EU policy aims for Big Tech ‘gatekeepers’ - 360
Juliane Mendelsohn, Oliver Budzinski
Published on May 23, 2022
The European Union’s Digital Markets Act is a bold, innovative attempt to do what no power has successfully done: mitigate the power of tech giants.
When Microsoft purchased Skype in 2011, many feared the service would be monetised at consumers’ expense. But a greater threat was in store: in the decade since, data-driven network effects and several mergers have allowed tech companies to expand and swallow up their rivals at a rapid rate, their sheer size and power allowing them to reach into every corner of digital life.
“Price” is no longer the most prominent concern. Instead, as EU vice-president Margrethe Vestager has said, it is about “prosperity”, “openness” and “freedom”. In other words, it is about allowing more access to and competition on existing platforms, while making sure consumers are not locked into digital ecosystems and can enjoy the full benefits of digitalisation.
The EU’s Digital Markets Act is a bold and novel approach to policy that identifies specific core platform services, such as search engines, social media and video-sharing platforms, shopping intermediaries or marketplaces, and audio assistants.
In these services, the Act seeks out “gatekeepers”: companies who meet quantitative criteria such as business turnover, number of users and market durability. Then, without having to find a prior violation or infringement, it imposes obligations upon gatekeepers and penalises those that fail to comply.
The new law aims to achieve “contestability” and “fairness” in digital markets by establishing a set of new rules (“dos and don’ts”).
Rules focused on “contestability” instruct platforms to enable interoperability and grant competitors access to accumulated data on fair, reasonable and non-discriminatory terms. The rules disallow self-preferencing and exclusivity clauses in relation to platforms’ own services. “Fairness” rules make sure that consumers can switch services (so-called “multi-homing”) and that they are not exploited, particularly regarding the use of their data.
The Act is being positioned by policymakers not as a competition law but as an antidote to the “slowness and lack of teeth” of competition-law enforcement in the digital world.
However, many fear that, like some other EU regulations, the Act will be difficult to enforce, stemming from a lack of clarity over how the law will operate in practice. Although some believe the regulations will be self-executing, prior attempts at regulating Big Tech suggest that projection is “overly optimistic”.
Uncertainty lingers around the legislation’s goals, which have not been clearly defined. Also, important terms lack definition. “Fairness” has many interpretations, and “contestability” is understood differently in the regulations than it is in the more widely known economic theory: within the new Act, contestability is not focused on the state of a market but on the ability of competitors to overcome barriers to entry, to expand and to challenge gatekeepers based on the merits of their digital products and services.
To function properly, the regulations must be able to anticipate and prevent harms before they occur. This can be difficult to achieve in a market as dynamic, innovative and disruptive as social media and technology.
The regulations’ effectiveness and spread of enforcement will rest on their implementation and design. Given the limited scope of the new Act, its larger success will depend on further work on its design and its interaction with larger competition policy.
The Act is a ripple in a wave of new digital-platform laws globally. Australia has introduced sweeping competition, consumer and media law reform, and India’s Competition Commission has probed and challenged several Big Tech practices. In the United States, under the stewardship of new chairperson Lina Khan, the Federal Trade Commission has pushed for the break-up of Meta Platforms while the agency awaits the passage of several new laws in a divided Congress.
Germany has introduced the notion of “outstanding power across markets” – companies that have the utmost significance to competition in several interconnected markets – along with extensive competition-law obligations, imposed only on Alphabet and Meta to date. This concept aims to capture digital economic power that is not limited to a single market but reaches across several interconnected products and services and is driven by data rather than just by market shares.
The German competition authority (Bundeskartellamt) is also fighting a prominent and lengthy legal battle over Facebook’s extensive use of consumer data. The case is being heard at the Court of Justice of the European Union.
Compared to its contemporaries, the new Act promises a lot in terms of openness and freedom. The true power of this novel and specific instrument will, however, be determined by how well it is integrated into and supported by larger competition and economic policy.
is Junior-Professor of Law and Economics of Digitization, Institute of Law & Institute of Economics, Ilmenau University of Technology, Germany.
is Professor of Economic Theory, Institute of Economics, Ilmenau University of Technology, Germany.
Prof Budzinski and Prof Mendelsohn have declared no conflicts of interest in relation to this article.
Originally published under Creative Commons by 360info™.