ICLE Director of Competition Policy, Dirk Auer, joined TechFreedom’s Tech Policy Podcast to discuss why Europe has been pursuing aggressive antitrust enforcement against American tech companies. The full episode is embedded below.

INTRODUCTION AND BACKGROUND

On 23 February 2022, the European Commission unveiled its proposal for a Data Act (DA).[1] As declared in the Impact Assessment,[2] the DA complements two other major instruments shaping the European single market for data, such as the Data Governance Act[3] and the Digital Markets Act (DMA),[4] and is a key pillar of the European Strategy for Data in which the Commission announced the establishment of EU-wide common, interoperable data spaces in strategic sectors to overcome legal and technical barriers to data sharing.[5] The DA also represents the latest effort of European policy makers to ensure free flows of data through a broad array of initiatives which differ among themselves in terms of scope and approach: some interventions are horizontal, others are sector-specific; some mandate data sharing, others envisage measures to facilitate the voluntary sharing; some introduce general data rights, others allow asymmetric data access rights.

Notably, the General Data Protection Regulation (GDPR) enshrined a general personal data portability right for individuals,[6] the Regulation on the free flow of non-personal data facilitated business-to- business data sharing practices,[7] the Open Data Directive aimed to put government data to good use for private players,[8] and the Data Governance Act attempted to harmonising conditions for the use of certain public sector data and further promoting the voluntary sharing of data by increasing trust in neutral data intermediaries that will help match data demand and supply in the data spaces.[9] Sector- specific legislations on data access have also been adopted or proposed to address identified market failures, such as in the automotive,[10] payment service providers,[11] smart metering information,[12] electricity network data,[13] intelligent transport systems,[14] renewables,[15] and energy performance of buildings.[16]

Against this background, given that the DA is a horizontal legislative initiative fostering data sharing by unlocking machine-generated data and overcoming vendor lock-in, an issue of coherence with existing and forthcoming EU data-related legislations emerges.

The premise of such regulatory intervention is provided by the fact that an ever-increasing amount of data is generated by machines or processes based on emerging technologies, such as the Internet of Things (IoT), and is used as a key component for innovative services and products, in particular for developing artificial intelligence (AI) applications.[17] The ability to gather and access different data sources is crucial in order for IoT innovation to thrive. IoT environments are possible as long as all sorts of devices can be interconnected and can exchange data in real-time. Therefore, access to data and data sharing practices are pivotal factors for unlocking competition and incentivising innovation.

From this perspective, the proposal for a DA represents the last episode of a long thread of European Commission interventions. Since the 2015 Digital Single Market Communication, the Commission has indeed emphasised the central role played by big data, cloud services, and the IoT for the EU’s competitiveness, also pointing out that the lack of open and interoperable systems and services and of data portability between services represents a barrier for the development of new services.[18] The issue of (limited) access to machine-generated data has been raised in the 2017 Communication on the European Data Economy,[19] where the Commission envisaged some potential interventions which are now advanced by the DA, as well as in more recent Commission’ Communications on a common European data space and a European strategy for data.[20] In particular, the latter indicated the “issues related to usage rights for co-generated data (such as IoT data in industrial settings)” as a priority area for a legislative intervention.[21]

Moreover, the IoT economy has been the subject of a recent sector inquiry which offered a comprehensive insight into the current structure of IoT environments and the competitive dynamics that are shaping their development.[22] In particular, the Commission underlined the role of digital ecosystems within which a huge number of IoT interactions take place and identified the most widespread operating systems and general voice assistants as the key technological platforms that connect different hardware and software components of an IoT business environment, increase their complementarity as well as provide a single access point to diverse categories of users.[23] Against this backdrop, interoperability is deemed to play a crucial role in improving consumer choice and preventing lock-in into providers’ products.

