In December 2020, the European Commission published two important proposals for digital technologies: the Digital Services Act (DSA), a EU regulatory framework for digital services and the Digital Markets Act (DMA), a regulatory framework for digital markets. Initially, these were conceived as a single framework supported by a ‘new competition tool’ aimed to address structural competition problems in a number of markets. Ultimately, the European Commission put forward two separate proposals, each with its own scope and goals. In this brief, I offer some initial reactions to the DMA proposal and point at likely improvements that could be included before the text is finalised.
The legal interest and the goals of the proposal
It is welcomed that the European Commission is not looking just at digital services, but also at digital markets. Indeed, these two spheres, that is how services are provided and how markets work, are ever more interlinked in the digital environment. The DMA proposal is thus a step in the right direction in order to build a fair, open, innovative and free digital environment for EU businesses and consumers alike.
The legal basis for the DMA proposal is Article 114 TFEU, therefore this is not a competition tools but encompasses other regulatory aims too. This is made clear by Recital 10, which states:
‘This Regulation pursues an objective that is complementary to, but different from that of protecting undistorted competition on any given market, as defined in competition law terms, which is to ensure that markets where gatekeepers are present are and remain contestable and fair, independently from the actual, likely or presumed effects of the conduct of a given gatekeeper covered by this Regulation on competition on a given market. This Regulation therefore aims at protecting a different legal interest from those rules and should be without prejudice to their application.’
Clarity about the legal interest is of key importance, as it provides a prism for the interpretation of the various rules; Recital 10 seems to suggest that the prism should not be competition. In concrete terms, this might mean that the gatekeeper concept might not be considered as a sub-category of dominance as defined in the competition frameworks; or that the case-by-case assessment of the obligations under Article 6 might not be performed as a narrow competition assessment.
If the protection of undistorted competition is not the ultimate goal, what is then? The proposal seems to have two main goals: contestability and fairness.
The European Commission is concerned that the presence of gatekeeper platforms’ in a variety of digital markets undermine competition and market contestability. In its assessment, it explains that this leads to ‘inefficient market outcomes in terms of higher prices, lower quality, as well as less choice and innovation to the detriment of European consumers.’
According to the Executive Summary of Impact Assessment Report, the DMA should ‘foster the emergence of alternative platforms, which could deliver quality innovative products and services at affordable prices.’ However, a closer look at the proposal suggests that the focus is on creating the condition for competition at the business users’ level (intra-platform), rather than on creating the conditions for more platforms to enter the market (inter-platform). In other words, the DMA proposal seems to care about protecting business users from, for example, self-preferencing behaviours of vertically integrated platforms; the imposition of most-favoured-nation clauses; the mandatory use of certain platforms’ services in their relationships with end-users. But it appears to do little to create the conditions for competition to be restored at the platforms’ level.
A meaningful example is Article 6 (i)(f), which requires gatekeepers to provide access and interoperability only with regards to business users or ancillary services. Rather than fostering the emergence of new platforms, this provision might increase the systemic dependence of business users and ancillary services’ providers from the core platform, whose position remains uncontested and secured in the upper market.
By narrowing the focus on contestability and entry at the business users’ layer, the DMA seems to accept the status quo of gatekeeping at the core platforms’ layer. One might wonder why the Commission made this choice; one interpretation could be that the institution opted for an approach closer to public utilities regulation. In any case, one might also wonder whether the DMA should do more to open the strongly centralised environment we face with regards to core platform services. This concentration, as the same Commission has repeatedly said in the past, raises structural competition problems. Moreover, it might not the best solution for individuals, because it provides a few platforms with too much economic and political power, including power on users’ rights and on the flow of information in society. The inclusion of more ambitious rules to stimulate the emergence of alternative platforms might help the DMA to achieve its contestability goal.
The second goal of the DMA is fairness. Article 10 defines unfairness as the ‘an imbalance of rights and obligations on business users and the gatekeeper is obtaining an advantage from business users that is disproportionate to the service provided by the gatekeeper to business users’. The language is very close to the one used in the Unfair Commercial Practices Directive. Some have argued that it implies a (re)distributive meaning, which might go further than the meaning it could be attributed to fairness from a purely competition perspective.
This wide interpretation of fairness is a welcome step. Nevertheless, the DMA seems not to take into account that unfairness can characterise the relationship among gatekeepers and end-users too. Indeed, various conducts put in place by gatekeepers have an exploitative effect towards end users. This is problematic from a purely economic perspective, but also has a negative impact on end users’ rights. If one player is able to dictate a quality standard in the market, this also affects the protection of end users’ data, their freedom of expression, their right to non-discrimination and other human rights.
However, the European Commission does not seem to look at this perspective. There is almost no mention of the end users’ perspective in the DMA proposal and in the accompanying package. Therefore, when the imbalance on rights and obligations is on end users, they might be left alone in tackling the unfairness, because the DMA does not seem to consider this, yet typical, exploitative cases as something deserving of action. But the protection of end-users from exploitative conducts by companies with a position of market power is traditionally one of the main goals of competition and pro-competitive measures. Article 102 of the Treaty on the Functioning of the European Union (TFEU) includes exploitative conducts towards consumers the same way it includes exclusionary conducts towards competitors. No hierarchy is provided, nor any element that could lead to the conclusion that the former is less important than the latter.
