Webinar

EU Digital Markets: Where do Member States stand?

Webinar of the "Law & Economics" Series organised by Concurrences, in partnership with Skadden, with Gabriella Muscolo (Commissioner, Italian Competition Authority), Martijn Snoep (Chairman, The Netherlands Authority for Consumers & Markets), Jacques Steenbergen (President, Belgian Competition Authority), Bill Batchelor (Partner, Skadden) and Ingrid Vandenborre (Partner, Skadden).

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Synthesis

Bill Batchelor started by presenting the panellists and the topic for discussion. He invited Ingrid Vandenborre to outline the national and EU laws, as well as the parallel investigations of various types of conduct in digital markets. Mr Batchelor asked Martijn Snoep to present the activities of the Netherlands Authority for Consumers & Markets on digital markets and asked whether a single EU-level law cutting across national variations was appropriate.

He also invited Jacques Steenbergen to address the new rules prohibiting the abuse of economic dependence that entered into force in Belgium mid-2020, applicable to all sectors, but which may also address the types of conduct examined by the DMA. Bill Batchelor then directed questions to the panellists, for example about whether there was an enforcement gap for which new ex ante measures were required, whether a black-lists of prohibited practices risked overlooking the efficiencies/benefits of platforms, and whether a more nuanced economic-lead assessment was preferable.

Ingrid Vandenborre set up the current lay of the land and gave an overview of the regulatory framework and proposals. She elaborated on the Digital Market Act proposal issued on 15 December 2020 and commented on the views expressed by the Member States on that proposal. Ms Vandenborre also discussed the different approaches to defining relevant undertakings by way of gatekeepers or those holding strategic market positions, with the latter permitting greater flexibility in assessing the actual economic relevance of the entity. According to the Swedish Competition Authority, the DMA will not be enough to curb large tech companies and other tools, such as new investigation tools, will need to be adopted at the national level. Other Member States have concurred that the DMA, which is limited in scope, might not be sufficient.

Ms Vandenborre contrasted the DMA categories of firms and conduct with the initiative by the Competition & Markets Authority (CMA) of 8 December 2020 (the Digital Markets Taskforce Advice to Government) and the 10th amendment to the German Competition Act that entered into effect on 19 January 2021. For example, while the CMA recommendations refer to tech firms that have a “strategic market status” assessed on the basis of (i) whether the firm has substantial and entrenched market power in relation to at least one specific activity; and (ii) whether that power provides the firm with a strategic position, the definition of gatekeeper under the DMA captures tech firms (i) of a size that impact the internal market (annual turnover of EUR 6.5 billion or more in the last three financial years – or average market capitalisation or equivalent fair market value of at least EUR6.5 billion in the last financial year, and provides a core platform service in at least three Member States), (ii) that control an important gateway for business users to reach final consumers (at least 45 million monthly active end users in the EU and at least 10,000 yearly active business users in the EU in the last financial year); and (iii) that have an established or expected entrenched and durable position (the first two criteria met in each of the last three financial years).

The amendment to the German Competition Act relates to tech firms with “paramount significance across markets”, which is assessed based on several factors such as dominance in other markets, vertical integration, access to competitively relevant data, etc. Also, the “intermediation power” has been added as a criterion for identifying dominance. Furthermore, after commenting on those differences, Ingrid Vandenborre presented the most significant elements of criticism, such as the fact that all business models seem to be treated the same in developing those tools, while they are fundamentally different, and the uncertainty around the scope for considering the companies efficiencies. She also raised the status for the new competition tool, which might have been able to play a role in this respect and referred to the Swedish authority’s comment in this regard.

Martijn Snoep started his intervention by presenting the Netherlands Authority for Consumers & Markets as a multi-functional authority, for example, both a competition agency and a consumer protection agency also entrusted with the implementation of the Regulation on interchange fees, the Payment Services Directive 2, the Regulation on net neutrality, and (most likely soon) the Regulation on platform-to-business relations. Digital markets have been on the Authority’s radar and the agenda for a while. The Authority has approached new markets by launching market studies and assessing justifications for investigations. It is also in the process of revising the procedural tools of its enforcement activities to investigate algorithms properly with due process in mind. Martijn Snoep also emphasised initiatives by the Authority to cooperate and share findings and best practices with other competition authorities.

