Digital Competition Regulation: Costs, Tradeoffs, and Consequences

For more on this topic, see the ICLE Issue Spotlight “Digital Competition Regulations Around the World.”

Abstract

This paper explores the discrepancies between the stated and actual goals of Digital Competition Regulations (DCRs), a new regulatory framework that has gained traction globally, particularly following the European Union’s Digital Markets Act (DMA). While DCRs are ostensibly designed to protect competition, the paper argues that their true objectives are more aligned with redistributing economic power, protecting less efficient competitors, and diminishing the competitive advantages of dominant digital platforms (gatekeepers).

Unlike traditional competition law, which seeks to protect the competitive process to benefit consumers, DCRs focus on altering market dynamics through prescriptive interventions. These interventions prioritize fairness and a distorted notion of contestability over efficiency and consumer welfare, leading to regulations that protect competitors rather than competition itself.

Despite an apparent familiar similarity with traditional competition law, DCRs are fundamentally inconsistent with the core principles of competition policy, which emphasize market efficiency, innovation, and consumer benefits. By focusing on leveling the playing field rather than fostering true competition, these regulations may stifle innovation, reduce incentives for investment, and ultimately harm consumers. Thus, while DCRs address concerns about the concentration of economic power in digital markets, their approach is at odds with the established goals of competition policy, raising critical questions about the future of economic regulation in the digital age.

Introduction

Inspired by the European Union’s Digital Markets Act (“DMA”),[1] a growing number of jurisdictions around the globe either have adopted or are considering adopting a framework of ex-ante rules to more closely regulate the business models and behavior of online platforms.

These “digital competition regulations”[2] (“DCRs”) share two key features. The first is that they target so-called “gatekeepers” who control the world’s largest online platforms. Such regulations assume that these firms have accumulated a degree of economic and political power that allows them to harm competition, exclude rivals, exploit users, and possibly inflict a broader range of social harms in ways that cannot be adequately addressed through existing competition laws.[3] Typically cited as examples of gatekeepers are the main platforms of Google, Amazon, Facebook/Meta, Apple, and Microsoft.

The second common feature these DCR regimes share is that they impose similar, if not identical, per se prohibitions and obligations on gatekeepers. These often include prohibitions on self-preferencing,[4] third-party functionality or access restrictions,[5] and the use of third-party data,[6] as well as obligations for interoperability[7] and data sharing.[8]

It is not always entirely clear what DCRs aim to achieve, however. A cursory survey suggests that these rules pursue different goals, without an immediately apparent unifying theme. For example, some DCRs have been integrated into existing competition laws and ostensibly pursue the same goals: the protection of competition and consumer welfare. Others aim for a range of goals—including, but not limited to, competition—such as the protection of small and medium-sized enterprises (“SMEs”); regional equality; social participation; and improving the lot of business users who operate on online platforms. Some DCRs purposefully and explicitly sidestep competition-oriented considerations, aiming instead for such adjacent but ultimately distinct goals as “fairness” and “contestability.”[9]

What emerges is a seeming patchwork of goals and objectives. In this paper, we seek to assess those disparate goals and objectives, drawing on many of the major proposed and enacted DCRs.

Section I examines the goals that DCRs claim to pursue. It takes those goals at face value and offers a largely descriptive account of the objectives offered. Where necessary (such as, for example, where those goals are cryptic or not clearly articulated), reference is made to public statements by those who promulgated them.

Section II argues that DCRs are best understood as a new form of law, grounded in ideas that have found limited success in competition law itself. To some extent, DCRs are based on a common narrative that has transformed some of the core principles and themes of antitrust law. As such, DCRs partially jibe with antitrust law, but ultimately diverge from it in subtle but consequential ways.

Section III argues that, despite superficial differences, DCRs share three common goals. The first is a desire to redistribute rents from some companies to others. At the most fundamental level, DCRs all seek to address what are perceived to be extreme power imbalances between digital platforms and the rest of society—especially business users and competitors. Thus, they seek to redistribute rents away from so-called “gatekeepers” and toward the business users that operate on those platforms, and to promote competitors (including, but not limited to, via rent redistribution).

DCRs are particularly concerned with ensuring that competitors, even if they are less efficient, enter or remain in the market. This is evidenced by a lack of overarching efficiency or consumer-welfare goals—even in those regulations that are based on existing competition laws—that would otherwise enable enforcers to differentiate between anticompetitive exclusion of rivals and market exit that results from rivals’ inferior product offerings. The focus on protecting competitors also stems from DCRs’ pursuit of “contestability.” In this context, promoting contestability entails diminishing the benefits of the network effects and the data advantages enjoyed by incumbents on the theory that they make it difficult for other firms to compete—not because they are harmful to consumers or because they have been acquired illegally or through deceit.

The third way that DCRs seek to balance power relations and achieve fairness is by “leveling down” the status of the incumbent digital platforms. DCRs worsen the competitive position of gatekeepers such as by negating gatekeepers’ ability to capitalize on key investments and facilitating third parties’ free riding on those investments. Essentially, gatekeepers are expected to aid and subsidize competitors and third parties at little or no cost. This, in turn, diminishes their competitive position and dissipates their resources (and investments) for the benefit of another group.

Section IV addresses the overall implications of an abrupt shift in competition regulation toward DCRs’ rent-redistribution norm. Rent redistribution entails significant risks of judicial error and rent-seeking. Regulators may require firms to supply their services at inefficiently low prices that are not mutually advantageous and may diminish those same firms’ incentives to invest and innovate. Those difficulties are compounded in the fast-moving digital space, where innovation cycles are faster, and yesterday’s prices and other nonprice factors may no longer be relevant today. By facilitating competitors—including those that may have fallen behind precisely because they have not made the same investments in technology, innovation, or product offerings—DCRs may dampen incentives to strive to become a so-called gatekeeper, to the ultimate detriment of consumers. Protecting competition benefits the public, but protecting competitors safeguards their special interests at the public’s expense.

Section V offers a more speculative coda about the possible broader implications of the shift toward a DCR regime. DCRs might signal the advent of a new paradigm in political economy: a redrawing of the existing lines and roles between states, markets, and firms, with greater emphasis on the role of the state as the ultimate ordering power of the economy. In hindsight, one expression of this could turn out to be the overturning (if only partially) of the essential principles of modern competition policy: the protection of competition rather than competitors, a policy emphasis on maximizing economic output rather than rent redistribution among firms, and a commitment to merit, rather than fairness. It is difficult to overstate how deeply at loggerheads this conception of the role of competition is from the existing, predominant paradigm long found in international economic regulation generally, and competition law in particular.

I. A Cacophony of Stated Goals in Digital Competition Regulation

Most DCRs pursue multiple overlapping objectives. The global picture is even more complex, as there is only partial overlap among the various goals pursued by DCRs in different jurisdictions.

Some DCRs are an extension of competition-law frameworks and are sometimes even formally embedded into existing competition laws. In principle, this means that the standard goals and rationale of competition law apply. Germany, for instance, recently amended its Competition Act, emphasizing the need to “intervene at an early stage in cases where competition is threatened by certain large digital companies.”[10] According to the Bundeskartellamt:

The newly introduced Section 19a probably represents the most important change as the Bundeskartellamt will now be able to intervene at an early stage in cases where competition is threatened by certain large digital companies. As a preventive measure the Bundeskartellamt can prohibit certain types of conduct by companies which, due to their strategic position and their resources, are of paramount significance for competition across markets.[11]

Similarly, Turkey currently is looking to amend the Turkish Competition Act with the objectives of promoting competition and innovation in digital markets; protecting consumer and business rights; and ensuring that gatekeepers do not engage in anticompetitive practices.[12] Proponents argue that the current Turkish Competition Act is not adequately equipped to address anticompetitive conduct in digital markets—such as, e.g., that the process of defining relevant markets is inappropriate for dynamic and global digital ecosystems and that specific regulations are needed due to the network effects that digital platforms confer.[13] These are all nominally competition-related concerns.[14] Other proposed changes to the Turkish Competition Act similarly reflect an increased emphasis on competition. For instance, in merger analysis, the current “dominance test” would be substituted with a “significant impediment to effective competition test,” similar to that in the EU merger-control regime. A “de minimis” rule would also be added to Article 41 to exempt agreements “that do not significantly impede competition.”

Other DCRs appear, at least to some extent, to pursue competition-law-inspired goals, despite not being formally incorporated into existing competition laws. In South Korea, for example, the Korean Fair Trade Commission (“KFTC”) recently proposed a draft DMA-style bill, the Platform Competition Promotion Act,  whose purpose is to establish ex-ante rules to restore competition rapidly in designated markets “without the tedious process of defining a relevant market through economic analysis.”[15] According to the KFTC, digital competition regulation is necessary to combat monopolization in digital markets, where monopolies tend to become entrenched.[16]  As some observers have noted,[17] the Platform Competition Promotion Act covers conduct already addressed by South Korea’s existing Monopoly Regulation and Fair Trade Act.[18] Thus, while the draft bill is likely to be passed as a separate piece of legislation, there appears to be a continuum between it and South Korean competition law.

In the United Kingdom, the Digital Markets, Competition, and Consumer Act received royal assent in 2024.[19] The DMCC aims to “provide for the regulation of competition in digital markets” and, in theory, dovetails with goals pursued by competition law (it even invokes familiar competition-law themes, such as market power).[20] The DMCC grants the UK antitrust enforcer, the Competition and Markets Authority (“CMA”), power to take “pro-competition interventions” where it has reasonable grounds to believe there may be an adverse effect on competition.[21]

The DMCC has, however, also been touted as a tool to “stamp out unfairness in digital markets.”[22] This could refer to the bill’s consumer protection provisions, which would prohibit, among other things, unfair commercial practices.[23] But it may also suggest that the DMCC goes beyond the remit of traditional UK competition law, in which “unfairness” is generally not central, except within the relatively narrow confines of the abuse-of-dominance provision under Section 18 of the Competition Act.[24]

Further, in a press release welcoming the DMCC draft, the CMA enumerated the bill’s benefits as falling into the three categories of “consumer protection,” “competition,” and “digital markets.”[25] The second category grants the CMA increased powers to “identify and stop unlawful anticompetitive conduct more quickly.”[26] The third, however, proposes that the bill will “[enable] all innovating businesses to compete fairly.”[27] This could imply that competition rules in digital markets would be governed by different principles than those that apply in “traditional” markets—that is, those that do not involve the purchase or sale of goods over the internet, or the provision of digital content.[28] The DMCC’s provisions on “digital markets” are also formally separate from those on “competition.”[29]

In Australia, the Australian Competition and Consumers Commission (“ACCC”) is conducting a five-year digital-platform-services inquiry, set to be finalized in March 2025.[30] The ACCC recommended, as part of the inquiry’s fifth interim report, service-specific obligations (similar to the UK’s proposed ex-ante rules) for “designated” digital platforms.[31] These would serve to address “anticompetitive conduct, unfair treatment of business users and barriers to entry and expansion that prevent effective competition in digital platform markets.”[32] Thus, alongside competition law’s traditional concerns (e.g., harms and benefits to consumers, innovation, efficiency, and “effective competition”), the ACCC would also incorporate concerns over “fairness” and, especially, the protection of business users.

In the United States, several bills have been put forward that are formally separate from existing antitrust law but cover some of the same conduct as would typically be addressed under U.S. antitrust law—albeit with seemingly different goals and standards. Some of these new goals and standards represent only slight variations on the usual goals of competition law. Three main pieces of legislation have so far been put forward: the American Innovation and Choice Online Act (“AICOA”),[33] the Open App Market Act (“OAMA”),[34] and the Augmenting Compatibility and Competition by Enabling Service Switch Act (“ACCESS Act”)[35] (together, “U.S. tech bills”).

Although the U.S. tech bills largely fail to describe their underlying goals, the titles of the bills and statements made by their sponsors suggest a set of overlapping concerns, such as preventing “material harm to competition,”[36] reducing “gatekeeper power in the app economy,” and “increasing choice, improving quality, and reducing costs for consumers.” [37] These goals appear to fall relatively well within the traditional remit of antitrust law.

But there are others. According to U.S. Sen. Amy Klobuchar (D-Minn.), the primary sponsor or cosponsor of several of the U.S. tech bills, AICOA is intended to “restore competition online by establishing commonsense rules of the road,” “ensure small businesses and entrepreneurs still have the opportunity to succeed in the digital marketplace,” and “create a more even playing field,” all “while also providing consumers with the benefit of greater choice online.”[38] “Fairness,” “fair prices,” and “innovation” all have also been invoked by the bills’ supporters.[39]

At the same time, for three out of the 10 types of challenged conduct, AICOA would require demonstrating “material harm to competition,” which would suggest that one of that bill’s goals is to protect competition. As the American Bar Association’s Antitrust Section has observed, however, there is no “material harm to competition” standard in U.S. antitrust law.[40] This suggests that AICOA may posit a different interpretation of what it means to protect competition, or of what sort of competition should be protected, than does traditional U.S. antitrust law.

OAMA, on the other hand, aims to open competitive avenues for startup apps, third-party app stores, and payment services in existing digital ecosystems.[41] Unlike AICOA, however, OAMA would not require a showing of harm to competition—material or otherwise—to establish liability, which appears to suggest that competition might be less of a concern than the bill’s title implies.

Finally, the ACCESS Act is intended to “promote competition, lower entry barriers and reduce switching costs for consumers and businesses online.”[42] U.S. Sen. Mark Warner (D-Va.), the bill’s primary sponsor, has said that the ACCESS Act will promote competition, allow startups to “compete on equal terms with the biggest social media companies,” and “level the playing field between consumers and companies” by giving them more control over who manages their privacy.[43] Again, these are antitrust-adjacent objectives, but with a flavor (“equal terms,” “level playing field,” etc.) that is largely foreign to U.S. antitrust law.

Other DCRs pursue a mix of competition and noncompetition goals. The South African Competition Commission’s (“SACC”) Final Report on the Online Intermediation Platforms Market Inquiry, for example, found that remedial actions similar to the ex-ante rules contemplated in the DMA and elsewhere are needed to grant “[g]reater visibility and opportunity for smaller South African platforms” to compete with international players; “[e]nabl[e] more intense platform competition,” offer “more choice and innovation”; reduce prices for consumers and business users; “[p]rovid[e] a level playing field for small businesses selling through these platforms, including fairer pricing and opportunities”; and “[p]rovid[e] a more inclusive digital economy” for historically disadvantaged peoples.[44]

In a similar vein, Brazil’s proposed law PL 2768/2022 pursues an expansive grab-bag of social and economic goals.[45] Article 4 states that targeted digital platforms must operate based on the following principles: freedom of initiative, free competition, consumer protection, a reduction in regional and social inequality, combatting the abuse of economic power, and widening social participation in matters of public interest.[46] In addition, PL 2768 also states as objectives that it will enable access to information, knowledge, and culture; foster innovation and mass access to new technologies and access models; promote interoperability among apps; and enable data portability.[47]

Finally, there are those DCRs that claim not to pursue competition-oriented goals at all. The DMA has two stated goals: “fairness” and “contestability,”[48] and explicitly denies being bound by, or even pursuing, the traditional goals of competition law: protecting competition and consumer welfare.[49] According to the DMA, competition, consumer welfare, and efficiency considerations such as those that underpin antitrust law are not relevant under the new framework. This is, according to the DMA’s text, because the goals of competition law and the DMA “are complimentary but ultimately distinct.”[50]

Interestingly, however, few other DCRs have so steadfastly disavowed competition considerations, even those that copy the DMA’s provisions verbatim. India is a case in point. In 2023, a report by the Standing Committee on Finance argued that, if digital competition regulation was not passed, “interconnected digital markets will rapidly demonstrate monopolistic outcomes that prevent fair competition. This will restrict consumer choice, inhibit business users, and prevent the rise of dynamic new companies.”[51] These concerns jibe with traditional antitrust goals, as indicated inter alia by the report’s title (“anti-competitive practices by big tech companies”). Later, another report, the Report of the Committee on Digital Competition Law (“CDC Report”),[52] proposed a Draft Digital Competition Bill.[53] According to the CDC Report, DMA-style digital competition regulation was needed to supplement the 2002 Indian Competition Act (“ICA”),[54] which—and here is the interesting part—supposedly also aims to promote “fairness and contestability.”[55]

But the ICA’s stated aims were the protection of competition, the interests of consumers, and free trade.[56] The Report of the High-Powered Expert Committee on Competition Law and Policy (“Raghavan Committee Report”),[57] which served as the basis for the ICA, modernized Indian competition law by moving it away from the structure-based paradigm of the earlier Anti-Monopolies and Restrictive Trade Practices Act of 1969 and toward an economic-effects-based analysis. The Raghavan Committee Report was unequivocal in its support of consumer welfare as the system’s ultimate goal.[58] Moreover, the report advised against a plurality of goals, including, specifically, “bureaucratic perceptions”[59] of equity and fairness, which, it argued, were mutually contradictory, difficult to quantify, and potentially opposed to the sustenance of free, unfettered competition.[60] It is therefore curious, to say the least, that the CDC Report would now, in hindsight, recast the ICA’s goals to support essentially the opposite idea.

The multiplicity of goals and their unclear, partially overlapping relationship with competition law raises questions about how we should think about these laws and, indeed, whether we can even think of them as a coherent, unified group. In the next section, we seek to untangle the nature and classification of digital competition regulation.

II. A New Form of Competition Regulation

DCRs are likely best understood as a new form of competition regulation. As some authors have noted, the precise relationship between competition law and the EU’s DMA is difficult to pinpoint.[61] In a similar vein, it is evident that many DCRs incorporate themes and concepts familiar to the competition lawyer, such as barriers to entry, exclusionary conduct, competitive constraints, monopolistic outcomes, and, in some cases, even market power. At first blush, this may suggest a direct relationship between digital competition regulation and competition law. While not entirely incorrect, that assessment comes with considerable caveats.

In this section, we argue that DCRs are a new form of competition regulation that diverges in subtle but definitive ways from mainstream notions of competition law. In essence, DCRs take plausible competition-law themes and alter and subvert them in fundamental ways, creating what could be described as sector-specific[62] or enforcer-friendly[63] competition laws. Due to their blend of competition principles and prescriptive, top-down regulatory provisions, we have opted for the term “digital competition regulation.” To understand their nature, we must start with their underlying assumptions and the ills they claim to address.

A. The Digital Competition Regulation Narrative

A starting assumption of all DCRs is that there is an extreme imbalance of power between large digital platforms and virtually every other stakeholder with whom they deal—from other industries to the businesses that operate on digital platforms to their competitors to, finally, end-users.[64] Even governments are often presumed to be virtually powerless in the face of the depredations of so-called “Big Tech.”[65] The adage that “big tech has too much power” has been almost universally endorsed by proponents of DCRs and strong antitrust enforcement;[66] is explicitly or implicitly embedded into those DCRs;[67] and now also permeates popular discourse, media, and entertainment.[68] The corollary is that asymmetric regulation is needed to help those other actors that have been “dispossessed” by big-tech platforms.

This notion is widespread and underpins a range of other policy proposals, not just DCRs. For example, the EU is considering a “Fair Share” regulation that would address the supposed power imbalance between tech companies and telecommunications operators, by forcing the former to pay for the infrastructure of the latter.[69] Similarly, various “bargaining codes” either already have been adopted or are currently under consideration to force tech companies to pay news publishers. In Australia, the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Act 2021 (“Bargaining Code”) was put in place to address the supposed bargaining-power imbalance between digital platforms and news-media businesses.[70]  According to the ACCC, digital-advertisement regulation was necessary to support the sustainability of the Australian news-media sector, “which is essential to a well-functioning democracy.”[71] Laws with a similar rationale have also been passed or are under consideration in other jurisdictions.[72]

All these initiatives originate from the same foundational assumption, which is that tech companies are more powerful than anyone else and are therefore able to get away with imposing draconian conditions unilaterally that allow them to benefit disproportionately at the expense of all other parties, business users, complementors, and consumers. While it is not always easy to identify a coherent thread running through the rules and prohibitions contained in DCRs and other initiatives to regulate “Big Tech,” a good rule of thumb to understand the unifying logic behind these initiatives is that digital platforms should have less “power,” and other stakeholders should have more “power.”

Sometimes—but by no means always—this also encompasses familiar notions of “market power,” i.e., firms’ ability to profitably raise prices because of the absence of sufficient competition. In fact, in most DCRs, “power” stems from the fact that an online platform is an important gateway for business users to reach consumers.[73] This is considered manifestly evident by the platform’s size, turnover, or “strategic” importance.[74] As Bundeskartellamt (the German competition authority) President Andreas Mundt has put it: “we shouldn’t talk about this narrow issue of price, we should talk about power.”[75]

DCRs embody this principle. They seek to extract better deals for the party or parties that are considered to suffer from an imbalance of bargaining power vis-à-vis digital platforms—such as, for instance, through interoperability and data-sharing mandates. As we argue below,[76] these beneficiaries are intended to be the platform’s business users and competitors.

The reasoning is as follows. The asymmetrical power relations between digital platforms and other actors are presumed to lead to unfair outcomes in how these stakeholders are treated and the ways that rents are allocated across the supply chain. As the DMA explains in its preamble:

The combination of those features of gatekeepers is likely to lead, in many cases, to serious imbalances in bargaining power and, consequently, to unfair practices and conditions for business users, as well as for end users of core platform services provided by gatekeepers, to the detriment of prices, quality, fair competition, choice and innovation in the digital sector.[77]

Once it is accepted that power relations between digital platforms and other stakeholders are unfairly skewed, any outcome resulting from the interaction of the two groups must also, by definition, be “unfair.” For example, under the DMA, “unfairness” is broadly defined as “an imbalance between the rights and obligations of business users where the gatekeeper obtains a disproportionate advantage.”[78] A “fair” outcome would be one in which market participants—including, but not limited to, business users—“adequately” capture the benefits from their innovations or other efforts, something the DMA assumes is currently not taking place due to gatekeepers’ superior bargaining power.

In the world of digital competition regulation, “unfairness” is a foregone conclusion. And, sure enough, the concept of “fairness” is the central normative value driving these regulations. Proponents liberally invoke it[79] and it features prominently in DCRs.[80] This narrative, however, is built on premises that differ markedly from those of antitrust law. Indeed, while prioritizing “competition” over “fairness” may sometimes result in “fair” outcomes, it certainly need not: “Fairness may indeed result from competition. But competition may instead generate unfair outcomes if the prior situation is unfair. Competition tends to perpetuate the existing structure of distribution, rather than to guarantee fairness.”[81] We discuss the premises that distinguish antitrust law from Digital Competition Regulation below.

B. Key Differences in First Principles Between Digital Competition Regulation and Antitrust

The DMA is the original blueprint for all digital competition regulation that has followed in its wake. The DMA’s text states that it is distinct from competition law:

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, potential or presumed effects of the conduct of a given gatekeeper covered by this Regulation on competition on a given market. This Regulation therefore aims to protect a different legal interest from that protected by those rules and it should apply without prejudice to their application.[82]

Other DCRs are rarely so candid about their break with competition law. On the contrary, some are even outwardly couched in competition-based terms. But in the end, DCRs replicate all or most of the prohibitions and obligations pioneered by the DMA.[83] DCRs also apply largely to the same companies as the DMA or, at the very least, use the same thresholds to establish which companies should be subject to regulation.[84]

This leads to a curious “Schrödinger’s DCR” scenario, where the same substantive rules simultaneously are and are not competition law. In the EU, for example, they are not; but in Turkey and Germany, they are. India’s DCB is a verbatim copy of the DMA, yet it is presented as a specific competition law.[85] This apparent contradiction is salvageable only if one thinks of digital competition regulation neither as competition law, strictu sensu, nor as an entirely separate regulation, but rather, as a partially overlapping tool that regulates competition and competition-related conduct in a different—and sometimes fundamentally different—manner.

Consider the example of the EU. EU competition law seeks to protect competition and consumer welfare. The DMA, on the other hand, is guided by the twin goals of “fairness” and “contestability.” As such, under the DMA (as under all other digital competition regulations), the relevant standards are inverted. Under most DCRs, market power—understood as a firm’s ability to raise praises profitably—is either immaterial or not essential to establish whether a firm is a gatekeeper.[86] The competition-law practice of defining relevant markets on a case-by-case basis to determine whether a company has market power is, therefore, likewise moot.[87]

That approach is instead substituted for a list of pre-determined “core platform services,” which are thought to be sufficiently unique that they necessitate special and more stringent regulation.[88] Notably, and unlike in competition law, this presumption admits no evidence to the contrary. Once an offering is marked as a core platform service, all a company can do to escape digital competition regulation is to argue either that it is not a gatekeeper, or that its services do not fall into the definition of a core platform service.

A corollary of this is that it is typically irrelevant whether a firm is dominant, or even a monopolist. Instead, DCRs apply to companies with high turnover and many business- or end-users—in other words, to “big” companies or companies people currently rely on or like to use.

Lastly, consumer-welfare considerations, which are central under competition law,[89] play only a marginal role in digital competition regulation, both in imposing prohibitions and mandates and in exempting companies from fulfilling those prohibitions or obligations.[90] While DCR supporters applaud this shift toward a broader conception of power,[91] it is important to understand how this approach differs from competition law.[92]

Competition law generally does not engage companies for being big or “important”—even if they are of “paramount importance”—except in very narrow instances, such as those prescribed by the essential-facilities doctrine.[93] Rather, antitrust targets conduct that restricts competition to the ultimate detriment of consumers. To establish whether a company has the ability and incentive to restrict competition, an assessment of market power is typically required, and definitions of relevant product and geographic markets are instrumental to that end.

Even the concept of dominance in competition law eschews crude arithmetic in favor of evidence-based analysis of market power, including the dynamics of the specific market; the extent to which products are differentiated; and shifts in market-share trends over time.[94] As one leading EU competition-law textbook puts it: “The assessment of substantial market power calls for a realistic analysis of the competitive pressure both from within and from outside the relevant market. A finding of a dominant position derives from a combination of several factors which, taken separately, are not necessarily determinative.”[95]

Well-established competition-law principles—such as the prevention of free-riding,[96] the protection of competition rather than competitors,[97] and the freedom of even a monopolist to set its own terms and choose with whom it does business[98]—all preclude the imposition of hard-and-fast prohibitions and obligations without a robust case-by-case analysis or consideration of countervailing efficiencies. The narrow exceptions are those few cases where (substantive) experience shows that per se prohibitions are warranted. But note that even cartels, “the cancers of the market economy,”[99] can generally be exempted under EU competition law.[100]

Particularly in digital markets characterized by network effects, scale economies and other variations of increasing returns, there exists no such consensus about the harms inflicted by the sort of gatekeeper conduct covered by DCRs.[101] As economist Brian Arthur aptly notes:

In Marshall’s world, antitrust regulation is well understood. Allowing a single player to control, say, more than 35% of the silver market is tantamount to allowing monopoly pricing, and the government rightly steps in. In the increasing-returns world, things are more complicated. There are arguments in favor of allowing a product or company in the web of technology to dominate a market, as well as arguments against.[102]

Yet in digital competition regulation, strict (often per se) prohibitions and obligations based on a company’s size are the norm.

C. The Transformation of Familiar Antitrust Themes

Even those DCRs that explicitly allude to competition-related objectives—such as the protection of competition and consumers—modify those objectives in subtle, but important ways. The U.S. tech bills are a case in point. AICOA would introduce a new “material harm to competition” standard. This facially sounds like it could be an existing standard under U.S. antitrust law, but it is not.[103]

DCRs also combine traditional competition-law objectives with considerations that would not be cognizable under antitrust law. For example, Brazilian competition law is guided by the constitutional principles of free competition, freedom of initiative, the social role of property, consumer protection, and prevention of the abuse of economic power.[104] PL 2768, however, would add two exogenous elements to these relatively mainstream antitrust goals: a reduction in regional and social inequality and increased social participation in matters of public interest.[105]

Other DCRs—like the UK’s or Australia’s prospective efforts to regulate digital platforms—also combine “fairness” goals with consumer welfare and competition considerations.[106] India’s DCB even offers an ex-post rationalization of competition law that brings it in line with the “fairness and contestability” goals of the new digital competition regulation.[107]

It is nonetheless questionable whether the protection of consumers and business users under DCRs accords with antitrust notions of “consumer welfare.” It should be noted that competition law, unlike consumer-protection law, protects consumers only indirectly, through the suppression of anticompetitive practices that may affect them through increased prices or decreased quality. Thus, antitrust law is generally uninterested in a company’s deceptive practices, unless they stem directly from a competitive restraint or the misuse of market power.[108] In this scenario, market power acts as a filter to determine where a company’s conduct can be corrected by market forces, and where intervention may be necessary.[109]

By contrast, even where DCRs claim to benefit consumers,[110] they generally seek to do so through mandates of increased transparency, explicit consent, choice screens, and the like, which are either imposed independently of market power[111] or do not require a strict causal link with market power.[112] While some of the focus on consumers thus remains (at least nominally), the ways in which DCRs protect consumers are ultimately more in line with consumer protection law than competition law. That is, the focus is on enforcing certain product design decisions and end-states that regulators assume consumers prefer, rather than on the premise that the protection of competition will ultimately, but tangentially, benefit consumers.

As for the protection of business users, according to some interpretations, antitrust law protects both consumers and other trading parties (customers).[113] This could, in principle, also include “business users.” Unlike digital competition regulation, however, antitrust law does not generally protect a predetermined group of businesses such that, for example, business users of online platforms would be afforded special protection. Any trading party—regardless of size, industry, or position in the supply chain, and whether a small developer or a large online platform—could theoretically benefit from the protection afforded by antitrust law to those harmed by the misuse of market power.

D. When Failed Antitrust Doctrine Becomes ‘Groundbreaking’ New Regulation

While digital competition regulation’s approach to competition diverges from that of mainstream competition law, and may even be anathema to it, the arguments it espouses are not new. To the contrary, digital competition regulation, in many ways, codifies ideas that have been repeatedly tried and spurned by competition law.

The fountainhead of these ideas is that size alone should be the determining factor for antitrust action and liability.[114] On this historically recurring view—which is championed today most fervently by American “neo-Brandeisians” and European “ordoliberals”—big business inherently harms smaller companies, consumers, and democracy. It is therefore the role of antitrust law to combat this pernicious influence through structural remedies, merger control, and other interventions intended to disperse economic power.[115]

In a similar vein, digital competition regulation targets companies that, a priori, have little in common. Digital competition regulation applies to information-technology firms that specialize in online advertising, such as Google and Meta, but also to electronics companies that focus on hardware, such as Apple.[116] It covers voice assistants and social media, which are vastly different products. Cloud computing, another “core platform service,” is arguably not even a platform; yet it was included in the DMA at the 11th hour.[117] In the end, what these “gatekeepers” have in common is that they all enjoy significant turnover, large user bases, are disruptors of legacy industries (such as, for example, news media), and are—possibly for these precise reasons—politically convenient targets.[118]

One corollary of this school of thought is that antitrust law should abandon (or, at least, drastically reduce) its reliance on the consumer-welfare standard as the lodestar of competition.[119] The law’s fixation on consumer welfare, the argument goes, has turned a blind eye to rampant economic concentration and to any form of abuse or exploitation that does not result in decreased output or higher prices.[120] Instead of this “myopic” focus on economic efficiency, proponents argue, antitrust law should strive to uphold a pluralistic market structure, which necessarily implies protecting companies from more efficient competitors.[121] This, they claim, was the Sherman Act’s original intent, which was subverted, in time, by the Chicago School’s emphasis on economic efficiency.[122]

Shunning consumer welfare also has implications for the role of market power in antitrust analysis. At the most fundamental level, competition law is concerned with controlling market power.[123] However, on the neo-Brandeisian view, antitrust’s historical concern with delineating efficient and inefficient market exit gives way to the unitary goal of controlling size and maintaining a certain market structure, regardless of companies’ abilities to restrict competition and profitably raise prices.[124] This denies the importance of market power or, at the very least, redefines it as synonymous with size and market concentration.[125] This is familiar ground for digital competition regulation, which, as we have seen, generally does not target companies with market power, but companies with a certain size and “economic significance.”

Throughout antitrust law’s storied history, it has often been argued that antitrust law pursues, or should pursue, a plurality of goals and values.[126] Today, these arguments posit that antitrust law must look beyond a “narrow focus” on consumer welfare,[127] which is still enshrined as the dominant paradigm in most jurisdictions. Some of the alternative goals posited to inform the adjudication of competition-law cases include, but are not limited to, democracy, protection of competitors (especially SMEs), pluralism, social participation, combating undue corporate size, and equality. In turn, many of these goals are mentioned in digital competition regulation. In Section III, we argue that wealth redistribution (equality), the protection of competitors, and combatting size are truly shared goals of DCRs.

Digital competition regulation is a bridge between competition law and regulation. That bridge is built on old but persistent ideas that have found limited success in antitrust law and that have largely been precluded by decades of case-law and the progressively mounting exigencies of robust, effects-based economic analysis.[128] It is therefore perhaps unsurprising that digital competition regulation spurns both in favor or new legislation and per se rules.

Its break with antitrust law, however, is not total, and was arguably never intended to be. Instead, digital competition regulation revises modern competition law to bring it in line with the regulatory philosophy it seeks to resuscitate, selectively plucking those bits and pieces that conform to that vision and discarding those that do not.

The partial continuity between competition law and digital competition regulation is not merely hypothetical, either. Consider the example of the DMA. According to EU Commissioner of Competition Margrethe Vestager, “the Digital Markets Act is very different to antitrust enforcement under Article 102 TFEU. First, the DMA is not competition law. Its legal basis is Article 114 TFEU. Therefore, it pursues objectives pertaining to the internal market.”[129]

But observe that the DMA covers conduct identical to that which the Commission has pursued under EU competition law. For instance, Google Shopping was a self-preferencing case that would fall under Article 6(5) of the DMA.[130] Cases AT.40462 and AT.40703, which related to Amazon’s use of nonpublic trader data when competing on the Amazon Marketplace and its supposed bias when awarding the “Buy Box,” would now be caught by Articles 6(2) and 6(5) of the DMA.[131] Apple’s anti-steering provisions—for which the Commission issued a fine mere days before the DMA’s entry into force—would be prohibited by Article 5(4) of the DMA.[132]

These overlaps cast doubt on the assertion that the DMA and EU competition law are two distinctly different regimes. They suggest instead that the DMA is simply a more stringent, targeted, and enforcer-friendly form of competition regulation, intended specifically to cover certain products, certain companies, and certain markets. Or, as at least one commentator put it: “the DMA is just antitrust law in disguise.”[133] Indeed, Australia’s ACCC may have said the quiet part out loud when it contended that its proposed DCR would be both a “compliment to, and an expansion of, existing competition rules.”[134]

A separate, albeit equally pertinent question is whether the sui generis logic of digital competition regulation will eventually be transferred to standard competition law, pushing the regimes closer together by remaking competition law. Now that they have the weight of the law—in jurisdictions like Turkey and Germany, even formally incorporated into competition law—ideas that have hitherto remained at the fringes of mainstream competition law may gain increased respectability even in competition-law circles. Further, the goals of competition law may even be reconfigured, a posteriori, in accordance with the rationale of digital competition regulation.

