How the European Union can best apply the Digital Markets Act
The European Union’s new Digital Markets Act will enable the European Commission to get ahead of potential anti-competitive behaviour.
Big tech will soon have to comply with a new competition tool – the European Union’s Digital Markets Act (DMA). This law, which will apply from spring 2023, imposes an ex-ante list of dos and don’ts on an estimated 13 ‘gatekeepers’, or online companies that both business and private users find it hard to avoid. The aim is to ensure greater competition in some digital markets. The DMA will complement antitrust laws, under which an ex-post approach is taken to tackling competition concerns (after a firm’s anti-competition practice has taken place). This antitrust approach is too slow and case-specific to deal with anti-competitive behaviour in the digital sector. The DMA implies that firms must prevent anti-competitive practices from occurring in the first place.
The coexistence of the DMA and antitrust law creates an opportunity but also potential complications. The opportunity is that the DMA and antitrust laws will support each other. The DMA should reduce the need for future antitrust enforcement cases and will help fine-tune antitrust remedies that were unsuccessful in restoring competition. Antitrust laws will help the EU competition authority and DMA enforcer, the European Commission, to identify new problematic practices that will fall under the DMA.
But the risk is that the coexistence creates inefficiency and inconsistency. Inefficiency could arise from the Commission's limited resources. For now, it has only 22 people dealing with digital antitrust issues, including nine exclusively for the DMA. The Commission must allocate its workforce efficiently so it is not overwhelmed by enforcing both laws simultaneously. Inconsistency could arise from the differences between the DMA and antitrust laws in terms of remedies. The DMA imposes general remedies, whereas antitrust laws impose case-specific remedies in case of an infringement. Thus, DMA remedies might be insufficient compared to some antitrust remedies. The European Commission must seek to best exploit the opportunities arising from the coexistence of antitrust enforcement and the DMA.
Digital antitrust cases against potential gatekeepers
The Commission and competition authorities in the 27 EU countries are already very active against the estimated 13 potential gatekeepers, initiating at least 51 antitrust cases so far. Most have been opened in the last three years, a period that coincides with market inquiries in Australia, Europe, Germany, the United Kingdom and the United States, which found competition issues in some digital markets.
Figure 1 shows that the European Commission has pursued the most cases, with 15 past and ongoing cases. This is unsurprising. The digital giants often follow the same practices globally, making the Commission the de-facto EU authority to deal with competition issues because they often concern all EU countries. Nevertheless, EU countries apply antitrust laws in their own jurisdictions and have opened overall more than twice the number of Commission cases. Germany (11 cases), Italy (9) and France (8) are the most active national competition authorities. Figure 2 shows the cases opened by year and their status.
Of the 51 cases, 29 will be ongoing before a competition authority or a court when the DMA enters into force in November 2022 (the DMA will then apply six months later). Figure 3 shows that of 29 ongoing cases, 18 concern alleged antitrust violations (when a firm abuses its dominant position in the market). The other cases are: five cases under the German DMA-like competition law section 19a (a law requiring some digital firms to comply with a list of banned behaviours); five alleged cartel cases (when a firm coordinates its behaviour with at least one other firm); and one case involving both cartel allegations and abuse of economic dependence (when a firm abuses a situation in which its business partners are dependent on it). Thus, most ongoing cases (23) fall into policy areas covered by the DMA, which is silent on cartels and abuse of economic dependence.
Figure 4 classifies the DMA-relevant ongoing antitrust cases according to the practices that allegedly violated the law. Eight cases concern ‘self-preferencing’, or the promotion of a firm's own service over rivals, and another eight concern unfair terms and conditions. Both issues are central to the DMA, which aims to ensure contestability of digital markets and fairness by prohibiting self-preferencing and unfair practices.
A closer look shows that, except for two cases related to tying (the forced linking of products or services), all 23 DMA-relevant cases before a competition authority will also be subject to a DMA rule (Table 1).
In other words, ongoing cases will overlap with one or more DMA rules. It follows that the DMA is likely to solve in the future some of the competition concerns raised by ongoing antitrust cases, regardless of whether antitrust cases end up with an infringement decision or not.
Managing the overlap
Antitrust laws and the DMA will inevitably overlap. How the European Commission manages this depends on whether antitrust cases are ongoing, over or still to come.
Where antitrust cases are ongoing at the point the DMA enters into force, the Commission and national competition authorities should end current investigations that overlap with the DMA to avoid duplication of human resources and inconsistency between the DMA and antitrust laws. They can do by obtaining commitments from potential gatekeepers that they will comply with the DMA rules.
This is the path that Amazon and the Commission have adopted to close with commitments the Amazon Buy Box and Amazon Marketplace investigations (currently receiving feedback from market participants). Such commitments will enable the competition authority to provide more guidance to potential gatekeepers on how they should comply with the DMA. The commitment will also save resources and time and avoid lengthy and costly legal antitrust challenges (and DMA legal challenges, if potential gatekeepers implement commitments effectively). Lastly, the commitments will force potential gatekeepers to comply with antitrust laws and the DMA in line with the Commission's expectations. In case of non-compliance with the commitments, the Commission could impose fines directly on potential gatekeepers under both antitrust laws and the DMA.
In relation to past antitrust cases where the antitrust remedies have not restored the competitive process, the Commission should use its powers under the DMA to fine-tune antitrust solutions to solve antitrust issues effectively. The DMA authorises the Commission to issue rules in some areas specifying how gatekeepers should comply. Doing this will ensure that the antitrust remedies are effective and that potential gatekeepers comply with the DMA in line with the Commission's expectations. In other words, more detailed rules will serve as a safety net when antitrust remedies do not work effectively or when the competition authority loses the antitrust case before a court.
For new digital competition cases, the Commission will have both antitrust laws and the DMA at its disposal. The Commission should prioritise ensuring compliance with the DMA because potential gatekeepers must automatically comply with the rules and in case of non-compliance, the Commission must only prove non-compliance with the rule. There will be no need to follow the burdensome process of an antitrust investigation requiring definition of a relevant market, a dominant position, and the anti-competitive effects of a practice. When a practice does not fall under the DMA, the Commission should open an antitrust investigation, potentially at the same time as a market investigation into new practice under the DMA (Art. 19 DMA), to test whether it has detrimental effects on competition.