In February and March 2021, ACT | The App Association and Competition Policy International (CPI) are collaborating on a series of webinars discussing how antitrust regulation works in the digital world. During the first event of the series, five experts explored the key issues surrounding the European Commission’s Digital Markets Act (DMA) and the effects it might have on the wider platform economy.

The panellists were:

  • Alexandre de Streel, co-director at the Centre on Regulation in Europe and professor of European law at the University of Namur
  • Aurelien Portuese, director of antitrust and innovation policy at the Information Technology & Innovation Foundation and professor of law at George Mason University and the Catholic University of Paris
  • Nicolas Petit, joint chair in competition law at the European University Institute and professor of law at the College of Europe (Bruges)
  • Dirk Auer, senior fellow in law and economics at the International Center for Law & Economics and professor of law at the Catholic University of Leuven and the University of Liège
  • Stanislas Dewavrin, chief operating officer of Oh BiBi

During a wide-ranging exploration of the impact of the DMA, some panellists expressed doubts about the regulation’s ability to stimulate growth and innovation in the EU. Before the panel discussion, we hosted Member of the European Parliament (MEP) Alex Agius Saliba for a fireside chat.

The European Parliament will likely push for more ambitious proposals:

  • MEP Saliba expressed his support for the Digital Services Act (DSA) as well as the DMA.
  • He welcomed that the proposals include key European Parliament recommendations, such as a separate liability regime for online marketplaces and the “know your customer” principle.
  • Nonetheless, he thought the proposal lacks stricter transparency requirements for all service providers.
  • He further shared his concerns about several Member States implementing their own digital competition rules, as such a patchwork creates significant barriers for SMEs to grow and succeed.

Watch the full panel here.

Political pressure is a driving factor behind regulations like the DMA:

  • Professor Alexandre De Streel listed protectionism, questions of fairness and the perception that Europe has lost its autonomy to dominant foreign companies as key influences on the DMA proposal. He does not, however, think that legislation is the best way to accomplish redistribution.
  • Professor Aurelien Portuese expressed a similar view, stating that the EU is trying to regain control of the digital economy by targeting foreign companies. Instead, Portuese suggested, the Commission should focus on completing the Digital Single Market (DSM).
  • Professor Nicolas Petit added that besides political pressure, economic and legal considerations play roles as well. European policymakers perceive that current competition law gives big tech too much opportunity to justify their anti-competitive behaviours, Petit stated.
  • As Dr. Dirk Auer put it ‘we still have some work to do to understand these markets’.
  • From the developers’ perspective, Stanislas Dewavrin emphasised the dynamism of the app economy. In his experience, innovation and disruption are the only constants on the app stores.

Legal fragmentation is a major concern when it comes to applying competition law to digital markets:

  • The DMA will likely cause Europe to lag in global competition, Portuese stated, rather than successfully creating the innovation economy that European lawmakers desire.
  • Petit explained that fragmentation would harm startups rather than big tech firms.
  • For small European companies, the DSM and minimal fragmentation is a very attractive concept, especially in relation to U.S. and Chinese competitors, Dewavrin explained.
  • Considering past antitrust remedies, Auer raised the possibility that these decisions were not addressing the right problem. He emphasised that the current approach of competition interventions fails to answer the question of why digital markets have systematically become more closed.
  • To protect competition, ‘the DMA trades short-term efficiency for long-term competition’, according to De Streel.
  • In disagreement, Portuese contrasted the DMA’s explicitly short-term approach with tech companies’ long-term driven business models. This disconnect illustrates that the DMA is bound to fail, Portuese said.

Many legal uncertainties remain in the DMA proposal:

  • Auer emphasised that whoever enforces the ‘extremely open-ended’ provisions will be very powerful and that it will likely take a long time for policymakers to interpret the meaning of the DMA’s criteria and thresholds.
  • Regarding the new criteria and thresholds, Portuese expressed his concern that without references and definitions to ‘digital markets’, decision-makers do not know what they are talking about. He stated that there was no such thing as a ‘digital market’ as the relevant markets for the DMA are integrated, both online and offline. Further, Portuese worried that small companies will become collateral of the ‘foreseeable gatekeeper’ clause.
  • Similarly, De Streel expressed concern that SME voices would not be included in the DMA’s implementation. He suggested an ‘ecosystem of enforcement’ in addition to a regulatory dialogue between the gatekeepers and the Commission.
  • Adding on to the concern about the foreseeable gatekeeper clause, Petit also emphasised that the gatekeeper concept currently does not capture what a tipped market is. Spending more time on defining the right criteria would help to take account of the problem of tipping markets, according to Petit.

The DMA’s obligations have the potential to increase costs for everyone:

  • Obligations to allow sideloading or alternative app stores creates costs by having to put products on several stores, as Dewavrin highlighted. Consumers tend to pick the best product, so even if the law forces other venues for app distribution, Dewavrin thinks they will not work if developers and/or consumers are not using them.
  • Based on past cases like Microsoft or Google, Auer did not expect the obligations to create European champions.
  • Similarly, Portuese doubted that the obligations would accomplish much, other than increasing consumer costs.
  • Petit also criticised that ‘the obligations limit companies’ ability to profit from innovation and reduce the opportunity to capture value in the long term’.

As the event concluded, the panel agreed that the DMA had not addressed several important issues and that it is necessary to discuss more and be more explicit.

The full discussion is available here.

Our series on antitrust in the digital world has two more events coming up! You can register here, and watch our event “Antitrust in America: How a New Administration Tackles Digital Platforms” from 4 March 2021 here.