This possibility may at first blush seem far-fetched, but it cannot be discarded as entirely hypothetical. As observed earlier, the CDC Report in India recast the ICA as a tool aimed at ensuring fairness and contestability, even though the ICA’s long-standing (and stated) aims are, in fact, the protection of competition, the interests of consumers, and free trade.[135] In a similar vein, Andreas Mundt, the President of Germany’s Bundeskartellamt, recently remarked that competition law “has always been about fairness and contestability,”[136] thus extrapolating the logic of the DMA’s sector-specific competition regulation to all competition law.

In the past when populist arguments about equality, fairness, and “anti-bigness” have been suggested in competition law, they have largely (though not entirely) failed.[137] It is thus somewhat ironic that such ideas should now be spurred on by passage of the DMA, a regulation that is, by its own terms, not even a competition law, sensu proprio.

III. The Real Goals of Digital Competition Regulation

Notwithstanding their superficial differences, DCRs are largely animated by a common narrative and, on the whole, seek to achieve similar goals. At the most basic level, DCRs seek to tip the balance of power away from digital platforms,[138] redistribute rents (especially toward app developers and complementors), and make it easier for potential competitors to contest incumbents’ positions. In this context, traditional antitrust conceptions of competition and consumer welfare are afforded, at best, a ceremonial role.

A. Redistributing Rents Among Firms

Despite the discrepancies identified above,[139] upon closer examination it becomes evident that DCRs share a common set of assumptions, rationales, and goals. The first of these goals is rent redistribution among firms.

The central conceit of DCRs is that asymmetrical power relations between digital platforms and virtually everyone else produce “unfair” outcomes in which, in a zero-sum game, “big tech” gets a big slice of the piece at the expense of every other stakeholder.[140] Thus, DCRs must step in to reallocate rents across the supply chain, so that other actors receive a share of benefits in line with regulators’ understanding of what constitutes a “fair” distributive outcome.

Indeed, as the OECD has noted, the concept of “fairness” is strongly tied to redistribution.[141] As Pablo Ibáñez Colomo has written (about the then-proposed draft DMA), “the proposal is crafted to grant substantial leeway to restructure digital markets and re-allocate rents.”[142] This notion is accepted even by DCR proponents who have admitted that “the regime is not designed to regulate infrastructure monopolies, but rather to create competition as well as to redistribute some rents.”[143]

As to who specifically should benefit from such interventions, the answer varies somewhat across jurisdictions and may depend on the effectiveness of various groups’ rent-seeking efforts or the particular country’s political priorities.[144] In countries like Japan, Korea and South Africa, for example, there has been an explicit emphasis on redistribution toward SMEs, with attempts made to “equalize” their bargaining position vis-à-vis large digital platforms (South Africa additionally favors home-grown SMEs).[145] Other jurisdictions, such as the EU, emphasize competitors and companies that “depend” on the digital platform to do business—such as, e.g., app developers and complementors that “depend” on access to smartphone users through iOS, logistics operators that “depend” on Amazon to reach customers, and shops that “depend” on Google for exposure.[146] Granted, these companies may also be SMEs, but they need necessarily not be.[147] In fact, many of the DMA’s expected beneficiaries, including Spotify, Epic Games, and Yelp,[148] are not small companies at all.[149]

Elsewhere it is explicitly recognized that DCRs seek to abet the market position of national companies. Prior to the DMA’s adoption, many leading European politicians touted the act’s text as a protectionist, industrial-policy tool that would hinder U.S. firms to the benefit of European rivals. As France’s then Minister of the Economy Bruno Le Maire stated:

Digital giants are not just nice companies with whom we need to cooperate, they are rivals, rivals of the states that do not respect our economic rules, which must therefore be regulated…. There is no political sovereignty without technological sovereignty. You cannot claim sovereignty if your 5G networks are Chinese, if your satellites are American, if your launchers are Russian and if all the products are imported from outside.[150]

This logic dovetails neatly with the EU’s broader push for digital and technology sovereignty, a strategy intended to reduce the continent’s dependence on technologies that originate abroad. This strategy has already been institutionalized at different levels of EU digital and industrial policy.[151] In fact, the European Parliament’s 2020 briefing on “Digital Sovereignty for Europe” explicitly anticipated an ex-ante regulatory regime similar to the DMA as a centerpiece of that initiative.[152]

The fact that no European companies were designated as gatekeepers lends credence to theories about the DMA’s protectionist origins.[153] At the very least, it seems questionable whether such an effort would have been undertaken if it would have captured many EU companies, and it seems implausible that the specific triggers implemented for companies to fall under the DMA were not designed to exclude EU companies and include U.S. and Chinese ones.[154]

But while protectionism is not explicitly embedded in EU law, it likely will be in South Africa’s digital competition regulation. The understanding of “free competition” that underpins the SACC’s DCR proposal hinges on forcing large, foreign digital platforms to elevate local competitors and complementors, even if it means granting them unique advantages.[155] So, in a sense, competition is “free” where it leads to equitable outcomes—a remarkable pivot away from the logic of competition law (although not entirely foreign to South African competition law[156]). Moreover, unlike other DCRs, the SACC’s proposal explicitly notes that its proposed remedies are designed to redistribute wealth from the targeted digital companies or downstream business users toward certain social groups—namely, South African companies, historically disadvantaged peoples (“HDPs”), and SMEs, especially those owned by HDPs.[157]

For instance, to redress the “unfair” advantage enjoyed by larger competitors that end up displayed more prominently in Google’s search results and that are able to invest in search-engine optimization,[158] the SACC would oblige Google to introduce a “new platform sites unit (or carousel) to display smaller SA platforms relevant to the search (e.g., travel platforms in a travel search) for free and augment organic search results with a content-rich display.”[159] In addition, Google would be forced to add a South African flag identifier and South African platform filter to “aid consumers to easily identify and support local platforms in competition to global ones.”[160]

The SACC’s proposal is chock full of similar, explicitly redistributive policies that—despite being formally integrated into competition law—flip its logic on its head by requiring distortions of competition in order to (putatively) preserve undistorted competition. Thus, the SACC’s proposal would require gatekeepers to: give free credit to South African SMEs; offer promotional rebates; waive fees and provide direct funding for the identification, onboarding, promotion, and growth of SMEs owned by HDPs; force app stores to have a “local curation of apps” aimed at circumventing “automated curation based on sales and downloads for the SA storefronts and some geo-relevance criteria”; and ban both volume-based discounts that benefit larger companies (relative to SMEs) and promotions that would otherwise “decimate” local competitors.[161]

One reading of these terms is that the SACC’s report deviates from the “standard” in digital competition regulation. Another is that the SACC is simply more forthright about accomplishing the sorts of goals implicit in the DMA and other DCRs. Indeed, the SACC targets the same types of digital platforms as the DMA, includes many of the same prohibitions and obligations (e.g., self-preferencing, interoperability, cross-use of data, price parity clauses), and openly references the DMA.[162]

In some countries, the beneficiaries are intended to be primarily national companies or SMEs. Ultimately, like many other questions surrounding digital competition regulation, the question of cui bono—who benefits?—is not an economic one, but a political one, hinging on the determination of which parties lawmakers or regulators want to favor, and which they wish to disfavor.[163] The bottom line, however, goes back to the same, simple idea: gatekeepers should get less, and other businesses should get more.

Consider, for example, the reaction to Apple’s DMA compliance plan.[164] Most of the backlash concerned the frustrated expectations that Apple would, as a result of the obligations imposed by the DMA, take a smaller cut from in-app payments and paid downloads on its platform.[165] If one strips away the rhetoric, the reaction was not about competitive bottlenecks, competition, fairness, contestability, or any other such lofty ambitions, but about the very simple arithmetic of rent seeking, whereby those who invest in lobbying legislators expect a return on their investments.[166]

Or consider the UK’s DMCC. As Dirk Auer, Matthew Lesh and Lazar Radic have written, “the DMCC… includes a ‘final offer mechanism’ that the CMA can use in cases where a conduct requirement relating to fair and reasonable payment has been breached, and where the CMA considers that other powers would not resolve the breach within a reasonable time period.”[167] The two parties to a transaction (at least one of them being a gatekeeper, or what the DMCC refers to as a firm with “strategic market status” (“SMS”)) submit suggested payment terms for the transaction. “The CMA then decides between the two offers, with no option to take a third or intermediate course.”[168]

Under the DMCC , however, “this mechanism could be applied to any SMS business relationship with third parties.”[169] While this might not involve direct price setting, “it does mean the CMA will have the power to decide between two alternative offers and, thus, will be determining the distribution of revenues”—potentially for any third party.[170]

Despite some specific distributional differences, then, the overarching implication of digital competition regulation is generally the same: competitors and business users (e.g., app store and app developers in the case of Apple’s iOS, sellers and logistics operators in the case of Amazon’s marketplace, competing search and service providers in the case of Google search, etc.), should be propped up by gatekeepers. They should get more and easier access to gatekeepers’ platforms, feature more prominently therein, be entitled to a bigger slice of the transactions facilitated by those platforms,[171] and pay gatekeepers less (or nothing at all).

B. Facilitating Rivals and the Duality of Contestability

The longstanding understanding of competition law is that protecting competition often forces less efficient competitors to depart the market. “After decades of agonizing interpretation, a sort of working compromise has been reached, so that the goal of antitrust is to preserve a competitive process even at the cost at times of the disappearance of less efficient small businesses.”[172] DCRs, by contrast, are chiefly concerned with ensuring that even inferior competitors enter or remain on the market. DCRs thus share a common aim not just to protect users but to benefit competitors directly.[173]  If a designated digital platform acts “unfairly,” its actions are illegal. But it is generally—save limited exceptions—irrelevant whether its behavior is efficient or if it enhances consumer welfare. Yet these are the very questions that typically serve to distinguish pro-competitive from anticompetitive conduct in the context of competition law (and competition on the merits from anticompetitive conduct).[174]

This makes sense if one recognizes that digital competition regulation and competition law have fundamentally different goals: the former seeks to make it easier for nonincumbent digital platforms to succeed and stay on the market, regardless of the costs either to consumers or to the regulated platforms; the latter seeks to protect competition to the ultimate benefit of consumers, which often implies (and requires) weeding out laggard competitors.[175] As former U.S. Federal Trade Commission (“FTC”) Commissioner Maureen Ohlhausen has observed:

Some recent legislative and regulatory proposals appear to be in tension with this basic premise. Rather than focusing on protection of competition itself, they appear to impose requirements on some companies designed specifically to facilitate their competitors, including those competitors that may have fallen behind precisely because they had not made the same investments in technology, innovation or product offerings. For example, the Digital Markets Act (DMA) would force a ‘gatekeeper’ company to provide business users of its service, as well as those who provide complementary services, access to and interoperability with the same operating system, hardware, or software features that are available to or used by the gatekeeper. While this would restrain gatekeepers and presumably facilitate the interests of the gatekeeper’s rivals, it is not clear how this would protect consumers, as opposed to competitors.[176]

DCRs aim to facilitate competitors by making covered digital markets more “contestable,”[177] which sounds, at first cut, like a tenet of competition law.[178] In particular, DCRs seem to espouse a (greatly simplified) theory of contestability in which even oligopoly markets will behave as if they are perfectly competitive as long as entry by new rivals is easy.[179] But there are important differences between the DCR approach to contestability and the economic theory of contestability.

In particular, where network effects or scale economies predominate (as is always the case with digital platforms), enhanced contestability by policy is most likely to redistribute rents but not necessarily to serve consumers or create competition. “[I]f the market cannot profitably accommodate another entrant, due to scale economies and the nature of the oligopoly interaction, entry will be followed by some firm’s exit and another period of high prices.”[180] If all increased contestability does is to replace one gatekeeper with another, it can hardly be said to improve competitive outcomes.

Similarly, the success of the economic theory of contestability is heavily dependent on the specific terms of the model.[181] This means that engineering situations in which “artificial” contestability is enabled may not lead to the results predicted by economic theory, and the costs of overriding the natural competitive process may be greater than the benefits:

As in the famous socialism debate between Hayek, von Mises, and Lange the competitive process may be worth saving even though it may at times stray far from the Pareto-optimal equation of price and marginal cost…. This is so because it is hard for regulators or the state to design a system that has information processing powers and incentive compatibility properties of the competitive process. This is important in the nonstatic real world, which is plagued with uncertainty and incentive problems.[182]

In much the same way, the economic theory of contestability suggests that, in many circumstances, expanding competition beyond an existing oligopoly (or even duopoly) may have little effect on outcomes because such markets already behave as if they are competitive (or at least more competitive than a pure monopoly). This is borne out by experimental research.[183] While this confirms the underlying idea of the theory of contestability, it does not support DCRs’ efforts to artificially enhance contestability in a great number (perhaps even all) of the relevant digital markets, none of which are actually purely monopolistic. In other words, the economic theory of contestability supports the notion of reducing entry barriers in monopoly markets but does not support doing so in “gatekeeper” markets.

This also means that, at least from the contestability (as opposed to fairness) standpoint, DCRs may not improve market outcomes. DCRs operate on the assumption that gatekeeper markets are less competitive than markets with more entrants. But while this is true in the pure (uncontestable) monopoly cases against which the economic theory of contestability is judged, it need not be true in gatekeeper markets. “It is simply not true that monopoly pricing is a ‘natural’ result of a market merely because firms in the market exhibit decreasing costs and demand is sufficient to support no more than a single firm.” Regulators of digital gatekeepers may not like the structure of the markets they govern, but it cannot be inferred from that structure that such markets are anticompetitive.

Finally, competition economics has always recognized that entry can be an important source of competitive constraint.[184] It is unclear what the concept of “contestability” as espoused by digital competition regulation offers beyond that, other than a political preference for a particular distribution of rents different from the status quo. The relevant question in economic policy is always “compared to what?”—why is this institution better than another institution?[185] DCRs have value only if they offer the prospect of better outcomes than traditional competition law—especially because they impose enormous additional costs (both direct regulatory costs, as well as compliance costs) beyond those of traditional competition law.

Given these differences, it is perhaps unsurprising that the practical implementation of the concept of contestability in DCRs is often starkly at odds with what a competition-focused approach would counsel. DCRs appear to adopt a version of contestability that assumes virtually no economic limit on the benefits of entry into digital platform markets. The assumption is that, as long as consumers consistently use certain dominant platforms, markets must not be contestable, or not sufficiently so.[186] The putative reason for this alleged paucity of contestability lies in certain advantages that have accrued to incumbent platforms and that rivals purportedly cannot reasonably replicate, such as network effects, data accumulation, and data-driven economies of scale.[187] Consumer cognitive biases and lock-in are asserted as further cementing incumbents’ positions.[188] Because digital markets are also said to be “winner-take-all” (or “winner-takes-most”)[189] the corollary is that currently dominant firms will remain dominant unless regulators intercede swiftly and decisively to bolster contestability.[190]

DCRs seek to achieve this state of contestability by “equalizing” the positions of gatekeepers and competitors in two interconnected ways: by diminishing incumbents’ advantages and by forcing them to share some of those advantages with competitors. Making digital markets more contestable, therefore, requires undercutting the benefits of network effects and advantages enjoyed by “data-rich” incumbents,[191] not because data harvesting is inherently bad or because incumbents have acquired such data illegally or through deceit, but because these conditions make it harder for other firms to compete. Contestability—understood here as other firms’ ability to successfully challenge incumbent digital platforms’ positions—is therefore put forward as a goal in itself, regardless of those challengers’ relative efficiency or what effects the contestability-enhancing obligations may have on consumers.[192]

It is not hard to see how the myopic focus on contestability is connected to the protection of competitors but not end-users. Many, if not most, of the obligations and prohibitions in DCRs are best understood as attempts to improve the fortunes of competitors, while stifling incumbents, typically under a conception that it is feasible for multiple firms to hold significant shares of platform markets. As discussed below, however, mandating this preferred structural outcome is not always beneficial even for competitors—but it always imposes some costs on the operation of markets characterized by network effects, thus harming consumers.[193]

1. Digital Competition Regulation rules that benefit rivals by mandating access to incumbents’ resources

For instance, data-sharing obligations—such as those included in Article 19a of the German Competition Act and Art. 6(2) of the DMA—make it harder for incumbents to accumulate data, while also forcing them to share the data they collect with competitors.[194] The objective is apparently not to tackle data harvesting because it is noxious—indeed, the obligation to share data with smaller rivals that may not have data-protection mechanisms that are nearly as robust as those of dominant incumbents indicates that data protection is far from a concern.[195] Instead, the goal is to disperse users and data across smaller competitors to counteract network effects, thereby making it easier for those competitors to stay in the market and contest the incumbents’ position: “Enabling personal data mobility may provide a consumer-led tool that will increase use for new digital services, providing companies with an easier way to compete and grow in data-driven markets.”[196]

Interoperability and data-portability obligations require incumbents to make their products and services compatible with those offered by competitors, often with very limited scope for affirmative defenses grounded in objective security and privacy considerations. The logic is that interoperability reduces switching costs and allows competitors to more easily attract previously “locked-in” users.[197] As EU Competition Commissioner Margarethe Vestager remarked, “[i]t’s not just that digitisation has made economies of scale more important than before. It’s also that the huge amount of data that some platforms have, and the huge networks behind them, can give them an edge that smaller rivals can’t match.”[198] While dulling this “edge” by mandating data sharing may nominally benefit certain competitors who receive an artificial leg-up in their competition with incumbents, the overall consequences for competition and competitors more generally are ambiguous:

On the one hand, the presence of switching costs can… make it harder for new competitors to enter…. On the other hand, however, for the same reason, the presence of switching costs can induce entry by competitors looking to capture new customers (those not yet locked-in to an incumbent’s platform) who they can lock-in to their own service, and thus from whom they can expect to extract higher prices. Thus, efforts to induce competition by encouraging data portability may backfire, as potential new competitors, facing the prospect of a reduced ability to lock-in users themselves, may have a reduced incentive to enter in the first place.[199]

Indeed, empirical studies have shown that switching costs do not always make markets less competitive (and thus that interventions aimed at increasing contestability by artificially reducing switching costs may not aid contestability).[200]

At the same time, although they seem simple, interoperability mandates are not self-executing. For example, if a platform can charge an excessive price for interoperability, it may function the same as a prohibition. Thus, such obligations are often coupled with reasonable and non-discriminatory pricing regimes, requiring a regulatory apparatus or expensive judicial determinations to enforce. At the same time, interoperability requires standardization, which may, itself, be the subject of a complex regulatory process.[201] The result of interoperability mandates, therefore, may be a substantial regulatory infrastructure (perhaps well beyond those contemplated by digital competition regulations) and one that prioritizes favored businesses and business models at the expense of market efficiency and efficacy.[202]

Similarly, so-called “self-preferencing” provisions seek to give a leg-up to competitors and complementors that use an incumbents’ platform by prohibiting designated companies from prioritizing their own products and services ahead of rivals’, even if consumers ultimately benefit from such positioning (e.g., because the incumbent’s package is more convenient).[203] Concern over the “unfairness” of platform self-preferencing has long been one of the primary motivations for DCR regimes.[204]

Yet the notion that platform competition with complementors is economically harmful because of such self-preferencing is entirely speculative.[205] Indeed it contradicts  “over a century of antitrust jurisprudence, economic study, and enforcement agency practice” that have firmly established that “the competitive effects of a vertically integrated firm’s ‘discrimination’ in favor of its own products or services… generally produce significant benefits for consumers.”[206] It is also flatly contrary to a number of empirical studies showing that even the welfare of competitors (to say nothing of consumers) may often be improved by such self-preferencing.[207] While enforcement of such provisions may benefit certain competitors in the short run, they create perverse incentives for rivals without the foresight to invest in a platform or diversify the risk of relying on a rival’s platform to underinvest in ensuring their own viability by inefficiently insuring them against their own business misjudgments.[208]

Ultimately, what all these provisions have in common is that they primarily seek to increase the number of competitors on the market and to enhance their ability to gain market share without regard to the propriety of doing so. That is, these goals are to be obtained regardless of their effects on the quality of competition, end products, or concerns related to free-riding on incumbents’ legitimate business investments, superior management decisions, or product design (all of which are considerations that would be cognizable under antitrust law).[209] “Contestability” in digital competition regulation thus means an erosion, through regulatory means, of incumbents’ competitive advantages, regardless of how those advantages have been achieved. And relative to the notion of contestability in competition economics, it is focused on superficial structural outcomes (more competitors simultaneously competing in a market) rather than optimal process constraints on the ability of incumbent firms to exploit their perceived market power (through the threat of successive entry).[210]

2. Digital Competition Regulation rules that benefit rivals by granting them regulatory influence

Digital competition regulation is inherently competitor-oriented—regardless of its stated goals—in other, subtler ways, as well. For instance, the DMCC explicitly invites potential or actual competitors to provide testimony to the CMA before it imposes or revokes a conduct requirement or before implementing remedial “procompetitive interventions.”[211]

The U.S.’s proposed ACCESS Act would give competitors a privileged seat at the table by requiring a covered platform to ask the FTC for permission before making any changes to its interoperability interface[212]—and by requiring the FTC to consult with a “technical committee” formed by, among others, representatives of businesses that utilize or compete with the covered platform.[213] Representatives of the covered platform also would sit on the technical committee but have no vote.[214]

Importantly, in the latter example, the FTC’s decision in these matters would be dependent on whether competitors’ interests have been harmed—i.e., “that the change is not being made with the purpose or effect of unreasonably denying access or undermining interoperability for competing businesses or potential competing businesses.”[215] This is tantamount to asking competitors for permission to make product-design decisions for a rival’s own platform, based solely on the interests of those competitors.[216]

And, as we have seen, implementation of the DMA has been strongly influenced by competitor interests. Less than a month after the DMA’s entry into force, the European Commission launched investigations into four gatekeepers for noncompliance. Critical to the Commission’s decisions to investigate these companies was feedback received from stakeholders,[217] most of whom are competing firms who hoped to benefit from its provisions. In all these cases, the stated metric of non-compliance was the alleged absence of specific outcomes benefiting those competitors.[218]

C. ‘Leveling Down’ Gatekeepers

There are two ways to promote equality: one is by lifting party B up, the other is by dragging party A down.[219] DCRs employ both mechanisms to suppress presumptively illegitimate levels of gatekeeper power. In the previous subsection, we focused on how digital competition regulations attempt to raise up competitors. But DCRs also (sometimes concomitantly and sometimes separately) seek to worsen gatekeepers’ competitive positions such as by negating gatekeepers’ ability to capitalize on key investments and facilitating free riding by third parties that reduces the value of those investments.

Some DCRs are considerably more candid than others about their intent to hamstring gatekeepers. The Turkish E-Commerce Law, for example, includes some provisions that differ from the DMA, despite being evidently inspired by it.[220] “The amended E-Commerce Law goes beyond prohibiting gatekeepers’ behavior that restricts fair and effective competition, and introduces provisions that prevent undertakings in the e-commerce sector from gaining market power through organic internal growth without distorting competition or committing any unfair practices.”[221] Among those provisions are regulations that would not only prevent electronic-commerce intermediary-service providers (“ECISPs”) from gaining significant market power, but also require that those already in a dominant position must lose this power.[222] Bas and Sanli contend that this distinguishes the E-Commerce Directive from the DMA. While it is technically true that the DMA does not impose measures that would, e.g., directly limit a firm’s advertising expenditure or to tax additional transactions beyond a certain threshold, it does nevertheless “level down” gatekeepers’ ability to compete and grow organically in other ways. In this sense, the Turkish E-Commerce Directive takes the DMA’s logic to its natural conclusion and, much like the SACC’s proposal,[223] simply says the quiet part out loud. Indeed, in the end, all DCRs incorporate elements intended to promote fairness by harming incumbents.

For example, prohibitions on the use of accumulated, nonpublic, third-party data by incumbents benefit certain competitors, but they also reduce the return on the massive investments made by incumbents in collecting and using that data. Although data tracking and sharing are costly, gatekeepers are expected to aid and subsidize competitors and third parties at little or no cost,[224] thereby diminishing their competitive positions and dissipating their resources (and investments) for the benefit of another group. Data-use prohibitions particularly deter or preclude gatekeepers from monetizing the investments made in their platforms by, say, using that data to improve their own products and product lineup in response to new information about users’ changing tastes. This directly undermines gatekeepers’ competitive positions, which depend on their ability to improve and adapt their products.[225]

Yet this is viewed by proponents as a feature, not a bug, of DCRs, which seek to dissipate gatekeepers’ “power,” where power does not necessarily mean “market power” (i.e., the ability to profitably raise prices), but simply their ability to compete effectively. For example, even if allowing gatekeepers to use nonpublic data would improve their products to consumers’ ultimate benefit, it would also “harm” competitors in the sense that it would make it harder for them to compete with the incumbent. In such circumstances, the use of data would not be anticompetitive, but it would be “unfair.” By contrast, in the moral lexicon of digital competition regulation, free riding and effectively expropriating gatekeepers’ investments would not be considered “unfair”—even if it were, in fact, anticompetitive.

Self-preferencing prohibitions destroy one of the primary incentives for (and benefits of) vertical integration, which is the ability to prioritize a company’s own upstream or downstream products.[226] They thus also curtail the incumbent platform’s incentive and ability to respond to changing market conditions by investing in and implementing new technology when doing so entails the platform incorporating a product or service previously offered by third parties (the classic example of which is Google’s evolution from offering only “ten blue links” in its search results to offering direct answers to search queries in the form of maps, local business data, comparison shopping results, and the like).[227] Rules against self-preferencing, in other words, can become mandates for costly technological and business-model stasis when competitors’ complaints are given outsized importance:

The relatively static, “nostalgic” analysis that essentially assumes that any given complementor that succeeded in the past “should” succeed in the future (especially against competition from a platform’s own, integrated product) is deeply flawed. Past success under a particular set of platform constraints is no reason to assume that a complementor would provide any measure of innovation in the future under different constraints, nor is it an argument for insisting that the platform’s constraints cannot change. Indeed, if platform discrimination is rampant, the fact that a complementor previously succeeded under different, discriminatory conditions offers no reason to think that that there was an “effective competition structure” in the first place and thus that its previous success was in any way “merited.”[228]

Under traditional antitrust standards concerns for preserving investment and innovation incentives are paramount—even when they may entail self-preferencing by incumbent firms with relatively dominant positions. As a German antitrust court put it:

The prohibition of the abuse of a dominant position does not have as its object to preserve outdated business models that cannot withstand change….

While the applicant seeks to maintain the status quo because its member companies have done well in the past with their traditional business model, respondent is trying to position itself in the face of changing competition…. Competition on the merits does not require [a firm] to leave its offer unchanged and thus to accept being left behind by its competitors.[229]

By the same token, prohibitions on self-preferencing and openness mandates also limit a platform’s ability to offer goods whose quality and delivery it can more readily guarantee,[230] another bane for competitiveness recast as a desirable symptom of “fairness and contestability.” Particularly in order to preserve their ability to control overall platform characteristics like user experience, data security, and privacy, platforms often have an incentive to favor their own offerings and limit third-party access to data and certain core functionalities. “[A] well-managed platform will exert some control where doing so is most important, and openness where control is least meaningful.”[231] Where it is unable to offer or improve these qualities (or where its incentive to do so is reduced by regulation reducing its ability to realize a return on investment in them), a platform will refrain from undertaking them, withholding from the market innovations that would otherwise benefit competitors and business platform users.

The UK’s DMCC is designed to foreclose activities that would otherwise bolster gatekeepers’ “strategic significance.”[232] A company with strategic significance is defined as one that fulfills one or several of the following conditions: has achieved significant size or scale; is used by a significant number of other undertakings in carrying out their business; has a position that allows it to determine or substantially influence the ways in which other undertakings conduct themselves; or is in a position to extend its market power to different activities.[233] At least three of these conditions (the first three) can easily result from organic growth or procompetitive behavior. “There are many investments and innovations that would, if permitted, benefit consumers—either immediately or over the longer term—” but which may enhance a platform’s “strategic significance” as defined by the DMCC.[234] Indeed, improving a firm’s products and thereby increasing its sales will often naturally lead to increased size or scale.

The inverse is also true: product improvements, innovation, and efficiencies can result from size or scale.[235] This is especially relevant in the context of digital platforms, where a product’s attractiveness often derives from its size and scope—that is, from the direct and indirect network effects that result from adding additional users to the network. In other words, the more consumers use a product or service, the more valuable that product or service becomes to consumers on both sides of the platform.[236] Capping scale and size thus curtails one of the primary (if not the main) spurs of digital platforms’ growth and competitiveness.

Which, of course, was arguably the intent behind DCRs all along. In this context, some DCRs contain provisions that allow enforcers to impose a moratorium on mergers and acquisitions involving a gatekeeper, even where such concentrations would not ordinarily fall within the scope of relevant merger-control rules.[237]

Other prohibitions and obligations that form part of the standard DCR package harm incumbents by facilitating free riding. Sideloading mandates, for example, allow third parties to free-load on gatekeepers’ investments in developing popular and functional user interfaces and secure environments for the use of third-party content.[238] Insofar as they lessen gatekeepers’ ability to curate content and monitor safety and privacy risks, they also deprecate platforms’ overall quality and integrity, thereby potentially harming even the very companies they seek to aid.[239] Sideloading and interoperability mandates also essentially turn closed platforms into open ones (or, at the very least, they bring the two much closer together), thus effectively prohibiting a significant source of product differentiation by forcing closed platforms to forfeit the competitive benefits they may have relative to the primary alternative business model.[240] Antitrust law is unequivocal in its preference for inter-brand over intra-brand competition.[241] But under digital competition regulation, this principle gives way to a de-facto harmonization toward the model preferred by regulators—i.e., the one that makes every successful platform as open and accessible to competitors as possible, regardless of the tradeoffs.

This degree of animosity toward digital platforms may seem puzzling given the manifest benefits that they have conferred.[242] But one’s priors matter quite a bit here. If one accepts, tout court, the dystopian narrative that casts digital platforms as uniquely powerful, unfair, and abusive,[243] this punitive approach[244] is understandable and, in a sense, even required.

D. Consumers as an Afterthought

DCRs affect wealth transfers from gatekeepers to other firms.[245] But DCRs also affect—or, at least, tacitly accept—wealth transfers from consumers to other firms.

First, and fundamentally, DCRs generally do not require a finding of consumer harm to intercede, and they impose numerous per se prohibitions on conduct without any showing of harm. Second, DCRs provide limited scope for efficiency defenses. Generally, defenses rooted only in objective privacy and security concerns are allowed,[246] and even these are subject to a high evidentiary burden.[247]

On the other hand, justifications that relate to product quality, curation, or that otherwise seek to improve consumers’ experiences are not typically permitted. For example, the quality-of-life improvements that may come from better curation and selection of apps in a closed platform (i.e., one that does not allow for the sideloading of apps or third-party app stores) are not relevant under the DMA—nor is any other dimension of consumer welfare, including price, quality, aesthetics, or user experience.

Other jurisdictions’ DCRs vary in the extent to which exceptions to ex ante prohibitions and obligations will be considered, but the common thread is that none (with the partial exception of the DMCC) appears to allow for anything approaching a broad-based consideration of consumer welfare.

The Turkish DCR goes even further than the DMA, in that it does not appear to allow for any exemptions (even on the basis of safety and privacy).[248] The SACC’s proposal likewise does not appear to provide scope for affirmative defenses.[249] In Australia, the DPS Inquiry states that exemptions should be put in place to mitigate “unintended consequences.”[250] This could, in principle, include consumer welfare considerations, but the DPS Inquiry’s explicit reference to the DMA[251] and various public statements by the ACCC suggest that this is unlikely to be the case.[252] Likewise, the Brazilian proposal states that costs, benefits, and proportionality should be observed when establishing an obligation under Art.10,[253] although there is no indication of what this would mean in practice, or whether it encompasses consumer welfare; indeed, Articles 10 and 11 of PL 2768 do not mention consumer welfare.[254]

In most cases, the diminished role of consumer welfare is reflected not only in the extremely limited scope of permissible exceptions to ex ante rules, but in the heighted standards imposed on platforms to take advantage of them.

