Competition policy experts on the Digital Markets Act: strengthen adjustment mechanisms

Kay Jebelli
7 min readNov 22, 2021

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A large number of competition policy experts from across the world have weighed in on the Digital Markets Act proposal. Their verdict is clear: the platform conduct to be prohibited by the regulation is not always harmful in every circumstance, and the proposal needs adjustment mechanisms to avoid overregulating the services that many consumers and business users enjoy.

AFP / K. Triboullard

As the Digital Markets Act (DMA) deliberations are entering their first decisive phase, it is timely to reflect on what competition experts are saying about the proposed regulation for tech companies. The central question for the future is: how can obligations be better tailored to specific market circumstances so as to avoid unintended consequences as the digital economy evolves?

While there is much debate about this point among the co-legislators, it is often overlooked that the expert verdict is clear: the DMA needs adjustment mechanisms to ensure it remains effective and proportionate.

Let’s see in more detail what some of the leading academics have to say about an inflexible, catch-all, one-size-fits-all approach that the European Commission’s DMA proposal represents.

EU Commission advisers warn against per se, form-based prohibitions

The Commission’s push to introduce new competition regulation for the digital economy began with a 2019 expert report by Professors Heike Schweitzer, Jacques Crémer, and Yves-Alexandre de Montjoye on “Competition policy for the digital era”. While dedicating many pages to theories of harm which are now addressed by particular prohibitions and obligations contained in Articles 5 and 6 of the DMA, these experts warned that prejudging the conduct would be risky.

Because of the innovative and dynamic nature of the digital world, and because its economics are not yet completely understood, it is extremely difficult to estimate consumer welfare effects of specific practices. … It should be the dominant platform’s responsibility to show that the practice at stake brings sufficient compensatory efficiency gains. Given the breadth of the presumption, and the fact that our insights into possible countervailing efficiencies are still evolving, such efficiency defences should be fully explored by competition agencies and courts.” (pg. 71).

Reflecting on the DMA proposal itself, Heike Schweitzer warned that a one-size-fits-all approach doesn’t reflect the diversity of market realities:

Much remains to be learned about the dynamics of competition in platform markets where a small number of firms continue to co-exist and compete for users. In oligopolistic settings in particular, a case-by-case assessment will therefore be needed. Therefore, the flexibility proposed in Art. 15(4) for settings where markets are likely to tip should arguably apply in all oligopolistic settings.” (pg. 21)

Commenting on the DMA alongside co-authors of the German Competition Law 4.0 Report Martin Schallbruch and Achim Wambach, Heike Schweitzer disapproved of imposing inflexible rules without clearly tailoring the scope of those rules to services where competitive concerns are present:

“Rigid rules of conduct entail the risk of preventing competitive innovation. This approach is only justified if the scope of application of the rules is clearly tailored to players who pose an urgent competitive threat that can be effectively combated with the help of the conduct obligations. However, the criteria for gatekeeper platforms lack such a clear anchoring in competition economics and competition law.”

Jacques Crémer as well, along with a group of distinguished international co-authors including Monika Schnitzer (also an author of the German report), Amelia Fletcher (co-author of the UK’s Furman Report), and Fiona M. Scott Morton (co-author of the US Report of the Stigler Committee on Digital Platforms), warn of unduly harmful side effects given the diversity of services being regulated. They conclude:

“the potential for an affirmative defense should provide a helpful route to avoiding unduly harmful regulatory side effects. Such a feature also could be valuable in adapting the regulation to very different future business models. By comparison, the EU proposals only allow for exception/exemption on very narrow grounds, relating to public interest or economic viability in the EEA. … Overall, allowing for some form of defense, albeit with a high hurdle, seems worthy of consideration in the EU. It would improve coherence with the US approach” (pg. 20).

