National Member States of the European Union want to have more input in the application of the Digital Markets Act (“DMA”); see our earlier blog about the DMA here. In the bill, the European Commission (the “Commission”) acts as the central regulator in the enforcement of powerful platforms, but several EU Member States are now disputing that position. This blog takes a closer look at the DMA and the role of national Member States.
What is the DMA?
The DMA consists of a set of new ex ante measures for digital gatekeepers, to complement current European competition law. The ex ante regime in telecommunications regulations (the Impact Assessment, paragraph 138) served as inspiration for the Commission. At the same time, the Commission is aware that the diversity of online platforms makes regulation difficult. That is the reason for the fundamental differences compared to the sector-specific telecommunications regulations. Whereas the enforcement of telecom operators with significant market power (“SMP”) is left entirely to national authorities, the Commission is in charge of the application and enforcement of the DMA. Initially, those powers were intended to be very far-reaching; see the New Competition Tool (“NCT”). The Commission was also to be given the power to intervene in non-digital markets, for instance. The NCT was widely criticised by the Commission. Those far-reaching powers will therefore not be granted, but the Commission will nevertheless be given ample scope to regulate gatekeepers. The views in question of the various Member States and authorities are addressed in this blog.
Role of the Netherlands and other Member States
In the Commission’s opinion, Member States are unable to tackle problems with gatekeepers. The Commission also finds that attempts of various Member States to do so have resulted in fragmentation of regulations. The Commission believes that gatekeepers often operate across borders and that their business models are often used on a global scale. One of the guiding criteria is therefore that if a company wishes to be a gatekeeper, it must operate in at least three EU Member States. The Commission considers itself better placed than EU Member States to monitor this criterion. As a central regulator, the Commission’s powers include carrying out market investigations that may give rise to broader obligations in the DMA, adjust gatekeeper thresholds or impose sanctions in the event of systematic non-compliance.
During the consultation process, national regulators, including the Netherlands Authority for Consumers and Markets (“ACM”), expressed support for an EU-wide approach. In addition to the Netherlands, France, Germany and Belgium also agree that the DMA should be about “joint enforcement” (see here). This is in contrast to the Nordic competition authorities (Sweden, Denmark, Finland, Norway and Iceland), which advised in a memorandum against revising EU rules. In their opinion, the Commission's plans should be accompanied by action at a national level. According to the Nordic competition authorities, that will require a new additional framework to solve targeted and tailor-made interventions at national level, such as new guidelines for data interoperability and individual codes of conduct for platforms. They use the UK's Market Investigation Tool as an example.
For the time being, the Member States play a limited role in the bill. The DMA has three specific objectives: (i) to ensure contestable digital markets; (ii) to guarantee fairness between digital gatekeepers and business users; and (iii) to harmonise the internal market. The DMA prohibits Member States from imposing further obligations on gatekeepers that serve these purposes. Member State representatives are merely grouped in a new Digital Markets Advisory Committee (Article 32 DMA). That committee will give the Commission non-binding advice, for instance on the designation of gatekeepers on the basis of the quantitative and qualitative indicators, and suspension or waiver of obligations. The committee intervenes at a later stage in the procedure, namely in market investigations or enforcement measures. The Dutch government’s position is that it is insufficiently clear whether that advisory committee sufficiently guarantees the involvement of national authorities. The Netherlands has proposed that national regulators such as ACM should be given a monitoring role in relation to the Commission. The Working Group for the Assessment of New Commission Proposals (BNC) (chaired by the Ministry of Foreign Affairs) is furthermore arguing that it should be easier for business owners to raise problems regarding gatekeepers with national supervisors than with the Commission alone. According to the working group, national authorities could also contribute to the specification of the obligations of the grey list (Article 6 DMA) and assist in monitoring compliance with the obligations. ACM chairman Martijn Snoep, for instance, is also calling on regulators to be more adaptive in their assessment of the effectiveness and replacement of the rules set out in the DMA.
Three or more Member States may furthermore request the Commission to open a market investigation to determine whether a core platform service provider (such as an online search engine, an online intermediary service provider or an online social network service) should be designated as a gatekeeper (Article 33 DMA). The logic behind this is that a gatekeeper must offer a core platform service in at least three Member States (Article 3(2)(a) DMA).
The DMA does not prevent Member States from imposing obligations under EU competition law and national competition rules (Article 1(5) DMA). After the DMA enters into force, all the Member States therefore have the options of imposing specific competition rules for gatekeepers on an ad hoc basis alongside the DMA, which is already happening at full speed in Germany. The question presents itself whether that is desirable, since it could lead to fragmentation. In the Commission’s opinion, the DMA is “complementary” to the competition rules and “aims to protect a legal interest other than those rules”. On the other hand, the relationship between the DMA and competition law is inevitable. The eighteen obligations for gatekeepers arising from Article 5 and Article 6 DMA are based on prohibiting behaviour that violates Article 101 and Article 102 TFEU, such as self-preferencing, charging excessive access prices and combining personal data on different platforms.
Consequences in practice?
In theory, a national dominant player would not fall within the proposed scope of the DMA. According to the definition in the DMA, a gatekeeper must operate in three or more EU Member States. This does not mean that the DMA is irrelevant in Dutch practice. Although the bill states that it is aimed at “a few large platforms”, it also appears to apply to a broader spectrum of undertakings than only dominant players in accordance with Article 102 TFEU. The Commission states that the current thresholds mean that 10 to 15 companies come under the definition of gatekeeper. The Commission has provided no further explanation for this number (Impact Assessment, paragraph 148). The Commission is also targeting platforms that are “likely to hold a firmly established and long-term position” on the market. There is a great deal of legal uncertainty (for instance regarding scaling-up) for companies that fall below the quantitative criteria but do meet this requirement. It follows from this that the Commission is targeting a larger group than Big Tech alone (such as Google, Apple, Facebook, Amazon and Microsoft). If the Commission wished to do so, the question is how the Commission intends to predict the development of digital markets and how it will deal with these flexible criteria, since that will give the Commission a large margin of discretion in practice to designate (new) gatekeepers.
If, after a market investigation by the Commission or on the basis of submissions by three Member States, it becomes apparent that a company does act as a gatekeeper, such an emerging gatekeeper is subject to some of the obligations. Avoiding those obligations is no easy task. Undertakings may not put forward efficiency arguments, for instance (recital 4 to the DMA and Impact Assessment, paragraph 158). Moreover, the Commission does not bear the burden of proof, is not required to define the relevant market and has more extensive powers. It is therefore easy to imagine that the Commission would give priority to the DMA over applying Article 102 TFEU (which has a much higher burden of proof). In a speech on 11 March 2021, Competition Commissioner Vestager stressed that the expertise of national competition authorities in enforcement is essential in light of their experience with substantive and procedural elements of the DMA, but that is not apparent from the legislative proposal.
While the legislative process will take place in the next 18-24 months in the Council of the European Union and the European Parliament, the modalities of the cooperation between the Commission and national Member States are still an important open question. It remains to be seen whether the Council of the European Union and the European Parliament will advocate a more decentralised system, also taking into account the criticisms from the Nordic Member States. To be continued!
This blog is an adaptation of the thesis that Fiorri Michael wrote at Maverick Advocaten. Her thesis on the DMA and its possible impact on online platforms in the Netherlands was rated 10/10.
Information on dawn raids by ACM and the European Commission can be found at invalacm.nl