Article 19a of the German Competition Act, for example, allows for exemptions where there is an “objective justification.”[255] But unlike every other instance under the German Competition Act, Article 19a reverses the burden of proof and requires the gatekeeper, not the Bundeskartellamt, to prove that the prohibited conduct is objectively justified.[256]

In a similar vein, the U.S.’s proposed AICOA bill would require plaintiffs to prove only “material harm to competition” for violations under the bill’s provisions relating to self-preferencing and terms-of-service discrimination.[257] For violations of the rest of the bill (including provisions relating to, e.g., tying, data use, and interoperability), no harmful effects need be shown by the plaintiff at all; instead, like Article 19a, the bill would reverse the burden of proof for these provisions, requiring the defendant to show a lack of material harm—to prove a negative, in other words.[258]

The most consumer-friendly DCR appears to be the UK’s DMCC, which includes a provision requiring that “[b]efore imposing a conduct requirement or a combination of conduct requirements on a designated undertaking, the CMA must have regard in particular to the benefits for consumers that the CMA considers would likely result (directly or indirectly) from the conduct requirement or combination of conduct requirements.”[259] Similarly, the CMA has stated that it will enforce the law with “regard to its Prioritisation Principles when considering whether and how to address issues in relation to a relevant digital activity.”[260] Under those principles, “[t]he CMA has a statutory duty to ‘promote competition, both within and outside the UK, for the benefit of consumers.’”[261]

The DMCC also allows for a “countervailing benefits exception”[262] to apply when behavior under a conduct investigation is found to provide sufficient other benefits to consumers that “could not be realised without the conduct” and where “the conduct is proportionate to the realisation of those benefits,” without “eliminat[ing] or prevent[ing] effective competition.”[263] Unlike the Australian DPS Inquiry, examples of the benefits to be considered include not only security and privacy, but also the traditional metrics of the consumer welfare standard: “lower prices, higher quality goods or services, or greater innovation in relation to goods or services.”[264]

The CBE would apply only if the CMA were persuaded that the challenged conduct were the only way to achieve the countervailing benefits,[265] which would seem to incorporate something like a “least restrictive means” tests—a more exacting standard than the “less restrictive means” test that applies, for example, under U.S. antitrust law.[266] And, of course, unlike the traditional antitrust burden-shifting framework, the initial burden of proof apparently rests with the defendant,[267] as does the demonstration (by “clear and compelling evidence”) that the conduct is necessary to achieve the countervailing benefits.[268]

The DMCC certainly incorporates many more consumer welfare considerations than other DCRs. But marginality of consumer welfare as a relevant policy factor is compounded in the UK by the fact that CMA decisions would be subject only to “judicial review.”[269] Firms will thus be unable to challenge the authority’s factual assessments on questions such as indispensability and proportionality.[270] Even the chance that such a thing could be shown will be of limited value to affected firms because the exemption can apply only once an investigation into a breach of a conduct requirement is underway.[271]

The narrow and strict exceptions to the above DCRs confirm the downgraded status of consumer welfare in digital competition regulation (vis-à-vis competition law). The broader question, however, is whether a pro-consumer approach is even compatible with the overarching goals of digital competition regulation. A corollary of promoting competitors and leveling down gatekeepers is that successful companies and their products are made worse—often at consumers’ expense. For instance, choice screens may facilitate some competitors, but at the expense of the user experience.[272] Not integrating products might give a leg up to competing services, but consumers might resent the diminished functionality.[273] Mandated interoperability may similarly reduce the benefits an incumbent enjoys from network effects, but users may prefer the improved safety, privacy, and curation that typically comes with closed or semi-closed “walled-garden” ecosystems, like Apple’s iOS.[274]

In sum, proponents of DCRs appear to view losses in consumer welfare as an acceptable (and potentially even desirable) tradeoff for competitors’ increased ability to contest incumbents’ positions, as well as for wealth transfers across the supply chain that are seen as inherently just, equitable, and fair.

IV. The Perils of Redistributive and Protectionist Competition Regulation

While competition enforcement can affect the allocation of rents among firms, this is generally not the goal of competition policy. The only rent redistribution that is, in principle, relevant in competition law is the one between companies that misuse their market power and consumers (or, in some cases, trading parties). But the overarching goal in antitrust law is to rectify distortions of competition that result in deadweight loss and that transfer consumer surplus to the monopolist; it is not to allocate resources among a set of hand-picked “big” firms and their smaller rivals in way that legislators or regulators consider “fair.” It is the market, not the government, that determines what is “fair,” and competition laws exist to preserve, not to rewrite, that outcome.

Indeed, even some advocates of incorporating political goals into antitrust law, such as former U.S. FTC Chairman Robert Pitofsky, saw no merit in using competition law to accomplish the objectives like those espoused by DCRs, including the protection of small businesses, mandatory interoperability, and the redistribution of income to achieve social goals:

There are a number of non-economic concerns that can play no useful role in antitrust enforcement. These include (1) protection for small businessmen against the rigors of competition, (2) special rights for franchisees and other distributors to continuing access to a supplier’s products or services regardless of the efficiency of their distribution operation and the will of the supplier (a kind of civil rights statute for distributors), and (3) income redistribution to achieve social goals.[275]

This is for good reason. Rent redistribution among firms entails significant risks of judicial error and rent seeking. Regulators may require firms to supply their services at inefficiently low prices that are not mutually advantageous, which may in turn diminish those firms’ incentives to invest and innovate.

DCR backers may retort that rent redistribution is the goal of most natural monopoly regulations (such as those in the telecommunications and energy-distribution industries), which generally rely on both price regulation and access regimes to favor downstream firms and (ultimately) consumers.[276] But digital markets tend to be very different from those traditionally subject to price regulation and access regimes. And even in those industries, price regulation and access regimes raise many difficulties, such as identifying appropriate price/cost ratios and fleshing out the nonprice aspects of the goods/services or regulated firms.

Those difficulties are compounded in the fast-moving digital space, where innovation cycles are faster, and where yesterday’s prices and nonprice factors may no longer be relevant today.[277] In short, rent redistribution is difficult to do well in traditional natural-monopoly settings, and may be impossible to do without judicial error in the digital world.

Furthermore, assuming such redistribution was to take place, what would a fair redistribution entail? “Fairness” is subjective, and, as such, in the eye of the beholder.[278] Moreover, reasonable people may and often do disagree on what is and is not fair. What is perceived as “unfair” by the app distributor who pays a commission to use a platform’s in-app payment system may seem “fair” to the owner of the operating system and the app store, who makes significant investments to maintain them.[279] Because fairness is such an inherently elusive concept,[280] “fair” and “unfair” must ultimately be defined by DCRs by induction (i.e., from the bottom up, in a “you know it when you see it” approach), which is difficult to square with any cogent normative theory or limiting principle.[281]

For example, in response to claims that Apple must allow competing in-app payment services (IAPs) to operate in the App Store in order to make its 30% IAP fee more competitive (i.e., cheaper), Apple would seem to be well within its rights to allow independent payment processors to compete, charge an all-in fee of 30% when Apple’s IAP is chosen, and charge app developers a somewhat reduced, mandatory, per-transaction fee when Apple’s IAP is not used.[282] Indeed, where such a remedy has already been imposed, that is exactly what Apple has done.” In the Netherlands, where Apple was required by the Dutch Authority for Consumers and Markets (“ACM”) to uncouple distribution and payments for dating apps, Apple adopted the following policy:

Developers of dating apps who want to continue using Apple’s in-app purchase system may do so and no further action is needed…. Consistent with the ACM’s order, dating apps that . . . use a third-party in-app payment provider will pay Apple a commission on transactions. Apple will charge a 27% commission on the price paid by the user, net of value-added taxes. This is a reduced rate that excludes value related to payment processing and related activities.[283]

The company responded similarly to the DMA.[284]

“It is not hard to see the fundamental problem with this approach. If a 27% commission plus competitive payment-provider fee permits more ‘competition’ than complete exclusion of third-party providers, then surely a 26% fee would permit even more competition. And a 25% fee more still.”[285] Where such an approach logically ends is theoretically unlimited and defined by where a self-interested competitor or customer wants it to end—presumably at zero fee.[286] Unsurprisingly, of course, complementor and competitor firms have already complained—vociferously—of Apple’s DMA compliance proposal.[287]

Even if it were possible to identify a logical stopping point, doing so would entail the kind of price control that antitrust law has long rejected as being at loggerheads with a free market.[288] Without a measurable market failure, what is the frontier of fairness? When does a complaint stop being a competition or gatekeeper issue and become a private dispute about wanting to pay less—or nothing—for a service?[289]

Another obvious problem with facilitating competitors and leveling down gatekeepers is that it discourages investment, innovation, and competition on the merits. Having been encouraged to bring new, innovative products to market and compete for consumers’ business, successful companies—now branded with the pejorative “gatekeeper” epithet—are turned upon and subjected to punitive regulation.[290] The benefits that they have legitimately and arduously acquired are dissipated across the supply chain, and their competitors, who lacked the foresight and business acumen to make the same or similar investments, are rewarded for their sluggishness.[291] This stifles the mechanisms that propel competition, and is, for this very reason, generally not a sound way of approaching competition policy (or competition regulation). As Justice Learned Hand observed almost 80 years ago, “the successful competitor, having been urged to compete, must not be turned upon when he wins.”[292] There is no reason why digital competition regulation should be impervious to that logic.

The abrupt shift from competition law to digital competition regulation also sends investors the wrong message. It is well-established in the economic literature that uncertainty about the future can have real economic effects—particularly for irreversible decisions like sunk-cost investments.[293] Unexpected shifts in policy can create or exacerbate this uncertainty by creating “economic policy uncertainty.”[294] As one commentator put it: “Commitment issues arise where a government commits itself in one period to behaving in certain ways in the future but, when it comes to a future point in time, reneges on the earlier commitment to reflect its preferences at that later point in time.”[295]

For example, today’s gatekeepers have made significant investments in data processing, vertical integration, scaling, and building ecosystems. Many of these investments are sunk, meaning that they can no longer be recouped or can be recouped only partially. With the various DCRs’ entry into force, however, gatekeepers can no longer fully utilize those investments. For instance, they cannot self-preference and thereby reap the full benefits of vertical integration;[296] they cannot use third-party data generated on the platforms they have built and in which they have invested; and they must now allow third parties and competitors to free ride on those investments in a number of ways, ranging from allowing sideloading to mandated data sharing.[297]

In dynamic contexts, time inconsistency can obviously affect firms’ actions and decisions, leading to diminished investments.[298] But it is also questionable how “fair” (to use the mot du jour of digital competition regulation) it is to expropriate a company’s sunk-cost investments by abruptly shifting the regulatory goalposts under a new paradigm of competition regulation that essentially subverts the logic of the previous one, and penalizes what was previously seen as permissible and even desirable conduct.

V. Coda: Beyond Digital Competition Regulation

Aldous Huxley once wrote that several excuses are always less convincing than one.[299] His point was that multiple justifications may often conceal the fact that none of them are entirely convincing in their own right. This maxim aptly captures the doubts that persist surrounding digital competition regulations.

On the surface, DCRs pursue a variety of sometimes overlapping, sometimes contradictory, and sometimes disparate goals and objectives.[300] Some of these goals and objectives hearken back to familiar antitrust themes, but it would be a mistake to treat DCRs as either an appendix to or extension of, competition law.[301] Unlike mainstream competition laws, DCRs address a moral, rather than an economic failure. DCRs emphasize notions of power that are foreign to competition law, essentially promulgating a new form of competition regulation that subverts the logic, rationale, and goals of the existing and rigorously supported paradigm.

This approach to regulating competition may be new, but it is not original. On the contrary, the use of antitrust law to castigate firms that are seen as “too big and powerful,” promote visions of social justice, and facilitate laggard competitors (even at the expense of competition or consumer welfare) have been around since the inception of the Sherman Act.[302] In this sense, those who say that digital competition regulation is not competition law, and should therefore not be judged by competition-law standards,[303] are correct on the form but wrong on the substance.[304] They miss the bigger and more important point, which is that, regardless of its legal classification, digital competition regulation is competition regulation, just not the kind we have known for (at least) the last half a century.

The rationale that underpins—and may ultimately undermine—digital competition regulation can be explained as follows:[305]

• Competition is no longer about consumer-facing efficiency but about fairness and the correction of perceived power imbalances.
• In practice, this means improving the lot of some, while “leveling down” others, regardless of the respective merits or demerits of each group (or their products).
• In this world, “contestability” is not so much the ability to displace an incumbent through competition on the merits, but very much the reverse: It is about lowering the competitive bar to increase the number of companies in the market, full stop.

Whether or not this benefits consumers is largely immaterial, as the normative lodestars of digital competition regulation—fairness and contestability—are seen as having inherent moral value and are thus removed from any utilitarian calculus of countervailing efficiencies (except, arguably, increases in competitors’ market shares).

Ultimately, however, this “new” approach to competition will have to reckon with the same problems and contradictions as the erstwhile antitrust paradigms from which it draws inspiration:

• The minefield of redistributive policies is likely to hamstring investment and innovation by targeted digital platforms.
• It is also likely to encourage costly and self-defeating rent-seeking behavior by self-interested third parties.

Moreover, the irony is likely not lost on even the most casual observer that, for regulations so obsessed with “fairness,” it is fundamentally unfair for DCRs to siphon rents away from some companies and into others by fiat and to force those companies to share their hard-won competitive advantages with others who have not had the foresight or business acumen to make the same investments in a timely fashion.

• Ultimately, these dynamics will impede investment and curtail economic growth, affecting a macroeconomic transfer from the entire citizenry to a few politically favored domestic firms and to foreign jurisdictions with relatively less deleterious policies.[306]

It is difficult to overstate how big of a departure from competition law this approach to competition regulation is. But digital competition regulation is potentially more than just a digression from established principles in a relatively niche, technical field like competition law. Under the most expansive version of this interpretation, digital competition regulation heralds a new conception of the role and place of companies, markets, and the state in society.

In this “post-neoliberal” world,[307] the role of the state would not be to address market failures that harm consumers through discrete interventions guided by general, abstract, and reactive rules of general applicability (such as, among others, competition law), but to intercede aggressively to redraw markets, redesign products, pick winners, and redistribute rents—indeed, to act as the ultimate ordering power of the economy.[308]

It is not difficult to see how “old” competition-law principles, such as the consumer-welfare standard, effects-based analysis, and the procedural safeguards designed to cabin enforcers’ discretion, are anathema to this system, and in danger of being replaced by it.

But for now, this remains just a hypothesis, and some would say—perhaps rightly so—an alarmist one. Yet there are unmistakable signs—as unmistakable as social science will allow—that a new paradigm of political philosophy is in the making: from the rehabilitation of once-maligned idea of industrial policy,[309] to the rise of new activist movements like “Law and Political Economy” in U.S. law schools,[310] to the ascension in academia and policy of neo-Brandeisianism,[311] to recurrent proclamations of the “death of neoliberalism”[312] and its “idols,” including the consumer welfare standard in antitrust law.[313]

It is still too early to assume that this outcome is a foregone conclusion, however, and the potential global spread of digital competition regulations currently remains just that—a potential. As we gain more insight into the actual consequences of enacted digital competition regulations in places like the EU and Germany, and as other jurisdictions consider the problematic implications for their own economies, perhaps today’s regulatory momentum will be stymied. Only time will tell whether digital competition regulation was truly a sign of things to come, or merely a small but ultimately insignificant abrupt dirigiste turn in the zigzagging of antitrust history.[314] And only time will tell whether the approach to competition regulation promulgated by digital competition regulation will stay confined to the activities of a few large concerns and a handful of core platform services, or whether its logic will, in the end, seep into other spheres of policy and social life.

[1] Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on Contestable and Fair Markets in the Digital Sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828, 2022 O.J. (L 265) 1 (hereinafter “Digital Markets Act” or “DMA”).

[2] “Digital competition regulation” and “DCR” are used interchangeably throughout to refer both to rules already in place and to rules currently under consideration. Context on legislative status will be given where available and appropriate.

[3] The terms “competition law” and “antitrust law” are used interchangeably.

[4] See, e.g., DMA, supra note 1, at Art. 6(5) (“The gatekeeper shall not treat more favourably, in ranking and related indexing and crawling, services and products offered by the gatekeeper itself than similar services or products of a third party. The gatekeeper shall apply transparent, fair and non-discriminatory conditions to such ranking.”).

[5] See, e.g., id., at Art. 5(5) (“The gatekeeper shall allow end users to access and use, through its core platform services, content, subscriptions, features or other items, by using the software application of a business user, including where those end users acquired such items from the relevant business user without using the core platform services of the gatekeeper.”); Art 5(7) (“The gatekeeper shall not require end users to use, or business users to use, to offer, or to interoperate with, an identification service, a web browser engine or a payment service, or technical services that support the provision of payment services, such as payment systems for in-app purchases, of that gatekeeper in the context of services provided by the business users using that gatekeeper’s core platform services.”); Art. 6(4) (“The gatekeeper shall allow and technically enable the installation and effective use of third-party software applications or software application stores using, or interoperating with, its operating system….”); Art. 6(12) (“The gatekeeper shall apply fair, reasonable, and non-discriminatory general conditions of access for business users to its software application stores, online search engines and online social networking services….”).

[6] See, e.g., id., at Art. 5(2) (“The gatekeeper shall not… (a) process, for the purpose of providing online advertising services, personal data of end users using services of third parties that make use of core platform services of the gatekeeper.”); Art. 6(2) (“The gatekeeper shall not use, in competition with business users, any data that is not publicly available that is generated or provided by those business users in the context of their use of the relevant core platform services or of the services provided together with, or in support of, the relevant core platform services, including data generated or provided by the customers of those business users.”).

[7] See, e.g., id. at Art. 6(7) (“The gatekeeper shall allow providers of services and providers of hardware, free of charge, effective interoperability with, and access for the purposes of interoperability to, the same hardware and software features… as are available to services or hardware provided by the gatekeeper. Furthermore, the gatekeeper shall allow business users and alternative providers of services provided together with, or in support of, core platform services, free of charge, effective interoperability with, and access for the purposes of interoperability to, the same operating system, hardware or software features, regardless of whether those features are part of the operating system, as are available to, or used by, that gatekeeper when providing such services.”); Art 7(1) (“Where a gatekeeper provides number-independent interpersonal communications services…, it shall make the basic functionalities of its number-independent interpersonal communications services interoperable with the number-independent interpersonal communications services of another provider offering or intending to offer such services in the Union, by providing the necessary technical interfaces or similar solutions that facilitate interoperability, upon request, and free of charge.”).

[8] See, e.g., id. at Art. 6(10) (“The gatekeeper shall provide business users and third parties authorised by a business user, at their request, free of charge, with effective, high-quality, continuous and real-time access to, and use of, aggregated and non-aggregated data, including personal data, that is provided for or generated in the context of the use of the relevant core platform services or services provided together with, or in support of, the relevant core platform services by those business users and the end users engaging with the products or services provided by those business users.”); Art. 6(11) (“The gatekeeper shall provide to any third-party undertaking providing online search engines, at its request, with access on fair, reasonable and non-discriminatory terms to ranking, query, click and view data in relation to free and paid search generated by end users on its online search engines.”).

[9] See, e.g., DMA, supra note 1, at Recital 7 (“[T]he purpose of this Regulation is to contribute to the proper functioning of the internal market by laying down rules to ensure contestability and fairness for the markets in the digital sector in general, and for business users and end users of core platform services provided by gatekeepers in particular.”).

[10] Press Release, Amendment of the German Act Against Restraints of Competition, Bundeskartellamt (Jan. 19, 2021), https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2021/19_01_2021_GWB%20Novelle.html.

[11] Id.

[12] The Act on the Protection of Competition No. 4054, Official Gazette (Dec. 13, 1994) (Turk.).

[13] See, E-Pazaryeri Platformari Sektor Incelemesi Nihai Raporu, Turkish Competition Authority (2022), available at https://www.tpf.com.tr/dosyalar/2022/06/e-pazaryeri-si-raporu-pdf.pdf (Turkish language only).

[14] Arguably, however, there is an increased emphasis on “business rights.”

[15] See Lee & Ko (law firm), KFTC Proposes Ex-Ante Regulation of Platforms Under the “Platform Competition Promotion Act,” Legal 500 (Jan. 4, 2024), https://www.legal500.com/developments/thought-leadership/kftc-proposes-ex-ante-regulation-of-platforms-under-the-platform-competition-promotion-act.

[16] Park So-Jeong & Lee Jung-Soo, S. Korea Speeds Up to Regulate Platform Giants Such as Google or Apple, The Chosun Daily (Feb. 4, 2024), https://www.chosun.com/english/national-en/2024/02/04/MCCJQZTJ3ZC5JJ7NVDM46D6R2I.

[17] See, e.g., id.

[18] Monopoly Regulation and Fair Trade Act, Act. No, 3320, Dec. 31, 1980, amended by Act No. 18661, Dec. 28, 2021 (S. Kor.).

[19] Digital Markets Competition and Consumer Act, 2024 c.13 (UK) (hereinafter “DMCC”).

[20] See, e.g., DMCC, id. at Sec. 2, which defines companies with “strategic market status” as those with “substantial and entrenched market power.” By contrast, the DMA states: “Although Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) apply to the conduct of gatekeepers, the scope of those provisions is limited to certain instances of market power, for example dominance on specific markets and of anti-competitive behaviour, and enforcement occurs ex post and requires an extensive investigation of often very complex facts on a case by case basis. Moreover, existing Union law does not address, or does not address effectively, the challenges to the effective functioning of the internal market posed by the conduct of gatekeepers that are not necessarily dominant in competition-law terms.” DMA, supra note 1, at Recital 5.

[21] DMCC, supra note 19, at Part 1, Chap. 4.

[22] Press Release, New Bill to Stamp Out Unfair Practices and Promote Competition in Digital Markets, UK Competition and Markets Authority (Apr. 25, 2023), https://www.gov.uk/government/news/new-bill-to-stamp-out-unfair-practices-and-promote-competition-in-digital-markets.

[23] DMCC, supra note 19, at Part 4.

[24] See Competition Act 1998 c.41 (UK).

[25] See Press Release, supra note 22.

[26] Id.

[27] Id. (emphasis added).

[28] The DMCC defines “digital activities” as those involving the purchase or sale of goods over the internet, or the provision of digital content. DMCC, supra note 19, Sec. 3.

[29] The provisions on digital markets are covered in Part 1 of the DMCC. DMCC Part 2 covers competition.

[30] Digital Platform Services Inquiry, Australian Competition and Consumer Commission, https://www.accc.gov.au/inquiries-and-consultations/digital-platform-services-inquiry-2020-25 (last accessed May 13, 2024) (hereinafter “DPS Inquiry”).

[31] Digital Platform Services Inquiry, Interim Report 5, Australian Competition and Consumer Commission (2022), at 5 (“The ACCC recommends a new regulatory regime to promote competition in digital platform services. The regime would introduce new competition measures for digital platforms.”). The term “digital regime” has also been used to describe the authority granted to the UK’s newly created Digital Markets Unit. See Moritz Godel, Mayumi Louguet, Paula Ramada, & Rhys Williams, Monitoring and Evaluating the Digital Markets Unit (DMU) and New Pro-Competition Regime for Digital Markets, London Economics (Jan. 2023), available at https://assets.publishing.service.gov.uk/media/64538076c33b460012f5e65d/monitoring_and_evaluating_the_new_pro-competition_regime_for_digital_markets.pdf.

[32] Digital Platform Services Inquiry, Interim Report 5, id. at 5.

[33] American Innovation and Choice Online Act, S. 2992, 117^th Cong. (2022) (hereinafter “AICOA”).

[34] Open App Market Act, S. 2710, 117^th Cong. (2022) (hereinafter “OAMA”).

[35] ACCESS Act of 2021, H.R. 3849, 117^th Cong. (2021) (hereinafter “ACCESS Act”).

[36] AICOA, supra note 33, at § 3.

[37] OAMA, supra note 34. The bill’s title reads: “to promote competition and reduce gatekeeper power in the app economy, increase choice, improve quality, and reduce costs for consumers.”

[38] Press Release, Klobuchar, Grassley, Colleagues to Introduce Bipartisan Legislation to Rein in Big Tech, U.S. Sen. Amy Klobuchar (Oct. 14, 2021), https://www.klobuchar.senate.gov/public/index.cfm/2021/10/klobuchar-grassley-colleagues-to-introduce-bipartisan-legislation-to-rein-in-big-tech. The bill’s title is somewhat ambiguous, as it reads: “to provide that certain discriminatory conduct by covered platforms shall be unlawful, and for other purposes.” See AICOA, supra note 33.

[39] See id.

[40] Comments of the American Bar Association Antitrust Law Section Regarding the American Innovation and Choice Online Act (S. 2992), American Bar Association Antitrust Law Section (Apr. 27, 2022) at 5, available at https://appliedantitrust.com/00_basic_materials/pending_legislation/Senate_2021/S2992_aba_comments2022_04_27.pdf (hereinafter “ABA Letter”).

[41] Press Release, Klobuchar Statement on Judiciary Passage of Legislation to Set App Store Rules of the Road, U.S. Senator Amy Klobuchar (Feb. 3, 2022), https://www.klobuchar.senate.gov/public/index.cfm/2022/2/klobuchar-statement-on-judiciary-committee-passage-of-legislation-to-set-app-store-rules-of-the-road.

[42] This is stated in the title of the bill. The ACCESS Act also claims to “encourage entry by reducing or eliminating the network effects that limit competition with the covered platform.” See ACCESS Act, supra note 35, at § 6(c).

[43] Press Release, Lawmakers Reintroduce Bipartisan Legislation to Encourage Competition in Social Media, U.S. Sen. Mark R. Warner (May 25, 2022), https://www.warner.senate.gov/public/index.cfm/2022/5/lawmakers-reintroduce-bipartisan-legislation-to-encourage-competition-in-social-media. See also Legislation Summary, The ACCESS Act of 2022, U.S. Senator Mark R. Warner (May 25, 2022), available at https://www.warner.senate.gov/public/_cache/files/9/f/9f5af2f7-de62-4c05-b1dd-82d5618fb843/BA9F3B16A519F296CAEDE9B7EFAB0B7A.access-act-one-pager.pdf.

[44] Online Intermediation Platforms Market Inquiry, Summary of Final Report and Remedial Actions, South African Competition Commission (2023) at 13, available at https://www.compcom.co.za/wp-content/uploads/2023/07/CC_OIPMI-Summary-of-Findings-and-Remedial-action.pdf (hereinafter “SACC Report”).

[45] Projeto de Lei PL 2768/2022, https://www.camara.leg.br/proposicoesWeb/fichadetramitacao?idProposicao=2337417 (Braz.) (Portuguese language only) (hereinafter “PL 2768”).

[46] Id. at Art. 4.

[47] See id. at Art. 5.

[48] DMA, supra note 1, at Recitals 2 & 31. On the two objectives being intertwined, see id. at Recital 34.

[49] Id. at Recital 10.

[50] Id.

[51] Anti-Competitive Practices by Big Tech Companies, Fifty Third Report, Standing Committee on Finance, 17th Lok Sahba (India) (2022-23) at 29, available at https://eparlib.nic.in/bitstream/123456789/1464505/1/17_Finance_53.pdf.

[52] Report of the Committee on Digital Competition Law (India) (2024), available at https://www.mca.gov.in/bin/dms/getdocument?mds=gzGtvSkE3zIVhAuBe2pbow%253D%253D&type=open (hereinafter “CDC Report”).

[53] Id. at 151-92, Annexure IV: Draft Digital Competition Bill.

[54] The Competition Act, No. 12 of 2003, INDIA CODE (1993) (hereinafter “ICA”).

[55] CDC Report, supra note 52 at 4, 42.

[56] See ICA, supra note 54, at preamble. The ICA does not mention “contestability.”

[57] Report of the High-Powered Expert Committee on Competition Law and Policy (India) (1999), available at https://theindiancompetitionlaw.wordpress.com/wp-content/uploads/2013/02/report_of_high_level_committee_on_competition_policy_law_svs_raghavan_committee.pdf.

[58] See id. at 1.1.9 (“The ultimate raison d’être of competition is the interest of the consumer.”). See also id. at 1.2.0.

[59] See id. at 2.4.1.

[60] Id. at 3.2.8. “If multiple objectives are allowed to rein in the Competition Policy, conflicts and inconsistent results may surface detriment to the consumers… In addition, such concerns as community breakdown, fairness, equity and pluralism cannot be quantified easily or even defined acceptably… it needs to be underscored that attempts to incorporate such concerns may result in inconsistent application and interpretation of Competition Policy, besides dilution of competition principles. The peril is that the competitive process may be undermined, if too many objectives are built into the Competition Policy and too many exemptions/exceptions are laid down in dilution of competition principles.”

[61] See, e.g., Pelle Beems, The DMA in the Broader Regulatory Landscape of the EU: An Institutional Perspective, 19 Eur. Comp. J. 1, 27 (2023); Pierre Larouche & Alexandre De Streel, The European Digital Market: A Revolution Grounded on Traditions, 12 J. Eur. Comp. L. & Practice 542, 542 (2021) (arguing that the DMA’s conceptual nature is in a “difficult epistemological position”).

[62] See Nicolas Petit, The Proposed Digital Markets Act (DMA): A Legal and Policy Review, 12 J. Eur. Competition L. & Practice 529, 530 (2021) (“The DMA is essentially sector-specific competition law.”). The DMA’s competition-law DNA is also explicitly reflected in Section 1.4.1 of the Legislative Financial Statement, which is annexed to the DMA proposal. See id. (“The general objective of this initiative is to ensure the proper functioning of the internal market by promoting effective competition in digital markets.”). See also Beems, supra note 61, at 27 (“In my view, it could be desirable to qualify the DMA as a specific branch of competition law that applies to gatekeepers.”).

[63] See Giuseppe Colangelo, The European Digital Markets Act and Antitrust Enforcement: A Liaison Dangereuse, 5 Eur. L. Rev., 597, 610 (2022) (“In service of this goal of speedier enforcement, the DMA dispenses with economic analysis and the efficiency-oriented consumer welfare test, substituting lower legal standards and evidentiary burdens.”). See also Pablo Iba?n?ez Colomo, The Draft Digital Markets Act: A Legal and Institutional Analysis, 12 J. Eur. Comp. L. & Prac. 561, 566 (2021).

[64] It should be underscored that “power” here means something much broader and general than the narrow concept of “market power” under competition law. Unlike “market power,” assertions that so-called “Big Tech” wield “power” are not intended to invoke a state-of-the art term, but rather are general references to companies’ size, resources, and capacity. Neo-Brandeisians like Lina Khan and Tim Wu often refer to the “power” of Big Tech in such terms. See generally Tim Wu, The Curse of Bigness: Antitrust in the Gilded Age (2018). For Wu, like Khan, the harmful “power” of Big Tech refers not just to concentrated economic power or market power, but to a range of other mechanisms by which these firms allegedly hold sway over democracy, elections, and society at-large. See also Zephyr Teachout & Lina Khan, Market Structure and Political Law: A Taxonomy of Power, 9 Duke J. Const. L. & Pub. Pol’y 37,74 (2014).

[65] See, e.g., Joshua Q. Nelson, Joe Concha: “Big Tech is More Powerful than Government” in Terms of Speech, Fox News (Jan. 27 2021), https://www.foxnews.com/media/joe-concha-big-tech-more-powerful-government-speech; How 5 Tech Giants Have Become More like Governments than Companies, Fresh Air (Oct. 26, 2017), https://www.npr.org/2017/10/26/560136311/how-5-tech-giants-have-become-more-like-governments-than-companies (“New York Times tech columnist Farhad Manjoo warns that the ‘frightful five’—Amazon, Google, Apple, Microsoft and Facebook—are collectively more powerful than many governments.”).

[66] See, e.g., Press Release, Klobuchar, Grassley Statements on Judiciary Committee Passage of First Major Technology Bill on Competition to Advance to Senate Floor Since the Dawn of the Internet, U.S. Sen. Amy Klobuchar (Jan. 20, 2022), https://www.klobuchar.senate.gov/public/index.cfm/2022/1/klobuchar-grassley-statements-on-judiciary-committee-passage-of-first-major-technology-bill-on-competition-to-advance-to-senate-floor-since-the-dawn-of-the-internet (“Everyone acknowledges the problems posed by dominant online platforms.”).

[67] See, e.g., DMA, supra note 1, at Recitals 3, 4, 33, & 62.

[68] See, e.g., The Social Dilemma (Exposure Labs, Argent Pictures & The Space Program, 2020); Tech Monopolies: Last Week Tonight with John Oliver (HBO, 2022); Yanis Varoufakis, Technofeudalism: What Killed Capitalism (2023); Shoshana Zuboff, The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power (2019).

[69] See Luca Bertuzzi, EU Commission Launches Connectivity Package with ‘Fair Share’ Consultation, EurActiv (Feb. 28, 2023), https://www.euractiv.com/section/digital/news/eu-commission-launches-connectivity-package-with-fair-share-consultation. See also Daniele Condorelli, Jorge Padilla, & Zita Vasas, Another Look at the Debate on the “Fair Share” Proposal: An Economic Viewpoint, Compass Lexecon (2023), available at https://www.telefonica.com/en/wp-content/uploads/sites/5/2023/05/Compass-Lexecon-Report-on-the-fair-share-debate.pdf. On the supposed bargaining-power imbalance between large traffic originators and telecommunications companies, see id. at 1.34(d) (“There is a risk that the current unregulated arrangements result in no payments from LTOs due to asymmetries of information between industry participants, free-riding among LTOs, and the large imbalance in bargaining power between LTOs and TELCOs.”) See also id. at 3.77, 3.78 and 3.79-3.84 for the argument that the power imbalances require intervention. For a different view of “fair share,” see Giuseppe Colangelo, Fair Share of Network Costs and Regulatory Myopia: Learning from Net Neutrality Mistakes, 16 L. Innov. & Tech. 218 (2024).

[70] See Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Act 2021 (Austl.); for a defense of legislation forcing digital platforms to compensate media companies, see Zephyr Teachout, The Big Unfriendly Tech Giants, The Nation (Dec. 25, 2023), https://www.thenation.com/article/society/big-tech-nondiscrimination.

[71] News Media Bargaining Code, Australian Competition and Consumer Commission, https://www.accc.gov.au/focus-areas/digital-platforms/news-media-bargaining-code/news-media-bargaining-code (last accessed May 14, 2024).

[72] See, e.g., Journalism and Competition Preservation Act of 2023, S. 1094, 118th Cong. (2023); Online News Act (S.C. 2023, c.23) (Can.).

[73] See, e.g., DMA, supra note 1, at Recitals 1, 15, 20, & 62, and Art.1(b); DMCC, supra note 19, at Sec. 6(b); PL 2768, supra note 45, at Art. 2 (which defines the regulation’s targets as companies with the “power to control essential access”); German Competition Act in the version published on 26 June 2013 (Bundesgesetzblatt (Federal Law Gazette) I, p. 1750, 3245), as last amended by Article 1 of the Act of 25 October 2023 (Federal Law Gazette I, p. 294), Art.19(a) (1)5 (Ger.) (hereinafter “German Competition Act”).

[74] See, e.g., DMA, id. at Recital 23, Art. 3 & Art. 3(8)(a); DMCC, id. at Sec. 6(a); German Competition Act, id. at Art.19(a).

