The Digital Markets Act: How Does it Compare with Competition Law?
05 Ottobre 2022
In July 2022, the European Parliament and the Council of the European Union approved the final text of an ex ante regulatory system to control the conduct of companies that will be known as “digital gatekeepers”. This takes the form of an EU Regulation and is called the “Digital Markets Act” (DMA) (1).
The system is heavily inspired by competition law, yet the EU legislator insists that it is not just another set of competition rules but rather a system of regulatory intervention that is complementary to competition lawc(2).
This short paper includes some general and preliminary observations on the nature of the DMA and on where the DMA is different from and where it is similar with competition law. In that sense, the paper mainly concentrates on Article 102 TFEU, since the DMA – to a great extent – has been inspired by Article 102 TFEU cases and investigations (3).
System of prohibition v. system of control of abuse
A first difference between the DMA and Article 102 TFEU is that the DMA introduces a “system of prohibition” (4),nas opposed to the “system of control of abuse”.
In competition law, the prohibition system is generally acknowledged to be a more efficient system with regard to cartels and anti-competitive agreements (5). Under Article 101 TFEU and the equivalent rules of national competition laws, the law prohibits the existence itself of certain agreements or concerted practices, while the behaviour of the companies is in itself immaterial. On the other hand, in the system of control of abuse, followed under Article 102 TFEU (and the equivalent rules of national competition laws), it is not the existence of a dominant position as such, but only its abuse, that is prohibited.
The DMA is different from Article 102 TFEU and is not based on a system of control of abuse but rather on a system of prohibition (6). In that sense, it is closer to Article 101 TFEU. The DMA imposes prescriptive obligations on a limited number of market players with no scope for analysis of the nature of the behaviour of the designated “gatekeeper”. Thus, unlike exclusionary abuses under Article 102 TFEU, where two conditions must be met, (i) the dominant undertaking must use methods that are not consistent with the concept of “competition on the merits”, and (ii) the conduct must be capable of producing exclusionary effects (7), there is no such analysis in the DMA. The gatekeepers' conduct does not need to be inconsistent with “competition on the merits” or any other concept that pertains to the two objectives pursued by the DMA: contestability and fairness. At the same time, it does not need to be proven that such conduct produces actual or likely effects on contestability and fairness. The final text of the DMA includes specific definitions for “contestability” and “unfairness” in Recitals 32 and 33, respectively. However, the fact that the two main objectives are now defined does not mean that the prescriptions of Articles 5, 6 and 7 can be varied according to whether certain conduct produces or is liable to produce the effects described in Recitals 32 and 33 (8).
At the same time, no account is taken of efficiencies or other objective justifications. The DMA does not leave space for such justifications. First, efficiencies play no role in the designation of “gatekeepers” under Article 3, since under Recital 23 “[a]ny justification on economic grounds seeking to enter into market definition or to demonstrate efficiencies deriving from a specific type of behaviour by the undertaking providing core platform services should be discarded, as it is not relevant to the designation as a gatekeeper”. Second, the substantive provisions of the DMA provide for no possibility to submit a “defence” based on the notion of objective justification or efficiencies. Indeed, Article 10 provides for a very limited exemption only on grounds of public health and public security.
Indeed, we can consider this as a very inflexible system of prohibition, unlike the system of prohibition in Article 101 TFEU (9), or indeed Section 19a of the German Competition Act (10), both of which are more flexible.
Prescriptive rules v. general clauses
The DMA is also very different from both Articles 101 and 102 TFEU in that it is based not on flexible general clauses but rather on exhaustive and inflexible lists of per se rules, expressed as positive obligations or as negative prohibitions.
In Articles 101(1) and 102 TFEU, the respective general clauses of “restriction of competition” and “abuse of a dominant position” are more open-ended and flexible. The text of Treaty rules includes certain examples of anti-competitive conduct, but these are not exhaustive (11) and, indeed, the enforcers and the courts have never insisted on identifying conduct by reference to those examples.
