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With a little help from some friends: coordinating Digital Markets Act enforcement

 With a little help from some friends: coordinating Digital Markets Act enforcement

The European Union’s Digital Markets Act (DMA), which entered into force on 1 November and will apply from May 2023, is aimed at taming some of the anti-competitive practices of big tech. The European Commission is its sole enforcer, but is not yet ready to enforce it. The Commission currently has only limited human resources and a budget that does not match that available to the estimated 13 ‘gatekeepers’, or pervasive online platforms covered by the DMA. The risk is that, at best, DMA enforcement will be too slow and case-specific, triggering the same criticisms as levelled at antitrust enforcement, by which the DMA is inspired. At worst, DMA enforcement will be ineffective.

One solution could be for the Commission to turn to EU countries to help enforce the DMA – and in fact the DMA foresees this. However, national competition authorities (NCAs) in EU countries currently lack incentives to participate. If they did help the enforcement effort, they would be doing the Commission’s job by dedicating staff and time without receiving any recognition or direct benefits. NCAs have already pursued and completed several antitrust cases in the digital sector. The Commission should therefore build on their expertise by providing them with incentives to help with DMA enforcement.

The role of national competition authorities

National competition authorities and some EU governments, including those of France, the Netherlands and Germany, called during the legislative process to give DMA enforcement power to NCAs. But in the final text of the law, approved by the European Parliament and the Council of the EU, NCAs were given only the role of assisting the Commission in DMA enforcement.

Thus EU countries can collect complaints, support the Commission with market investigations, and conduct market investigations into cases of possible non-compliance. In other words, NCAs will do the work and share outcomes with the Commission, which will then accept or decline. In a time of resource constraints, they might prefer to allocate resources to investigations where they can have a direct impact.

The DMA does allow NCAs to enforce European or national antitrust laws against gatekeepers in cases concerning cartels (when at least two firms cooperate illegally), abuse of dominant position and unilateral conduct (for example, when a company abuses an economically-dependent trading partner). NCAs can also adopt rules that pursue public-interest objectives other than those of the DMA, namely contestability (the ability to challenge) and fairness (balanced rights and obligations).

In practice, NCAs will thus probably continue to enforce competition laws against gatekeepers. Some EU countries already have impressive track records of antitrust cases against the 13 potential gatekeepers, with NCAs in Germany, Italy and France the most active.

In addition, some NCAs have invested significantly in human resources. The NCAs of France, Germany, Luxembourg and Portugal have created dedicated digital economy units composed of economists, lawyers and data scientists in charge of supervising digital cases.

They have also invested in skills. In the last few years, they have dedicated significant time to understanding how the digital economy works – for example, the 2016 German and French report on competition law and data. They have also carried out market studies (for example, the 2018 French market investigation into online advertising) and issued position papers (for example, the 2020 Nordic memorandum on digital platforms).

Some countries, including GermanyAustria, and Italy, have also adopted specific rules to deal with digital economy issues. In particular, Germany imposes requirements similar to the DMA on the same firms that are likely to fall under the DMA (so far, the German rule applies to GoogleMeta and Amazon, while Apple is still under designation).

In sum, the digital economy is the priority for several NCAs, and there is no doubt that they will continue to be active.

Providing incentives

Because NCAs lack incentives to help the Commission directly enforce the regulation, the question then is how to steer them to help the Commission and how the Commission can leverage their expertise. The Commission should provide an incentive by involving NCAs explicitly in enforcing the regulation. This can be done in two ways.

First, NCAs should be able to pursue joint investigations with the Commission. The DMA allows EU countries to investigate and share information, including confidential information, with the Commission only for the purpose of enforcement cooperation. The Commission could involve NCAs from the outset of investigations while publicly recognising the support they provide. The Commission will thus benefit from the NCAs’ expertise, while the NCAs will improve their international reputations and increase their knowledge.

Second, EU countries can open antitrust cases with a view to adding new services and practices to the scope of the DMA. This will help the Commission identify new services and behaviours that pose competition problems and should be covered by the DMA. For the Commission to do this, it must conduct a market investigation, which must rely, among other things, on evidence found in the context of antitrust cases. Therefore, when NCAs opens antitrust cases in the digital sector, they could directly influence the further evolution of the DMA. The Commission will save on human resources and time, while the NCAs will improve their enforcement practices and build their international reputations.

Consistent coordination

The DMA requires the Commission and NCAs to coordinate their enforcement actions within the European Competition Network (ECN), a forum via which NCAs collaborate to ensure consistent enforcement of European competition laws. However, the practical arrangements for this cooperation have yet to be defined.

While cooperation is essential, there is a risk that some decisions will be inconsistent. The situation will likely arise when applying the DMA and national DMA-like rules, especially the German requirements, which are very similar to the DMA in substance and spirit. Some forthcoming antitrust cases will thus likely be DMA-like antitrust cases where European or national antitrust laws apply alongside the DMA. For instance, a gatekeeper might be subject to specific rules under European or national laws, and general rules under the DMA. The DMA does not allow the Commission to block national investigations, potentially leading to inconsistency and inefficient allocation of human resources. Cases could be duplicated, as has happened with the Apple App Tracking Transparency antitrust investigations in FrancePoland and Germany, over allegations that Apple favours its own services over rivals by imposing unfair privacy terms and conditions on developers.

The DMA requires the European Commission to adopt an implementing act setting out details of practical arrangements for cooperation between the Commission and national authorities, including NCAs within the ECN. This implementing act should give the Commission oversight powers to ensure EU countries apply the DMA and EU and national antitrust laws consistently. EU countries are already required to cooperate and coordinate their enforcement of DMA-like antitrust cases with the Commission. To ensure further consistency and an efficient allocation of resources, the Commission should also put in place a mechanism that would delegate, at the request of EU members or on its own initiative, the enforcement of some DMA-like cases to NCAs under European or national laws. NCAs involved should prove that they have the expertise and human resources to deal with the issue. Moreover, to ensure a certain level of centralisation to deal with inconsistencies, the Commission should steer NCA enforcement practice through guidance on how to enforce DMA-like cases consistently with the DMA.

This blog post is based on data from the recently published  Bruegel Blog.

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