[75] “From Price to Power”? Reorienting Antitrust for the New Political Economy, panel at Antitrust, Regulation and the Next World Order conference, Youtube.com (Feb. 2, 2024), https://www.youtube.com/watch?v=rWNIhGA8Rx8&ab_channel=Antitrust%2CRegulationandtheNextWorldOrder.

[76] See infra, Section III.

[77] DMA, supra note 1, at Recital 4 (emphasis added).

[78] Id. at Recital 33.

[79] See Press Release, Digital Markets Act: Commission Welcomes Political Agreement on Rules to Ensure Fair and Open Digital Markets, European Commission (Mar. 25, 2022), https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1978 (“What we want is simple: Fair markets also in digital. We are now taking a huge step forward to get there—that markets are fair, open and contestable…. This regulation, together with strong competition law enforcement, will bring fairer conditions to consumers and businesses for many digital services across the EU.”) (emphasis added). See also Press Release, Klobuchar, Grassley, Colleagues to Introduce Bipartisan Legislation to Rein in Big Tech, U.S. Sen. Amy Klobuchar (Oct. 14, 2021), https://www.klobuchar.senate.gov/public/index.cfm/2021/10/klobuchar-grassley-colleagues-to-introduce-bipartisan-legislation-to-rein-in-big-tech (joint statement by Sens. Amy Klobuchar and Chuck Grassley with references to “fair competition,” “fair prices,” “unfairly preferencing their own products,” “fairer prices,” “unfairly limiting consumer choices,” “fair rules for the road”).

[80] For example, the DMA mentions the term “fairness,” or some variation thereof, 90 times in 66 pages.

[81] William G. Shepherd, Contestability vs. Competition: Once More, 71 Land Econ. 299, 304 (1995).

[82] DMA, supra note 1, at Recital 11 (emphasis added).

[83] See id. at Arts. 5-7.

[84] See id. at Art. 3.

[85] See CDC Report, supra note 52, at 2.

[86] See, e.g., German Competition Act, supra note 73, at Section 19a(1) (stating that, in determining the paramount significance for competition across an undertaking’s markets, there shall be particular account taken of its dominant position; financial strength or access to other resources; vertical integration; access to data relevant to competition; and the relevance of its activities for third-party access to supply and sales markets). See also DMCC, supra note 19, at Secs. 5 & 6 (substantial and entrenched market power is a cumulative criterion, together with a position of strategic significance); DMA, supra note 1, at Recital 5 & Art. 3 (market power is irrelevant because the criteria for designation are (a) having a significant impact on the internal market; (b) providing a core platform service that is an important gateway for business users to reach end users; and (c) enjoying an entrenched and durable position). PL 2768, supra note 45, does not mention market power, and instead references control of essential access. The U.S. tech bills do not define covered platforms on the basis of market power, either.

[87] The DMA explicitly rejects it. See DMA, id. at Recital 23.

[88] Examples include online-intermediation services, online search engines, online social-networking services, and video-sharing platform services. See DMA, id. at Art. 2.

[89] See Elise Dorsey, Geoffrey A. Manne, Jan M. Rybnicek, Kristian Stout, & Joshua D. Wright, Consumer Welfare & the Rule of Law: The Case Against the New Populist Antitrust Movement, 47 Pepp. L. Rev. 861, 916 (2020).

[90] There are some exceptions to this. Some digital competition regulations seem to incorporate consumer-welfare considerations. One example is the KFTC’s recently proposed digital competition regulation, which is putatively aimed at protecting business users and consumers and would allow for an efficiency defense. See Lee & Ko, supra note 15. (NB: At the time of writing the text of the regulation is unavailable in English).

[91] See “From Price to Power”? Reorienting Antitrust for the New Political Economy, supra note 75.

[92] See also infra, Sections II.C & II.D.

[93] On the essential facilities doctrine in the United States, see Philip K. Areeda, Essential Facilities: An Epithet in Need of Limiting Principles, 58 Antitrust L.J. 841 (1990). Since the U.S. Supreme Court’s ruling in Trinko, no plaintiff has successfully litigated an essential facilities claim to judgment. See Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2003) (“As a general matter, the Sherman Act “does not restrict the long recognized right of [a] trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal.’”) (citations omitted).

[94] See European Commission, Communication from the Commission—Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, OJ C 45, 24.2.2009 (2009), at Recital 13.

[95] Richard Whish & David Bailey, Competition Law (10^th ed. 2021), at 142-3.

[96] See, e.g., Christopher M. Seelen, The Essential Facilities Doctrine: What does it Mean to be Essential? 80 Marq. L. Rev. 1117, 1123 (1997), discussing free-riding and the moral-hazard considerations implicit in defining essential facilities as essential to a competitor, rather than to competition. (“[A]pplication of the doctrine often focuses unduly on the effect of the denial of access on the plaintiff’s ability to compete-not on the infringement of competition which is the objective of the antitrust law.” (citations omitted), and at 1124 (“There exists a moral hazard when plaintiffs bring an essential facility claim against a single competitor. Indeed, firms might try to use the doctrine to take a ‘free ride’ on the efforts of a competitor.”). See also, Verband Deutscher Wetterdienstleister v. Google, Reference No. 408 HKO 36/13, Court of Hamburg (Apr. 4, 2013) at 4 (“[A]pplicant’s members have been participating and will continue to participate in Google Search as ‘free riders.’ They demand favorable positioning without offering compensation.”); Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977) (applying the rule of reason to territorial restrictions because they might be imposed by a manufacturer who wishes to prevent dealers from free-riding on point-of-sale services provided by another dealer).

[97] See, e.g., Brown Shoe Co. v. United States, 370 U.S. 294, 344 (1962) (“It is competition, not competitors, which the Act protects.”). See also Donna E. Patterson and Carl Shapiro, Transatlantic Divergence in GE/Honeywell: Causes and Lessons, Antitrust 18 (2001); Maureen K. Ohlhausen & John M. Taladay, Are Competition Officials Abandoning Competition Principles?, 13 J. Comp. L. & Practice 463 (2022).

[98] See, e.g., Trinko, 540 U.S. at 408; Pac. Bell Tel. Co. v. linkLine Commc’ns, Inc., 555 U.S. 438, 448 (2009); Chavez v. Whirlpool Corp., 113 Cal. Rptr. 2d, 182-83 (Ct. App. 2001); Foremost Pro Color, Inc. v. Eastman Kodak Co., 703 F.2d 534, 545 (9th Cir. 1983) (“The antitrust laws [do] not impose a duty on [firms] . . . to assist [competitors] . . . to ‘survive or expand.’”) (citations omitted).

[99] Mario Monti, Speech at the Third Nordic Competition Policy Conference, Stockholm: Fighting Cartels Why and How? Why Should We be Concerned with Cartels and Collusive Behaviour? (Sept. 11, 2000). See also Trinko 540 U.S. at 408 (characterizing cartels as “the supreme evil of antitrust”).

[100] Although there is a rebuttable presumption to the contrary, undertakings can argue that agreements containing hardcore restrictions should benefit from an individual exemption under Article 101(3) TFEU. See Judgment of 13 October 2011, Pierre Fabre, C?439/09, ECLI:EU:C:2011:649. Moreover, “hardcore restrictions,” like cartels, need to be restrictions of competition “by object,” within the meaning of Art. 101(1) TFEU. Undertakings can hence try to demonstrate that a given hardcore restriction, examined in its economic and legal context, is objectively justified and does not fall within the prohibition laid down in Article 101(1) TFEU. See Opinion of Advocate General Wahl delivered on 16 July 2017, Coty, C-230/16, ECLI:EU:C:2017:603.

[101] For an extensive set of views opposing those endorsed by proponents of digital competition regulations, see, e.g., The Global Antitrust Institute Report on the Digital Economy (Joshua D. Wright & Douglas H. Ginsburg, eds., Nov. 11, 2020), https://gaidigitalreport.com.

[102] W. Brian Arthur, Increasing Returns and the New World of Business, 74 Harv. Bus. Rev. 100, 106 (1996). See also Dirk Auer & Geoffrey A. Manne, Antitrust Dystopia and Antitrust Nostalgia: Alarmist Theories of Harm in Digital Markets and their Origins, 28 Geo. Mason L. Rev. 1279, 1294 (2023) (“But while these increasing returns can cause markets to become more concentrated, they also imply that it is often more efficient to have a single firm serve the entire market.”).

[103] See ABA letter, supra note 40.

[104] See Law No. 12.529 of 30 November, 2011 (Braz.), available at https://www.icao.int/sustainability/Documents/Compendium_FairCompetition/LACAC/LAW_12529-2011_en.pdf.

[105] See PL 2768, supra note 45, at Art. 4.

[106] See supra, Section I.

[107] See id.

[108] See, e.g., Rambus v. Fed. Trade Comm’n, 522 F.3d 456, 459 (D.C. Cir. 2008) (“[D]eceit merely enabling a monopolist to charge higher prices than it otherwise could have charged—would not in itself constitute monopolization.”). See also Judgment of 4 August 2023, Meta Platforms v. Bundeskartellamt, Case C 252-21, ECLI:EU:C:2023:537.

[109] For example, where a small company increases prices or downgrades its product, this can generally be corrected through competition, as the company will lose market share and be forced out of the market unless it changes its behavior. But when the same outcome is achieved through restrictions of competition or the misuse of market power, the market may be unable to respond effectively, and intervention may become necessary.

[110] We question whether this was ever the true intent behind DCRs. See infra, Section III.D. Some of the DCRs that do reference consumer benefits are the UK’s DMCC, supra note 19, at Sec.29, Australia’s Digital Platform Services Inquiry, Interim Report 5, supra note 31, at 6-7, and the recent Korean proposal, supra note 15.

[111] As noted earlier, market power is generally not a requirement of DCRs. One exception is the DMCC, where market power is one of the cumulative criteria for a company to have “significant market status,” and thus a precondition for the imposition of prohibitions and mandates. See DMCC, supra note 20.

[112] One of the best examples is the German Competition Act, supra note 73, at Section 19a. The German Competition Act states that “the relatively strict causality required between an undertaking’s dominant position and exploitative conduct […] has been abolished. Under the new rules, a normative causal link between the dominant position and the anticompetitive conduct is sufficient to establish an exploitative abuse.” Digital Markets Regulation Handbook (Thomas Graf, et al., eds. 2022) at 38-39, available at https://www.clearygottlieb.com/-/media/files/rostrum/22092308%20digital%20markets%20regulation%20handbookr16. In other words, not only is market power not required to designate an undertaking as having “paramount cross-market significance,” but specific forms of conduct can be mandated or prohibited without the need to prove a causal nexus between paramount cross-market significance and any finding of anticompetitive conduct. See also infra, Section II.B.

[113] See, e.g., Svend Albaek, Consumer Welfare in EU Competition Policy, in Aims and Values in Competition Law, 67, 75 (Caroline Heide-Jørgensen, Ulla Neergaard, Christian Bergqvist, & Sune T. Poulsen eds., 2013) (“In practice it turns out that we should understand ‘consumers’ as customers rather than ‘real’ or ‘final’ consumers. Paragraph 84 of the General Guidelines takes a first step towards clarifying this: ‘[C]onsumers within the meaning of Article 81(3) are the customers of the parties to the agreement and subsequent purchasers.”). See also Article 102 (c) TFEU, which prohibits dominant companies from “applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage” (emphasis added). For a U.S. perspective, see, e.g., Kenneth Heyer, Welfare Standards and Merger Analysis: Why Not the Best? 2 Comp. Pol’y Int’l 29 (2006).

[114] In the United States, the clearest early exponent of these ideas was Justice Louis D. Brandeis, who coined the term “curse of bigness” to refer to the material, social, and political ills that accompanied large corporations. See, e.g., Louis D. Brandeis, The Curse of Bigness: Miscellaneous Papers of Louis D. Brandeis (Osmond K. Fraenkel ed., 1934). In Europe, the notion is associated with the ordoliberal school. See, e.g., Wilhelm Roepke, A Humane Economy: The Social Framework of the Free Market (2014) at 32 (“If we want to name a common denominator for the social disease of our times, then it is concentration”).

[115] See, e.g. Wu, supra note 64. See also Sally Lee, Tim Wu Explains How Big Tech is Crippling Democracy, Columbia Magazine (Spring 2019), https://magazine.columbia.edu/article/how-mega-corporations-are-crippling-democracy (“Asked whether bigness must be bad by its very nature, Tim Wu replies: ‘well, it’s designed to put its own interests over human interests, to grow like a cancer, and to never die. I once heard someone say that if a corporation were a person, it would be a sociopath. Which brings us to the real question: who is this country for? For humans or these artificial entities?’”). See also Teachout & Khan, supra note 64, at 37 (“Ever-increasing corporate size and concentration undercut democratic self-governance by disproportionately influencing governmental actors, as recognized by campaign finance reformers.”); id. at 40-41 (“Antitrust means, for us, government power to limit company size and concentration; this incarnation is an ethos, not a legal term.”).

[116] See, e.g., Amanda Lotz, “Big Tech” Isn’t One Big Monopoly — It’s 5 Companies All in Different Businesses, The Conversation (Mar. 23, 2018), https://theconversation.com/big-tech-isnt-one-big-monopoly-its-5-companies-all-in-different-businesses-92791; Isobel A. Hamilton, Tim Cook Says He’s Tired of Big Tech Being Painted as a Monolithic Force That Needs Tearing Apart, Business Insider (May 7, 2019), https://www.businessinsider.com/apple-ceo-tim-cook-tired-of-big-tech-being-viewed-as-monolithic-2019-5. (“Tech is not monolithic. That would be like saying ‘all restaurants are the same,’ or ‘all TV networks are the same.’”) See also Nicolas Petit, Big tech and the Digital Economy: The Moligopoly Scenario (2022); Frank H. Easterbrook, Cyberspace and the Law of the Horse, 1996 U. Chi. Leg. Forum 207 (1996).

[117] See Friso Bostoen, Understanding the Digital Markets Act, 68 Antitrust Bull. 263, 282 (2023) (“It is difficult to find a common thread here. For starters, NIICS and cloud services are one-sided rather than multisided, so they can hardly be core platform services”).

[118] See Lazar Radic, Gatekeeping, the DMA, and the Future of Competition Regulation, Truth on the Market (Nov. 8, 2023), https://truthonthemarket.com/2023/11/08/gatekeeping-the-dma-and-the-future-of-competition-regulation. On tech disruption of traditional industries, see Adam Hayes, 20 Industries Threatened by Tech Disruption, Investopedia (Jan. 23, 2022), https://www.investopedia.com/articles/investing/020615/20-industries-threatened-tech-disruption.asp; on the bipartisan hostility toward “Big Tech” in the United States, see Nitasha Tiku, How Big Tech Became a Bipartisan Whipping Boy, Wired (Oct. 23, 2017), https://www.wired.com/story/how-big-tech-became-a-bipartisan-whipping-boy.

[119] See, e.g., Lina Khan, Amazon’s Antitrust Paradox, 126 Yale L.J. 710 (2017); Teachout & Khan, supra note 64; Kirk Ott, Event Notes: The Consumer Welfare Standard is Dead, Long Live the Standard, ProMarket (Nov.1, 2022), https://www.promarket.org/2022/11/01/event-notes-the-consumer-welfare-standard-is-dead-long-live-the-standard; Zephyr Teachout, The Death of the Consumer Welfare Standard, ProMarket (Nov. 7, 2023), https://www.promarket.org/2023/11/07/zephyr-teachout-the-death-of-the-consumer-welfare-standard.

[120] See, e.g., Rana Foroohar, The Great US-Europe Antitrust Divide, Financial Times (Feb. 5, 2024), https://www.ft.com/content/065a2f93-dc1e-410c-ba9d-73c930cedc14.

[121] Neo-Brandeisians often argue that antitrust law should strive to uphold a dispersed market structure and protect small business. See, e.g., Lina Khan & Sandeep Vaheesan. Market Power and Inequality: The Antitrust Counterrevolution and its discontents, 11 Harv. L. & Pol’y Rev. 235, 237 (2017) (“Antitrust laws must be reoriented away from the current efficiency focus toward a broader understanding that aims to protect consumers and small suppliers from the market power of large sellers and buyers, maintain the openness of markets, and disperse economic and political power.”).

[122] See Khan & Vaheesan, id. at 236-37 (“Antitrust laws historically sought to protect consumers and small suppliers from noncompetitive pricing, preserve open markets to all comers, and disperse economic and political power. The Reagan administration—with no input from Congress—rewrote antitrust to focus on the concept of neoclassical economic efficiency.”); id. at 294 (“It is important to trace contemporary antitrust enforcement and the philosophy underpinning it to the Chicago School intellectual revolution of the 1970s and 1980s, codified into policy by President Reagan. By collapsing a multitude of goals into the pursuit of narrow ‘economic efficiency,’ both scholars and practitioners ushered in standards and analyses that have heavily tilted the field in favor of defendants.”).

[123] See, e.g., Nicolas Petit, Understanding Market Power, Robert Schuman Centre for Advanced Studies Working Paper No. RSC 14 (2022) at 1 (“Antitrust laws are concerned with undue market power. In an economic conception of the law, antitrust rules of liability strike down anticompetitive business conduct or mergers that represent illegitimate market power strategies.”).

[124] On inefficient and efficient market exit, see Dirk Auer & Lazar Radic, The Growing Legacy of Intel, 14 J. Comp. L. & Prac. 15 (2023).

[125] According to some, the interpretation of market power as synonymous with size and concentration is the European reading of the concept. See Petit, supra note 123, at 1 (“When European antitrust lawyers think about market power, they do not direct their attention to consumer prices. They think about corporate size and industrial concentration, see giant American firms, and deduce that they have a domestic market power problem.”).

[126] See, e.g., Or Brook, Non-Competition Interests in EU Antitrust Law: An Empirical Study of Article 101 TFEU (1^st ed. 2023) (discussing the different goals and values of EU competition law throughout the years); Konstantinos Stylianou & Marcos Iacovides, The Goals of EU Competition Law: A Comprehensive Empirical Investigation, 42 Legal Studies 1, 17-18 (2020) (“EU competition law is not monothematic but pursues a multitude of goals historically and today.”). In the United States, see Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself, 7 (1978) (finding the collection of socio-political goals at the time to be “mutually incompatible”); Joshua D. Wright & Douglas H. Ginsburg, The Goals of Antitrust: Welfare Trumps Choice, 81 Fordham L. Rev. 2405, 2405 (2013) (“The Court interpreted the Sherman and Clayton Acts to reflect a hodgepodge of social and political goals….”); Thomas A. Lambert & Tate Cooper, Neo-Brandeisianism’s Democracy Paradox, 49 J. Corp. L. 18 (2023) (“In the mid-Twentieth Century, U.S. courts embraced the sort of multi-goaled deconcentration agenda Neo-Brandeisians advocate.”); Joshua D. Wright, Elyse Dorsey, Jonathan Klick, & Jan M. Rybnicek, Requiem for a Paradox: The Dubious Rise and Inevitable Fall of Hipster Antitrust, 51 Ariz. St. L.J. 293, 300-01 (2019) (discussing multi-goaled approach of mid-20^th-century antitrust).

[127] See, e.g., Ioannis Lianos, Polycentric Competition Law, 71 Current Leg. Probs. 161 (2019); Maurice E. Stucke, Reconsidering Antitrust’s Goals, 53 B.C.L. Rev. 551, 551 (2012) (“The quest for a single economic goal has failed…. This article proposes how to integrate antitrust’s multiple policy objectives into the legal framework.”); The Consumer Welfare Standard in Antitrust: Outdated or a Harbor in a Sea of Doubt?: Hearing Before the Subcomm. on Antitrust, Competition and Consumer Rights of the S. Comm. on the Judiciary, 115th Cong. (2017) (statement of Barry Lynn) (arguing for the return to a “political antitrust”); Dina I. Walked, Antitrust as Public Interest Law: Redistribution, Equity, and Social Justice, 65 Antitrust Bull. 87, 87 (2020) (“Once we frame antitrust as public interest law, in its broadest sense, we are empowered to use it to address inequality.”); Saksham Malik, Social Justice as a Goal of Competition Policy, Kluwer Competition Law Blog (Feb. 23, 2024), https://competitionlawblog.kluwercompetitionlaw.com/2024/02/23/social-justice-as-a-goal-of-competition-policy.

[128] It is no coincidence that critics of the “status quo” consistently attempt to cast economic analysis and (certain) antitrust case law as a mistake brought about by judges adhering to the ideology of “neoliberalism,” rather than as the result of organic, piecemeal progression. See, e.g., Khan & Vaheesan, supra note 120.

[129] Margrethe Vestager, Keynote of EVP Vestager at the European Competition Law Tuesdays: A Principles Based Approach to Competition Policy (Oct. 25, 2022), https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_22_6393. See also Ohlhausen & Taladay, supra note 97, at 465.

[130] See DMA, supra note 1, at 6(5) (“The gatekeeper shall not treat more favourably, in ranking and related indexing and crawling, services and products offered by the gatekeeper itself than similar services or products of a third party. The gatekeeper shall apply transparent, fair and non-discriminatory conditions to such ranking.”).

[131] See Press Release, Antitrust: Commission Accepts Commitments by Amazon Barring It from Using Marketplace Seller Data and Ensuring Equal Access to Buy Box and Prime, European Commission (Dec. 20, 2022), https://ec.europa.eu/commission/presscorner/detail/en/ip_22_7777.

[132] See Lazar Radic, Apple Fined at the 11^th Hour Before DMA Enters into Force, Truth on the Market (Mar. 5, 2024), https://truthonthemarket.com/2024/03/05/apple-fined-at-the-11th-hour-before-the-dma-enters-into-force/.

[133] Giuseppe Colangelo (@GiuColangelo), Twitter (Oct. 5, 2023, 2:37 PM), https://x.com/GiuColangelo/status/1709910565496172793?s=20.

[134] See Digital Platform Service Inquiry Firth Interim Report, supra note 31, at 14 (emphasis added).

[135] See CDC Report, supra note 55.

[136] Antitrust, Regulation, and the Next World Order conference, supra note 75.

[137] See Herbert Hovenkamp, The Slogans and Goals of Antitrust Law, 25 N.Y.U. J. Legis. & Pub. Pol’y 705, 715 (2023) (discussing the rhetorical appeal of the anti-bigness narrative but concluding that “the immense popularity of the ‘anti-bigness’ rhetoric aside, one is hard pressed to find a single antitrust decision that broke up or even disciplined a large firm simply because it was too big”). See also id. at 744 (“The concerns about large absolute size show up in the hostility directed against large internet platforms”).

[138] See supra, Section II.

[139] See supra, Section I.

[140] See, e.g., DMA, supra note 1, at Recital 4 (identifying “unfair practices” as resulting from “serious imbalances in bargaining power”).

[141] Ex Ante Regulation in Digital Markets – Background Note, DAF/COMP (2021) 15, 16, OECD (Dec. 1, 2021) (“Framing regulations in terms of fairness may therefore also refer to redistribution, better treatment of users, or a host of other goals”). See also id. at 19.

[142] Pablo Ibáñez Colomo, The Draft Digital Markets Act: A Legal and Institutional Analysis, 12 J. Comp. L. & Prac. 561, 562 (2021). See also id. at 565 (“The driver of many disputes that may superficially be seen as relating to leveraging can be more rationalised, more convincingly, as attempts to re-allocate rents away from vertically-integrated incumbents to rivals.”).

[143] Fiona Scott Morton & Cristina Caffarra, The European Commission Digital Markets Act: A Translation, VoxEU (Jan. 5, 2021), https://cepr.org/voxeu/columns/european-commission-digital-markets-act-translation (emphasis added). We contest the assertion that the DMA and other digital competition regulations aim to create competition, rather than merely aid competitors. See supra, Section III.

[144] On the relationship between rent seeking and ex-ante regulation, see generally Thom Lambert, Rent-Seeking and Public Choice in Digital Markets, in The Global Antitrust Institute Report on the Digital Economy (Joshua D. Wright & Douglas H. Ginsburg, eds., Nov. 11, 2020), https://gaidigitalreport.com/2020/08/25/rent-seeking-and-public-choice-in-digital-markets.

[145] See, e.g., Making the Digital Market Easier to Use: The Act on Improving Transparency and Fairness of Digital Platforms (TFDPA), Japanese Ministry of Economy, Trade, and Industry (Apr. 23, 2021), https://www.meti.go.jp/english/mobile/2021/20210423001en.html. The Ministry of Economy, Trade, and Industry (METI) specifically links the TFDPA to benefits for SMEs. In its press release introducing the TFDPA, METI starts by listing the benefits of digital platforms for SMEs, freelancers, and start-ups, later indicating that the transparency and fairness provisions contained therein are aimed at protecting them from “abusive” conduct, such as self-preferencing or unilateral fee changes. See also Ebru Gokce Dessemond, Restoring Competition in ‘‘Winner-Took-All’’ Digital Platform Markets, UNCTAD (Feb. 4, 2020), https://unctad.org/news/restoring-competition-winner-took-all-digital-platform-markets (“Competition law provisions on unfair trade practices and abuse of superior bargaining position, as found in competition laws of Japan and the Republic of Korea, would empower competition authorities in protecting the interests of smaller firms vis-à-vis big platforms.”) See SACC Report, supra note 44, at 1, 3, 6, 13 (concluding at 13 that the DMA-style remedies proposed in the report will provide benefits such as “greater visibility and opportunity for smaller South African platforms to acquire customers through Google Search,” and “providing a level playing field for small businesses selling through these platforms, including fairer pricing and opportunities for gaining visibility and customer acquisition relative to the large national businesses they compete with”).

[146] See generally infra, Section III.A. See also DMA, supra note 1, at Recital 2 (referring to “a significant degree of dependence of both business users and end users”). See also id. at Recitals 20, 43, & 75. On self-inflicted dependence, see Geoffrey A. Manne, The Real Reason Foundem Foundered, ICLE Antitrust & Consumer Protection Research Program White Paper 2018-02 (2018) at 6, available at https://laweconcenter.org/wp-content/uploads/2018/05/manne-the_real_reaon_foundem_foundered_2018-05-02-1.pdf (“A content provider that makes itself dependent upon another company for distribution (or vice versa, of course) takes a significant risk. Although it may benefit from greater access to users, it places itself at the mercy of the other—or at least faces great difficulty (and great cost) adapting to unanticipated, crucial changes in distribution over which it has no control. This is a species of what economists call the ‘asset specificity’ problem.”).

[147] For commentary on how bans on self-preferencing benefit large, but less-efficient competitors, see Lazar Radic & Geoffrey A. Manne, Amazon Italy’s Efficiency Offense, Truth on the Market (Jan. 11, 2022), https://truthonthemarket.com/2022/01/11/amazon-italys-efficiency-offense.

[148] See, e.g., Adam Kovacevich, The Digital Markets Act’s “Statler & Waldorf” Problem, Medium (Mar. 7 2024), https://medium.com/chamber-of-progress/the-digital-markets-acts-statler-waldorf-problem-2c9b6786bb55 (arguing that the companies that lobbied for the DMA are content aggregators like Yelp, Tripadvisor, and Booking.com; big app makers like Spotify, Epic Games, and Match.com; and rival search engines like Ecosia, Yandex, and DuckDuckGo).

[149] For example, in 2023, Epic Games’ revenue was roughly $5.6 billion, and it employed about 4,300 workers. See J. Clement, Gross revenue generated by Epic Games worldwide from 2018 to 2026, Statista (Dec. 8, 2023), https://www.statista.com/statistics/1234106/epic-games-annual-revenue and https://www.statista.com/statistics/1234218/epic-games-employees; J. Clement, Number of Epic Games employees worldwide from 2018 to 2026, Statista (Mar. 22, 2024). According to the OECD, an SME is a small or medium-sized enterprise that employs fewer than 250 people. See OECD, Enterprises by business size, OECD (last accessed May 18, 2024), https://data.oecd.org/entrepreneur/enterprises-by-business-size.htm#:~:text=In%20small%20and%20medium%2Dsized,More.

[150] Mathieu Pollet, France to Prioritise Digital Regulation, Tech Sovereignty During EU Council Presidency, EurActiv (Dec. 14, 2021), https://www.euractiv.com/section/digital/news/france-to-prioritise-digital-regulation-tech-sovereignty-during-eu-council-presidency.

[151] See, e.g., Matthias Bauer & Fredrik Erixon, Europe’s Quest for Technology Sovereignty: Opportunities and Pitfalls, ECIPE (2020), https://ecipe.org/publications/europes-technology-sovereignty; Dennis Csernatoni, et al., Digital Sovereignty: From Narrative to Policy?, EU Cyber Direct (2022), https://eucyberdirect.eu/research/digital-sovereignty-narrative-policy.

[152] See Digital Sovereignty for Europe, European Parliament (2020), available at https://www.europarl.europa.eu/RegData/etudes/BRIE/2020/651992/EPRS_BRI(2020)651992_EN.pdf. For further discussion, see Lazar Radic, Gatekeeping, the DMA, and the Future of Competition Regulation, Truth on the Market (Nov. 8, 2023), https://truthonthemarket.com/2023/11/08/gatekeeping-the-dma-and-the-future-of-competition-regulation.

[153] See Press Release, Digital Markets Act: Commission Designates Six Gatekeepers, European Commission (Sep. 6, 2023), https://ec.europa.eu/commission/presscorner/detail/en/ip_23_4328.

[154] See, e.g., Meredith Broadbent, Implications of the Digital Markets Act for Transatlantic Cooperation, CSIS 2 (2021), https://csis-website-prod.s3.amazonaws.com/s3fs-public/publication/210915_Broadbent_Implications_DMA.pdf?VersionId=xiVAF5jjSEdwakIvtNE3v2dSWlVdIUTG (pointing out that Andreas Schwab, the rapporteur assigned by the European Parliament to the DMA, had repeatedly called for the need to limit the scope of the DMA to non-European firms, and noting that ultimately “the Schwab report, released in June [2021], narrowed the initial scope of the DMA and increased the size thresholds, meaning the DMA would not apply to non-U.S. companies like the European-headquartered Booking.com”).

[155] We give some examples below, but see SACC Report, supra note 44, at 3 (discussing the remedies Google must implement to address the distortion by which small and new platforms struggle for visibility and customers). As the SACC Report notes, the “distortion” in question is apparently the lack of sufficiently equitable outcomes: “The Inquiry finds that the Google Search dominance and business model distorts platform competition as small and new platforms struggle for visibility and customer acquisition. To address this distortion, the remedial actions have focused on improving paid and organic result visibility for smaller SA platforms.” Id.

[156] See id. at 2.

[157] See id. at 1,3,6, 13. See also notes 145 and 155 and accompanying text. On HDP-owned SMEs, specifically, see supra note 44, at 1, 5, 8 (stating at 1 that the goals of the DCR are aligned with those of the South African Competition Act, including achieving greater participation in the economy by SMEs and HDPs). Indeed, the SACC Report is suffused with measures requiring gatekeepers to bolster HDPs. Some examples are given below, but see id. at 5 (requiring Takealot to implement an “HDP Programme” that would include rebates, personalized onboarding, subscription fee waivers for the first three months, and advertising credit”).

[158] Note the particularly telling quirk that the “unfairness” here stems from having the resources to invest in search-engine optimization.

[159] SACC Report, supra note 44, at 3.

[160] Id.

[161] Id. at 10.

[162] Id. at 3 and 6. In the full-length version of the report, the DMA is mentioned even more. See Online Intermediation Platforms Market Inquiry, Final Report and Decision, South African Competition Commission 6, 9, 23, 32 & 67 (2023).

[163] Even the DMA’s supporters accept that the regulation is not grounded in economics. See, e.g., Cristina Caffarra, Europe’s Tech Regulation is Not Economic Policy, Project Syndicate (Oct. 11, 2023), https://www.project-syndicate.org/commentary/european-union-digital-markets-act-will-not-tame-big-tech-by-cristina-caffarra-2023-10?barrier=accesspaylog.

[164] Press Release, Apple Announces Changes to iOS, Safari, and the App Store in the European Union, Apple Inc., (Jan. 25, 2024), https://www.apple.com/newsroom/2024/01/apple-announces-changes-to-ios-safari-and-the-app-store-in-the-european-union.

[165] See, e.g., Andy Yen, Apple’s DMA Compliance Plan Is a Trap and a Slap in the Face for the European Commission, Proton (2024), https://proton.me/blog/apple-dma-compliance-plan-trap; Press Release, Apple’s Proposed Changes Reject the Goals of the DMA, Spotify (Jan. 26, 2024), https://newsroom.spotify.com/2024-01-26/apples-proposed-changes-reject-the-goals-of-the-dma; Morgan Meaker, Apple Isn’t Ready to Release Its Grip on the App Store, Wired (Jan. 26, 2024), https://www.wired.com/story/apple-app-store-sideloading-europe-dma.

[166] See, supra note 148 (discussing who lobbied for the DMA).

[167] Dirk Auer, Matthew Lesh, & Lazar Radic, Digital Overload: How the Digital Markets, Competition and Consumers Bill’s Sweeping New Powers Threaten Britain’s Economy, IEA Perspectives 24,25 (Sep. 18, 2023) https://iea.org.uk/publications/digital-overload-how-the-digital-markets-competition-and-consumers-bills-sweeping-new-powers-threaten-britains-economy. See also DMCC, supra note 19, at Secs. 38-45.

[168] Id. at 25.

[169] Id. at Sec. 38 (referring to transactions between a firm with SMS and a third party). The term is not defined as having a legal meaning different from the obvious, literal one. Namely, that “a” third party means any third party engaged in a transaction involving one or several of the digital activities falling under the DMCC’s scope).

[170] Auer, Lesh & Radic, supra note 167, at 24-25. As the authors note, “[t]his would be entirely unprecedented as there is, to our knowledge, no similar power available to any other competition regulator anywhere else in the world.” Id. at 25.

[171] It is becoming clearer and clearer that the test for compliance with the DMA’s rules will be whether competitors and complementors enjoy an increase in market shares. See, e.g., Foo Yun Chee & Martin Coulter, EU’s Digital Markets Act hands boost to Big Tech’s smaller rivals, Reuters (Mar. 11, 2024), https://www.reuters.com/technology/eus-digital-markets-act-hands-boost-big-techs-smaller-rivals-2024-03-08/. The public policy chief of Ecosia, one of Google’s competitors in search, had this to say about the implementation of the DMA: “The implementation of these new rules is a step in the right direction, but the proof of the pudding is always in the eating, and whether we see any meaningful changes in market share.” Id. (emphasis added).