To contribute to the current policy debate, this paper will provide a first assessment of the tabled DA and will suggest possible improvements for the ongoing legislative negotiations. The paper is structured as follows. Section 2 deals with the problems addressed and the objectives pursued by the legislative initiative. Section 3 analyses the scope of the new data access and sharing right for connected devices. Then, Section 4 investigates the provisions aimed at favouring business-to- government data sharing for the public interest. Section 5 deals with the rules which tackle the vendor lock-in problem in data processing services by facilitating switching between cloud and edge services. Section 6 analyses the requirements set forth regarding interoperability. Finally, Section 7 concludes by addressing the governance structure. Each section briefly summarises the DA proposal and then makes a first assessment with suggestions for improvements.

[1] European Commission, ‘Proposal for a Regulation of the European Parliament and of the Council on harmonised rules on fair access and use of data (Data Act)’ COM(2022) 68 final.

[2] Commission Staff Working Document, Impact Assessment Report accompanying the Proposal for a Regulation on harmonised rules on fair access to and use of data (Data Act) SWD(2022) 34 final, 1.

[3] Regulation (EU) 2022/868 on European data governance (Data Governance Act) [2022] OJ L 152/1.

[4] Regulation (EU) on contestable and fair markets in the digital sector (Digital Markets Act).

[5] European Commission, ‘A European strategy for data’ COM(2020) 66 final.

[6] Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC, [2016] OJ L 119/1, Article 20.

[7] Regulation (EU) 2018/1807 on a framework for the free flow of non-personal data in the European Union, [2018] OJ L 303/59.

[8] Directive (EU) 2019/1024 on open data and the re-use of public sector information, [2019] OJ L 172/56.

[9] Data Governance Act, supra note 3.

[10] Regulation (EU) 2018/858 on the approval and market surveillance of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles, amending Regulations (EC) No 715/2007 and (EC) No 595/2009 and repealing Directive 2007/46/EC, [2017] OJ L 151/1.

[11] Directive (EU) 2015/2366 on payment services in the internal market, [2015] OJ L 337/35, Article 67.

[12] Directive (EU) 2019/944 on common rules for the internal market for electricity and amending Directive 2012/27/EU, [2019] OJ L 158/125; and Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC, [2009] OJ L 211/94.

[13] Regulation (EU) 2017/1485 establishing a guideline on electricity transmission system operation, [2017] OJ L 220/1; and Regulation (EU) 2015/703 establishing a network code on interoperability and data exchange rules, [2015] OJ L 113/13.

[14] Directive 2010/40/EU on the framework for the deployment of Intelligent Transport Systems in the field of road transport and for interfaces with other modes of transport Text with EEA relevance, [2010] OJ L 207/1.

[15] Proposal for a Directive amending Directive (EU) 2018/2001, Regulation (EU) 2018/1999 and Directive 98/70/EC as regards the promotion of energy from renewable sources, and repealing Council Directive (EU) 2015/652, COM(2021) 557 final.

[16] Proposal for a Directive on the energy performance of buildings (recast), COM(2021) 802 final.

[17] On the economic value of data, see Jan Krämer, Daniel Schnurr, and Sally Broughton Micova (2020), ‘The role of data for digital markets contestability’, CERRE Report https://cerre.eu/wp-content/uploads/2020/08/cerre- the_role_of_data_for_digital_markets_contestability_case_studies_and_data_access_remedies-september2020.pdf.

[18] European Commission, ‘A Digital Single Market Strategy for Europe’, COM(2015) 192 final, 14.

[19] European Commission, ‘Building a European Data Economy’, COM(2017) 9 final, 12-13.

[20] European Commission, ‘A European strategy for data’, supra note 5, 10; and European Commission, ‘Towards a common European data space’, COM(2018) 232 final, 10.

[21] European Commission, ‘A European strategy for data’, supra note 5, 13, and 26.

[22] European Commission, ‘Final Report – Sector inquiry into consumer Internet of Things’ COM(2022) 19 final.

[23] Commission Staff Working Document accompanying the ‘Final Report – Sector inquiry into consumer Internet of Things’ COM(2022) 10 final.