On the contrary, the DMA is not based on the general clause approach. Articles 5, 6 and 7 contain a numerus clausus of per se rules. This, of course, enhances legal certainty. Undertakings designated as “gatekeepers” know that as long as they comply with the specific lists of rules, their conduct is lawful. However, this type of legal certainty has another facet: the DMA rules of Articles 5 to 7 can also be seen as a “straight-jacket” that is imposed on “gatekeepers”, without any flexibility and without taking into account their differing business models, incentives, and conduct characteristics (12).
This applies not just to Article 5 but also to Articles 6 and 7. It is true that, in accordance with Article 8(2), the Commission may, on its own initiative or at the request of a gatekeeper open proceedings pursuant to Article 20 with a view to adopting an implementing act, “specifying” the measures that the gatekeeper must implement in order to effectively comply with the Article 6 and 7 rules. However, the specification process does not reduce the inflexibility or prescriptiveness of Articles 6 and 7. Indeed, it is clear from Article 8(2) and Recital 65 that the specification process is not varying or affecting the nature of each of the rules contained in Articles 6 and 7, which are self-executing, but only relates to effective compliance measures that need to be taken by the gatekeeper. In other words, the rules of Articles 6 and 7 are not specifiable and adjustable in themselves; only the required compliance measures are. In that sense, the Article 8(2) specification process is very different from the Article 101(3) TFEU “individual exemption decisions” that the Commission had exclusive competence to adopt prior to 2004. In that case, the “exemption” was an integral part of the legal rule: a particular practice was prohibited only if it restricted competition per Article 101(1) TFEU and the conditions of Article 101(3) TFEU were not fulfilled. On the other hand, the prohibitions of Articles 6 and 7 are complete and apply, irrespective of a possible “regulatory dialogue” between the Commission and the gatekeeper and a possible specification decision, which relates only to compliance measures.
Such prescriptiveness and inflexibility is not best suited to dynamic markets, which are better served by competition authorities imposing flexible and more targeted obligations (13). It is also ironic that the per se prohibitions of Articles 5 to 7 are derived in their vast majority from specific competition cases that related /relate to specific facts and business models and were / are based on an analysis of anti-competitive effects rather than anti-competitive object (14).
It is again interesting to note that Section 19a of the German Competition Act is more flexible than the DMA in three respects: first, the Bundeskartellamt has discretion as to whether to prohibit for the future certain conduct by a designated undertaking of paramount significance for competition across markets (UPSCAM) (15); second, the seven prohibitions of Section 19a(2) are expressed in general clause style and their specification in the law is expressly indicative (“in particular”); third, it is open to an UPSCAM to put forward an objective justification and efficiency defence.
Ex ante sectoral regulation v. ex post competition enforcement
Unlike the competition rules which are imbedded in the Treaty and make up the Union's “economic constitution”, the DMA amounts to sectoral regulation in the form of secondary EU law (16). In so doing, the DMA Proposal does not break any new legal ground. There are already many areas where EU law has introduced sectoral regulation. This is mostly the case of network industries that were controlled by former State monopolies. The aim of sectoral regulation in those cases was to introduce rules of a transitory nature, in order to create the circumstances in which ex ante intervention becomes unnecessary in the longer term, so that the activities in question become subject to competition law alone (17). There are also other examples, where sectoral regulation was introduced to deal with perceived problems that competition law could not address (18). The DMA has more similarities with the latter category of cases.
The DMA is very different from competition enforcement in the sense that it introduces ex ante rules, as opposed to a system of ex post intervention. Although there are certain ex ante elements also in competition law enforcement, such as in the area of Block Exemption Regulations that in effect guide companies to structure their agreements in a certain way (19), or more importantly in the area of merger enforcement, competition law enforcement fundamentally takes place ex post and is usually accompanied by the imposition of ad hoc remedies and fines. Competition tools also tend to be reactive, i.e. they are employed to respond to particular conduct. Even merger enforcement is reactive, since the triggering event is the notification of a concentration, which the parties control and can always withdraw.