[172] Robert Pitofsky, The Political Content of Antitrust, 127 U. Penn. L. Rev. 1051, 1059 (1979). See, also, e.g., Judgment of 6 September 2016, Intel v. Commission, Case C?413/14 P, EU:C:2017:632, para. 134 (“Thus, not every exclusionary effect is necessarily detrimental to competition. Competition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation”) (emphasis added).

[173] See Alfonso Lamadrid & Pablo Ibáñez Colomo, The DMA—Procedural Afterthoughts, Chillin’ Competition (Sep. 5, 2022), https://chillingcompetition.com/2022/09/05/the-dma-procedural-afterthoughts (“Unlike competition law, the DMA is not so much about protecting consumers, but competitors/third parties.”); Chee & Coulter, supra note 171 (“As the world’s biggest tech companies revamp their core online services to comply with the European Union’s landmark Digital Markets Act, the changes could give some smaller rivals and even peers a competitive edge.”).

[174] See, e.g., Auer & Radic, supra note 124.

[175] See generally supra, Section II. See also, e.g., OECD, Competition on the Merits, DAF/COMP(2005)27, 9 (2005), available at https://www.oecd.org/competition/abuse/35911017.pdf (“It is widely agreed that the purpose of competition policy is to protect competition, not competitors”). See also Brown Shoe Co. v. United States, 370 U.S. at 344 (“It is competition, not competitors, which the [Sherman] Act protects.”).

[176] Ohlhausen & Taladay, supra note 97, at 465.

[177] DMA, supra note 1, at, e.g., recitals 8, 11, 97, 105, and especially 107 (stating that the objective of the DMA is to “ensure a contestable and fair digital sector in general and core platform services in particular”).

[178] See generally William J. Baumol, Contestable Markets: An Uprising in the Theory of Industry Structure, 72 Am. Econ. Rev. 1 (1982); William J. Baumol, John Panzar & Robert D. Willig, Contestable Markets and the Theory of Industry Structure (revised ed. 1988).

[179] See, e.g., Fiona Scott Morton & Cristina Caffarra, The European Commission Digital Markets Act: A Translation, VoxEU (Jan. 5, 2021), https://cepr.org/voxeu/columns/european-commission-digital-markets-act-translation (“The EC law is designed to operate much more strongly on the dimension of barriers to entry and to competition in the expectation that, if entry barriers are lowered, more competition can create a competitive price or quality.”).

[180] Marius Schwartz, The Nature and Scope of Contestability Theory, 38 Oxford Econ. Papers (New Series), Supplement: Strategic Behaviour and Industrial Competition 37, 38 (1986).

[181] See William A. Brock, Contestable Markets and the Theory of Industry Structure: A Review Article, 91 J. Pol. Econ. 1055, 1059-62 (1983) (“But nowhere in the book is a game precisely defined as modern theory expects. That is not easy, but until it is done contestability theory must be used with caution. Unpalatable hidden assumptions may be necessary to obtain Baumol et al.’s conclusions.”).

[182] Id. at 1064.

[183] Don Coursey, R. Mark Isaac and Vernon L. Smith, Natural Monopoly and Contested Markets: Some Experimental Results, 27 J. L. & Econ. 91, 109 (1984) (“Qualitatively it can be seen that the mean duopoly price is more competitive than the mean monopoly price in eighteen out of eighteen periods; mean duopoly quantity is greater in eighteen of eighteen periods, and mean duopoly efficiency is greater in eighteen of eighteen of eighteen periods.”).

[184] See id. at 38-39 (noting that “the basic idea that threat of entry may constrain pricing in concentrated industries has long been recognized” and discussing its role in the history of competition economics).

[185] See generally Neil Komesar, Imperfect Alternatives: Choosing Institutions in Law, Economics, and Public Policy (1994).

[186] See, e.g., Questions and Answers, Digital Markets Act: Ensuring Fair and Open Digital Markets, European Commission (Sep. 6, 2023), https://ec.europa.eu/commission/presscorner/detail/en/qanda_20_2349 (“[Gatekeepers] will therefore have to proactively implement certain behaviours that make the markets more open and contestable.”).

[187] See e.g., Unlocking Digital Competition: Report of the Digital Competition Expert Panel (Mar. 2019) at 4, available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/785547/unlocking_digital_competition_furman_review_web.pdf (arguing that network effects and returns to scale of data are entrenched and that “competition for the market cannot be counted on, by itself, to solve the problems associated with market tipping and ‘winner-takes-most’”) (hereinafter “Furman Report”). See also id. at 32-41 (discussing the purported causes of concentration in digital markets, including data-driven network effects and economies of scale). This report was the roadmap for the UK’s DMCC. See id. at 4.

[188] For background see Maurice E. Stucke, Behavioral Antitrust and Monopolization, 8 J. Comp. L. & Econ. 545, 567 (2012) (arguing that behavioral economics can explain how firms maintain monopoly power through “lock-in” strategies and by exploiting consumers’ biases). See also, more specifically, Luís Cabral, Justus Haucap, Geoffrey Parker, Georgios Petropoulos, Tommaso Valletti, & Marshall Van Alstyne, The EU Digital Markets Act: A. Report from a Panel of Economic Experts, Publications Office of the European Union 6 (2021), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3783436 (“The combination of economies of scale and scope, network effects, zero pricing, consumer behavioural biases, create new market dynamics with sudden radical decreases in competition (‘tipping’) and concentration of economic power around a few ‘winner-takes-it-all/most’ online platforms…. We (the Panel) agree with the consensus that has emerged over the last years that existing ex-post competition and regulatory tools are insufficient to address the challenges of digital platforms.”); id. at 3 and 17 (arguing that high app store fees are the result of customer and supplier lock-in), and 18 (“Online aftermarket sales are subject to behavioural biases in in-app advertising and to lock-in effects in apps that exhibit social network effects.”).

[189] Furman Report, supra note 187, at 4, 8, & 35.

[190] See id. at 4. Note, however, that the Furman Report advised against a “radical shift” from the established basis of competition law, including the use of the consumer welfare standard. But see Cabral, et al., supra note 188, at 5 (“the Panel endorses the vision encapsulated in the DMA, including the designation of large gatekeeper platforms and a series of ex-ante obligations they should comply with.”).

[191] See, e.g., Jan Krämer & Daniel Schnurr, Big Data and Digital Markets Contestability: Theory of Harm and Data Access Remedies, 18 J. Comp. L. & Econ. 255 (2021).

[192] See infra, Section III.D for further discussion of this point.

[193] See Arthur, supra note 102, at 106.

[194] See German Competition Act, supra note 73, at Art. 19a(4) (which prohibits “creating or appreciably raising barriers to market entry or otherwise impeding other undertakings by processing data relevant for competition that have been collected by the undertaking”), 19a(4)(a) (which prohibits “making the use of services conditional on the user agreeing to the processing of data from other services of the undertaking or a third-party provider without giving the user sufficient choice as to whether, how and for what purpose such data are processed”), and 19a(4)(b) (which prohibits “processing data relevant for competition received from other undertakings for purposes other than those necessary for the provision of its own services to these undertakings without giving these undertakings sufficient choice as to whether, how and for what purpose such data are processed”). Certain terms, such as “sufficient choice,” could imply a moving target that is difficult to comply with. See, similarly, German Competition Act, id. at Art. 19a(7)(a) (which prohibits “demanding the transfer of data or rights that are not absolutely necessary for the purpose of presenting these offers”)(emphasis added); 19(a)(7)(b) (which prohibits “making the quality in which these offers are presented conditional on the transfer of data or rights which are not reasonably required for this purpose”)(emphasis added); and Art. 19a(5) (prohibiting gatekeepers from refusing the interoperability of products or services or data portability, or making it more difficult). See also DMA, supra note 1 at 6(2) (prohibiting gatekeepers from using, “in competition with business users, any data that is not publicly available that is generated or provided by those business users in the context of their use of the relevant core platform services”) and 6(9) (requiring that gatekeepers “provide end users and third parties authorised by an end user, at their request and free of charge, with effective portability of data provided by the end user or generated through the activity of the end user in the context of the use of the relevant core platform service, including by providing, free of charge, tools to facilitate the effective exercise of such data portability, and including by the provision of continuous and real-time access to such data.”).

[195] See, e.g., Mikolaj Barczentewicz, Privacy and Security Risks of Interoperability and Sideloading Mandates, Truth on the Market (Jan. 26, 2022), https://truthonthemarket.com/2022/01/26/privacy-and-security-risks-of-interoperability-and-sideloading-mandates/; Mikolaj Barczentewicz, Privacy and Security Implications of Regulation of Digital Services in the EU and in the US, TTLF Working Papers No. 84, Stanford-Vienna Transatlantic Technology Law Forum (2022), available at https://law.stanford.edu/wp-content/uploads/2022/01/TTLF-WP-84_Barczentewicz.pdf.

[196] Furman Report, supra note 187, at 74 (emphasis added).

[197] See, e.g., id. at 37 (“Switching and multi-homing by users of platforms can be the antidote to strong network effects, but in many digital markets a combination of the above restrictions means that these competitive dynamics are limited.”).

[198] Margrethe Vestager, Competition Commissioner, European Commission, Speech at the OECD/G7 Conference: Competition and the Digital Economy (Jun. 3, 2019), https://ec.europa.eu/commission/commissioners/2014-2019/vestager/announcements/competition-and-digital-economy_en.

[199] Geoffrey A. Manne & Sam Bowman, Data Portability and Interoperability: The Promise and Perils of Data Portability Mandates as a Competition Tool, ICLE Issue Brief (Sep. 10, 2020) at 9, available at https://laweconcenter.org/wp-content/uploads/2020/09/Data-Portability-Paper-v4-2020-09-03.pdf.

[200] See Jean-Pierre Dubé, Günter J. Hitsch, & Peter E. Rossi, Do Switching Costs Make Markets Less Competitive?, 46 J. Marketing Rsrch. 435, 435 (2009) (“In the simulations, prices are as much as 18% lower with than without switching costs. More important, equilibrium prices do not increase even in the presence of switching costs that are of the same order of magnitude as product price.”).

[201] See, e.g., Sam Bowman, Mandatory Interoperability Is Not a ‘Super Tool’ for Platform Competition, Truth on the Market (November 29, 2021), https://truthonthemarket.com/2021/11/29/mandatory-interoperability-is-not-a-super-tool-for-platform-competition/ (“None of this is to say that interoperability mandates can never work, but their benefits can be oversold, especially when their costs are ignored.”).

[202] See Dube, et al., supra note 200, at 435.

[203] On self-preferencing in the context of antitrust, see Radic & Manne, supra note 147.

[204] See, e.g., Vestager, supra note 198 (quoted in Kyriakos Fountoukakos & Samuel Hall, Competition Issues in the Digital Era Eu Developments, CPI Antitrust Chron. (Aug. 2019) at 7, available at https://www.competitionpolicyinternational.com/wp-content/uploads/2019/08/CPI-Fountoukakos-Hall.pdf) (“One of the biggest issues we face is with platform businesses that also compete with companies that depend on the platform… competing with others that rely on the platform but also setting the rules that govern that competition. It’s easy to see how this sort of double role can bring a risk of conflict of interest; a risk that the operator of a platform will be tempted to tweak the rules and features of the platform to benefit its own services.”).

[205] See Geoffrey A. Manne, Against the vertical discrimination presumption, Concurrences No. 2-2020 at 1 (2020). See also Jonathan M. Barnett, The Host’s Dilemma: Strategic Forfeiture in Platform Markets for Informational Goods, 124 Harv. L. Rev. 1861 (2011); Andrei Hagiu & Kevin Boudreau, Platform Rules: Multi-Sided Platforms as Regulators, in Platforms, Markets and Innovation (Annabelle Gawer, ed. 2009)

[206] Joshua D. Wright, Defining and Measuring Search Bias: Some Preliminary Evidence, ICLE Antitrust & Consumer Protection White Paper 2011-01 (Nov. 3, 2011) at 5, available at https://laweconcenter.org/resource/defining-and-measuring-search-bias-some-preliminary-evidence/.

[207] See Manne, supra note 205, at 1-2 (citing examples from the literature showing that complementors and consumers alike often benefit from platform self-preferencing). See also Sam Bowman & Geoffrey A. Manne, Platform Self-Preferencing Can be Good for Consumers and Even Competitors, Truth on the Market (Mar. 4, 2021), https://laweconcenter.wpengine.com/2021/03/04/platform-self-preferencing-can-be-good-for-consumers-and-even-competitors.

[208] See Manne, The Real Reason Foundem Foundered, supra note 146, at 6-11.

[209] On the role of these concepts in antitrust law, see supra, Section II. On data portability and free riding, see Sam Bowman, Data Portability: The Costs of Imposed Openness, Int’l. Ctr. for Law & Econ. (2020), available at https://laweconcenter.org/wp-content/uploads/2020/09/ICLE-tldr-Data-Portability.pdf.

[210] On the economic theory of contestability, see generally Baumol, supra note 178; Baumol, Panzar & Willig, supra note 178.

[211] DMCC, supra note 19, at Secs. 24 & 48.

[212] See ACCESS Act, supra note 42, at § 4(e).

[213] Id. at § 7.

[214] Id. at § 7(b)(4).

[215] Id. at § 4(e)(1).

[216] See Kovacevich, supra note 148 (“[T]he Digital Markets Act directs Big Tech companies to redesign their products to give their rivals more opportunity—in the form of alternative app stores, guaranteed links and visibility in search results, and mandatory de-linking of integrated services. But early indications are that the complainant companies won’t be satisfied with more opportunity. They are already complaining that DMA will be a failure unless it can create the equal outcomes that they desire.”) (emphasis in original).

[217] See Remarks by Executive-Vice President Vestager and Commissioner Breton on the Opening of Non-Compliance Investigations under the Digital Markets Act, European Commission (Mar. 25 2024), https://ec.europa.eu/commission/presscorner/detail/es/speech_24_1702 (“Stakeholders provided feedback on the compliance solutions offered. Their feedback tells us that certain compliance measures fail to achieve their objectives and fall short of expectations.”).

[218] See Kovacevich, supra note 148 (collecting examples).

[219] The terms “leveling down” and “leveling up” are, to our knowledge, not normally deployed in the fields of antitrust law and Digital Competition Regulation. They are, however, used frequently in areas of constitutional law, such as equality and free speech. In the context of equality law, see generally Deborah L. Brake, When Equality Leaves Everyone Worse Off: The Problem of Levelling Down in Equality Law, 46 Wm. & Mary L. Rev. 513 (2004) (citing examples such as achieving equality between men and women by leveling down men’s opportunities until they reach parity with women’s, or leveling down public spending in wealthier school districts to reach equality with poorer districts).

[220] Kadir Bas & Kerem Cem Senli, E-Ticaret Kanunu De?i?iklikleri: Rekabeti Koruyor Mu Yoksa Engelliyor Mu? [Amendments to E-Commerce Directive: Protecting or Preventing Competition?] 30 Marmara Üniversitesi Hukuk Fakültesi Hukuk Ara?t?rmalar? Dergisi 250 (2024).

[221] Id. at 255.

[222] Id. at 260. The Turkish law also imposes significant constraints on gatekeepers’ advertising budgets in another effort to level down incumbents. See id. at 271 (“Another example of atypical regulations envisaged in the E-Commerce Law is the limitations imposed on the advertising and discount budgets of large-scale ECISPs.”).

[223] See SACC Report, supra note 44.

[224] See, e.g., DMA, supra note 1, at Art. 6(7) (establishing a duty to provide interoperability with the gatekeepers’ services, free of charge). See also DMA, id., at Arts. 5(4), 5(10), 6(8), 6(9), & 7(1).

[225] See infra, Section III.D. See also Verband Deutscher Wetterdienstleister v. Google, supra note 96, at 3.

[226] See Issue Spotlight: Self-Preferencing, Int’l. Ctr. for Law & Econ. (last updated Nov. 10, 2022), https://laweconcenter.org/spotlights/self-preferencing.

[227] See, e.g., Geoffrey A. Manne & Joshua D. Wright, If Search Neutrality Is the Answer, What’s the Question?, 2012 Colum. Bus. L. Rev. 151, 197 (“By offering a link not only to McDonalds’ website, but also to a map showing the locations of the nearest restaurants, Google is offering up results in different forms and hoping that one will satisfy the user’s preferences. In this setting, there is no economic justification for requiring a search engine to offer another site’s rather than its own simply because there happen to be other sites that do, indeed, offer such content (and would like cheaper access to consumers). Meanwhile, the implication that this requirement exists essentially because Google has not always offered results in this form (it is now ‘leveraging its dominance into ancillary markets’ rather than ‘offering the same product it always has, only in a more advanced format’) is an affront to the dynamism and innovation of high-tech markets.”).

[228] Geoffrey A. Manne, Error Costs in Digital Markets, in The Global Antitrust Institute Report on the Digital Economy 33, 83 (Joshua D. Wright & Douglas H. Ginsburg eds., 2020).

[229] Verband Deutscher Wetterdienstleister v. Google, supra note 96, at 3.

[230] See generally Bowman & Manne, supra note 207.

[231] Id. at 19.

[232] DMCC, supra note 19, at Sec. 20(3)(c).

[233] Id.

[234] See Auer, Lesh, & Radic, supra note 170, at 18.

[235] See, e.g., William Baumol, The Free Market Innovation Machine 196 (2002) (“Oligopolistic competition among large, high-tech, business firms, with innovation as a prime competitive weapon, ensures continued innovative activities and, very plausibly, their growth. In this market form, in which a few giant firms dominate a particular market, innovation has replaced price as the name of the game in a number of important industries.”); Hadi Houlla & Aurelien Portuese, The Great Revealing: Taking Competition in America and Europe Seriously, ITIF Schumpeter Project on Competition Policy 23 (2023), available at https://www2.itif.org/2023-us-eu-competition.pdf (“In highly innovative industries, greater firm size and concentration lower industry-wide costs. A European study shows that larger high-tech firms could increase technological knowledge better than smaller ones… When economies of scale or network effects are large, firms must be sufficiently large to be efficient.”); Joseph A. Schumpeter, Capitalism, Socialism, and Democracy, 100-1 (1942) (“There cannot be any reasonable doubt that under the conditions of our epoch such [technological] superiority is as a matter of fact the outstanding feature of the typical large-scale unit of control.”).

[236] Two-sided markets connect distinct sets of users whose demands for the platform are interdependent—i.e., consumers’ demand for a platform increases as more products are available and, conversely, sellers’ demand for a platform increases as additional consumers use the platform, increasing the overall potential for transactions. These network effects can be direct (more consumers on one side attract more consumers on the same side), or indirect (more consumers on one side attract more consumers on the other side). See, e.g., Bruno Jullien, Alessandro Pavan, & Marc Rysman, Two-Sided Markets, Pricing and Network Effects, 4 Handbook of Industrial Organization 485, 487 (2021) (“A central aspect of platform economics is the role of network effects, which apply when a product is valued based on the extent to which other market participants adopt or use the same product.”); OECD Policy Roundtables, Two-Sided Markets 11 (Dec. 17, 2009), available at https://www.oecd.org/daf/competition/44445730.pdf.

[237] See, e.g., DMA, supra note 1, at Art. 14 (establishing a duty to report mergers that would ordinarily fall under the relevant EU merger-control rules threshold); Art. 18(2) (empowering the Commission to prohibit gatekeepers from entering into future concentrations concerning core platform services or any digital products or services, in cases where gatekeepers have engaged in “systematic non-compliance.”); DMCC, supra note 19, at Sec. 55 (mandating companies with SMS to notify certain mergers, even though the UK does not have a compulsory notification regime).

[238] See, e.g., Dirk Auer & Geoffrey A. Manne, Apple v Epic: The Value of Closed Systems, Int’l. Ctr. L. & Econ. (Apr. 20, 2021), available at https://laweconcenter.org/wp-content/uploads/2021/04/tldr-Apple-v-Epic.pdf.

[239] This argument was accepted in the context of in-app payment systems by the U.S. District Court in Epic Games, Inc. v. Apple, Inc., 67 F.4th 946, 971 (9th Cir. 2023) (“The district court credited Apple’s rationale that its restrictions seek to enhance consumer appeal and differentiate Apple products by improving iOS security and privacy.”). On the security and privacy risks posed by sideloading and interoperability, see, for example, Barczentewicz, Privacy and Security Implications of Regulation of Digital Services, supra note 195; Bjorn Lundqvist, Injecting Security into European Tech Policy, CEPA Report (2023), https://cepa.org/comprehensive-reports/reining-in-the-gatekeepers-and-opening-the-door-to-security-risks.

[240] “Open” and “closed” platforms are not synonymous with “good” and “bad” platforms. These are legitimate differences in product design and business philosophy, and neither is inherently more restrictive than the other. See, e.g., Andrei Hagiu, Proprietary vs. Open Two-Sided Platforms and Social Efficiency, Harvard Business School Strategy Unit Working Paper No. 09-113 (2007) at 2-3 (explaining that there is a “fundamental welfare tradeoff between two-sided proprietary… platforms and two-sided open platforms, which allow ‘free entry’ on both sides of the market” and thus “it is by no means obvious which type of platform will create higher product variety, consumer adoption and total social welfare”). See also Barnett, The Host’s Dilemma, supra note 205, at 1927.

[241] See, e.g., Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 748–49 (1988) (Stevens, J., dissenting) (“A demonstrable benefit to interbrand competition will outweigh the harm to intrabrand competition that is caused by the imposition of vertical nonprice restrictions on dealers.”); Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007) (“For, as has been indicated already, the antitrust laws are designed primarily to protect interbrand competition, from which lower prices can later result.”).

[242] For a tongue-in-cheek remark, see Herbert Hovenkamp (@Sherman1890), Twitter (Jan. 15, 2024, 7:22 AM), https://x.com/Sherman1890/status/1746870481393762534?s=20 (“yet antitrust policy pursues big tech as if they were crack houses.”). See also Robert Armstrong and Ethan Wu, What Big Tech Antitrust Gets Wrong, An Interview with Herbert Hovenkamp, Financial Times (Jan. 19, 2024), https://www.ft.com/content/4eec8bc3-c892-4704-ae66-a4432c6d4fd7 (“With Big Tech, we’re looking at probably the most productive part of the economy. The rate of innovation is high. They spend a lot of money on R&D. They are among the largest patent holders. There’s very little evidence of collusion. They seem to be competing with each other quite strongly. They pay their workers relatively well and have fairly educated workforces. None of this is a sign that these are industries we should be pursuing. That doesn’t mean they don’t do some anti-competitive things. But the whole idea that we should be targeting Big Tech strikes me as fundamentally wrong-headed.”). It should be noted that the comment was made in the context of antitrust law. However, the general sentiment about the unique hostility of certain regulators and legislatures towards certain tech companies could be extrapolated, mutatis mutandis, to digital competition regulation, especially considering its competition-oriented elements See supra, Section II.

[243] See supra, Section II.A. See also generally Auer & Manne, Antitrust Dystopia and Antitrust Nostalgia, supra note 102.

[244] See, e.g., Oles Andriychuk, Do DMA Obligations for Gatekeepers Create Entitlements for Business Users?, 11 J. Antitrust Enforcement. 123, 127 (2022) (“The means for allowing the second-tier ersatz-Big Tech to scale up is punitive: to slow down the current gatekeepers by imposing upon them a catalogue of exceptionally demanding obligations.”) (emphasis added); id. at 131 (“This punitive nature of the DMA also means that the obligations can be blatantly arduous and interventionist.”) (emphasis added).

[245] See supra, Section III.A.

[246] See DMA, supra note 1, at Art. 7(9). There is also a limited exemption in which the gatekeeper can show that, due to exceptional circumstances beyond its control, complying with the obligations of the DMA would endanger the economic viability of its operation in the EU. See DMA, id. at Art. 9(1).

[247] See id. at Art. 7(9) (permitting such a defense only when “such measures are strictly necessary and proportionate and are duly justified by the gatekeeper”) (emphasis added).

[248] See Graf, et al. supra note 112, at 59.

[249] See SACC Report, supra note 44.

[250] Digital Platform Services Inquiry, Interim Report 5, supra note 31, at 14.

[251] Id. at § 7.2.4.

[252] For example, the ACCC has said that “[t]he drafting of obligations should consider any justifiable reasons for the conduct (such as necessary and proportionate privacy or security justifications). Id. at 123 (emphasis added).

[253] See PL 2768, supra note 45, at Art. 11.

[254] As discussed in Section I, supra, PL 2768 pursues a multiplicity of goals, and there is no telling how much weight (if any) would be afforded to consumer protection under Art. 10.

[255] German Competition Act, supra note 73, at Art. 19a(7).

[256] See Jens-Uwe Franck & Martin Peitz, Section 19a of the Reformed German Competition Act: A (Too) Powerful Weapon to Tame Big Tech?, CPI Antitrust Chronicle (March 2021) at 4, available at https://www.competitionpolicyinternational.com/wp-content/uploads/2021/03/6-Section-19a-of-the-Reformed-German-Competition-Act-A-Too-Powerful-Weapon-to-Tame-Big-Tech-By-Jens-Uwe-Franck-Martin-Peitz.pdf (“Pursuant to the general rules for competition enforcement under German law, as a matter of principle, in abuse cases the competition authority is entrusted with the task of determining, measuring, and balancing pro- and anticompetitive effects and/or the efficiency losses and gains of a scrutinized practice.”).

[257] See AICOA supra note 33 at § 3. As discussed in Section II, supra, “material harm to competition” already establishes a lower (but also fundamentally different) threshold for the plaintiff than the standard typically applied in antitrust law, as it implies a showing of harm to competitors, rather than to competition.

[258] See Graf et al., supra note 112, at 76.

[259] DMCC, supra note 19, at Sec. 19(10).

[260] CMA, Digital Markets Competition Regime Guidance, CMA194con DRAFT (May 24, 2024), at Sec. 3.11, available at https://assets.publishing.service.gov.uk/media/6650a56d8f90ef31c23ebaa6/Digital_markets_competition_regime_guidance.pdf.

[261] CMA, Prioritisation Principles, CMA Corporate Report (Oct. 30, 2023), https://www.gov.uk/government/publications/cma-prioritisation-principles/cma-prioritisationprinciples (emphasis added). See also CMA, Digital Markets Competition Regime Guidance, id. at Sec. 7.23.

[262] DMCC, supra note 19, at Sec. 29(1)-(3). See also A New Pro-Competition Regime for Digital Markets: Advice of the Digital Markets Taskforce, Document CMA-135 (2020), at Sec. 4.40, available at https://assets.publishing.service.gov.uk/media/5fce7567e90e07562f98286c/Digital_Taskforce_-_Advice.pdf (“Conduct which may in some circumstances be harmful, in others may be permissible or desirable as it produces sufficient countervailing benefits.”).

[263] Id. at Sec. 29(2)(c), (d), & (e). See also Auer, Lesh, & Radic, supra note 170.

[264] CMA, Digital Markets Competition Regime Guidance, CMA194con DRAFT (May 24, 2024) at Sec. 7.64, available at https://assets.publishing.service.gov.uk/media/6650a56d8f90ef31c23ebaa6/Digital_markets_competition_regime_guidance.pdf.

[265] See id. at 7.69 (“This condition means that the CMA must be satisfied that there is no other reasonable or practical way for the firm to achieve the benefits with less anticompetitive effect.”).

[266] See, e.g., Ohio v. Am. Express Co., 138 S. Ct. 2274, 2284 (2018) (“To determine whether a restraint violates the rule of reason…, a three-step, burden-shifting framework applies. Under this framework, the plaintiff has the initial burden to prove that the challenged restraint has a substantial anticompetitive effect that harms consumers in the relevant market. If the plaintiff carries its burden, then the burden shifts to the defendant to show a procompetitive rationale for the restraint. If the defendant makes this showing, then the burden shifts back to the plaintiff to demonstrate that the procompetitive efficiencies could be reasonably achieved through less anticompetitive means.”).

[267] See CMA, Digital Markets Competition Regime Guidance, supra note 260, at Sec. 3.33 (“In all cases, the CMA expects the SMS firm and/or other relevant third parties to identify the likely effects of [conduct requirement] and provide the CMA with evidence of these.”).

[268] Id. at 7.60.

[269] Judicial review in this context allows appellants to challenge procedural aspects of a decision, but not its merits, which is, by contrast, reserved for a “full-merits review.” See, e.g., Annetje Ottow, Market and Competition Authorities: Good Agency Principles 218 (2015); Peter Cane, Judicial Review and Merits Review: Comparing Administrative Adjudication by Courts and Tribunals, in Comparative Administrative Law 426, 433-34 (Susan Rose-Ackerman & Peter Lindseth eds., 2010). As Auer, Lesh & Radic have written: “It will only be possible to challenge the decision-making on process grounds under the judicial review standard. In simple terms, courts will not assess whether the CMA was ‘right’, but whether the correct procedures were followed.” Auer, Lesh & Radic, supra note 167, at 11.

[270] Id.

[271] This is implied by the fact such an exemption arises only in Sec. 29, which concerns only the closing, not the opening, of conduct investigations. See DMCC, supra note 19, at Sec. 29. See also Auer, Lesh & Radic, id.

[272] See, e.g., Megan Gray, ‘Choice Screen’ Fever Dream: Enforcers’ New Favorite Remedy Won’t Blunt Google’s Search Monopoly, TechPolicyPress (Feb. 15, 2024), https://www.techpolicy.press/choice-screen-fever-dream-enforcers-new-favorite-remedy-wont-blunt-googles-search-monopoly/ (“These choice screens will soon surround consumers as part of a stream at setup, which will spill into an ocean of online choice popups. Notably, Google’s business initially succeeded in part because of its ‘clean’ interface, in contrast to Yahoo’s overstuffed ad platform…. [E]nforcers failed to grasp that these ‘clear and conspicuous’ disclaimers are now so pervasive that the public largely ignores them. Thus, the ultimate issue—whether consumers have actual comprehension of the information being disclaimed when encountering it in the real world—is forgotten; the enforcers lost the forest for the trees.”).

[273] There is some evidence that this has already happened with the DMA-required degradation of Google and Google Maps. See, e.g., Edith Hancock, “Severe Pain in the Butt”: EU’s Digital Competition Rules Make New Enemies on the Internet, Politico (Mar. 25 2024), https://www.politico.eu/article/european-union-digital-markets-act-google-search-malicious-compliance (“Before [the DMA], users could search for a location on Google by simply clicking on the Google Map link to expand it and navigate it easily. That feature doesn’t work in the same way in Europe anymore and users are irritated.”).

[274] See ICLE Brief for the 9^th Circuit in Epic Games v. Apple, No. 21-16695 (9th Cir.), ID No. 12409936, Dkt. Entry 98 (Mar. 31, 2022) at 26, available at https://laweconcenter.org/resources/icle-brief-for-9th-circuit-for-epic-games-v-apple (“Even if an open platform led to more apps and IAP [in-app payment] options for all consumers, some consumers may be better off as a result and others may be worse off. More vigilant users may avoid downloading apps and using IAP systems that are unreliable or which impose invasive data-sharing obligations, but less vigilant users will fall prey to malware, spyware, and other harmful content invited by an open system. The upshot is, ‘a more competitive market may be better at delivering to vigilant consumers what they want, but may end up exploiting more vulnerable consumers’”). See also Mark Armstrong, Interactions Between Competition and Consumer Policy, Comp. Pol’y Int’l (2008), https://ora.ox.ac.uk/objects/uuid:ff166fcf-c3c1-4057-9cf5-10e295b66468/files/m4cc2cf988db14b5da92bb20f1f1a838b.

[275] Pitofsky, supra note 172, at 1058.

[276] See generally, Christopher Decker, Modern Economic Regulation (2014).

[277] In the context of the DMCC, see Auer, Lesh, & Radic, supra note 170.

[278] See Pinar Akman, Regulating Competition in Digital Platform Markets: A Critical Assessment of the Framework and Approach of the EU Digital Markets Act, 47 Eur. L. Rev. 85, 110 (2023) (“The description of ‘(un)fairness’ as provided for in the DMA cannot be said to improve upon the position of the concept in competition law, as it, too, relies on an assessment that is ultimately subjective and involves a value judgement.”). See also id. at n. 134 (“This is because it involves establishing what counts as an ‘imbalance of rights and obligations’ on the business users of a gatekeeper and what counts as an ‘advantage’ obtained by the gatekeeper from its business users that is ‘disproportionate’ to the service provided by the gatekeeper to its business users.”) (citing Recommendations for an Effective and Efficient Digital Markets Act, Monopolkommission [Germany] Special Report 82 (2021), https://www.monopolkommission.de/en/reports/special-reports/specialreports-on-own-initiative/372-sr-82-dma.html).

[279] On the in-app payment commission being a legitimate way to recoup investments, see ICLE Brief in Epic Games v. Apple, supra note 274.

[280] Giuseppe Colangelo, In Fairness we (Should Not) Trust. The Duplicity of the EU Competition Policy Mantra in Digital Markets, 68 Antitrust Bull. 618, 622 (2023) (“Despite its appealing features, fairness appears a subjective and vague moral concept, hence useless as a tool in decisionmaking.”).

[281] For example, Chapter III of the DMA is appropriately entitled “Practices of Gatekeepers that Limit Contestability or Are Unfair.” See DMA, supra note 1, at 33-43. The chapter sets out the list of practices that are, by definition—but not by moral precept, of course—”unfair.”

[282] See ICLE Brief in Epic Games v. Apple, supra note 274, at 18.

[283] Distributing Dating Apps in the Netherlands, Apple Developer Support, https://developer.apple.com/support/storekit-external-entitlement (last visited Mar. 10, 2024).

[284] See Press Release, Apple Announces Changes to IOS, Safari, and the App Store in the European Union, Apple Inc. (Jan. 25, 2024), https://www.apple.com/newsroom/2024/01/apple-announces-changes-to-ios-safari-and-the-app-store-in-the-european-union. (“The new business terms for iOS apps in the EU have three elements: Reduced commission — iOS apps on the App Store will pay a reduced commission of either 10 percent (for the vast majority of developers, and subscriptions following their first year) or 17 percent on transactions for digital goods and services; Payment processing fee — iOS apps on the App Store can use the App Store’s payment processing for an additional 3 percent fee. Developers can use a payment service provider within their app or link users to their website to process payments for no additional fee to Apple; Core Technology Fee — iOS apps distributed from the App Store and/or an alternative app marketplace will pay €0.50 for each first annual install per year over a 1 million threshold.”) (emphasis in original).