Then, he expressed satisfaction with the DMA proposal and the efforts of the European Commission to take the lead but mentioned that more can be done to involve national authorities in enforcement. He explained that the DMA does not share EU competition law’s purpose and aims at fairness. The regulatory solution could conflict with a competition law solution; in this case, the regulatory assessment should supersede the competition law assessment, as it reflects as lex specialis the legislator’s intent. He stressed however the downside of black-letter law, that is, the lack of flexibility. Articles 5 and 6 of the DMA leave little room for defences by gatekeepers. The DMA should allow for defences articulated around innovation, efficiencies, fairness or contestability and thus create a safety valve to avoid unintended consequences.

Jacques Steenbergen dealt with the legal concept of ‘economic dependence’, noting that prohibitions of abuse of economic dependence were introduced after identifying a gap below the dominance threshold allowing for abuse in bilateral relationships, not the market as a whole. Economic dependence is a business-to-business issue: the concept of ‘abuse of economic dependence’ aims to target a situation where a company abuses the relative economic dependence of another company. Mr Steenbergen stressed that, in the digital context, it is useful to adopt tools to capture conducts that are abusive although they do not constitute abuses of dominance. While action at the EU level is crucial (and GAFA’s will, according to Jacques Steenbergen, usually present issues at the EU level), action at the national level allows dealing with abuses in domestic markets by a variety of platforms. It remains to be seen whether the Belgian competition authority will make extensive use of this new tool, which could allow dealing with abusive practices in the digital sectors.

However, the same procedural rules as in other infringement cases will apply: to enforce the economic dependence rules, the Belgian Competition Authority will conduct investigations under the standard procedures, using requests for information or dawn raids. Therefore, the first experiences have come and will come, from courts, that can declare contracts or clauses null and void or grant compensation for damages caused by abusive practices. Mr Steenbergen then addressed the notion that the scope of application of the DMA would be too limited. However, the definition of the scope of application is challenging, as more or less all products and services have become or will become digital. Focusing on digital markets therefore requires a more precisely defined scope of application. Finally, he suggested that the difference and interface between the proposed DMA and competition law should be clarified, to avoid that issues of sustainability leave the scope of competition law.

Gabriella Muscolo joined the discussion and commented on the enforcement activities of the Italian Competition Authority. She noted that the focus is two-fold: competition law and consumer protection law. Wearing those two hats allow the agency to adapt its activities, by leveraging the most adequate tools to best tackle issues. She emphasised the need to develop sophisticated analyses of quality, which requires multi-disciplinary assessments. Gabriella Muscolo also stressed that the Italian Competition Authority has focused its efforts on transparency, a necessary prerequisite for operators to make economically rational choices, but also fairness and clarity.

She also explained that the agency investigated WhatsApp and fined the California-based company after finding that the exclusions and limitation of liability established in its favour were unfair. The agency also found, in another case, that Facebook had not accurately and fairly informed its users when their data was being processed. It also fined the platform for carrying out an aggressive practice consisting of exerting undue influence on registered users who suffer the transmission of their data from Facebook to third-party websites and applications for commercial purposes. Ms Muscolo then mentioned the latest efforts with antitrust enforcement, for example about Google’s display ad business and possible abuse of dominant position through the discriminatory use of huge amounts of data collected through various applications, thus preventing rivals from competing effectively and adversely affecting consumers.

Questions & Answers

A participant commented on the introduction of regulation and the advantage of the black-letter approach but suggested that focus should be placed on future developments, noting that black-lists of prohibited practices might become out of fashion rather quickly. Jacques Steenbergen answered that only time will tell whether the DMA is forward-looking and flexible enough. It depends on the facts that are brought to the Commission.

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Speakers

  • Netherlands Authority for Consumers & Markets (The Hague)
  • Belgian Competition Authority (Brussels)
  • Italian Competition Authority (Rome)
  • Skadden, Arps, Slate, Meagher & Flom (Brussels)
  • Skadden, Arps, Slate, Meagher & Flom (London)