Digital platforms between regulation and competition law

(*) Siragusa Mario, Cleary Gottlieb, Professor, College of Europe.

In recent years, there has been considerable debate regarding the limits of competition rules, particularly in relation to digital platforms.

This debate has resulted in two important developments:

On the one hand (i) a significant increase in the application of competition rules by the European Commission and national authorities, and (ii) the strengthening of national competition rules.

On the other hand, a strong impetus for regulatory activities, of which the DMA is the most important element.

The significant recent increase in the application of competition rules seems to indicate that the problem is not the limits of competition law, but rather the intensity of its application. Indeed, many recent developments have been thanks to the great flexibility of the competition rules, such as: new types of abuse, not only exclusionary, but also exploitative (for example, excessive pricing); a revival of interim measures (the Broadcom case); a new interpretation of Article 22 of the Merger Regulation, to tackle the “killer acquisitions” phenomenon; a new approach to the definition of relevant market, using a more dynamic perspective; and the General Court upholding the European Commission's decision in the Google Shopping case, which widens the application of Article 102. This has led to a significant increase in the European Commission, and national authorities, bringing proceedings against large digital platforms.

At the same time, some Member States have taken legislative action to be in a position to regulate the behavior of undertakings with market power, at much less stringent levels than those required to establish a dominant position. Similar action has been taken in Germany and Italy (and also in the United Kingdom, post-Brexit). Moreover, Article 3 of Regulation 1/2003 leaves Member States free to adopt stricter measures to address the unilateral conduct of undertakings.

As far as the Regulation is concerned, the DMA introduces a series of stringent harmonized standards applicable ex ante, aimed at ensuring:

i. that the markets served by gatekeepers are fair and contestable (Article 1(1)); and

ii. he proper functioning of the market, avoiding fragmentation arising from the risk of divergent alternative solutions between different Member States (Recitals 6, 7 and 8).

The overall architecture of the DMA raises two key issues, which we will analyze briefly:

a. To what extent is fragmentation prevented?

b. What is the scope of contestability that the DMA aims to achieve?

1. On the risk of fragmentation, the situation is different from the point of view of regulation and that of competition law:

Indeed, from a regulatory point of view, there should be no risk of fragmentation. Article 1(5) of the DMA provides that Member States must not impose on gatekeepers further obligations by way of laws, regulations or administrative measures, in order to ensure the fairness and contestability of the markets. They can only impose obligations regarding issues falling outside the scope of the Regulation, but such obligations must not be related to the 2 status of gatekeeper.

From the point of view of competition rules, the situation is completely different. As the DMA is intended to complement competition rules, Article 1(6) of the DMA is without prejudice to the application of Articles 101 and 102, national competition rules, including those imposing additional obligations on gatekeepers, and merger control rules.

The only limitation is that set out in Article 1(7), namely that national authorities must not take any decision that runs counter to a decision of the European Commission under the DMA.

Although the DMA refers to complementarity, there is no doubt that there is a clear overlap between the DMA and the competition rules.

- First of all, the DMA is the result of the downsizing of the New Competition Tool, which was intended to strengthen the powers of the European Commission to apply the competition rules to the digital market.

- The obligations imposed by the DMA, all of those in Article 5 and most of those in Article 6, are clearly derived from competition case law. They translate into ex ante obligations cases decided on the basis of competition rules.

- Furthermore, the DMA is without prejudice to the application of the competition rules, both Articles 101 and 102, and the national rules. A case that is subject to one of the ex ante obligations under the DMA, may also be subject to the ex post application of the competition rules by both the European Commission and the national authorities, which may apply both Articles 101 and 102 and the national rules to it.

- To the extent that, as Recital 10 states, the legal interests protected by the DMA and competition law are to be regarded as different, the parallel application of the DMA and competition law would not pose a ne bis in idem problem.

In the bPost SA v. Autorité belge de la concurrence case, the Court of Justice further departed from the principle of the prohibition of double jeopardy set out in the EU Charter of Fundamental Rights. It ruled that this principle does not preclude an undertaking from being fined for an infringement of competition law when for the same facts it has been the subject of a final decision for the violation of a sectoral rule; provided that there are precise and clear rules making it possible to foresee which acts or omissions are liable to be subject to such proceedings, as well as to coordination between the two competent authorities. In addition, the two proceedings must have been conducted in a sufficiently coordinated manner within a proximate timeframe and the overall penalties imposed must correspond to the seriousness of the infringements committed. Otherwise, it is ne bis in idem.