[285] ICLE Brief in Epic Games v. Apple, supra note 274, at 18.

[286] Adam Kovacevich has referred to this as the “Stalter and Waldorf” problem. See Kovacevich, supra note 148.

[287] See, e.g., A Letter to the European Commission on Apple’s Lack of DMA Compliance, Spotify Newsroom (Mar.1 2024) https://newsroom.spotify.com/2024-03-01/a-letter-to-the-european-commission-on-apples-lack-of-dma-compliance/.

[288] See Trinko, 540 U.S. at 407 (2003) (“The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system […] Firms may acquire monopoly power by establishing an infrastructure that renders them uniquely suited to serve their customers […] Enforced sharing also requires antitrust courts to act as central planners, identifying the proper price, quantity, and other terms of dealing—a role for which they are ill-suited”). See also Brian Albrecht, Imposed Final Offer Arbitration: Price Regulation by Any Other Name, Truth on the Market (Dec. 7, 2022), https://truthonthemarket.com/2022/12/07/imposed-final-offer-arbitration-price-regulation-by-any-other-name.

[289] See ICLE Brief in Epic Games v. Apple, supra note 274 (“In essence, Epic is trying to recast its objection to Apple’s 30% commission for use of Apple’s optional IAP system as a harm to consumers and competition more broadly.”). On a similar trend in antitrust (but which is even more relevant in the context of DCRs, see Jonathan Barnett, Antitrustifying Contract: Thoughts on Epic Games v. Apple and Apple v. Qualcomm, Truth on the Market (Oct. 26, 2020) https://truthonthemarket.com/2020/10/26/antitrustifying-contract-thoughts-on-epic-games-v-apple-and-apple-v-qualcomm.

[290] See, e.g., Andriychuk, supra note 244.

[291] See, e.g., Ohlhausen & Taladay, supra note 96.

[292] United States v. Aluminum Co. of America, 148 F.2d 416, 430 (2d Cir. 1945).

[293] See, e.g., Ben Bernanke, Irreversibility, Uncertainty and Cyclical Investment, 98 Q. J. Econ. 85 (1983); Avinash Dixit, Entry and Exit Decisions Under Uncertainty, 97 J. Pol. Econ. 620 (1989); Robert S. Pindyck, Irreversibility, Uncertainty, and Investment, 29 J. Econ. Lit. 1110 (1991); Nicholas Bloom et al., Uncertainty and Investment Dynamics, 74 Rev. Econ. Stud. 391 (2007); Nicholas Bloom, The Impact of Uncertainty Shocks, 77 Econometrica 623 (2009).

[294] See generally Steven J. Davis, Regulatory Complexity and Policy Uncertainty: Headwinds of Our Own Making, Becker Friedman Inst. for Rsrch. in Econ. Working Paper No. 2723980 (2017), available at https://ssrn.com/abstract=2723980.

[295] Decker, supra note 276.

[296] Many companies vertically integrate to have the ability to preference their own downstream or upstream products or services. See generally Eric Fruits, Geoffrey A. Manne, & Kristian Stout, The Fatal Economic Flaws of the Contemporary Campaign Against Vertical Integration, 68 Kan. L. Rev. 5 (2020), https://kuscholarworks.ku.edu/handle/1808/30526; Sam Bowman & Geoffrey Manne, Self-Preferencing: Building an Ecosystem, Int’l. Ctr. for Law & Econ. (Jul. 21, 2020), available at https://laweconcenter.org/wp-content/uploads/2020/07/ICLE-tldr-Self-preferencing_-building-an-ecosystem-FINAL.pdf.

[297] See supra, Section III.B.

[298] See Decker, supra note 276, at 190-91. See also references, supra note 293.

[299] See Aldous Huxley, Point Counter Point (1928).

[300] See supra, Section I.

[301] See supra, Section II.

[302] As discussed, these ideas are, at least to some extent, redolent of the neo-Brandeisian (and older, Brandeisian) school of thought in the United States and ordoliberalism in Europe. See, e.g., Joseph Coniglio, Why the “New Brandeis Movement” Gets Antitrust Wrong, Law360 (Apr. 24, 2018), https://www.law360.com/articles/1036456/why-the-new-brandeis-movement-gets-antitrust-wrong (“The [neo-Brandeisian movement] is not a new entrant in the marketplace of ideas.”). See also Daniel Crane, How Much Brandeis Do the Neo-Brandeisians Want?, 64 Antitrust Bull. 4 (2019).

[303] See, e.g., Rupprecht Podszun, Philipp Bongartz, & Sarah Langenstein, Proposals on How to Improve the Digital Markets Act, Working Paper (Feb. 18, 2021) at 3, https://ssrn.com/abstract=3788571 (“Critics who wish to place the tool into the realm of competition law miss the point that this is a fundamentally different approach.”).

[304] In the EU, for example, the DMA was proposed on the basis of Article 114 TFEU, rather than Article 352 TFEU. The consequence is that, for the purpose of EU law, the DMA is considered an internal market regulation, rather than competition legislation. It has been argued that Article 352 TFEU, or Article 114 TFEU in conjunction with Article 103 TFEU, would have been the more appropriate legal mechanism. See, e.g., Alfonso Lamadrid & Nieves Bayón Fernández, Why the Proposed DMA Might be Illegal Under Article 114 TFEU, and How to Fix It, 12 J. Comp. L. & Prac. 7 (2021). One reason why the Commission might have preferred to use Article 114 TFEU over Article 352 TFEU is that the process under Article 114 is less cumbersome. Unlike Article 114, Article 352 TFEU requires unanimity among EU member states and would not enable the European Parliament to function as co-legislator. See Alfonso Lamadrid, The Key to Understand the Digital Markets Act: It’s the Legal Basis, Chillin’ Competition (Dec. 03, 2020), https://chillingcompetition.com/2020/12/03/the-key-to-understand-the-digital-markets-act-its-the-legal-basis.

[305] See supra, Section III.

[306] While it is impossible to connect broad macroeconomic trends conclusively to specific policy decisions, it does seem clear that Europe’s approach to economic regulation has not served it well. See, e.g., Greg Ip, Europe Regulates Its Way to Last Place, Wall St. J. (Jan. 31, 2024), https://www.wsj.com/economy/europeregulates-its-way-to-last-place-2a03c21d (“Of course, Europe’s economy underperforms for lots of reasons, from demographics to energy costs, not just regulation. And U.S. regulators aren’t exactly hands-off. Still, they tend to act on evidence of harm, whereas Europe’s will act on the mere possibility. This precautionary principle can throttle innovation in its cradle.”). In that environment, the EU’s economic performance has fallen significantly behind that of the United States. See, e.g., id.; Eric Albert, Europe Trails Behind the United States in Economic Growth, Le Monde (Nov. 1, 2023), https://www.lemonde.fr/en/economy/article/2023/11/01/europe-trails-behind-the-united-states-in-economicgrowth_6218259_19.html (“For the past fifteen years, Europe has been falling further and further behind…. Since 2007, per capita growth on the other side of the Atlantic has been 19.2%, compared with 7.6% in the eurozone. A gap of almost twelve points.”); Fredrik Erixon, Oscar Guinea, & Oscar du Roy, If the EU Was a State in the United States: Comparing Economic Growth Between EU and US States, ECIPE Policy Brief No.07/2023 (2023), available at https://ecipe.org/publications/comparingeconomic-growth-between-eu-and-us-states (“[I]n 2010 US GDP per capita was 47 percent larger than the EU while in 2021 this gap increased to 82 percent. If the current trend of GDP per capita carries forward, in 2035, the average GDP per capita in the US will be $96,000 while the average EU GDP per capita will be $60,000.”); id. (noting that some of the reasons for the EU’s lagging growth include slower business creation and destruction, anemic R&D investment, and less stick and growth of intangible capital assets, which are crucial for the adoption and diffusion of productivity-driving technologies); Patrick Artus, Economics: Why Europe is Falling Behind the USA, Polytechnique Insights (Jun.11 2024), https://www.polytechnique-insights.com/en/columns/economy/economy-why-europe-is-falling-behind-the-usa/ (arguing that the cumulative GDP growth gap between the U.S. and the EU can be explained by insufficient investment in new technologies and inadequate spending on R&D in Europe).

[307] The term is used often in the literature and media. For an example of the former, see William Davies & Nicholas Gane, Post-Neoliberalism? An Introduction, 38 Theory, Culture & Soc’y 3 (2021). For an example of the latter, see Rana Foroohar, The New Rules for Business in a Post-Neoliberal World, Financial Times (Oct. 9, 2022), https://www.ft.com/content/e04bc664-04b2-4ef6-90f9-64e9c4c126aa. For an example somewhere in between, see Joseph Stiglitz, The Road to Freedom: Economics and the Good Society (2024).

[308] The term has been used by, among others, Thomas Biebricher and Frieder Vogelmann to describe the views of the Ordoliberals on the respective roles of the market and the state. See Thomas Biebricher and Frieder Vogelmann, The Birth of Austerity: German Ordoliberalism and Contemporary Neoliberalism 138-39 (2017).

[309] See e.g., Jean Tirole, Competition and Industrial Policy in the 21^st Century, 3 Oxford Open Econ. i983, i999 (2024) (noting that the “popularity” of industrial policy and state aid has grown recently “in Europe, China, the USA and several other parts of the world”); Kathleen R. McNamara, Transforming Europe? The EU’s Industrial Policy and Geopolitical Turn, 31 J. Eur. Pub. Pol. 2371, 2372 (2023) (observing a rise of new “market activism” in the EU and finding that “EU industrial policy is increasingly willing to use “public powers to actively shape markets for the interests and values of a bounded political community”).

[310] See Jedediah Britton-Purdy, David Singh Grewal, Amy Kapczynski & K. Sabeel Rahman, Building a Law-and-Political-Economy Framework: Beyond the Twentieth-Century Synthesis, 129 Yale L.J. 1784 (2020); David Singh Grewal, Amy Kapczynski, & Jedediah Britton-Purdy, Law and Political Economy: Toward a Manifesto, LPE Project (Nov. 6, 2017), https://lpeproject.org/blog/law-and-political-economy-toward-a-manifesto/ (“We pursue these egalitarian and democratic commitments through a set of theoretical premises. Politics and the economy cannot be separated. Politics both creates and shapes the economy. In turn, politics is profoundly shaped by economic relations and economic power. Attempts to separate the economy from politics make justice harder to pursue in both domains. As recent events illustrate, market society generates political conflict—conflict that is profoundly racialized and gendered. A politics that can engage this conflict must be attentive to the interplay between the ways the state creates ‘the market’ and the ways market power feeds back into the politics, and between the hierarchies and humiliations of ‘private’ life and the appeal of reactionary political visions.”).

[311] See supra note 91, and the examples cited therein.

[312] See Davies and Gane, supra note 307, at 1 (“While events of 2020–21 have facilitated new forms of privatization of many public services and goods, they also signal, potentially, a break from the neoliberal orthodoxies of the previous four decades, and, in particular, from their overriding concern for the market.”). See also Edward Luce, It’s the End of Globalism As We Know It, Financial Times (May 8, 2020), https://www.ft.com/content/3b64a08a-7d91-4f09-9a31-0157fa9192cf (“The past 40 years have been predicated on a complex system of neoliberalism that is slowly but surely coming undone, but as of yet, we don’t have any global replacement.”); Paolo Gerbaudo, A Post-Neoliberal Paradigm is Emerging: Conversation with Felicia Wong, El Pais (Nov. 4, 2022), https://agendapublica.elpais.com/noticia/18303/post-neoliberal-paradigm-is-emerging-conversation-with-felicia-wong.

[313] See, e.g., Teachout, The Death of the Consumer Welfare Standard, supra note 119.

[314] After Hillary Clinton lost the 2016 U.S. presidential election to Donald Trump, Barack Obama referred to history and progress in the United States as zigzagging, rather than moving in a straight line. See, Statement by the President, White House Office of the Press Secretary (Nov. 09, 2016), https://obamawhitehouse.archives.gov/the-press-office/2016/11/09/statement-president.

As in the Public Enemy song that gives this post its title, the hype about alleged competition risks in the artificial intelligence (AI) “market” is a sequel—and not a good one—to the hyperbolic and dystopian view that has informed several recent antitrust-policy proposals and demands for tougher enforcement of competition laws, particularly in digital markets. As we will explain, the evidence tells a different story, and there are plenty of reasons to be rather cautious before taking any action in the AI sector.

Read the full piece here.

Ayear after it was created by the Government of India’s Ministry of Corporate Affairs to examine the need for a separate law on competition in digital markets, India’s Committee on Digital Competition Law (CDCL) in February both published its report recommending adoption of such rules and submitted the draft Digital Competition Act (DCA), which is virtually identical to the European Union’s Digital Markets Act (DMA).

Read the full piece here.

Abstract

The AI Act is poised to become a pillar of modern competition law. The present article seeks to provide competition practitioners with a practical yet critical guide to its key provisions. It concludes with suggestions for making the AI Act more competition friendly.

Read at SSRN.

Introduction

We welcome the opportunity to comment on the European Commission’s call for evidence on “Virtual worlds (metaverses) – a vision for openness, safety and respect.”[1]

The metaverse is an exciting and rapidly evolving set of virtual worlds. As with any new technology, concerns about the potential risks and negative consequences that the metaverse may bring have moved policymakers to explore how best to regulate this new space.

In its call for evidence, the commission suggests that preemptive regulatory steps may be needed to avoid the metaverse becoming “a more closed ecosystem with the prevalence of proprietary systems and gatekeepers.”[2] But this diagnosis rests on dubious premises.

From the outset, it is important to recognize that simply because the metaverse is new does not mean that it is unregulated. Existing regulations may not explicitly or exclusively target metaverse ecosystems, but a vast regulatory apparatus already covers most aspects of business in virtual worlds. As we explain in greater detail (Section I), this includes European competition law, the Digital Markets Act (“DMA”), the General Data Protection Act (“GDPR), the Digital Services Act (“DSA”), and many more. Before it enacts any new rules, the commission should carefully consider whether there are any metaverse-specific problems not already addressed by these legal provisions.

This sense that the metaverse is already adequately regulated is reinforced by two important factors.

The first is that competition appears particularly intense in this space (Section II). There are currently multiple firms vying to offer compelling virtual worlds. At the time of writing, however, none appears close to dominating the market. In turn, this intense competition will encourage platforms to design services that meet consumers’ demands, notably in terms of safety and privacy. Nor does the market appear likely to fall into the hands of one of the big tech firms that command a sizeable share of more traditional internet services. Meta notoriously has poured more than $3.99 billion into its metaverse offerings during the first quarter of 2023, in addition to $13.72 billion the previous calendar year.[3] Despite these vast investments and a strategic focus on metaverse services, the company has, thus far, struggled to achieve meaningful traction in the space.[4]

Second, the commission’s primary concern appears to be that metaverses will become insufficiently “open and interoperable”.[5] But to the extent that these ecosystems do, indeed, become closed and proprietary, there is no reason to believe this to be a problem. Closed and proprietary ecosystems have several features that may be attractive to consumers and developers (Section III). These include improved product safety, performance, and ease of development. This is certainly not to say that closed ecosystems are always better than more open ones, but rather that the commission is wrong to assume that one model or the other is optimal. Instead, the proper balance depends on tradeoffs that markets are better placed to decide.

Finally, timing is of the essence (Section IV). The commission’s call for evidence appears to assume that, by acting preemptively, it can shape the metaverse industry according to its idiosyncratic preferences:

It is crucial for the EU to be present in the development of virtual worlds and their governance, and lead the way through important challenges such as setting standards, building infrastructure, and addressing legal, economic, societal and ethical aspects.[6]

The commission has further expressed hopes that this will enable European firms to thrive:

The initiative is expected to create more opportunities for EU industrial players along the value chain, such as for EU providers of hardware and software components, system integrators and content creators.[7]

But intervening so early in a fledgling industry’s life cycle is like shooting a moving target from a mile away. New rules might end up being irrelevant. Worse, by signaling that metaverses will be subject to heightened regulatory scrutiny for the foreseeable future, the commission may chill investment from the very firms is purports to support. In short, the commission should resist the urge to intervene so long as the industry is not fully mature.

I.        Old Rules for a New Frontier

The commission’s call for evidence appears to be premised on the idea there is something new and unique about metaverse ecosystems that warrants industry-specific rules and regulations.

Against this backdrop, Frank Easterbrook’s seminal piece “Cyberspace and the Law of the Horse” seems more relevant than ever.[8] In his article, Easterbrook analogized the then-emerging field of cyberspace law to the “law of the horse.” He argued, in essence, that legal incidents involving horses are best understood by studying general legal disciplines like torts and property law, rather than studying all the legal incidents involving horses:

Lots of cases deal with sales of horses; others deal with people kicked by horses; still more deal with the licensing and racing of horses, or with the care veterinarians give to horses, or with prizes at horse shows. Any effort to collect these strands into a course on “The Law of the Horse” is doomed to be shallow and to miss unifying principles.

From a policy standpoint, Easterbrook’s intuition is clear. Policymakers should be less worried about developing new bodies of law to regulate legal disputes in cyberspace and, instead, concentrate their efforts on understanding how traditional rules apply to the disputes that arise in this space:

When asked to talk about “Property in Cyberspace,” my immediate reaction was, “Isn’t this just the law of the horse?”… This leads directly to my principal conclusion: Develop a sound law of intellectual property, then apply it to computer networks.[9]

Easterbrook’s intuition would appear even more appropriate to law in the metaverse. Policymakers often assume that, because the metaverse is new and not covered by specific regulations, it must surely be a lawless area where few rules apply and companies are free to exclude their competitors and exploit consumers. As the commission puts it, drawing an analogy to the emergence of the first big tech companies:

The first wave of the Internet developed mostly in an uncoordinated and unregulated manner leading to a more closed ecosystem with the prevalence of proprietary systems and gatekeepers.

Although virtual worlds and the transition to Web 4.0 are still in the early stages, we are witnessing the dawn of a similar situation, where global corporations are massively investing in core technologies, filing trademarks, and setting de facto standards as early movers…[10]

A.                  The Internet Was Never an Unregulated World

Unfortunately, this assertion both rewrites the history of the internet and ignores the plethora of regulations that currently apply to metaverse services, particularly when they operate in the European Union.

For a start, it is important to recognize that digital platforms fall under several pieces of European legislation. Chief among these is European competition law, which has long applied to tech firms. After all, the Microsoft competition cases date back to the early 2000s and the commission opened its competition cases against Google way back in 2011.[11] These early cases were followed by investigations into online platforms like Apple’s iPhone and App Store, as well as Amazon’s online marketplace.[12] It is simply not true that the internet emerged in an unregulated environment (at least in terms of competition policy). EU oversight of digital platforms has also grown steadily more capacious, including through the recent passage of the DMA, which will arguably apply to metaverse worlds when they reach a certain size.[13]

And it is not just competition law that has directly shaped the European internet as we know it today. The e-Commerce Directive has governed how online platforms conduct business since it entered into force in 2000.[14] Oversimplifying, the directive shields online intermediaries from liability when illegal content is hosted on their platforms, conditional on them fulfilling certain limited obligations.[15] In turn, this has enabled online platforms to grow without fear of being held liable for their users’ behavior, while guaranteeing some level of safety and compliance with existing laws. More recent legislation, such as the DSA, will only reinforce the extent to which online markets (including virtual worlds) must maintain high standards of safety and content curation. [16]

B.                  Metaverse’s Regulatory Framework Is Already in Place

Existing laws and regulations that govern such areas as intellectual property, contracts, consumer protection, and online safety are equally applicable to the metaverse. The metaverse is not a separate and unique realm, but rather an extension of the physical world we already inhabit. Or, to put it differently, the metaverse is populated by real consumers and firms who are bound by the laws that are applicable in their jurisdictions.

The commission’s call for evidence appears to recognize this much, although it doesn’t appears to consider the possibility that—given this large body of existing laws—more regulation might not be the answer:

Furthermore, the EU already has a strong regulatory framework to address potential impacts that virtual worlds may have on aspects such as competition, cybersecurity, artistic creation and privacy. EU legislation such as the General Data Protection Regulation, Digital Services Act, Digital Markets Act, Net Neutrality Regulation and the Unfair Commercial Practices Directive will ensure that users are protected in relation to several aspects and that EU small and medium-sized enterprises are not driven out of the market. The revised Directive on Security of Network and Information Systems will strengthen supply chain cybersecurity while the upcoming EU Digital ID will give full control to users over their identity and data.[17]

To put this in more concrete terms, a virtual item or avatar created within the metaverse is subject to the same copyright and trademark laws as a physical product. Property over those creations may be transferred, subject to the metaverse platform’s terms of service, which are governed by existing contract and consumer-protection laws. For example, the terms of use governing Decentraland (a blockchain-based virtual world) include a detailed section on how ownership of copyright-protected works may or may not be transferred from users to the platform.[18] In turn, these terms are subject to the same consumer-protection laws that apply to the physical world.

Of course, the application of existing laws to the metaverse is not always straightforward. There are some unique challenges and complexities that arise in this new space. The enforceability of some existing laws may, for example, be complicated in virtual worlds (like Decentraland) that rely on blockchain technology. Indeed, blockchains often have characteristics—such as immutability, decentralized ownership, and a reliance on pseudonymity or anonymity—that complicate legal enforcement.[19] These potential obstacles are specific to blockchain technology, however, not to metaverses.

Indeed, there is no reason to believe that all, or even most, successful metaverse services will be blockchain-based. In fact, two of the most successful virtual worlds do not rely on the blockchain.[20] The upshot is that enacting metaverse-specific rules to deal with blockchain-specific issues is almost certainly the wrong way to proceed.

C.                  New Rules Are Not Always the Best Path Forward

More fundamentally, even if metaverses do give rise to legal blind spots, this does not necessarily mean that new regulation is warranted.

In his seminal rebuttal to Easterbrook’s “Law of the Horse”, Lawrence Lessig cited two examples of cyberspace law that, in his opinion, fell under the radar of existing legal provisions and necessitated the creation of internet-specific laws: the widespread accessibility of pornographic content and firms’ ability to track users’ behavior online.[21] No champion of free markets, Lessig nonetheless argued that blinds spots of this sort do not necessarily warrant the adoption of new regulations (though, in those two cases, that is largely what the European Union decided to do[22]). Instead, he argued four main factors constrain firms’ behavior in cyberspace. Legal provisions are only one of those four constraints—the others being norms, markets, and code.[23] If other constraints are operating, then what may appear to be a legal blind spot may not, in fact, give rise to problematic behavior or outcomes. And because regulation may sometimes be over-inclusive, it will sometimes be better for regulators to adopt a laissez-faire approach.[24]

This intuition is perhaps best understood with reference to Ronald Coase. In his Nobel-winning work on “The Problem of Social Cost”, Coase essentially argued that governments need not worry about the initial allocation of rights (and, by extension, externalities) when they are well-delimited and transaction costs are low:

It is always possible to modify by transactions on the market the initial legal delimitation of rights. And, of course, if such market transactions are costless such a rearrangement of rights will always take place if it would lead to an increase in the value of production.[25]

This has important ramifications for the regulation of business in the metaverse. Even if it were true that existing laws were inapplicable in the metaverse, this is not sufficient justification for passing new regulations. Instead, the real question is whether various frictions prevent consumers and businesses from reaching agreements that grow the value of these online ecosystems. If these agreements can take place, then the scope for beneficial government intervention is more limited. As things stand, there is little reason to believe that frictions of this sort prevent consumers, platforms, and content creators from concluding such deals in the metaverse context—for example, determining how the rights over metaverse creations are allocated.

Finally, even if the commission surmised that there are currently market failures in the metaverse, this does not necessarily mean that entirely new regulations are appropriate. Indeed, it may be preferrable to adapt existing legal principles, rather than enact new rules. As explained in Section IV, creating new regulations that are specific to the metaverse could be counterproductive. They could create uncertainty and additional compliance costs for businesses, without necessarily achieving any meaningful improvements in consumer protection or other regulatory goals. Furthermore, new rules could stifle innovation and limit the potential of this exciting new technology.

In short, there is little to suggest that new rules are required to govern the metaverse. The existing legal framework appears largely sufficient to address most concerns that may arise in this space. Policymakers should instead focus on adapting and refining this existing framework, as necessary.

II.      Competing for Consumer Trust

As suggested above, the extent to which metaverse services compete with each other (and continue to do so in the future) will largely determine whether they fulfil consumers’ expectations and meet the safety and trustworthiness requirements to which the commission aspires. As even the left-leaning Lessig put it:

Markets regulate behavior in cyberspace too. Prices structures often constrain access, and if they do not, then busy signals do. (America Online (AOL) learned this lesson when it shifted from an hourly to a flat-rate pricing plan.) Some sites on the web charge for access, as on-line services like AOL have for some time. Advertisers reward popular sites; online services drop unpopular forums. These behaviors are all a function of market constraints and market opportunity, and they all reflect the regulatory role of the market.[26]

The commission’s call for evidence implicitly recognizes the important role that competition plays, although it frames the subject primarily in terms of the problems that would arise if competition ceased to operate:

There is a risk of having a small number of big players becoming future gatekeepers of virtual worlds, creating market entry barriers and shutting out EU start-ups and SMEs from this emerging market. Such a closed ecosystem with the prevalence of proprietary systems can negatively affect the protection of personal information and data, the cybersecurity and the freedom and openness of virtual worlds at the same time.[27]

It is thus necessary to ask whether there is robust competition in the market for metaverse services. The short answer is a resounding yes.

A.                  Competition Without Tipping

While there is no precise definition of what constitutes a metaverse—much less a precise definition of the relevant market—available data suggests the space is highly competitive. This is evident in the fact that even a major global firm like Meta—having invested billions of dollars in its metaverse branch (and having rebranded the company accordingly)—has struggled to gain traction.[28]

Other major players in the space include the likes of Roblox, Fortnite, and Minecraft, which all have somewhere between 70 and 200 million active users.[29] This likely explains why Meta’s much-anticipated virtual world struggled to gain meaningful traction with consumers, stalling at around 300,000 active users.[30] Alongside these traditional players, there are also several decentralized platforms that are underpinned by blockchain technology. While these platforms have attracted massive investments, they are largely peripheral in terms of active users, with numbers often only in the low thousands.[31]

There are several inferences that can be drawn from these limited datasets. For one, it is clear that the metaverse industry is not yet fully mature. There are still multiple paradigms competing for consumer attention: game-based platforms versus social-network platforms; traditional platforms versus blockchain platforms, etc. In the terminology developed by David Teece, the metaverse industry has not yet reached a “paradigmatic” stage. It is fair to assume there is still significant scope for the entry of differentiated firms.[32]

It is also worth noting that metaverse competition does not appear to exhibit the same sort of network effects and tipping that is sometimes associated with more traditional social networks.[33] Despite competing for nearly a decade, no single metaverse project appears to be running away with the market.[34] This lack of tipping might be because these projects are highly differentiated.[35] It may also be due to the ease of multi-homing among them.[36]

More broadly, it is far from clear that competition will lead to a single metaverse for all uses. Different types of metaverse services may benefit from different user interfaces, graphics, and physics engines. This cuts in favor of multiple metaverses coexisting, rather than all services coordinating within a single ecosystem. Competition therefore appears likely lead to the emergence of multiple differentiated metaverses, rather than a single winner.

Ultimately, competition in the metaverse industry is strong and there is little sense these markets are about to tip towards a single firm in the year future.

B.                  Competing for Consumer Trust

As alluded to in the previous subsection, the world’s largest and most successful metaverse entrants to date are traditional videogaming platforms that have various marketplaces and currencies attached.[37] In other words, decentralized virtual worlds built upon blockchain technology remain marginal.

This has important policy implications. The primary legal issues raised by metaverses are the same as those encountered on other digital marketplaces. This includes issues like minor fraud, scams, and children buying content without their parents’ authorization.[38] To the extent these harms are not adequately deterred by existing laws, metaverse platforms themselves have important incentives to police them. In turn, these incentives may be compounded by strong competition among platforms.

Metaverses are generally multi-sided platforms that bring together distinct groups of users, including consumers and content creators. In order to maximize the value of their ecosystems, platforms have an incentive to balance the interests of these distinct groups.[39] In practice, this will often mean offering consumers various forms of protection against fraud and scams and actively policing platforms’ marketplaces. As David Evans puts it:

But as with any community, there are numerous opportunities for people and businesses to create negative externalities, or engage in other bad behavior, that can reduce economic efficiency and, in the extreme, lead to the tragedy of the commons. Multi-sided platforms, acting selfishly to maximize their own profits, often develop governance mechanisms to reduce harmful behavior. They also develop rules to manage many of the same kinds of problems that beset communities subject to public laws and regulations. They enforce these rules through the exercise of property rights and, most importantly, through the “Bouncer’s Right” to exclude agents from some quantum of the platform, including prohibiting some agents from the platform entirely…[40]

While there is little economic research to suggest that competition directly increases hosts’ incentive to policy their platforms, it stands to reason that doing so effectively can help platforms to expand the appeal of their ecosystems. This is particularly important for metaverse services whose userbases remain just a fraction of the size they could ultimately reach. While 100 or 200 million users already comprises a vast ecosystem, it pales in comparison to the sometimes billions of users that “traditional” online platforms attract.

The bottom line is that the market for metaverses is growing. This likely compounds platforms’ incentives to weed out undesirable behavior, thereby complementing government efforts to achieve the same goal.

III.    Opening Platforms or Opening Pandora’s Box?

In its call for evidence, the commission implicitly assumes that open ecosystems are better for consumers than closed ones. Indeed, the commission laments that a lack of regulation made the Internet less open than it would otherwise have been. In its own words:

The first wave of the Internet developed mostly in an uncoordinated and unregulated manner leading to a more closed ecosystem with the prevalence of proprietary systems and gatekeepers.[41]

According to the commission, it would be detrimental to consumers if metaverse competition led to closed and proprietary ecosystems:

Such a closed ecosystem with the prevalence of proprietary systems can negatively affect the protection of personal information and data, the cybersecurity and the freedom and openness of virtual worlds at the same time.[42]

But this assumption is simply wrong. There are many benefits to closed ecosystems. Choosing the optimal degree of openness entails tradeoffs. At the very least, this suggests that policymakers should be careful not to assume that opening platforms up will systematically provide net benefits to consumers.

A.      Antitrust Enforcement and Regulatory Initiatives

To understand why open (and highly propertized) platforms are not always better for consumers, it is worth looking at past competition enforcement in the online space. Recent interventions by competition authorities have generally attempted (or are attempting) to move platforms toward more openness and less propertization. For their part, these platforms are already tremendously open (as the “platform” terminology implies) and attempt to achieve a delicate balance between centralization and decentralization.

The Microsoft cases and the Apple investigation both sought or seek to bring more openness and less propertization to those respective platforms. Microsoft was made to share proprietary data with third parties (less propertization) and to open its platform to rival media players and web browsers (more openness).[43] The same applies to Apple. Plaintiffs in private antitrust litigation brought in the United States[44] and government enforcement actions in Europe[45] are seeking to limit the fees that Apple can extract from downstream rivals (less propertization), as well as to ensure that it cannot exclude rival mobile-payments solutions from its platform (more openness).

The various cases that were brought by EU and U.S. authorities against Qualcomm broadly sought to limit the extent to which it was monetizing its intellectual property.[46] The European Union’s Amazon investigation centers on the ways in which the company uses data from third-party sellers (and, ultimately, the distribution of revenue between those sellers and Amazon).[47] In both cases, authorities are ultimately trying to limit the extent to which firms can propertize their assets.

Finally, both of the EU’s Google cases sought to bring more openness to the company’s main platform. The Google Shopping decision sanctioned Google for purportedly placing its services more favorably than those of its rivals.[48] The separate Android decision sought to facilitate rival search engines’ and browsers’ access to the Android ecosystem. The same appears to be true of ongoing litigation brought by state attorneys general in the United States.[49]

Much of the same can be said of the numerous regulatory initiatives pertaining to digital markets. Indeed, draft regulations being contemplated around the globe mimic the features of the antitrust/competition interventions discussed above. For instance, it is widely accepted that Europe’s DMA effectively transposes and streamlines the enforcement of the theories harm described above.[50] Similarly, several scholars have argued that the proposed American Innovation and Choice Online Act (“AICOA”) in the United States largely mimics European competition policy.[51] The legislation would ultimately require firms to open up their platforms, most notably by forcing them to treat rival services as they would their own and to make their services more interoperable with those rivals.[52]

What is striking about these decisions and investigations is the extent to which authorities are pushing back against the very features that distinguish the platforms they are investigating. Closed (or relatively closed) platforms are forced to open up, and firms with highly propertized assets are made to share them (or, at the very least, monetize them less aggressively).

B.      The Empty Quadrant

All of this would not be very interesting if it weren’t for a final piece of the puzzle: the model of open and shared platforms that authorities apparently favor has traditionally struggled to gain traction with consumers. Indeed, there seem to be vanishingly few successful consumer-oriented products and services in this space.

There have been numerous attempts to introduce truly open consumer-oriented operating systems in both the mobile and desktop segments. Most have ended in failure. Ubuntu and other flavors of the Linux operating system remain fringe products. There have been attempts to create open-source search engines, but they have not met with success.[53] The picture is similar in the online retail space. Amazon appears to have beaten eBay, despite the latter being more open and less propertized. Indeed, Amazon has historically charged higher fees than eBay and offers sellers much less freedom in the ways in which they may sell their goods.[54]

This theme is repeated in the standardization space. There have been innumerable attempts to impose open, royalty-free standards. At least in the mobile-internet industry, few (if any) of these have taken off. Instead, proprietary standards such as 5G and WiFi have been far more successful. That pattern is repeated in other highly standardized industries, like digital-video formats. Most recently, the proprietary Dolby Vision format seems to be winning the war against the open HDR10+ format.[55]

This is not to say that there haven’t been any successful examples of open, royalty-free standards. Internet protocols, blockchain, and Wikipedia all come to mind. Nor does it mean that we will not see more decentralized goods in the future. But by and large, firms and consumers have not yet taken to the idea of fully open and shared platforms. Or, at least, those platforms have not yet achieved widespread success in the marketplace (potentially due to supply-side considerations, such as the difficulty of managing open platforms or the potentially lower returns to innovation in weakly propertized ones).[56] And while some “open” projects have achieved tremendous scale, the consumer-facing side of these platforms is often dominated by intermediaries that opt for much more traditional business models (think of Coinbase in the blockchain space, or Android’s use of Linux).