Executive Summary

Intermediaries may not be the consumer welfare hero we want, but more often than not, they are one that we need. Policymakers often assume that intermediaries and centralization serve as a cost to society, and that consumers are better off when provided with “more choice.” Concrete expression of this view can be found in regulatory initiatives that aim to turn “closed” platforms into “open” ones (see, in Europe, the Digital Markets Act; and in the United States, the Open App Markets Act and the American Innovation and Choice Online Act). Against this backdrop, we explain that, as with all economic goods, intermediation involves tradeoffs. Intermediaries emerge when it would otherwise be too difficult (or too costly) for groups of users to meet and interact. There is thus no guarantee that government-mandated disintermediation — such as that contemplated in the European DMA and the U.S. AICOA bill — will generate net benefits in a given case. The ongoing Epic v Apple proceedings are a good example of why it is important to respect the role of intermediaries in digital markets, and the unique benefits intermediation can bring to consumers. The upshot is that intermediaries are far more valuable than they are usually given credit for.

Read the full issue brief here.

The European Union’s Digital Markets Act (DMA) has been finalized in principle, although some legislative details are still being negotiated. Alas, our earlier worries about user privacy still have not been addressed adequately.

Read the full piece here.

In the wake of Russia’s invasion, Europe’s plans to regulate technology look like a relic from a bygone era. An urgent need exists to rethink the assumptions and the goals of the Digital Markets Act (DMA), the Digital Services Act (DSA), and the AI Act (AIA) – indeed, Europe’s entire digital sovereignty agenda. 

Read the full piece here.

After years of debate and negotiations, European Lawmakers have agreed upon what will most likely be the final iteration of the Digital Markets Act (“DMA”), following the March 24 final round of “trilogue” talks.

Read the full piece here.

As the European Union’s Digital Markets Act (DMA) has entered the final stage of its approval process, one matter the inter-institutional negotiations appears likely to leave unresolved is how the DMA’s the relationship with competition law affects the very rationale and legal basis for the intervention.

Read the full piece here.

Executive Summary

In contrast to its stated aims to promote a Digital Single Market across the European Union, the proposed Digital Markets Act (DMA) could serve to fragment Europe’s legal framework even further, largely due to overlaps with competition law. This paper provides an analytical overview of areas where conflicts would inevitably arise from dual application of the DMA and European and national-level antitrust rules. It counsels full centralization of the DMA’s enforcement at the EU level to avoid further fragmentation, as well as constraining the law’s scope by limiting its application to a few large platform ecosystems.

Introduction

The Digital Markets Act (DMA) has entered the last and decisive stage of its approval process. With the Council of Europe having reached consensus on its general approach[1] and the European Parliament having adopted amendments,[2] the DMA proposal has moved into the inter-institutional negotiations known as the so-called “trilogue.”

The DMA has spurred a lively debate since it initially was proposed by the European Commission in December 2020.[3] This deliberative process has touched on all the proposal’s features, including its aims and scope, the regulations and rule-based approach it would adopt, and the measure’s institutional design. However, given the positions expressed by the Council and the Parliament, the rationale for DMA intervention and the proposal’s relationship with antitrust law remain relevant topics for exploration.

The DMA is grounded explicitly on the notion that competition law alone is insufficient to effectively address the challenges and systemic problems posed by the digital platform economy. Indeed, the scope of antitrust is limited to certain instances of market power (e.g., dominance on specific markets) and of anti-competitive behavior.[4] Further, its enforcement occurs ex post and requires extensive investigation on a case-by-case basis of what are often very complex sets of facts.[5] Moreover, it may not effectively address the challenges to well-functioning markets posed by the conduct of gatekeepers, who are not necessarily dominant in competition-law terms.[6] As a result, proposals such as the DMA invoke regulatory intervention to complement traditional antitrust rules by introducing a set of ex ante obligations for online platforms designated as gatekeepers. This also allows enforcers to dispense with the laborious process of defining relevant markets, proving dominance, and measuring market effects.

