA should adopt a more tailored approach that allows for differences between platform businesses and more user choice, rather than a one-size-fits-all approach that denies consumers the choice of a more integrated experience.

Interoperability

IMCO’s amendments seek to broaden the DMA’s interoperability requirements beyond just those hardware and software features used by a gatekeeper’s ancillary services. Instead, the amended Art. 6.1(f) would grant third-parties access to all hardware or software features of a gatekeepers’ core platform service; and would require that access be provided free of charge.  This would, in effect, force gatekeepers to function as open platforms, while preventing them from charging a fee for using their infrastructure. This risks a chilling effect on investment and innovation incentives, and future platform development, as the options for revenue generation become more constrained. 

Furthermore, imposing blanket interoperability requirements with no consideration of the specific circumstances of the platform’s commercial incentives, the third-party seeking access, or of the specific impact on users, risks inhibiting gatekeepers in their role as ecosystem governors, with negative consequences for users. As Professor Gawer noted, this gives rise to an important policy question “what do you control as a platform and what would the government control?” Professor Gawer asserted that “to impose interoperability by design and free of charge is too extreme. The issue with the extreme angle of these amendments is that in the end it’s going to weaken the DMA.”

Business model choice

The issues around interoperability are closely linked to other issues that arise in terms of business model choice. In particular, IMCO’s amendments to recital 49, would restrict how gatekeepers can bundle ‘core platform’ and ‘ancillary’ services, by requiring that each product or service be treated ‘as a separate commercial entity that is commercially viable as a standalone service’. This would effectively prohibit cross-subsidisation between services—leading to the disappearance of many free services, to the detriment of consumers. 

Furthermore, the increasingly blurred lines between different digital services would make enforcement of this obligation difficult and increase uncertainty for platform operators and beneficiaries of the DMA. Professor Gawer highlighted the difficulty in drawing a line between a core service and an ancillary service, and emphasised that these amendments would move the DMA away from its original goal, which is not limiting ex ante what business models platforms can pursue, but to create an environment fostering competition and fair market access.

Overall conclusions and takeaways

A central theme that arose in the discussion was the importance of preserving choice and variety, while still implementing the protections called for by the DMA. This means letting consumers choose how they use platforms and the extent to which they prefer personalised services or privacy protections. For platforms, this means preserving a choice over the business models and strategies they adopt, recognising that different business models in different economic settings can have different effects, meaning that a blanket one-size-fits-all prohibition risks eliminating services that consumers value.

In her closing remarks, Professor Gawer underlined that she passionately wants a good regulation of digital platforms, as they have obtained substantial economic and political power, and as such need to be regulated. However, the right way to regulate digital platforms is not through a bloated DMA which cuts at the heart of how platforms create value. What we need, Professor Gawer concluded, is a case by case, tailored approach, with the necessary resources in order to be enforceable on the ground without causing harm.