C.      Potential Explanations

The preceding section posited a recurring reality: the digital platforms that competition authorities wish to bring into existence are fundamentally different from those that emerge organically. But why have authorities’ ideal platforms, so far, failed to achieve truly meaningful success?

Three potential explanations come to mind. First, “closed” and “propertized” platforms might systematically—and perhaps anticompetitively—thwart their “open” and “shared” rivals. Second, shared platforms might fail to persist (or grow pervasive) because they are much harder to monetize, and there is thus less incentive to invest in them. This is essentially a supply-side explanation. Finally, consumers might opt for relatively closed systems precisely because they prefer these platforms to marginally more open ones—i.e., a demand-side explanation.

In evaluating the first conjecture, the key question is whether successful “closed” and “propertized” platforms overcame their rivals before or after they achieved some measure of market dominance. If success preceded dominance, then anticompetitive foreclosure alone cannot explain the proliferation of the “closed” and “propertized” model.[57]

Many of today’s dominant platforms, however, often overcame open/shared rivals, well before they achieved their current size. It is thus difficult to make the case that the early success of their business models was due to anticompetitive behavior. This is not to say these business models cannot raise antitrust issues, but rather that anticompetitive behavior is not a good explanation for their emergence.

Both the second and the third conjectures essentially ask whether “closed” and “propertized” might be better adapted to their environment than “open” and “shared” rivals.

In that respect, it is not unreasonable to surmise that highly propertized platforms would generally be easier to monetize than shared ones. For example, to monetize open-source platforms often requires relying on complementarities, which tend to be vulnerable to outside competition and free-riding.[58] There is thus a natural incentive for firms to invest and innovate in more propertized environments. In turn, competition enforcement that limits a platform’s ability to propertize their assets may harm innovation.

Similarly, authorities should reflect on whether consumers really want the more “competitive” ecosystems that they are trying to design. The European Commission, for example, has a long track record of seeking to open digital platforms, notably by requiring that platform owners do not preinstall their own web browsers (the Microsoft decisions are perhaps the most salient example). And yet, even after these interventions, new firms have kept using the very business model that the commission reprimanded, rather than the “pro-consumer” model it sought to impose on the industry. For example, Apple tied the Safari browser to its iPhones; Google went to some length to ensure that Chrome was preloaded on devices; and Samsung phones come with Samsung Internet as default.[59] Yet this has not ostensibly steered consumers away from those platforms.

Along similar lines, a sizable share of consumers opt for Apple’s iPhone, which is even more centrally curated than Microsoft Windows ever was (and the same is true of Apple’s MacOS). In other words, it is hard to claim that opening platforms is inherently good for consumers when those same consumers routinely opt for platforms with the very features that policymakers are trying to eliminate.

Finally, it is worth noting that the remedies imposed by competition authorities have been anything but successes. Windows XP N (the version of Windows that came without Windows Media Player) was an unmitigated flop, selling a paltry 1,787 copies.[60] Likewise, the internet-browser “ballot box” imposed by the commission was so irrelevant to consumers that it took months for authorities to notice that Microsoft had removed it, in violation of the commission’s decision.[61]

One potential inference is that consumers do not value competition interventions that make dominant ecosystems marginally more open and less propertized. There are also many reasons why consumers might prefer “closed” systems (at least, relative to the model favored by many policymakers), even when they must pay a premium for them.

Take the example of app stores. Maintaining some control over the apps that can access the store enables platforms to easily weed out bad actors. Similarly, controlling the hardware resources that each app can use may greatly improve device performance. Indeed, it may be that a measure of control facilitates the very innovations that consumers demand. Therefore, “authorities and courts should not underestimate the indispensable role control plays in achieving coordination and coherence in the context of systemic ef?ciencies. Without it, the attempted novelties and strategies might collapse under their own complexity.”[62]

Relatively centralized platforms can eliminate negative externalities that “bad” apps impose on rival apps and consumers.[63] This is especially true when consumers will tend to attribute dips in performance to the overall platform, rather than to a particular app.[64] At the same time, they can take advantage of positive externalities to improve the quality of the overall platform.

And it is surely the case that consumers prefer to make many of their decisions at the inter-platform level, rather than within each platform. In simple terms, users arguably make their most important decision when they choose between an Apple or Android smartphone (or a Mac and a PC, etc.). In doing so, they can select their preferred app suite with one simple decision. They might thus purchase an iPhone because they like the secure App Store, or an Android smartphone because they like the Chrome Browser and Google Search. Absent false information at the time of the initial platform decision, this decision will effectively incorporate expectations about subsequent constraints.[65]

Furthermore, forcing users to make too many “within-platform” choices may undermine a product’s attractiveness. Indeed, it is difficult to create a high-quality reputation if each user’s experience is fundamentally different.[66] In short, contrary to what antitrust authorities appear to believe, closed platforms might give most users exactly what they desire.

All of this suggests that consumers and firms often gravitate spontaneously toward both closed and highly propertized platforms, the opposite of what the commission and other competition authorities tend to favor. The reasons for this trend are still misunderstood, and mostly ignored. Too often it is simply assumed that consumers benefit from more openness, and that shared/open platforms are the natural order of things. Instead, what some regard as “market failures” may in fact be features that explain the rapid emergence of the digital economy.

When considering potential policy reforms targeting the metaverse, policymakers would be wrong to assume openness (notably, in the form of interoperability) and weak propertization are always objectively superior. Instead, these platform designs entail important tradeoffs. Closed metaverse ecosystems may lead to higher consumer safety and better performance, while interoperable systems may reduce the frictions consumers face when moving from one service to another. There is little reason to believe policymakers are in a better position to weigh these tradeoffs than consumers, who vote with their virtual feet.

IV.    Conclusion

A final important argument against intervening today is that the metaverse industry is nowhere near mature. Tomorrow’s challenges and market failures might not be the same as today’s. This makes it exceedingly difficult for policymakers to design appropriate regulation and increases the risk that regulation might harm innovation.

At the time of writing, the entire metaverse industry (both hardware and software) is estimated to be worth somewhere in the vicinity of $80 billion, and projections suggest this could grow by a factor of 10 by 2030.[67] Growth projections of this sort are notoriously unreliable. But in this case, they do suggest there is some consensus that the industry is not fully fledged.

Along similar lines, it remains unclear what types of metaverse services will gain the most traction with consumers, what sorts of hardware consumers will use to access these services, and what technologies will underpin the most successful metaverse platforms. In fact, it is still an open question whether the metaverse industry will foster any services that achieve widespread consumer adoption in the foreseeable future.[68] In other words, it is not exactly clear what products and services metaverse-specific rules would end up covering.

Given these uncertainties—and the other arguments against regulation discussed in the previous sections—it would be premature to enact metaverse-specific rules. And yet, that is precisely what the commission appears to be contemplating.

In its call for evidence, the commission suggests that acting now will enable it to shape the metaverse industry to fit its own preferences, while guaranteeing that European firms are central to metaverse ecosystems:

The EU is well positioned to shape this next evolution, reflecting the EU‘s vision for the Digital Decade 20302 and in line with the European Declaration on Digital Rights and Principles , from the outset: open, interoperable, trusted, secure, privacy preserving, virtual worlds, respecting our legislation.[69]

But this outcome is anything but certain. Intervening so early in the industry’s life cycle is like aiming at a moving target. New rules or guidelines might end up being irrelevant before they have any influence on the products that firms develop. More worryingly, acting now signals that the metaverse industry will be subject to heightened regulatory scrutiny for the foreseeable future. In turn, this may deter large platforms from investing in the European market. It also may funnel venture-capital investments away from the European continent.

The core problem is that, without a clear sense of the market failures that need to be fixed, there is little apparent upside to offset the costs of regulation. The best evidence concerning these potential costs comes from the GDPR. While privacy regulation is obviously not the same as other types of economic regulation, the evidence concerning the GDPR suggests that regulation may, at least in some instances, slow down innovation and reduce competition.

The most-cited empirical evidence concerning the effects of the GDPR comes from a paper by Garrett Johnson and co-authors, who link the GDPR to widespread increases to market concentration, particularly in the short-term:

We show that websites’ vendor use falls after the European Union’s (EU’s) General Data Protection Regulation (GDPR), but that market concentration also increases among technology vendors that provide support services to websites…. The week after the GDPR’s enforcement, website use of web technology vendors falls by 15% for EU residents. Websites are relatively more likely to retain top vendors, which increases the concentration of the vendor market by 17%. Increased concentration predominantly arises among vendors that use personal data, such as cookies, and from the increased relative shares of Facebook and Google-owned vendors, but not from website consent requests. Although the aggregate changes in vendor use and vendor concentration dissipate by the end of 2018, we find that the GDPR impact persists in the advertising vendor category most scrutinized by regulators.[70]

Along similar lines, an NBER working paper by Jian Jia and co-authors finds that enactment of the GDPR markedly reduced venture-capital investments in Europe:

Our findings indicate a negative differential effect on EU ventures after the rollout of GDPR relative to their US counterparts. These negative effects manifest in the overall number of financing rounds, the overall dollar amount raised across rounds, and in the dollar amount raised per individual round. Specifically, our findings suggest a $3.38 million decrease in the aggregate dollars raised by EU ventures per state per crude industry category per week, a 17.6% reduction in the number of weekly venture deals, and a 39.6% decrease in the amount raised in an average deal following the rollout of GDPR.[71]

In another paper, Samuel Goldberg and co-authors find that the GDPR led to a roughly 12% reduction in website pageviews and e-commerce revenue in Europe.[72] Finally, Rebecca Janssen and her co-authors show that the GDPR decreased the number of apps offered on Google’s Play Store between 2016 and 2019:

Using data on 4.1 million apps at the Google Play Store from 2016 to 2019, we document that GDPR induced the exit of about a third of available apps; and in the quarters following implementation, entry of new apps fell by half.[73]

Of course, the body of evidence concerning the GDPR’s effects is not entirely unambiguous. For example, Rajkumar Vekatesean and co-authors find that the GDPR had mixed effects on the returns of different types of firms.[74] Other papers also show similarly mixed effects.[75]

Ultimately, the empirical literature concerning the effects of the GDPR shows that regulation—in this case, privacy protection—is no free lunch. Of course, this does not mean that regulating the metaverse would necessarily have these same effects. But in the absence of a clear market failure to solve, it is unclear why policymakers should run such a risk in the first place.

In the end, regulating the metaverse is unlikely to be costless. The metaverse is still in its infancy, regulation could deter essential innovation, and the commission has thus far failed to identify any serious market failures that warrant public intervention. The result is that the commission’s call for evidence appears premature or, in other words, that the commission is putting the meta-cart before the meta-horse.

[1] Virtual Worlds (Metaverses) – A Vision for Openness, Safety and Respect, European Commission, https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13757-Virtual-worlds-metaverses-a-vision-for-openness-safety-and-respect/feedback_en?p_id=31962299H (hereafter, “Call for Evidence”).

[2] Id.

[3] Jonathan Vaian, Meta’s Reality Labs Records $3.99 Billion Quarterly Loss as Zuckerberg Pumps More Cash into Metaverse, CNBC (Apr. 26, 2023), https://www.cnbc.com/2023/04/26/metas-reality-labs-unit-records-3point99-billion-first-quarter-loss-.html.

[4] Alan Truly, Horizon Worlds Leak: Only 1 in 10 Users Return & Web Launch Is Coming, Mixed News (Mar. 3, 2023), https://mixed-news.com/en/horizon-worlds-leak-only-1-in-10-users-return-web-launch-coming; Kevin Hurler, Hey Fellow Kids: Meta Is Revamping Horizon Worlds to Attract More Teen Users, Gizmodo (Feb. 7, 2023), https://gizmodo.com/meta-metaverse-facebook-horizon-worlds-vr-1850082068; Emma Roth, Meta’s Horizon Worlds VR Platform Is Reportedly Struggling to Keep Users, The Verge (Oct. 15, 2022),
https://www.theverge.com/2022/10/15/23405811/meta-horizon-worlds-losing-users-report; Paul Tassi, Meta’s ‘Horizon Worlds’ Has Somehow Lost 100,000 Players in Eight Months, Forbes, (Oct. 17, 2022), https://www.forbes.com/sites/paultassi/2022/10/17/metas-horizon-worlds-has-somehow-lost-100000-players-in-eight-months/?sh=57242b862a1b.

[5] Call for Evidence, supra note 1.

[6] Id.

[7] Id.

[8] Frank H. Easterbrook, Cyberspace and the Law of the Horse, 1996 U. Chi. Legal F. 207 (1996).

[9] Id. at 208.

[10] Call for Evidence, supra note 1.

[11] See Case COMP/C-3/37.792, Microsoft, OJ L 32 (May 24, 2004); see also, Case COMP/39.530, Microsoft (Tying), OJ C 120 (Apr. 26, 2013); Case AT.39740, Google Search (Shopping), 2017 E.R.C. I-379; Case AT.40099 Google Android, 2018 E.R.C.

[12] See European Commission Press Release IP/20/1073, Antitrust: Commission Opens Investigations into Apple’s App Store Rules (Jun. 16, 2020); European Commission Press Release IP/20/1075, Antitrust: Commission Opens Investigation into Apple Practices Regarding Apple Pay (Jun. 16, 2020); European Commission Press Release IP/19/4291, Antitrust: Commission Opens Investigation into Possible Anti-Competitive Conduct of Amazon (Jul. 17, 2019).

[13] Regulation (EU) No 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act), https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32022R1925.

[14] Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on Certain Legal Aspects of Information Society Services, in Particular Electronic Commerce, in the Internal Market (hereafter, “eCommerce Directive”), https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A32000L0031.

[15] Id. art. 12 to 15.

[16] Regulation EU 2022/2065 of the European Parliament and of the Council of 19 October 2022 on a Single Market For Digital Services and Amending Directive 2000/31/EC (Digital Services Act), https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32022R2065 (hereafter, “DSA”).

[17] Call for Evidence, supra note 1.

[18] Terms of Use, Decentraland, https://decentraland.org/terms (last visited May 2, 2023).

[19] Andrew N. Choi & Cynthia A. Gierhart, Intellectual Property Enforcement in the Metaverse, Part 2, Holland & Knight (Oct. 13, 2022), https://www.hklaw.com/en/insights/publications/2022/10/intellectual-property-enforcement-in-the-metaverse-part-2; see, more generally, Thibault Schrepel, Blockchain + Antitrust (Elgar, 2021).

[20] Aron Garst, Fortnite and Roblox Are Dueling for the Future of User-Built Games, The Verge (Apr. 7, 2023), https://www.theverge.com/23674121/fortnite-roblox-user-generated-games.

[21] Lawrence Lessig, The Law of the Horse: What Cyberlaw Might Teach, 113 Harv. L. Rev. 510 (1999).

[22] Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 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 (General Data Protection Regulation); DSA, supra note 16; eCommerce Directive, supra note 14

[23] Lessig, supra note 22, at 507 (“Behavior, we might say, is regulated by four kinds of constraints. Law is just one of those constraints. Law (in at least one of its aspects) orders people to behave in certain ways; it threatens punishment if they do not obey. The law tells me not to buy certain drugs, not to sell cigarettes without a license, and not to trade across international borders without first filing a customs form. It promises strict punishments if these orders are not followed. In this way, we say that law regulates. But not only law regulates in this sense. Social norms do as well. Norms control where I can smoke; they affect how I behave with members of the opposite sex; they limit what I may wear; they influence whether I will pay my taxes. Like law, norms regulate by threatening punishment ex post. But unlike law, the punishments of norms are not centralized. Norms are enforced (if at all) by a community, not by a government. In this way, norms constrain, and therefore regulate. Markets, too, regulate. They regulate by price. The price of gasoline limits the amount one drives – more so in Europe than in the United States. The price of subway tickets affects the use of public transportation – more so in Europe than in the United States. Of course the market is able to constrain in this manner only because of other constraints of law and social norms: property and contract law govern markets; markets operate within the domain permitted by social norms. But given these norms, and given this law, the market presents another set of constraints on individual and collective behavior. And finally, there is a fourth feature of real space that regulates behavior – “architecture.””).

[24] Id. at 538-541; see also, Frank H. Easterbrook, Limits of Antitrust, 63 Tex. L. Rev. 1 (1984); Geoffrey A. Manne & Joshua D. Wright, Innovation and the Limits of Antitrust, 6 J. Comp. L. & Econ. 153 (2010); Geoffrey A. Manne, Error Costs in Digital Markets, 3 GAI Report on Competition in Digital Markets 33 (2020).

[25] R. H. Coase, The Problem of Social Cost, 9 J.L. & Econ. 15 (1960).

[26] Lessig, supra note 22, at 508.

[27] Call for Evidence, supra note 1.

[28] Catherine Thorbecke, What Metaverse? Meta Says Its Single Largest Investment Is Now in ‘Advancing AI’, CNN Business (Mar. 15, 2023), https://www.cnn.com/2023/03/15/tech/meta-ai-investment-priority/index.html; Ben Marlow, Mark Zuckerberg’s Metaverse Is Shattering into a Million Pieces, The Telegraph (Apr. 23, 2023), https://www.telegraph.co.uk/business/2023/04/21/mark-zuckerbergs-metaverse-shattering-million-pieces; Will Gendron, Meta Has Reportedly Stopped Pitching Advertisers on the Metaverse, BusinessInsider (Apr. 18, 2023), https://www.businessinsider.com/meta-zuckerberg-stopped-pitching-advertisers-metaverse-focus-reels-ai-report-2023-4.

[29] Mansoor Iqbal, Fortnite Usage and Revenue Statistics, Business of Apps (Jan. 9, 2023), https://www.businessofapps.com/data/fortnite-statistics; Matija Ferjan, 76 Little-Known Metaverse Statistics & Facts (2023 Data), Headphones Addict (Feb. 13, 2023), https://headphonesaddict.com/metaverse-statistics.

[30] James Batchelor, Meta’s Flagship Metaverse Horizon Worlds Struggling to Attract and Retain Users, Games Industry (Oct. 17, 2022), https://www.gamesindustry.biz/metas-flagship-metaverse-horizon-worlds-struggling-to-attract-and-retain-users; Ferjan, id.

[31] Richard Lawler, Decentraland’s Billion-Dollar ‘Metaverse’ Reportedly Had 38 Active Users in One Day, The Verge (Oct. 13, 2022), https://www.theverge.com/2022/10/13/23402418/decentraland-metaverse-empty-38-users-dappradar-wallet-data; The Sandbox, DappRadar, https://dappradar.com/multichain/games/the-sandbox (last visited May 3, 2023); Decentraland, DappRadar, https://dappradar.com/multichain/social/decentraland (last visited May 3, 2023).

[32] David J. Teece, Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing and Public Policy, 15 Research Policy 285-305 (1986), https://www.sciencedirect.com/science/article/abs/pii/0048733386900272.

[33] Geoffrey Manne & Dirk Auer, Antitrust Dystopia and Antitrust Nostalgia: Alarmist Theories of Harm in Digital Markets and Their Origins, 28 Geo. Mason L. Rev. 1279 (2021).

[34] Roblox, Wikipedia, https://en.wikipedia.org/wiki/Roblox (last visited May 3, 2023); Minecraft, Wikipedia, https://en.wikipedia.org/wiki/Minecraft (last visited May 3, 2023); Fortnite, Wikipedia, https://en.wikipedia.org/wiki/Fortnite (last visited May 3, 2023); see Fiza Chowdhury, Minecraft vs Roblox vs Fortnite: Which Is Better?, Metagreats (Feb. 20, 2023), https://www.metagreats.com/minecraft-vs-roblox-vs-fortnite.

[35]  Marc Rysman, The Economics of Two-Sided Markets, 13 J. Econ. Perspectives 134 (2009) (“First, if standards can differentiate from each other, they may be able to successfully coexist (Chou and Shy, 1990; Church and Gandal, 1992). Arguably, Apple and Microsoft operating systems have both survived by specializing in different markets: Microsoft in business and Apple in graphics and education. Magazines are an obvious example of platforms that differentiate in many dimensions and hence coexist.”).

[36] Id. at 134 (“Second, tipping is less likely if agents can easily use multiple standards. Corts and Lederman (forthcoming) show that the fixed cost of producing a video game for one more standard have reduced over time relative to the overall fixed costs of producing a game, which has led to increased distribution of games across multiple game systems (for example, PlayStation, Nintendo, and Xbox) and a less-concentrated game system market.”).

[37] What Are Fortnite, Roblox, Minecraft and Among Us? A Parent’s Guide to the Most Popular Online Games Kids Are Playing, FTC Business (Oct. 5, 2021), https://www.ftc.net/blog/what-are-fortnite-roblox-minecraft-and-among-us-a-parents-guide-to-the-most-popular-online-games-kids-are-playing; Jay Peters, Epic Is Merging Its Digital Asset Stores into One Huge Marketplace, The Verge (Mar. 22, 2023), https://www.theverge.com/2023/3/22/23645601/epic-games-fab-asset-marketplace-state-of-unreal-2023-gdc.

[38] Luke Winkie, Inside Roblox’s Criminal Underworld, Where Kids Are Scamming Kids, IGN (Jan. 2, 2023), https://www.ign.com/articles/inside-robloxs-criminal-underworld-where-kids-are-scamming-kids; Fake Minecraft Updates Pose Threat to Users, Tribune (Sept. 11, 2022), https://tribune.com.pk/story/2376087/fake-minecraft-updates-pose-threat-to-users; Ana Diaz, Roblox and the Wild West of Teenage Scammers, Polygon (Aug. 24, 2019) https://www.polygon.com/2019/8/24/20812218/roblox-teenage-developers-controversy-scammers-prison-roleplay; Rebecca Alter, Fortnite Tries Not to Scam Children and Face $520 Million in FTC Fines Challenge, Vulture (Dec. 19, 2022), https://www.vulture.com/2022/12/fortnite-epic-games-ftc-fines-privacy.html; Leonid Grustniy, Swindle Royale: Fortnite Scammers Get Busy, Kaspersky Daily (Dec. 3, 2020), https://www.kaspersky.com/blog/top-four-fortnite-scams/37896.

[39] See, generally, David Evans & Richard Schmalensee, Matchmakers: The New Economics of Multisided Platforms (Harvard Business Review Press, 2016).

[40] David S. Evans, Governing Bad Behaviour By Users of Multi-Sided Platforms, Berkley Technology Law Journal 27:2 (2012), 1201.

[41] Call for Evidence, supra note 1.

[42] Id.

[43] See Case COMP/C-3/37.792, Microsoft, OJ L 32 (May 24, 2004). See also, Case COMP/39.530, Microsoft (Tying), OJ C 120 (Apr. 26, 2013).

[44] See Complaint, Epic Games, Inc. v. Apple Inc., 493 F. Supp. 3d 817 (N.D. Cal. 2020) (4:20-cv-05640-YGR).

[45] See European Commission Press Release IP/20/1073, Antitrust: Commission Opens Investigations into Apple’s App Store Rules (Jun. 16, 2020); European Commission Press Release IP/20/1075, Antitrust: Commission Opens Investigation into Apple Practices Regarding Apple Pay (Jun. 16, 2020).

[46] See European Commission Press Release IP/18/421, Antitrust: Commission Fines Qualcomm €997 Million for Abuse of Dominant Market Position (Jan. 24, 2018); Federal Trade Commission v. Qualcomm Inc., 969 F.3d 974 (9th Cir. 2020).

[47] See European Commission Press Release IP/19/4291, Antitrust: Commission Opens Investigation into Possible Anti-Competitive Conduct of Amazon (Jul. 17, 2019).

[48] See Case AT.39740, Google Search (Shopping), 2017 E.R.C. I-379. See also, Case AT.40099 (Google Android), 2018 E.R.C.

[49] See Complaint, United States v. Google, LLC, (2020), https://www.justice.gov/opa/pr/justice-department-sues-monopolist-google-violating-antitrust-laws; see also, Complaint, Colorado et al. v. Google, LLC, (2020), available at https://coag.gov/app/uploads/2020/12/Colorado-et-al.-v.-Google-PUBLIC-REDACTED-Complaint.pdf.

[50] See, e.g., Giorgio Monti, The Digital Markets Act: Institutional Design and Suggestions for Improvement, Tillburg L. & Econ. Ctr., Discussion Paper No. 2021-04 (2021), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3797730 (“In sum, the DMA is more than an enhanced and simplified application of Article 102 TFEU: while the obligations may be criticised as being based on existing competition concerns, they are forward-looking in trying to create a regulatory environment where gatekeeper power is contained and perhaps even reduced.”) (Emphasis added).

[51] See, e.g., Aurelien Portuese, “Please, Help Yourself”: Toward a Taxonomy of Self-Preferencing, Information Technology & Innovation Foundation (Oct. 25, 2021), available at https://itif.org/sites/default/files/2021-self-preferencing-taxonomy.pdf. (“The latest example of such weaponization of self-preferencing by antitrust populists is provided by Sens. Amy Klobuchar (D-MN) and Chuck Grassley (R-IA). They introduced legislation in October 2021 aimed at prohibiting the practice.2 However, the legislation would ban self-preferencing only for a handful of designated companies—the so-called “covered platforms,” not the thousands of brick-and-mortar sellers that daily self-preference for the benefit of consumers. Mimicking the European Commission’s Digital Markets Act prohibiting self-preferencing, Senate and the House bills would degrade consumers’ experience and undermine competition, since self-preferencing often benefits consumers and constitutes an integral part, rather than an abnormality, of the process of competition.”).

[52] Efforts to saddle platforms with “non-discrimination” constraints are tantamount to mandating openness. See Geoffrey A. Manne, Against the Vertical Discrimination Presumption, Foreword, Concurrences No. 2-2020 (2020) at 2 (“The notion that platforms should be forced to allow complementors to compete on their own terms, free of constraints or competition from platforms is a species of the idea that platforms are most socially valuable when they are most ‘open.’ But mandating openness is not without costs, most importantly in terms of the effective operation of the platform and its own incentives for innovation.”).

[53] See, e.g., Klint Finley, Your Own Private Google: The Quest for an Open Source Search Engine, Wired (Jul. 12, 2021), https://www.wired.com/2012/12/solar-elasticsearch-google.

[54] See Brian Connolly, Selling on Amazon vs. eBay in 2021: Which Is Better?, JungleScout (Jan. 12, 2021), https://www.junglescout.com/blog/amazon-vs-ebay; Crucial Differences Between Amazon and eBay, SaleHOO, https://www.salehoo.com/educate/selling-on-amazon/crucial-differences-between-amazon-and-ebay (last visited Feb. 8, 2021).

[55] See, e.g., Dolby Vision Is Winning the War Against HDR10 +, It Requires a Single Standard, Tech Smart, https://voonze.com/dolby-vision-is-winning-the-war-against-hdr10-it-requires-a-single-standard (last visited June 6, 2022).

[56] On the importance of managers, see, e.g., Nicolai J Foss & Peter G Klein, Why Managers Still Matter, 56 MIT Sloan Mgmt. Rev., 73 (2014) (“In today’s knowledge-based economy, managerial authority is supposedly in decline. But there is still a strong need for someone to define and implement the organizational rules of the game.”).

[57] It is generally agreed upon that anticompetitive foreclosure is possible only when a firm enjoys some degree of market power. Frank H. Easterbrook, Limits of Antitrust, 63 Tex. L. Rev. 1, 20 (1984) (“Firms that lack power cannot injure competition no matter how hard they try. They may injure a few consumers, or a few rivals, or themselves (see (2) below) by selecting ‘anticompetitive’ tactics. When the firms lack market power, though, they cannot persist in deleterious practices. Rival firms will offer the consumers better deals. Rivals’ better offers will stamp out bad practices faster than the judicial process can. For these and other reasons many lower courts have held that proof of market power is an indispensable first step in any case under the Rule of Reason. The Supreme Court has established a market power hurdle in tying cases, despite the nominally per se character of the tying offense, on the same ground offered here: if the defendant lacks market power, other firms can offer the customer a better deal, and there is no need for judicial intervention.”).

[58] See, e.g., Josh Lerner & Jean Tirole, Some Simple Economics of Open Source, 50 J. Indus. Econ. 197 (2002).

[59] See Matthew Miller, Thanks, Samsung: Android’s Best Mobile Browser Now Available to All, ZDNet (Aug. 11, 2017), https://www.zdnet.com/article/thanks-samsung-androids-best-mobile-browser-now-available-to-all.

[60] FACT SHEET: Windows XP N Sales, RegMedia (Jun. 12, 2009), available at https://regmedia.co.uk/2009/06/12/microsoft_windows_xp_n_fact_sheet.pdf.

[61] See Case COMP/39.530, Microsoft (Tying), OJ C 120 (Apr. 26, 2013).

[62] Konstantinos Stylianou, Systemic Efficiencies in Competition Law: Evidence from the ICT Industry, 12 J. Competition L. & Econ. 557 (2016).

[63] See, e.g., Steven Sinofsky, The App Store Debate: A Story of Ecosystems, Medium (Jun. 21, 2020), https://medium.learningbyshipping.com/the-app-store-debate-a-story-of-ecosystems-938424eeef74.

[64] Id.

[65] See, e.g., Benjamin Klein, Market Power in Aftermarkets, 17 Managerial & Decision Econ. 143 (1996).

[66] See, e.g., Simon Hill, What Is Android Fragmentation, and Can Google Ever Fix It?, DigitalTrends (Oct. 31, 2018), https://www.digitaltrends.com/mobile/what-is-android-fragmentation-and-can-google-ever-fix-it.

[67] Metaverse Market Revenue Worldwide from 2022 to 2030, Statista, https://www.statista.com/statistics/1295784/metaverse-market-size (last visited May 3, 2023); Metaverse Market by Component (Hardware, Software (Extended Reality Software, Gaming Engine, 3D Mapping, Modeling & Reconstruction, Metaverse Platform, Financial Platform), and Professional Services), Vertical and Region – Global Forecast to 2027, Markets and Markets (Apr. 27, 2023), https://www.marketsandmarkets.com/Market-Reports/metaverse-market-166893905.html; see also, Press Release, Metaverse Market Size Worth $ 824.53 Billion, Globally, by 2030 at 39.1% CAGR, Verified Market Research (Jul. 13, 2022), https://www.prnewswire.com/news-releases/metaverse-market-size-worth–824-53-billion-globally-by-2030-at-39-1-cagr-verified-market-research-301585725.html.

[68] See, e.g., Megan Farokhmanesh, Will the Metaverse Live Up to the Hype? Game Developers Aren’t Impressed, Wired (Jan. 19, 2023), https://www.wired.com/story/metaverse-video-games-fortnite-zuckerberg; see also Mitch Wagner, The Metaverse Hype Bubble Has Popped. What Now?, Fierce Electronics (Feb. 24, 2023), https://www.fierceelectronics.com/embedded/metaverse-hype-bubble-has-popped-what-now.

[69] Call for Evidence, supra note 1.

[70] Garret A. Johnson, et al., Privacy and Market Concentration: Intended and Unintended Consequences of the GDPR, Forthcoming Management Science 1 (2023).

[71] Jian Jia, et al., The Short-Run Effects of GDPR on Technology Venture Investment, NBER Working Paper 25248, 4 (2018), available at https://www.nber.org/system/files/working_papers/w25248/w25248.pdf.

[72] Samuel G. Goldberg, Garrett A. Johnson, & Scott K. Shriver, Regulating Privacy Online: An Economic Evaluation of GDPR (2021), available at https://www.ftc.gov/system/files/documents/public_events/1588356/johnsongoldbergshriver.pdf.

[73] Rebecca Janßen, Reinhold Kesler, Michael Kummer, & Joel Waldfogel, GDPR and the Lost Generation of Innovative Apps, Nber Working Paper 30028, 2 (2022), available at https://www.nber.org/system/files/working_papers/w30028/w30028.pdf.

[74] Rajkumar Venkatesan, S. Arunachalam & Kiran Pedada, Short Run Effects of Generalized Data Protection Act on Returns from AI Acquisitions, University of Virginia Working Paper 6 (2022), available at: https://conference.nber.org/conf_papers/f161612.pdf. (“On average, GDPR exposure reduces the ROA of firms. We also find that GDPR exposure increases the ROA of firms that make AI acquisitions for improving customer experience, and cybersecurity. Returns on AI investments in innovation and operational efficiencies are unaffected by GDPR.”)

[75] For a detailed discussion of the empirical literature concerning the GDPR, see Garrett Johnson, Economic Research on Privacy Regulation: Lessons From the GDPR And Beyond, NBER Working Paper 30705 (2022), available at https://www.nber.org/system/files/working_papers/w30705/w30705.pdf.

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.

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[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.

Introduction

The dystopian novel is a powerful literary genre. It has given us such masterpieces as Nineteen Eighty-Four, Brave New World, Fahrenheit 451, and Animal Farm. Though these novels often shed light on some of the risks that contemporary society faces and the zeitgeist of the time when they were written, they almost always systematically overshoot the mark (whether intentionally or not) and severely underestimate the radical improvements commensurate with the technology (or other causes) that they fear. Nineteen Eighty-Four, for example, presciently saw in 1949 the coming ravages of communism, but it did not guess that markets would prevail, allowing us all to live freer and more comfortable lives than any preceding generation. Fahrenheit 451 accurately feared that books would lose their monopoly as the foremost medium of communication, but it completely missed the unparalleled access to knowledge that today’s generations enjoy. And while Animal Farm portrayed a metaphorical world where increasing inequality is inexorably linked to totalitarianism and immiseration, global poverty has reached historic lows in the twenty-first century, and this is likely also true of global inequality. In short, for all their literary merit, dystopian novels appear to be terrible predictors of the quality of future human existence. The fact that popular depictions of the future often take the shape of dystopias is more likely reflective of the genre’s entertainment value than of society’s impending demise.