- Furthermore, while in the case of application of Article 102 by the national authorities, the European Commission may decide to initiate proceedings depriving, pursuant to Article 11(6) of Regulation 1/2003, the national authority of the competence to apply Article 102, such a mechanism does not exist in the case where the national authority applies national rules prohibiting or sanctioning unilateral conduct of undertakings (Article 3(2) of Regulation 1/2003).

It is therefore clear that in order to avoid fragmentation and protect the internal market, maximum cooperation and coordination between the European Commission and the national authorities is needed. Since this coordination is necessary for the application of the competition rules, it seems absolutely crucial that, on the European Commission side, the Directorate-General for Competition should be responsible for the application of the DMA, and that on the national side, the national competition authorities should be the authorities designated to cooperate with the European Commission in the application of the DMA. Only this solution can ensure the best cooperation and reduce the risk of fragmentation.

The recent political agreement introduced in the DMA new rules aimed at improving cooperation and coordination with the national authorities (Article 31(b)) and cooperation with the national courts (Article 31(c)).

Article 31(b) provides for intensive cooperation and exchange of information between the European Commission and the national authorities within the ECN (the European Competition Network) in the case of proceedings both under Articles 101 and 102 and under national rules. If the national authorities start an investigation into a gatekeeper on the basis of national law, they have to inform the European Commission immediately, and if they intend to impose obligations on gatekeepers they have to inform the European Commission 30 days before their adoption. But the European Commission has no mechanism to prevent the national authorities from applying the national rules. The national authorities may also on their own initiative start an investigation into a possible violation of the obligations under Articles 5 and 6 of the DMA in their territory, but in this case if the European Commission decides to open a proceeding under Article 18 of the DMA, the national authorities no longer have competence to conclude such an investigation.

Moreover, the obligations imposed by Articles 5 and 6 of the DMA are sufficiently precise, at least those in Article 5, to be subject to direct application by national courts. Article 31(c) of the DMA contains rules on cooperation between the European Commission and the national courts, extending to the procedure relating to the application of the DMA, rules similar to those contained in Regulation 1/2003. The national courts must not adopt decisions that are contrary to the decisions of the European Commission and, in the case of proceedings pending before the European Commission, they may decide to stay their proceedings (without prejudice to a possible referral to the Court of Justice under Article 267 of the Treaty).

2. Regarding the objectives of the DMA and in particular the scope of contestability that it aims to achieve, most of the obligations imposed on platforms under Articles 5 and 6 of the DMA appear to have as their main objective fairness in the relationship between platform service providers and business users and end users. The focus of the DMA is on the ability of platforms to connect many business users with many end users through their services, which enables them to leverage the advantages gained in one area of their activity, such as access to large amounts of data, into new areas (Recital 3).

There is no doubt that ensuring fairness in dealings with users also improves competition between platforms. But this is rather an indirect effect of the obligations in Articles 5 and 6, since the main objective of the DMA seems in practice to be to create intra-platform, not inter-platform, competition.

Indeed, the DMA allows platforms to remain vertically integrated and operate across multiple markets and entire ecosystems, provided that there is competition within the single platforms (intra-platform competition) and fairness in dealing with users.

Virtually all of the obligations imposed by Articles 5 and 6 ensure intra- platform competition. Indeed, the access and interoperability obligation on the gatekeeper's operating system and virtual assistant is imposed only for “business users and providers of ancillary services and hardware”, not for providers of services from competing platforms (Article 6(1)(f)).

A new Article 6(a) has introduced an interoperability obligation in relation to interpersonal communications services that are not number-based.

The only obligation that directly addresses the issue of contestability by competing platforms (i.e., inter-platform competition) is Article 6.1(j), under which third-party online search providers must be granted access on FRAND (fair, reasonable and non-discriminatory) terms to ranking, query, click and view data in relation to searches (free and paid) generated by end users on gatekeeper search engines.

This obligation is aimed at online search providers, to improve their services and compete on the market with incumbent platforms. Of course, the access obligation refers only to simple data provided by users, not to data processed by the platform.

The obligation is almost structural in nature, as it obliges the gatekeeper to share with competitors one of its most important assets, data. All of the other obligations in Articles 5 and 6 are behavioral in nature.

3. Article 16(1) of the DMA provides that in the event that:

i) the gatekeeper systematically infringes the obligations set out in Articles 5 and 6; and

ii) has maintained, further strengthened or extended its position as gatekeeper, the European Commission may impose any behavioral or structural remedy proportionate to the infringement committed and necessary to ensure compliance with the regulation.

Remedies may include the prohibition, for a specified period of time, against engaging in concentrations in core platform services or other services in the digital sector or that enable the collection of information that relates to the systematic violation of the obligations (Article 16(1)(a)).