The DMA’s framers declare that the law aims to protect different legal interests than antitrust rules do. That is, rather than seeking to protect undistorted competition on any given market, the DMA look to ensure that markets where gatekeepers are present remain contestable and fair, independent from the actual, likely, or presumed effects of the conduct of a given gatekeeper.[7] Accordingly, the relevant legal basis for the DMA is found not in Article 103 of the Treaty on the Functioning of the European Union (TFEU), which is intended to implement antitrust rules pursuant to Articles 101 and 102 TFEU, but rather in Article 114 TFEU, covering “Common Rules on Competition, Taxation and Approximation of Laws.” Further, from an institutional-design perspective, the DMA opts for centralized implementation and enforcement at the EU level, rather than the traditional decentralized or parallel antitrust enforcement at the national level.

Because the intent of the DMA is to serve as a complementary regulatory scheme, traditional antitrust rules will remain applicable. However, those rules would not alleviate the obligations imposed on gatekeepers under the forthcoming DMA regulations and, particularly, efforts to make the DMA’s application uniform and effective.[8]

Despite claims that the DMA is not an instrument of competition law[9] and thus would not affect how antitrust rules apply in digital markets, the forthcoming regime appears to blur the line between regulation and antitrust by mixing their respective features and goals. Indeed, the DMA shares the same aims and protects the same legal interests as competition law.[10] Further, its list of prohibitions is effectively a synopsis of past and ongoing antitrust cases.[11] Therefore, the proposal can be described as a sector-specific competition law,[12] or a shift toward a more regulatory approach to competition law—one that is designed to allow assessments to be made more quickly and through a more simplified process.[13]

Acknowledging the continuum between competition law and the DMA, the European Competition Network (ECN) and some EU member states (self-anointed “friends of an effective DMA”) have proposed empowering national competition authorities (NCAs) to enforce DMA obligations.[14] Under this approach, while the European Commission would remain primarily responsible for enforcing the DMA and would have sole jurisdiction for designating gatekeepers or granting exemptions, NCAs would be permitted to enforce the DMA’s obligations and to use investigative and monitoring powers at their own initiative. According to supporters of this approach, the concurrent competence of the Commission and NCAs is needed to avoid the risks of conflicting decisions or remedies that would undermine the effectiveness and coherence of both the DMA and antitrust law (and, ultimately, the integrity of the internal market.)[15]

These risks have been heightened by the fact that Germany (one of the “friends of an effective DMA”) subsequently empowered its NCA, the Bundeskartellamt, to intervene at an early stage in cases where it finds that competition is threatened by large digital companies—in essence, granting the agency a regulatory tool that is functionally equivalent to the DMA.[16] Further, several member states are preparing to apply national rules on relative market power and economic dependence to large digital platforms, with the goal of correcting perceived imbalances of bargaining power between online platforms and business users.[17] As a result of these intersections among the DMA, national and European antitrust rules, and national laws on superior bargaining power, a digital platform may be subject to cumulative proceedings for the very same conduct, facing risks of double (or even triple and quadruple) jeopardy.[18]

The aim of this paper is to guide the reader through the jungle of potentially overlapping rules that will affect European digital markets in the post-DMA world. It attempts to demonstrate that, despite significant concerns about both the DMA’s content and its rationale, full centralization of its enforcement at EU level will likely be needed to reduce fragmentation and ensure harmonized implementation of the rules. Frictions with competition law would be further confined by narrowing the DMA’s scope to ecosystem-related issues, thereby limiting its application to the few large platforms that are able to orchestrate an ecosystem.

The paper is structured as follows. Section II analyzes the intersection between the DMA and competition law. Section III examines the DMA’s enforcement structure and the solutions advanced to safeguard cooperation and coordination with member states. Section IV illustrates the arguments supporting full centralization of DMA enforcement and the need to narrow its scope. Section V concludes.

Read the full white paper here.

[1] Proposal for a Regulation of the European Parliament and of the Council on Contestable and Fair Markets on the Digital Sector (Digital Markets Act) – General Approach, Council of the European Union (Nov. 16, 2021), available at https://data.consilium.europa.eu/doc/document/ST-13801-2021-INIT/en/pdf.