But dystopias are not just a literary phenomenon; they are also a powerful force in policy circles. For example, in the early 1970s, the so-called Club of Rome published an influential report titled The Limits to Growth. The report argued that absent rapid and far-reaching policy shifts, the planet was on a clear path to self-destruction:

If the present growth trends in world population, industrialization, pollution, food production, and resource depletion continue unchanged, the limits to growth on this planet will be reached sometime within the next one hundred years. The most probable result will be a rather sudden and uncontrollable decline in both population and industrial capacity.

Halfway through the authors’ 100-year timeline, however, available data suggests that their predictions were way off the mark. While the world’s economic growth has continued at a breakneck pace, extreme poverty, famine, and the depletion of natural resources have all decreased tremendously.

For all its inaccurate and misguided predictions, dire tracts such as The Limits to Growth perhaps deserve some of the credit for the environmental movements that followed. But taken at face value, the dystopian future along with the attendant policy demands put forward by works like The Limits to Growth would have had cataclysmic consequences for, apparently, extremely limited gain. The policy incentive is to strongly claim impending doom. There’s no incentive to suggest “all is well,” and little incentive even to offer realistic, caveated predictions.

As we argue in this Article, antitrust scholarship and commentary is also afflicted by dystopian thinking. Today, antitrust pessimists have set their sights predominantly on the digital economy—“big tech” and “big data”—alleging a vast array of potential harms. Scholars have argued that the data created and employed by the digital economy produces network effects that inevitably lead to tipping and more concentrated markets. In other words, firms will allegedly accumulate insurmountable data advantages and thus thwart competitors for extended periods of time. Some have gone so far as to argue that this threatens the very fabric of western democracy. Other commentators have voiced fears that companies may implement abusive privacy policies to shortchange consumers. It has also been said that the widespread adoption of pricing algorithms will almost inevitably lead to rampant price discrimination and algorithmic collusion. Indeed, “pollution” from data has even been likened to the environmental pollution that spawned The Limits to Growth: “If indeed ‘data are to this century what oil was to the last one,’ then—[it’s] argue[d]—data pollution is to our century what industrial pollution was to the last one.”

Some scholars have drawn explicit parallels between the emergence of the tech industry and famous dystopian novels. Professor Shoshana Zuboff, for instance, refers to today’s tech giants as “Big Other.” In an article called “Only You Can Prevent Dystopia,” one New York Times columnist surmised:

The new year is here, and online, the forecast calls for several seasons of hell. Tech giants and the media have scarcely figured out all that went wrong during the last presidential election—viral misinformation, state-sponsored propaganda, bots aplenty, all of us cleaved into our own tribal reality bubbles—yet here we go again, headlong into another experiment in digitally mediated democracy.

I’ll be honest with you: I’m terrified . . . There’s a good chance the internet will help break the world this year, and I’m not confident we have the tools to stop it.

Parallels between the novel Nineteen Eighty-Four and the power of large digital platforms were also plain to see when Epic Games launched an antitrust suit against Apple and its App Store in August 2020. Indeed, Epic Games released a short video clip parodying Apple’s famous “1984” ad (which upon its release was itself widely seen as a critique of the tech incumbents of the time).

Similarly, a piece in the New Statesman, titled “Slouching Towards Dystopia: The Rise of Surveillance Capitalism and the Death of Privacy,” concluded that: “Our lives and behaviour have been turned into profit for the Big Tech giants—and we meekly click ‘Accept.’ How did we sleepwalk into a world without privacy?”

Finally, a piece published in the online magazine Gizmodo asked a number of experts whether we are “already living in a tech dystopia.” Some of the responses were alarming, to say the least:

I’ve started thinking of some of our most promising tech, including machine learning, as like asbestos: … it’s really hard to account for, much less remove, once it’s in place; and it carries with it the possibility of deep injury both now and down the line.

. . . .

We live in a world saturated with technological surveillance, democracy-negating media, and technology companies that put themselves above the law while helping to spread hate and abuse all over the world.

Yet the most dystopian aspect of the current technology world may be that so many people actively promote these technologies as utopian.

Antitrust pessimism is not a new phenomenon, and antitrust enforcers and scholars have long been fascinated with—and skeptical of—high tech markets. From early interventions against the champions of the Second Industrial Revolution (oil, railways, steel, etc.) through the mid-twentieth century innovations such as telecommunications and early computing (most notably the RCA, IBM, and Bell Labs consent decrees in the US) to today’s technology giants, each wave of innovation has been met with a rapid response from antitrust authorities, copious intervention-minded scholarship, and waves of pessimistic press coverage. This is hardly surprising given that the adoption of antitrust statutes was in part a response to the emergence of those large corporations that came to dominate the Second Industrial Revolution (despite the numerous radical innovations that these firms introduced in the process). Especially for unilateral conduct issues, it has long been innovative firms that have drawn the lion’s share of cases, scholarly writings, and press coverage.

Underlying this pessimism is a pervasive assumption that new technologies will somehow undermine the competitiveness of markets, imperil innovation, and entrench dominant technology firms for decades to come. This is a form of antitrust dystopia. For its proponents, the future ushered in by digital platforms will be a bleak one—despite abundant evidence that information technology and competition in technology markets have played significant roles in the positive transformation of society. This tendency was highlighted by economist Ronald Coase:

[I]f an economist finds something—a business practice of one sort or another—that he does not understand, he looks for a monopoly explanation. And as in this field we are very ignorant, the number of ununderstandable practices tends to be rather large, and the reliance on a monopoly explanation, frequent.

“The fear of the new—and the assumption that ‘ununderstandable practices’ emerge from anticompetitive impulses and generate anticompetitive effects—permeates not only much antitrust scholarship, but antitrust doctrine as well.” While much antitrust doctrine is capable of accommodating novel conduct and innovative business practices, antitrust law—like all common law-based legal regimes—is inherently backward looking: it primarily evaluates novel arrangements with reference to existing or prior structures, contracts, and practices, often responding to any deviations with “inhospitality.” As a result, there is a built-in “nostalgia bias” throughout much of antitrust that casts a deeply skeptical eye upon novel conduct.

“The upshot is that antitrust scholarship often emphasizes the risks that new market realities create for competition, while idealizing the extent to which previous market realities led to procompetitive outcomes.” Against this backdrop, our Article argues that the current wave of antitrust pessimism is premised on particularly questionable assumptions about competition in data-intensive markets.

Part I lays out the theory and identifies the sources and likely magnitude of both the dystopia and nostalgia biases. Having examined various expressions of these two biases, the Article argues that their exponents ultimately seek to apply a precautionary principle within the field of antitrust enforcement, made most evident in critics’ calls for authorities to shift the burden of proof in a subset of proceedings.

Part II discusses how these arguments play out in the context of digital markets. It argues that economic forces may undermine many of the ills that allegedly plague these markets—and thus the case for implementing a form of precautionary antitrust enforcement. For instance, because data is ultimately just information, it will prove exceedingly difficult for firms to hoard data for extended periods of time. Instead, a more plausible risk is that firms will underinvest in the generation of data. Likewise, the main challenge for digital economy firms is not so much to obtain data, but to create valuable goods and hire talented engineers to draw insights from the data these goods generate. Recent empirical findings suggest, for example, that data economy firms don’t benefit as much as often claimed from data network effects or increasing returns to scale.

Part III reconsiders the United States v. Microsoft Corp. antitrust litigation—the most important precursor to today’s “big tech” antitrust enforcement efforts—and shows how it undermines, rather than supports, pessimistic antitrust thinking. It shows that many of the fears that were raised at the time didn’t transpire (for reasons unrelated to antitrust intervention). Rather, pessimists missed the emergence of key developments that greatly undermined Microsoft’s market position, and greatly overestimated Microsoft’s ability to thwart its competitors. Those circumstances—particularly revolving around the alleged “applications barrier to entry”—have uncanny analogues in the data markets of today. We thus explain how and why the Microsoft case should serve as a cautionary tale for current enforcers confronted with dystopian antitrust theories.

In short, the Article exposes a form of bias within the antitrust community. Unlike entrepreneurs, antitrust scholars and policy makers often lack the imagination to see how competition will emerge and enable entrants to overthrow seemingly untouchable incumbents. New technologies are particularly prone to this bias because there is a shorter history of competition to go on and thus less tangible evidence of attrition in these specific markets. The digital future is almost certainly far less bleak than many antitrust critics have suggested and yet the current swath of interventions aimed at reining in “big tech” presume. This does not mean that antitrust authorities should throw caution to the wind. Instead, policy makers should strive to maintain existing enforcement thresholds, which exclude interventions that are based solely on highly speculative theories of harm.

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It’s easy for politicians to make unrealistic promises. Indeed, without a healthy skepticism on the part of the public, they can grow like weeds. In the world of digital policy, the European Union’s Digital Markets Act (DMA) has proven fertile ground for just such promises. We’ve been told that large digital platforms are the source of many economic and social ills, and that handing more discretionary power to the government can solve these problems with no apparent side effects or costs.

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Abstract

Depending on implementation details, the EU Digital Markets Act (DMA) may have negative consequences regarding information privacy and security. The DMA’s interoperability mandates are a chief example of this problem. Some of the DMA’s provisions that pose risks to privacy and to the protection of personal data are accompanied either by no explicit safeguards or by insufficient safeguards. The question is then: how to interpret the DMA consistently with Articles 7-8 of the EU Charter of Fundamental Rights which ground the rights to privacy and the protection of personal data? Using the example of the prohibition on restricting users from switching and subscribing to third-party software and services (Article 6(6) DMA), I show that Charter-compatible interpretation of the DMA may depart from the intentions of the DMA’s drafters and even be perceived by some as significantly limiting the effectiveness of the DMA’s primary tools. However, given that—unlike the GDPR—the Charter takes precedence over a mere regulation like the DMA, such policy objections may have limited legal import. Thus, the true legal norms (legal content) of the DMA may be different than what a superficial reading of the text could suggest or, indeed, what the drafters hoped to achieve.

Among the regulatory tools created by the European Union’s Digital Markets Act (DMA)—landmark competition legislation that took effect across the EU last November—is a mandate that the largest digital-messaging services must be made interoperable. In the name of promoting fairness in digital markets, these gatekeeper services are asked to allow external services to connect with them, enabling new and smaller players to compete.

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The European Commission early last month published its draft template for DMA-compliance reports. This is the document that gatekeepers will periodically need to fill out, and which subsequently will be used to determine whether they comply with the European Union’s Digital Markets Act (DMA).

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Just before Christmas, the European Commission published a draft implementing regulation (DIR) of the Digital Markets Act (DMA), establishing procedural rules that, in the Commission’s own words, seek to bolster “legal certainty,” “due process,” and “effectiveness” under the DMA. The rights of defense laid down in the draft are, alas, anemic. In the long run, this will leave the Commission’s DMA-enforcement decisions open to challenge on procedural grounds before the Court of Justice of the European Union (CJEU).

Read the full piece here.

Background…

In December 2022, the European Commission launched a public consultation on the regulation to implement the Digital Markets Act, including how the DMA will be enforced procedurally. Among the issues the regulation covers are parties’ rights to be heard, firms’ deadlines to submit documents to the Commission, access to those documents and to the Commission’s case file, and how confidentiality will be protected.

However…

While reasonable people may disagree about the merits of digital-markets regulation, appropriate procedural rules that safeguard parties’ rights and create legal certainty are essential. The timing, background, and content of the Implementing Regulation, however, all raise legitimate concerns and underscore broader issues in the DMA.

Read the full explainer here.

As the Digital Markets Act (DMA) enters its implementation phase, the European Commission is investigating whether the proposed solutions of dominant tech firms (gatekeepers) comply with the mandates of the DMA. However, this process is unearthing new concerns about potential side effects and unintended consequences. One such concern is that pro-competition measures could weaken platform integrity and security, exposing end users to data breaches, scams, and privacy risks. Further, the topic is highly sensitive due to its potential geopolitical implications.

However, this debate is inevitable, as DMA mandates aim to promote fair access by opening up gatekeepers’ ecosystems, particularly app stores. The requirements include supporting sideloading (letting users install apps outside the app store), interoperability requirements (requiring smooth integration with third-party services), and obligations to remove anti-steering restrictions (allowing businesses to directly communicate with end users, promote offers, and enter into contracts with them, without going through the gatekeeper).

Against this backdrop, to mitigate the growing risk of polarisation – which has at times affected even academic discussions – it may be useful to identify common ground and outline reasonable principles to guide policymakers in addressing these complex challenges.

Summary:

• Risks to platform integrity and security are emerging as significant concerns in the implementation of the Digital Markets Act (DMA).
• Since policymaking involves trade-offs, the European Commission should assess whether the solutions proposed by gatekeepers align with the goal of fostering competition while maintaining an adequate level of security, ultimately achieving a constrained optimum.
• When evaluating gatekeepers’ technical implementations, it is crucial to account for the substantial differences in their business models.
• Due to information asymmetry between regulators and targeted companies, achieving a proper balance between competition and security requires the active involvement of gatekeepers.
• The experience of initiatives like Open Banking demonstrates that it is possible to promote competition without compromising security.

Arecent controversy over pornographic apps being downloaded to iPhones in the European Union illustrates a fundamental tension in the EU’s Digital Markets Act (DMA): the conflict between mandated openness and established user-safety expectations.

While the DMA aims to promote competition and user choice, the recent case of the pornographic-video app Hot Tub, distributed to iPhone users through the third-party app store AltStore PAL, demonstrates how improper application of the regulation can compromise the user-safety mechanisms upon which consumers have come to rely.

Read the full piece here.

Introduction

We appreciate the opportunity to respond to the European Commission’s Consultation on the Proposed Measures for Interoperability Between Apple’s iOS Operating System and Connected Devices (DMA.100203).

The Commission’s enforcement of Article 6(7) of the Digital Markets Act (DMA) has brought Apple’s iOS ecosystem under scrutiny. This provision mandates that designated operating systems and virtual assistants must ensure “effective interoperability” with third-party devices and services.

Unfortunately, while the provision is designed to benefit competition, that outcome is far from certain in the case at-hand. Indeed, as we explain in our comments, the maximalist vision of enforcement the Commission is contemplating poses grave risks to user security, the user experience, and innovation, with few countervailing benefits to competition. Apple’s iOS ecosystem is routinely praised for its integration and user safety, but both it and its users now face enhanced risks that stem from the Commission’s proposal for forced interoperability under the DMA.

Against this backdrop, these comments aim to highlight the potentially adverse effects of the Commission’s interpretation of Article 6(7). Specifically, they address: (i) the security risks associated with mandating far-reaching open access to iOS’s key features (as opposed to a more surgical approach); (ii) the economic and consumer implications of undermining the tightly integrated iOS ecosystem; and (iii) alternative and more balanced approaches to achieve interoperability without sacrificing user safety, impairing the user experience, or slowing innovation.

In short, we argue that it is possible to achieve the DMA’s goals while avoiding the harmful outcomes for European consumers and the tech ecosystem that are virtually inevitable under the approach the Commission currently envisions.

I. Background on Article 6(7) of the DMA

Article 6(7) of the DMA introduces a legal obligation for gatekeepers such as Apple to ensure “effective interoperability” between their operating systems and third-party devices and services, so long as this does not “compromise the integrity of the operating system”.^[1]

The underlying rationale is to foster competition by granting smaller competitors access to ecosystems that traditionally have been closed or tightly controlled. While this principle has some intuitive appeal, its application to highly integrated and security-conscious systems like iOS raises significant questions about its practicality and potential downsides, especially when policymakers opt for an exceedingly narrow interpretation of the security justifications offered by the DMA.

Implementing the interoperability requirements outlined in Article 6(7) for iOS presents a series of intricate technical and operational challenges. One major issue stems from the fact that many core features of iOS—such as near-field communication (NFC) capabilities and background application activity—are deliberately designed to be locked down. These features play a critical role in ensuring both the system’s security and the seamless performance users have come to expect from Apple devices. As we explain below, allowing third parties entirely unfettered access to these sensitive functions would fundamentally alter iOS’s security architecture, introducing potential vulnerabilities that could lead to serious breaches of user data, unauthorized financial transactions, and other malicious activities.

Moreover, interoperability at the scale envisioned by the DMA would require significant technical investment to establish and maintain secure and reliable communication protocols between iOS and third-party systems. The development of such standards is inherently complex, demanding extensive collaboration among stakeholders, rigorous testing, and ongoing oversight to address emerging threats and to ensure a consistent user experience. Yet the current DMA framework lacks clear guidelines or mechanisms to facilitate such a process, leaving a critical gap in its enforcement strategy. In short, as we have argued elsewhere, the Commission needs to give gatekeepers (including Apple) more time to design and market test remedies that achieve an appropriate balance between the DMA’s competition-related goals and the protection of user security.

II. Are the Proposed Measures ‘Necessary and Proportionate’?

Under the principle of proportionality, Commission decisions must not go beyond what is “necessary to achieve the desired end”.^[2] Furthermore, to comply with Article 6(7) of the DMA, the Commission must also allow “necessary and proportionate” departures from full interoperability. As a result, in the case at-hand, it must ask whether it is necessary to force unlimited interoperability between the Apple OS and third-party devices (as opposed to the DMA’s requirement of “effective” interoperability) in order to promote more “contestability and fairness” in digital markets.

In that regard, it is important to consider that market competition already provides significant interoperability between Apple and third-party devices. As a producer of complementary products (e.g., both smartphones like the iPhone and wireless headphones like Airpods), Apple may have the ability—and may appear to have incentive—to completely foreclose third-party products in order to maximize the sale of its own products. These incentives, however, are mitigated by the fact that at least some consumers want to use other brands.

Admittedly, Apple does have some market power, and there is some “stickiness” to its ecosystem. But it is misguided to view this “stickiness” as a problem. Rather, because it arises from Apple’s integrated product design—its efforts to ensure that its products “work seamlessly together” to create “a magical experience” for users^[3]—“stickiness”, in this context, is simply another way of describing features that better satisfy consumer demand. These efforts are a function of competition: Apple competes with Android to (among other things) provide consumers with the most integrated and most comfortable smartphone ecosystem.

But a non-negligible share of users prefer and use other brands, such as headphones from Sony, Sennheiser, Bose, and JBL, among innumerable others. Sophisticated audiophiles may prefer high-fidelity headphones; frequent travelers may prefer headphones with the best noise-canceling features, etc. Apple’s headphones, while apparently suitable for most people, may not satisfy all of these diverse consumer preferences. Thus, in response to such preferences, Apple not only allows these competing products to work with its own devices, but it also provides some enhanced connectivity/interoperability features that allow these devices to operate with much of the same core functionality as Apple’s own offerings. Apple products of course, have the best (“full”) interoperability: e.g., pairing is more seamless, and more information is displayed, sometimes automatically. But the differences are largely trivial. See, for instance, how the iPhone displays information about Airpods’ pairing and battery (Figure 1).

Figure 1: Airpods Pro Information Automatically Displayed on iOS

Source: Beebom[4]

That precise display isn’t available for other headphones. But other manufacturers’ products enjoy similar features, replicating the core functionality of Apple’s headphones. Once paired with an iPhone, for instance, most headphones can connect automatically to the smartphone. Information about the headphones’ battery, AirPlay, and other connectivity options are also easily accessible. See, for instance, how iOS displays information about the JBL Tune 700BT Headphones (Figure 2).

Figure 2: Third-Party Headphones Displayed on iOS

It is also possible to download third-party apps (from Sony, JBL, and Bose, for example) that allow a wider range of controls and provide more information about the devices.^[5] The same is true of fitness trackers and other wearables.^[6]

While this is not exactly the same treatment that Apple provides its own devices, it is difficult to see why the operation of such features must be identical to facilitate competition. Indeed, as noted, these third-party devices differ from Apple’s on many dimensions. It is unclear why differentiation on, say, battery display obviates the “contestability” engendered by Apple allowing third-party headphones with, say, higher sound quality or better waterproofing to connect with its devices.

Regardless, Apple quite clearly provides more than sufficient connectivity to allow users to try third-party devices, get more information about them, and to keep using them, if that is their preference. Considering that these devices do not entail significant switching costs and that consumers can and do readily “multi-home” (i.e., use AirPods while jogging, or JBL or Bose headphones for work purposes), the user experience that Apple provides facilitates considerable “contestability” and provides third-party manufacturers a manifestly fair chance to compete.

This matters, because Article 6(7) of the DMA tolerates limits to full interoperability where they are necessary and proportionate to protect “the integrity” of operating systems, software, and hardware.^[7] The DMA therefore contemplates a weighing process, under which trivial limits to interoperability (which, as explained above, is the case here) are legal if they are necessary to preempt larger harms to the ecosystem (which, as explained below, would be a consequence of the Commission’s proposed measures). In other words, mandating full interoperability in this case, as the Commission seeks to do, would provide almost no additional benefits to third parties, but entail significant risks and costs for consumers. Given this, the Commission must permit small departures from full interoperability where they are both necessary and proportionate.

III. Risks of Forced Interoperability

Unfortunately, the trivial competitive benefits that might be achieved by the Commission’s proposed measures would come at a significant cost to European consumers.

The Commission’s preliminary findings suggest an expansive interpretation of Article 6(7), advocating for opening APIs and features broadly without sufficient regard for the consequences.^[8] But this maximalist approach risks overwhelming gatekeepers (including Apple) with compliance requirements, diverting resources away from innovation, and potentially delaying the introduction of new features.

Furthermore, the indiscriminate nature of this enforcement could exacerbate users’ security risks, as third-party developers may lack the incentives or capabilities to match Apple’s stringent security standards. The combination of increased vulnerabilities and a slower pace of innovation threatens to undermine consumer welfare—and even to reduce the benefits to third-party rivals of platform connectivity.

A. Compromised User Security

The forced interoperability proposed under Article 6(7) introduces significant risks to user security. Many of the features targeted for interoperability—such as devices’ NFC capabilities and wireless-file-transfer functionalities like AirDrop—are integral to the iOS ecosystem’s security infrastructure. These features were designed with stringent safeguards to prevent unauthorized access and to ensure that users’ sensitive information remains protected. By mandating that third-party developers gain access to these APIs and functionalities, the Commission’s approach would create opportunities for exploitation by malicious actors.

Requiring Apple to offer third-party developers unrestricted access to NFC functionalities could facilitate skimming attacks and other forms of unauthorized transactions.^[9] A piece published on the NordVPN blog lists 10 security risks associated with the improper use of, and unbridled access to, smartphones’ NFC chips.^[10] One such risk is that NFC prompts may be used to trigger the download and installation of malware—a risk further compounded by the DMA’s requirement that iOS users be allowed to sideload applications.^[11] Mandating access to the NFC chip also increases the likelihood of relay attacks (where NFC information is intercepted by a third party), because NFC interoperability information and protocols will be made public.

Much the same can be said about mandating third-party access to iOS’s AirDrop functionality. Again, according to NordVPN, AirDrop presents several security risks that would be compounded by the measures the Commission seeks to impose. These risks range from comparatively mundane threats, such as leaks of email addresses and phone numbers (because AirDrop may use this personal information to identify parties) to more significant security hazards, such as “man-in-the-middle” attacks (where an attacker accesses a private exchange) and malware attacks (where an attacker sends an infected file via AirDrop).^[12]

The point is that those parts of the iOS ecosystem that the Commission would seek to open are particularly sensitive. By refusing to acknowledge and account for the inherent tradeoffs, the Commission’s proposal risks degrading the security of European users. These risks are further compounded by other DMA provisions, such as users’ ability to sideload apps and the requirement that third-party apps should be able to function in the background.

This is not just theoretical speculation. The Microsoft/CrowdStrike outage that kept airlines, hospitals, banks, and other businesses down for hours, generating great disruption for thousands of consumers,^[13] could have been—at least, in part—generated by an interoperability mandate. Indeed, as explained by the Financial Times:

Giving software companies that kind of access to an operating system is dangerous — it means you can quickly lose control of your computer if any of the software providers you rely on makes a mistake or is compromised. That is why Apple began informing third-party developers in 2020 that it would no longer grant them kernel-level access to the MacOS operating system (and also quite possibly why the CrowdStrike problem didn’t affect Apple devices).

But not all the fault lies with Microsoft. A 2009 agreement between the company and the European Commission requires it to grant outside developers the same access to Windows that its own security software has. The idea was to make it possible for other software companies to compete with Microsoft by ensuring many of its products and services are interoperable with outside software and tools. That’s a worthy goal, and many provisions in the agreement are entirely reasonable, such as requiring that Outlook support common calendar event and scheduling formats.

But the 2009 agreement is profoundly flawed in requiring Microsoft to make all of the APIs, or programming functions, that its own security software products use available to manufacturers of third-party security software products. This is the provision that requires Microsoft to give kernel-level access to companies such as CrowdStrike. Until it is changed, it’s not clear that Microsoft can implement the chief lesson of this debacle and start phasing out access, as Apple did four years ago.^[14]

Critics of this view may retort that those third parties who interoperate with iOS are well-situated to ensure their services safely interact with Apple’s ecosystem, but things are not quite so simple. Third-party developers may lack the resources to implement equivalent security measures. Apple’s security protocols are supported by substantial investments in research, engineering, and real-time monitoring of threats. Third-party developers, particularly smaller firms, may not possess the same level of technical expertise or financial capacity to replicate these safeguards. And because security failings are likely to be attributed to the most visible entity—in this case, Apple—third parties might not have the right incentives to provide optimal levels of security.

At the same time, of course, unscrupulous actors with no incentive to maintain security safeguards are sure to try to exploit any loopholes created by the Commission. The result is an inevitable increase in vulnerabilities, leaving European users more exposed to risks that could have been mitigated within a more controlled ecosystem.

B. Degraded Device Performance and Reliability

Beyond the security risks discussed above, the sort of interoperability the Commission is demanding may also have a sizable impact on the performance of users’ devices.

For example, allowing third-party applications to run in the background without adequate controls can significantly reduce battery life, as has been observed on competing platforms like Android.^[15] As one journalist put it: “Got the case of a quickly dying phone? It might be your background apps!”.^[16] The issue arises because background activity consumes system resources, often without users’ awareness. And because users may be unable to attribute battery degradation to a specific application, developers may have weak incentives to minimize the energy their apps consume.

Given this, forcing Apple to allow background execution for all apps would compel Apple to include larger batteries in its phones. iPhones currently offer comparable battery life to Android devices, despite using smaller battery packs.^[17] In turn, this can be expected to raise the cost of Apple devices and to degrade the user experience.

Similar problems may also arise with regard to data privacy. Third-party applications may intentionally or inadvertently collect user data during background operations, raising serious privacy concerns. Such changes not only diminish the user experience, but also erode trust in the iOS platform, which has built its reputation on seamless performance and reliability. While privacy breeches entail a direct threat to users, degrading platform quality will harm both users and the very third-party rivals the Commission intends to help.

The upshot is that the Commission’s proceedings threaten to degrade aspects of the iOS experience that European consumers value deeply.

IV. Economic Implications of the Commission’s Approach

The economic consequences of the Commission’s approach to interoperability extend beyond security and performance issues. By undermining Apple’s tightly integrated ecosystem, the DMA creates incentives for companies—including other large platforms covered under the DMA, such as Meta—to leverage Apple’s platform rather than invest in creating competing functionality, devices, and operating systems.

This strategy runs counter to the DMA’s stated goal of fostering competition. Instead of encouraging innovation and the development of new ecosystems, the current enforcement approach facilitates free-riding, wherein competitors stand to benefit from Apple’s investments without bearing the associated costs. This dynamic would not only stifle competition, but may also lead to higher costs for consumers, as regulatory compliance expenses are passed on through increased product prices. Additionally, the uncertainty surrounding broad and indiscriminate enforcement could deter investment in the European technology sector. Companies might hesitate to commit resources if they perceive that their proprietary innovations could be subject to forced sharing without adequate protections.

Finally, the economic implications extend to the broader market structure. By facilitating access to Apple’s APIs and features, the DMA might inadvertently entrench large competitors who are better positioned to capitalize on these openings, rather than enabling smaller firms to grow. This could lead to further consolidation, contrary to the DMA’s goals of decentralizing power and enhancing competition.

In summary, the Commission’s maximalist interpretation of Article 6(7) creates a confluence of risks that could compromise user security, degrade device performance, and undermine economic incentives for genuine competition. A more measured approach to interoperability—one that prioritizes user safety and fostering innovation—would better serve the interests of European consumers and the broader tech ecosystem.

V. Alternative Solutions

In light of these considerations, a more nuanced approach to interoperability is essential. By focusing on targeted solutions that balance the desire for competition with the imperatives of user security and system integrity, the Commission can better align its enforcement of Article 6(7) with its overarching objectives.

A. Encouraging Targeted Interoperability

A more effective way to achieve the goals of Article 6(7) without compromising user safety or innovation is to adopt a targeted approach to interoperability. This would involve limiting access to critical APIs and functionalities to a select group of trusted partners, vetted through stringent qualification processes.

For instance, Apple could work with the Commission and industry stakeholders to identify high-value use cases where interoperability is most beneficial to consumers. These could include APIs related to productivity, health monitoring, or other well-defined areas that enhance the user experience without exposing sensitive features like biometric authentication or NFC to unnecessary risks.

By focusing on specific high-impact areas, the Commission could encourage competition and innovation without disrupting the core integrity of Apple’s ecosystem. Such a framework would also allow for tighter oversight and quality control, ensuring that third-party developers meet the same high standards for security and performance that users expect from Apple products.

B. Fostering Collaborative Development

Another viable solution would be to encourage collaborative development between Apple and its competitors to establish secure interoperability protocols. This could involve creating industry standards for interoperability that prioritize security and reliability. For example, Apple, Meta, and other key players could collaborate to develop APIs with well-defined parameters, ensuring that only necessary data is shared, while safeguarding critical system functions.

Collaborative frameworks have the added benefit of fostering mutual accountability, as all parties would share responsibility to maintain the integrity of interoperable features. Such an approach would not only minimize security risks, but could also build trust among users, developers, and regulators.

C. Adopting a Risk-Based Approach

A risk-based approach to interoperability would prioritize user safety by categorizing system features according to their sensitivity and potential significance. For example, low-risk features like calendar synchronization or basic file sharing could be made relatively more accessible, while high-risk features like background execution and NFC capabilities would remain restricted. This tiered system would allow for a gradual and controlled expansion of interoperability, giving Apple and its partners the time and resources to adapt to new standards without jeopardizing user safety or system performance.

This approach would also enable the Commission to better align its enforcement efforts with its stated goals of fostering competition and protecting consumers. By addressing interoperability in a measured and strategic manner, the DMA could achieve its objectives without imposing undue burdens on developers or exposing users to unnecessary risks.

VI. Conclusion

The enforcement of Article 6(7) of the DMA presents a complex set of challenges that demand careful consideration. While the goal of fostering competition through interoperability may be laudable, the Commission’s current approach risks undermining user security, degrading device performance, and imposing economic costs that outweigh the benefits. The unintended consequences of broad and indiscriminate enforcement threaten to weaken consumer trust and stifle innovation in Europe’s digital markets.

To better achieve the DMA’s objectives, the Commission should adopt a more targeted, risk-based approach to interoperability. This would require focusing on high-value use cases, fostering collaboration among key industry players, and ensuring that mandates are proportionate to the risks involved. By aligning enforcement with these principles, the Commission could promote genuine competition and innovation while safeguarding the interests of European consumers.

^[1] Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on Contestable and Fair Markets in the Digital sector and Amending Directives (EU) 2019/1937 and (EU) 2020/1828, art. 6 (7), 2022 O.J (L 265) 1, 36 (hereinafter “DMA”).

^[2] Consolidated Version of the Treaty on European Union, art. 5(4), 26 October 2012, O.J. (C 326) 13 (hereinafter “the TEU”).

^[3] Felix Richter, Apple’s Tightly Knit iPhone Ecosystem, STATISTA (25 March 2024), https://www.statista.com/chart/31973/likelihood-of-iphone-users-using-other-apple-devices.

[4] Beebom Staff, How to Check AirPods Battery Level, Beebom (18 December 2023), https://beebom.com/how-check-airpods-battery-level.https://beebom.com/how-check-airpods-battery-level.

^[5] See, e.g., JBL, APPLE APP STORE, https://apps.apple.com/us/app/jbl-headphones/id1053136947 (last visited 8 January 2025); Sony Sound Connect, APPLE APP STORE, https://apps.apple.com/us/app/sony-sound-connect/id1168502924 (last visited 8 January 2025); Bose Connect App, BOSE, https://www.bose.com/apps/bose-connect?srsltid=AfmBOoq89DANpx8D7U3jdKDzX-MxXYfK6ID7vYJCBvxmt5X6JRiZC4Bi (last updated 8 January 2025).

^[6] See, e.g., Fitbit, APPLE APP STORE, https://apps.apple.com/us/app/fitbit-health-fitness/id462638897 (last visited 8 January 2025).

^[7] DMA, art. 6(7).

^[8] Case Summary, Case DMA, 100203 – Consultation on the Proposed Measures for Interoperability Between Apple’s iOS Operating System and Connected Devices, EUROPEAN COMM’N, (18 December 2024), available at https://digital-markets-act.ec.europa.eu/document/download/ee7ba643-6cd6-494d-8552-cbaaaf18426a_en?filename=DMA.100203%20-%20Case%20summary.pdf (hereinafter “Apple IOS Case Summary”).

^[9] Malcolm Higgins, NFC Security: 10 Security Risks You Need to Know, NORDVPN (10 August 2023), https://nordvpn.com/blog/nfc-security.

^[10] Id.

^[11] Id.

^[12] Ilma Viena?indyt?, Is AirDrop Secure? How to Use It Safely, NORDVPN (12 December 2023), https://nordvpn.com/blog/is-airdrop-safe.

^[13] Adam Satariano, Derrick Bryson Taylor, Remy Tumin, & Danielle Kaye, Outage for Microsoft Users Knocks Out Systems for Airlines and Hospitals in Chaotic Day, N.Y. Times (19 July 2024), https://www.nytimes.com/live/2024/07/19/business/global-tech-outage.

^[14] Josephine Wolff, Software Crash Exposes Tensions Between Security and Competition, F.T. (28 July 2024), https://www.ft.com/content/60dde560-194a-40d1-8c98-1d96d6d019a0.

^[15] Tristan Rayner, How to Stop the Android Apps Running in the Background, