With the Digital Markets Act, the EU Commission wants to limit the market power of tech giants such as Google, Apple, Facebook/Meta, Amazon or Microsoft and protect competition in the European market. In an interview, Heiko Richter, Senior Research Fellow for Digitalization and Competition Law at the Max Planck Institute for Innovation and Competition explains the goals of the planned regulation, which is currently being negotiated.
Heiko Richter is Senior Research Fellow for Digitalization and Competition Law at the Max Planck Institute for Innovation and Competition.
© MPI für Innovation und Wettbewerb
The idea of limiting the power of digital giants is not new. Rules punishing abuse of dominant position or unfair business practices already exist. What’s about to change?
Heiko Richter: The Digital Markets Act, or DMA for short, which is currently being negotiated in non-public consultations between the EU Parliament, Council and Commission, aims to provide a uniform EU-wide legal framework for digital markets in order to proactively prevent distortions of competition and stop certain business practices – for example, apps pre-installed on smartphones that cannot be deleted. The aim is also to facilitate the application of the law and speed up the process.
Why are the existing rules insufficient?
So far, especially in antitrust law, we have only ex-post rules: these only take effect after an infringement has occurred or is suspected. As a result, it takes a very long time before the behavior is sanctioned. In some cases, the contested acts took place up to ten years ago and the legal proceedings have still not been concluded. The result is that antitrust law is too slow because it takes action reactively.
What should change?
The basic idea of the DMA as a new act is to regulate in advance. The DMA is intended to impose behavioral obligations on particularly large platform services. To achieve this, it contains more than a dozen prohibitions and obligations, which are sometimes more or less specifically defined and must be observed by these services from the outset, otherwise they face severe sanctions.
We’ll come to the new rules in a moment. But first: Who does the planned regulation actually apply to?
The exact requirements are currently being negotiated. Depending on how the thresholds are determined, they could affect European platforms like Zalando or Booking in addition to the well-known digital giants. According to the Commission’s draft, a platform service should be considered a “gatekeeper” if the company to which the service belongs generates more than €6.5 billion in annual revenue in the EU or has a market value of more than €65 billion, and if the service has more than 45 million end users per month and 10,000 commercial users in the EU per year – over the past three years. The European Parliament is calling for slightly higher thresholds, such as €8 billion in revenue and €80 billion in market value.
Which obligations will gatekeepers have in the future?
So far, there are 18 obligations, but the list of obligations may be larger after the negotiations. Particularly relevant, for example, are prohibitions on tying registration for one service to registration for another, or prohibiting commercial users from offering their products and services on third-party platforms at different prices and conditions. In addition, operating systems such as Google’s Android or Apple’s iOS would have to allow app stores other than their own to be installed on smartphones. Self-preferential practices are to be explicitly prohibited, for example by offering consumers preferential treatment for the company’s own services, thereby closing the market to smaller or new competitors. In the future, it will also no longer be permitted to combine and use data for certain purposes, as Facebook is accused of doing.
Sounds like Lex Google, Lex Apple, Lex Facebook…
In fact, the individual obligations reflect cases in which the Commission and national competition authorities have taken action against these companies. Individual laws cannot exist, but it is of course possible to define abstract criteria for market activity in the EU in order to prevent as much problematic behavior as possible.
Certainly, it will hit the U.S. tech giants in particular with their services at the beginning: Apple’s and Google’s Appstore, Microsoft’s Bing in addition to Google’s search engine, Facebook and Whatsapp or Amazon Marketplace. The cloud computing segment of Amazon, for example, which is important for B2B and accounts for the largest share of the corporate profit, will also be affected. There are also discussions about including voice assistants such as Alexa or smart TVs.
Can the regulation make the digital markets more open and fairer?
The crucial question is how the Regulation will be applied and enforced in practice. There are still many unanswered questions: What is the exact procedure? What is the relationship between national competition authorities and the EU? What role should national courts play in enforcing the rules of the DMA?
The EU Commission is expected to play a significant role. What is it?
According to the draft, the EU Commission will be given a very central role, which is quite controversial in the Member States. The DMA permits the Commission to order a wide variety of measures against gatekeepers. These can be behavioral measures, i.e. that a company may no longer do something specific or must do something, and structural measures such as the separation of entire business units. At the same time, the Commission is supposed to monitor compliance with the orders. All this requires the EU Commission to create numerous additional positions with specific expertise. It is thus taking on a completely new role as regulator, and it remains to be seen whether it will ultimately succeed in standing up to the big tech companies on an equal level.
The new Regulation is expected to come into force quickly, with a target date of 2023. Can all the novelties be implemented immediately?
That remains to be seen. The problem is that many technical issues that are legally relevant are not solved, but only postponed. The fine-tuning is done by means of so-called Delegated Acts, which have yet to be issued by the Commission. In reality, this can take years. One example: Until now, Deutsche Bahn has not been obliged to make real-time information about its trains available to other transport information services such as Google Maps. The relevant EU Directive governing this has been in place since 2010, but the legal details came in 2017 in a Delegated Act from the Commission. The rules were not incorporated into the German Passenger Transportation Act until 2021, and it is still not clear to what extent Deutsche Bahn will have to provide real-time information.
What else is needed?
The effectiveness of enforcement by the public sector, in this case by the EU Commission, always depends on the political impetus. And priorities can change quickly in this regard. The current Commission, with Margrethe Verstager as Digital Commissioner, has the DMA high on its list, so the rules have come surprisingly fast. But it doesn’t guarantee that if there is a new Commission with a new agenda, it will continue with the same verve.
The interview was conducted by Michaela Hutterer