A system of ex ante intervention, on the other hand, is by nature pre-emptive and aims at regulating the conduct of undertakings ab initio. The DMA is particularly prescriptive and, in that sense, its ex ante nature is very pronounced. For that reason, I would be careful when using the word “enforcement” for the DMA and I would not expect the EU to create an apparatus of “enforcement” similar to competition law. That should not be the aim. Indeed, the more DMA “enforcement” there is, the less successful the DMA will be. The aim of the DMA is to regulate ex ante the “gatekeepers'” conduct. Obviously, the Commission will need to be able to review the gatekeepers' compliance and there are bound to be incidents of disagreement between the Commission and gatekeepers, which may give rise to specification decisions of Article 8(2) or non-compliance decisions of Article 29, possibly coupled with the imposition of fines and periodical penalty payments (Articles 30 and 31). But to expect the creation of an enforcement system similar to competition law and to look forward to statistics with numbers of dawn raids, investigations, fines and decisions per year, like in competition law enforcement, is entirely misguided and self-defeating. Measuring the effectiveness of the DMA should not be guided by enforcement statistics but rather by reports on compliance with the DMA rules.
The adoption of secondary EU law in the form of a Regulation will result in EU law pre-empting national laws under the principle of “pre-emption”. Under this principle, EU law precludes the valid adoption of new national legislative measures to the extent they would be incompatible with EU provisions (20). Indeed, Article 1(5) of the DMA Proposal makes clear that:
“In order to avoid the fragmentation of the internal market, Member States shall not impose further obligations on gatekeepers by way of laws, regulations or administrative measures for the purpose of ensuring contestable and fair markets. Nothing in this Regulation precludes Member States from imposing obligations on undertakings, including undertakings providing core platform services, for matters falling outside the scope of this Regulation, provided that those obligations are compatible with Union law and do not result from the fact that the relevant undertakings have the status of a gatekeeper within the meaning of this Regulation.”.
In addition, Recital 9 stresses that the DMA “[f]ragmentation of the internal market can only effectively be averted if Member States are prevented from applying national rules which are within the scope of and pursue the same objectives as this Regulation”.
Then, Article 1(6) stresses that:
“This Regulation is without prejudice to the application of Articles 101 and 102 TFEU. It is also without prejudice to the application of: (a) national competition rules prohibiting anti-competitive agreements, decisions by associations of undertakings, concerted practices and abuses of dominant positions; (b) national competition rules prohibiting other forms of unilateral conduct insofar as they are applied to undertakings other than gatekeepers or amount to the imposition of further obligations on gatekeepers […]”.
In addition, Recital 10 includes a rather novel definition of what constitutes “competition law” and refers to “to other national competition rules regarding unilateral conduct that are based on an individualised assessment of market positions and behaviour, including its actual or likely effects and the precise scope of the prohibited behaviour, and which provide for the possibility of undertakings to make efficiency and objective justification arguments for the behaviour in question”.
From the above, it is clear that Article 1(5) is the rule and what follows in Article 1(6) is the exception to the rule. In other words, the provision of Article 1(6) cannot cancel Article 1(5) out. The most important element in the pre-emption rule of Article 1(5) is whether the national law has the purpose of “ensuring fair and contestable markets”. Therefore, it is clear that the DMA precludes the Member States from introducing their own national laws to deal with “gatekeepers” in the digital sector, if their aim is to ensure fair and contestable markets. In that case, the DMA pre-empts such a national law and national courts are obliged to set it aside.
It can be debated whether Section 19a of the German Competition Act is hereby pre-empted by the DMA or not. While Recital 10 does nothing more but to describe the attributes of Section 19a of the German Competition Act, the truth is that Article 1(5) and Recital 9 set out the rule, while Article 1(6) and Recital 10 set out the exception to the rule. The latter cannot reduce the effectiveness of the former and have to be read restrictively. In addition, if national authorities were allowed to impose additional obligations on “gatekeepers” through the back door of “competition law” as defined above, the harmonisation rationale of the DMA would be weakened and there would be serious risks of fragmentation within the EU. This is a matter ultimately to be decided by the Court of Justice.