[2] Amendments Adopted on the Proposal for a Regulation of the European Parliament and of the Council on Contestable and Fair Markets in the Digital Sector (Digital Markets Act), European Parliament (Dec. 15, 2021), https://www.europarl.europa.eu/doceo/document/TA-9-2021-12-15_EN.html.

[3] Proposal for a Regulation on Contestable and Fair Markets in the Digital Sector (Digital Markets Act), European Commission (Dec. 15, 2020), available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020PC0842&from=en.

[4] Ibid., Recital 5.

[5] Ibid.

[6] Ibid.

[7] Ibid., Recital 10.

[8] Ibid., Recital 9 and Article 1(5).

[9] Margrethe Vestager, Competition in a Digital Age, speech to the European Internet Forum (Mar. 17, 2021), https://ec.europa.eu/commission/commissioners/2019-2024/vestager/announcements/competition-digital-age_en.

[10] Heike Schweitzer, The Art to Make Gatekeeper Positions Contestable and the Challenge to Know What Is Fair: A Discussion of the Digital Markets Act Proposal, 3 ZEuP 503 (Jun. 11, 2021).

[11] Cristina Caffarra and Fiona Scott Morton, The European Commission Digital Markets Act: A Translation, Vox EU (Jan. 5, 2021), https://voxeu.org/article/european-commission-digital-markets-act-translation.

[12] Nicolas Petit, The Proposed Digital Markets Act (DMA): A Legal and Policy Review, 12 J. Eur. Compet. Law Pract 529 (May 11, 2021).

[13] Marco Cappai and Giuseppe Colangelo, Taming Digital Gatekeepers: The More Regulatory Approach to Antitrust Law, 41 Comput. Law Secur. Rev. 1 (Apr. 9, 2021).

[14] How National Competition Agencies Can Strengthen the DMA, European Competition Network (Jun. 22, 2021), available at https://ec.europa.eu/competition/ecn/DMA_joint_EU_NCAs_paper_21.06.2021.pdf; Strengthening the Digital Markets Act and Its Enforcement, German Federal Ministry for Economic Affairs and Energy, French Ministére de l’Économie, les Finance et de la Relance, Dutch Ministry of Economic Affairs and Climate Policy, (May 27, 2021), available at https://www.bmwi.de/Redaktion/DE/Downloads/XYZ/zweites-gemeinsames-positionspapier-der-friends-of-an-effective-digital-markets-act.pdf?__blob=publicationFile&v=4.

[15] European Competition Network, supra note 14, 6-7.

[16] See Section 19a of the GWB Digitalization Act (Jan. 18, 2021), https://www.bundesrat.de/SharedDocs/beratungsvorgaenge/2021/0001-0100/0038-21.html.

[17] See, e.g., German GWB Digitalization Act, supra note 16; See, also, Belgian Royal Decree of 31 July 2020 Amending Books I and IV of the Code of Economic Law as Concerns the Abuse of Economic Dependence, Belgian Official Gazette (Jul. 19, 2020), http://www.ejustice.just.fgov.be/cgi_loi/change_lg.pl?language=fr&la=F&cn=2019040453&table_name=loi.

[18] Marco Cappai and Giuseppe Colangelo, A Unified Test for the European Ne Bis in Idem Principle: The Case Study of Digital Markets Regulation, SSRN working paper (Oct. 27, 2021), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3951088.

In their zeal to curb big tech through the Digital Markets Act, the European legislators are risking the privacy and security of all Europeans. It is time to accept the reality that the measures meant to force big platforms to be more open, will force them to lower their defences and to open the data of Europeans to bad actors. No amount of wishful thinking will change the fact that forced openness is in a tug of war with security. The DMA’s privacy and security provisions do not come close to taking the problem seriously and unreasonably expect the tech companies to solve a new class of risks that the DMA will create.

Read the full piece here.