Unfortunately, the European Commission has long since neglected this goal to concentrate on the economic aspects of the relationship among competitors. A clear example of this narrow approach is the 2009 Commission’s Guidance on the enforcement priorities in the application of Article 102 TFEU (back then, Article 82 EC), which only contemplates behaviours put in place by dominant players with the aim to exclude competitors. This might be an important shortcoming in the DMA, which on the contrary might be improved by including rules that provide the same protection to business users and end users in the Digital Single Market.
End users’ voices in the process
Another welcome step in the DMA is the market investigation system that should provide the European Commission with a certain degree of flexibility and check and balances in the enforcement with regards to key elements of the framework. These include the designation of a gatekeeper, the systematic non-compliance with the rules in Articles 5 and 6, and the impact of new services and practices.
Market investigations are a step in the right direction; yet some safeguards are needed to ensure that they work properly and are sufficiently inclusive of all voices and perspectives. Effective market investigations should not be a closed exchange between the regulator and the gatekeeper; rather, the former should look for information from all relevant actors, including end users. However, the market investigation system suggested in the DMA does not create adequate mechanisms for end users to be involved in the process. Therefore, the end users’ voice remains largely silent, notwithstanding the fact that the issues at stake have a strong impact on end users’ rights. There are no doubts that providing ways for the end users’ voice to be listened to, and amplified, could give greater legitimacy to the DMA regime. It could enrich the regulator’s evidence base and improve the quality of its analysis.
The scope of internal audits
Article 13 of the DMA imposes on gatekeepers to ‘submit to the Commission an independently audited description of any techniques for profiling of consumers that the gatekeeper applies to or across its core platform services’. Requiring internal audits about how automated systems (especially automated decision-making systems), are used by companies, including about how they work and which criteria are used to set them, is a basic and necessary step towards greater accountability. Transparency can help rebalance the asymmetry of information among gatekeepers, other players and end users.
However, the scope of the audit mandated in Article 13 might be too narrow to achieve its potential. The majority of automated decision making systems used by gatekeepers include at least three sets of activities: the massive collection of end users’ data; the profiling of the latter; the personalisation of the service based on such profiling. Each of these sets raises challenges for end users: the massive data collection is, more often than not, in conflict with various GDPR rules, such as data minimisation and purpose limitation. The profiling too needs to comply with the GDPR and could additionally raise problems with non-discrimination rules. But it is within the personalisation part that the major challenges seem to lay. Social media platforms or video sharing platforms are good examples here. On the one hand, personalisation can improve users’ experience and navigate the latter to a meaningful, for them, variety of content among the galaxy available. On the other hand, there are legitimate concerns that, in the absence of transparency about recommender systems or algorithmic systems, personalisation could be used to influence, or even manipulate, users’ choices and behaviours.
Even if we adopt a narrower economic perspective, the need for a wider scope of Article 13 remains. In fact, gatekeepers use algorithms to distribute the value created in the markets according to rent maximisation criteria that are non-transparent. These algorithmic rents cement their position of power, and their extractive business model limits the redistribution of value among those that create it. A comprehensive auditing of those algorithms is thus a first necessary step if regulators want to remedy this situation. Unless this gap is fixed, the provision runs the risk of being a blunt tool, or even of legitimising lack of transparency on what is left out. Additionally, it might be recommendable to clarify the main parameters of the mandatory audit such as, among others, the independence of who is called to perform it, the scope, and the criteria to be used in the assessment.
A holistic approach to DMA and DSA
As noted earlier, the DSA and DMA proposals are two complementary pieces of legislative intervention, which is needed to tackle complex challenges in the EU Digital Single Market. Those challenges are of economic, social, and political nature and an adequate solution of these problems is key to guarantee the future of EU democracies and the respect of EU values. None of the main challenges we face today can be solved by separately looking at the services or at the markets where they are provided. The goal of a fair, open and free digital environment can only be achieved if the services provided respect certain standards, and if markets are no longer controlled by a handful of gatekeepers. An holistic approach, strong coordination and complementarity between the rules for the services and those for the markets might be the best way to achieve this goal. Therefore, the discussion of the DSA and DMA proposals should take place holistically with a view to enhance synergies, avoid conflicts and fill gaps. Additionally, it is important for all relevant stakeholders to engage and be listened to by EU decision makers.
Maria Luisa Stasi is a Senior Legal Officer at Article 19.
Cf Commission Staff Working Document, Executive Summary of the Impact Assessment Report, SWD(2020) 364 Final, p.1.
Cf Commission Staff Working Document, SWD(2020) 364, cit. p.2.
 Cf Mazzuccato M, Enstminger j, Kattel R, Public Value and Platform Governance, UCL IIPP Working Paper, 2020-11.