Effective and Proportionate Implementation of the DMA

While the Digital Markets Act (DMA) negotiations attracted much media attention, the success of the DMA in creating contestability will crucially depend on its implementation, an issue that remains largely unexplored.

To contribute to the implementation process, CERRE releases two new papers entitled ‘DMA Compass’, authored by Alexandre de Streel, and the ‘Designation of Gatekeepers in the DMA’, penned by Richard Feasey. The papers scrutinise two aspects that will be crucial in terms of the effective enforcement of the regulation: the overarching goals and principles guiding the application of the rules, and the designation of gatekeepers and core platform services (CPS) they provide.

DMA COMPASS

The DMA is establishing a new field within EU economic regulation, therefore the first interpretation and enforcement actions taken by the Commission will be essential as they will determine the direction of future EU digital legislation.

Making decisions on these actions will be particularly difficult due to the diverse, fast-evolving, complex, and still not fully understood technologies and business models regulated by the DMA, while a substantial asymmetry of information between regulators and regulated platforms persists. Therefore, an interpretation and implementation “compass” is needed to guide the effective enforcement of the DMA, to help the gatekeepers to understand how they should comply, and to direct business users on how the DMA can help them enter the digital markets.

CERRE Academic Co-Director Alexandre de Streel points out the following key messages in his paper:

• It is advised to cluster the obligations around four categories:
  • Preventing anti-competitive leverage from one service to another,
  • Facilitating business and end users switching and multi-homing,
  • Opening platforms and data,
  • Increasing transparency.
• Gatekeepers and stakeholders should agree on a set of quantitative measurements, each relating to particular obligations, to introduce a degree of objectivity and shared factual understanding.
• Long-term competition analysis must be included and considered at all stages of interpreting and implementing the regulation in order to stimulate inter- and intra-platform competition. This approach will position the DMA closer to a ‘Managed Competition’ model; while the possibility of a ‘fossilisation’ and ‘gatekeeper entrenchment’ scenarios need to be avoided.

DESIGNATION OF GATEKEEEPERS IN THE DMA

The DMA includes quantitative and qualitative criteria to guide designation. The designation is, however, not automatic, and the text leaves room for different interpretations on whether the undertaking meets the initial thresholds or not. Thus, the designation process is likely to be a contested one.

The author of the paper, CERRE Senior Advisor Richard Feasey focuses on the three main questions around the designation process, namely:

• One gatekeeper designation or multiple designations? It is not clear whether gatekeepers will be designated in relation to a particular CPS, and thus could receive multiple designations if they are the providers of more than one CPS, or if the designation as a gatekeeper is a one-off event irrespective of how many CPS the undertaking provides. This has implications for the application of other provisions, like the obligations related to ‘emerging gatekeepers’, for instance. As such, the author recommends that the designation of gatekeepers is done in relation to each CPS.
• Same or different standards to rebut the presumption based on quantitative thresholds? The DMA states that exemptions of undertakings that meet the criteria will be ‘exceptional’ and requires companies to submit ‘sufficiently substantiated’ arguments before considering moving to a market investigation. However, it does not specify whether the market investigation in this case will follow the same evidential standards as for cases where the Commission is assessing the possible designation of gatekeepers that do not meet the quantitative thresholds. As the paper concludes, once both market investigation are launched, it would be appropriate that the evidential standards applied in both cases be the same, subject to the practical constraints arising from the different timescales given for the two types of investigations in the Act.
• The application of anti-circumvention rules: The DMA includes anti-circumvention provisions intended to prevent the ‘slicing and dicing’ of services and strategic behaviour of companies to escape designation. However, Annex A seems to at least accept, if not encourage, this ‘slicing and dicing’ of the different commercial services within a CPS if these are used for ‘different purposes’, which would allow the services to be reported, assessed, and designated separately. Therefore, the provisions in Annex A will need to be clarified through specific cases to ensure firms do not abuse the provision to evade legislation, something which might be difficult to prove for the European Commission.

These papers are part of a bigger CERRE project entitled ‘Effective and Proportionate Implementation of the DMA’ which is a collection of nine papers focusing on the trade-offs around the different possible interpretations of the regulation. The next group of papers, focusing on different groups of obligations, will be released on 28 November, with the final recommendations paper to be published on 12 December.