In any event, the DMA and the competition rules will be very similar and complementary to each other. Indeed, the “DNA” of the DMA is competition law and both of the two proclaimed objectives of the DMA, fairness and contestability, are inextricably linked with competition law. Fairness is a guiding principle behind and is specifically mentioned in the text of Article 102(a) TFEU, a provision that has been applied by the EU case law to both exclusionary and exploitative cases (21). Likewise, contestability is a key economic concept of paramount importance to competition law and industrial organization (22) and there is no doubt that the definition of contestability in Recital 32 echoes this, when referring to “the ability of undertakings to effectively overcome barriers to entry and expansion and challenge the gatekeeper on the merits of their products and services”. Therefore, there is no doubt that the DMA is an ex ante competition law statute.
The complementarities between the DMA and competition law raise many interesting questions that are bound to be debated in the future. While this is less of a problem when the enforcer of the two sets of rules is the same, as is the case for the Commission, which has – for the most part – exclusive competence to apply the DMA rules and at the same time applies the EU competition rules, the concurrent application of EU and/or national competition rules by national competition authorities and national courts (23) gives rise to challenges.
The DMA provides for a structured dialogue and co-operation procedure (Article 38) between the Commission and national competition authorities, which is inspired by Article 11 of Regulation 1/2003, but this system of co-operation does not go as far as including a rule equivalent to Article 11(6) of that Regulation. In other words, the opening of proceedings by the Commission with a view to investigating a violation of the DMA rules does not relieve national authorities of their competence to apply EU or their national competition law (24). And the more general problem remains: undertakings that are designated as “gatekeepers” may be subject to different regulatory obligations. For example, Section 19a of the German Competition Act introduces certain obligations that go further than the equivalent obligations of the DMA (25). If the Court of Justice decides in the future that Section 19a is not pre-empted by the DMA (26), a state of fragmentation within the Union would be inevitable. In short, there will be a common denominator, the DMA, but certain Member States may be able to impose “additional obligations”.
Going forward, it will be very important how the Commission and the national authorities will apply the “complementary” rules. The scenario in which the Commission brings a non-compliance proceeding under Article 29 of the DMA and, for example, the Bundeskartellamt brings in parallel or consecutively a Section 19a non-compliance case ought to be avoided. This would amount to a duplication of proceedings, which, even if it proves to be compliant with the principle of non bis in idem (27), is distractive and leads to fragmentation. In such cases, a choice has to be made beforehand as to which tool to use exclusively and as to who acts. This is an area not regulated by the DMA but perhaps the Commission should cease the opportunity to introduce guidelines.
The DMA will certainly change the legal reality for digital “gatekeepers”. Inspired from competition law, the DMA will always carry that “DNA”. At the same time, it is important to remember that the DMA is different from competition law in a number of respects: it follows a system of prohibition, it includes a numerus clausus of prescriptive obligations and prohibitions and it is an ex ante sectoral regulatory regime. The challenge will be how to ensure that the complementarity between the DMA and the competition rules does not result in fragmentation and inconsistencies.
(*) Assimakis P. Komninos, Partner, White & Case LLP; Visiting Professor (2020-2022), Université Catholique de Louvain.
The present views are strictly personal. Thanks are expressed to Christophe Carugati for helpful comments.
(1) The present paper relies on the text dated 27 June 2022, i.e. prior to its approval by the European Parliament sitting in plenary on 5 July 2022 and prior to its final approval by the Council on 18 July 2022. The DMA Regulation is expected to be published in the Official Journal in September/October 2022.
(2) Recital 11: “This Regulation pursues an objective that is complementary to, but different from that of protecting undistorted competition […]”.
(3) See generally Commission Staff Working Document SWD(2020) 363 final, Impact Assessment Report – Annexes, Brussels, 15.12.2020, Annex 5.6; European Commission, Digital Markets Act - Impact Assessment Support Study, Annexes, December 2020, Annex 4 “case studies”.
(4) The DMA includes not just negative prohibitions but also positive obligations. However, systematically, it is a tool that squarely falls within the “system of prohibition”.
(5) See generally Wouter P.J. Wils, “Community Report”, in: Cahill (Ed.), The Modernisation of EU Competition Law Enforcement in the European Union, FIDE 2004 National Reports (Cambridge, 2004), also available at SSRN: http://ssrn.com/abstract=1319249, para. 204.
(6) See Nicolas Petit, “The Proposed Digital Markets Act (DMA): A Legal and Policy Review”, 12 JECLAP 529 (2021), p. 532: “it is important to understand that the DMA, unlike the system of control of abuse, is not a system of discretionary supervision of bad behaviour by firms with gatekeeping positions. A specified list of prescriptive and proscriptive rules applies as soon as a firm is designated as a gatekeeper. There is no requirement of ‘improper' use of gatekeeping power that triggers application of the rules. And there is no process of evaluation of ‘improper' purpose or effect, negligence or deliberateness. The DMA is both a ‘no fault' regime and a per se prescription and proscription system.”
(7) See Case C-377/20, Servizio Elettrico Nazionale and Others v Autorità Garante della Concorrenza e del Mercato, ECLI:EU:C:2022:379, para. 103.
(8) However, these definitions may play a role when the principle of proportionality influences the enforcement of the DMA rules.
(9) For example, Article 101 TFEU necessitates an effects analysis for those agreements that can only be anti-competitive “by effect”. Article 101(1) TFEU also recognises the concept of “objective justification” (Case C‑439/09, Pierre Fabre Dermo-Cosmétique SAS v Président de l'Autorité de la concurrence and Ministre de l'Économie, de l'Industrie et de l'Emploi, ECLI:EU:C:2011:649, para. 39 et seq.). It also recognises the notion of ancillary restraints. And, finally, there is Article 101(3) TFEU, which allows pro-competitive agreements that introduce efficiencies, as long as certain conditions are fulfilled.
(10) Section 19a(2) in fine allows for objection justification and efficiency defences to be made by the undertaking of “paramount significance for competition across markets”.
(11) See e.g. Case T‑612/17, Google LLC and Alphabet, Inc. v Commission, ECLI:EU:T:2021:763, para. 154.
(12) For this reason, these rules must be seen as exceptional and cannot constitute a model for general competition law. In other words, enforcers and courts cannot and should not be “inspired” by such sectoral rules while applying conventional competition law.
(13) Compare Federal Ministry for Economic Affairs and Energy, A New Competition Framework for the Digital Economy, Report by the Commission ‘Competition Law 4.0', September 2019, p. 75, speaking of the need to impose “flexible, targeted remedies in digital markets”.
(14) See e.g. Case T‑612/17, Google LLC and Alphabet, Inc. v Commission, ECLI:EU:T:2021:763, para. 55, which clearly confirms that the Commission ran a case based on effects. Google Shopping also did not involve any anti-competitive strategy. See ibid, para 262: “In the context of establishing the infringement, the Commission did not therefore take into account any anticompetitive strategy or objectives that might have been pursued by Google, as it expressly confirmed at the hearing in response to a written question put by the Court.”
(15) See Section 19a(2) GWB: “[…] the Bundeskartellamt may prohibit such undertaking from […]” (emphasis added).
(16) The subject-matter scope of the new regime is defined in Article 1(1): “The purpose of this Regulation is to contribute to the proper functioning of the internal market by laying down harmonised rules ensuring for all businesses, contestable and fair markets in the digital sector across the Union where gatekeepers are present, to the benefit of business users and end users.”
(17) See Pablo Ibáñez Colomo, “The Draft Digital Markets Act: A Legal and Institutional Analysis”, 22 February 2021, available at SSRN: https://ssrn.com/abstract=3790276, p. 4. Compare Case C-117/20, bpost SA v Autorité belge de la concurrence, ECLI:EU:C:2022:202, para. 45 (“the object of the sectoral rules at issue in the main proceedings, which transposed Directive 97/67, is the liberalisation of the internal market for postal services”).
(18) See e.g. Regulation (EC) 80/2009 of the European Parliament and of the Council of 14 January 2009 on a Code of Conduct for computerised reservation systems, OJ  L 35/47; Regulation (EU) 531/2012 of the European Parliament and of the Council of 13 June 2012 on roaming on public mobile communications networks within the Union, OJ  L 172/10, as subsequently amended.
(19) The old generation of Block Exemption Regulations, which included “white lists”, with clauses that needed to be in an agreement for the Regulation to apply, had even more pronounced ex ante elements. Obviously, the pre-2004 notification and prior authorisation system for agreements also had an ex ante nature.
(20) Case 106/77, Amministrazione delle Finanze dello Stato v Simmenthal SpA, ECLI:EU:C:1978:49, para. 14.
(21) See e.g. Case C‑177/16, Autortiesību un komunicēšanās konsultāciju aģentūra / Latvijas Autoru apvienība v Konkurences padome, ECLI:EU:C:2017:689, para. 31 et seq. (for exploitative abuses) and Case C-280/08 P, Deutsche Telekom AG v Commission, ECLI:EU:C:2010:603, para. 172 (for exclusionary abuses).
(22) When a market is “contestable”, the threat of entry disciplines the incumbent and there is no monopoly pricing. See further William J. Baumol, John C. Panzar and Robert D. Willig, Contestable Markets and the Theory of Industry Structure, Harcourt Brace and Jovanovich (San Diego, 1982). The “contestability” of a particular share of demand is also a key parameter in evaluating whether certain practices can foreclose “as efficient competitors” of a dominant undertaking. See e.g. Case C‑549/10 P, Tomra Systems ASA and Others v Commission, ECLI:EU:C:2012:221, para. 42; Case C‑413/14 P, Intel Corporation Inc. v Commission, ECLI:EU:C:2017:632, para. 122.
(23) On the DMA and private enforcement, see Assimakis P. Komninos, “The Digital Markets Act and Private Enforcement: Proposals for an Optimal System of Enforcement”, in: Charbit & Gachot (Eds.), Eleanor Fox – Antitrust Ambassador to the World, Liber Amicorum, Concurrences (New York, 2001), p. 425 et seq.
(24) Such a rule was considered during the legislative process but was resisted by some Member States, in particular by Germany.
(25) E.g. the ban on exclusive pre-installation (Section 19a(2) lit. 1, b), the general prohibition of tying/coupling (Section 19a(2) lit. 3), the prohibition of data processing (Section 19a(2) lit. 4) and the obligation to ensure interoperability regardless of the type of service (Section 19a(2) lit. 5) seem to go further than the equivalent provisions of the DMA. See generally Philipp Bongartz, “§ 19a GWB - a keeper?”, 72 WuW 72 (2022).
(26) See immediately above.
(27) Under the most recent case law of the Court of Justice (Case C-117/20, bpost SA v Autorité belge de la concurrence, ECLI:EU:C:2022:202), the principle of non bis in idem is applicable as between sectoral regulation and competition law enforcement, as long as the respective cases relate to the same facts. However, a limitation of that principle can be justified on the basis of Article 52(1) of the Charter of Fundamental Rights. In that case, an ad hoc assessment is required, which we can call a “procedural rule of reason under the control of the law”. The conditions are: (i) the duplication of proceedings must be acknowledged as a possibility in the law itself; (ii) there are clear and precise rules making it possible to predict which acts or omissions are liable to be subject to a duplication of proceedings and penalties, and also to predict that there will be coordination between the two competent authorities; (iii) the two sets of proceedings have been conducted in a sufficiently coordinated manner within a proximate timeframe, and (iv) the overall penalties imposed correspond to the seriousness of the offences committed (bpost, paras 54-58). See also Recital 86 of the DMA, which has now adopted the bpost test.