This means two of the three Commission’s own expert advisers on competition policy for digital markets recommend the presence of adjustment mechanisms or defenses for designated gatekeepers (the third, Yves-Alexandre de Montjoye has not publicly commented on the DMA to my knowledge). In other words, they all acknowledge that some form of effects-based assessment is needed, that the conduct prohibited by the DMA is not always harmful in all circumstances for all platform services, even if offered by a designated gatekeeper. Or, as Frédéric Jenny, Chairman of the OECD Competition Committee, said quite concisely:

attempts to complement competition law enforcement with across the board ex ante regulations may be problematic as some practices (such as, for example, data portability or interoperability) may be procompetitive or pro-efficiency in certain ecosystem environments and be potentially anti-competitive in other ecosystem environments.” (pg. 12)

European National Competition Authorities

In line with the experts’ opinions, various European National Competition Authorities have expressed their thoughts on the proposed ex-ante, catch-all and one-size-fits-all approach of the DMA proposal. They have argued for a tailored and effects-based approach, in contrast to the inflexible prohibitions of the DMA. The Spanish Competition Authority warned of dangerous consequences for markets in its Position Paper:

[an] ex ante regulation with a list of DON’TS (prohibited clauses) aimed at solving competition problems in so different and dynamic markets can be dangerous for the functioning of markets and economic efficiency. For example, sharing data is neither bad nor good per se. It requires a case-by-case analysis”. (pg. 8).

Similarly, the Nordic Competition Authorities also warned against an inflexible approach that ignores the context of the services in question:

“it is doubtful that it would be beneficial to introduce a detailed list of obligations and prohibitions within an ex ante regulatory framework. This is because the same type of conduct can have both pro and anticompetitive effects depending on the market and/or the specific gatekeepers, and because digital markets are fast-moving.” (pg. 17).

In advocating for an effects-based assessment, the Dutch Competition Authority helpfully reminded:

the strategies and economic dynamics that lead companies to become dominant do not necessarily create competition problems.” (pg. 1)

Tania Van den Brande, Economics Director at the UK telecoms regulator has explained how the inflexible per se approach of the DMA can have unintended consequences:

the EU proposals put a greater emphasis on more detailed prescriptive rules, which limit regulatory action to practices that infringe the specific obligations listed in legislation. While this approach can create greater regulatory clarity, it can increase the risk of unintended consequences if firms in scope are unable to disapply rules where their conduct does not create harm.

German Monopolies Commission

Germany has long been at the forefront of enforcing competition law in the digital economy. It is therefore no surprise that German academics are particularly outspoken on the Digital Markets Act. The German Monopolies Commission is an independent expert committee which advises the German government and which influenced Germany’s recent competition law reforms. The Commission has drawn a clear distinction between Germany’s own effects-based approach, and the harmful consequences of the DMA’s inflexible per se approach, and suggests the strengthening of adjustment mechanisms, like the inclusion of an efficiency defence:

the at best limited opportunity to justify conduct regarded as harmful in accordance with Art. 5 and 6 DMA might lead to losses of welfare. The undertakings could hence (be obliged to) distance themselves from conduct which has negative impact on the contestability and fairness of markets, but at the same time bring about innovations the advantages of which counterbalance or even outweigh the negative impact. Whilst the structure of the individual requirements and prohibitions is likely to already be based on a general weighing up of their impact on the part of the European Commission, supplementing the DMA to include an efficiency defence might hence ensure greater justice in individual cases.” (pg. 44)

The Body of European Regulators for Electronic Communications (BEREC)

BEREC has extensive EU-wide experience enforcing pro-competitive ex-ante rules in the telecom sector. In their Report on ex ante regulation of digital gatekeepers, they too favour tailored remedies based on regulatory dialogue:

While self-executing rules are often too rigid and thus ineffective, principle-based rules and tailored remedies can be designed to tackle the identified issue and adapted and adjusted to the characteristics of a specific market or market player. This case-by-case assessment and enforcement is key to ensure that the intervention is proportionate, and effective.” (pg. 63)

This brief overview of expert opinion by some of the most distinguished competition scholars shows how there is strong consensus that the DMA needs adjustment mechanisms in order to remain an effective regulation that ensures fair competition in the evolving digital market. The co-legislators are well advised to take these recommendations into account and design a regulation that does not end up doing more harm than good.

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Kay Jebelli

Lawyer, Engineer, liberal minded, TCK. I work on digital law and policy and have clients in the technology industry.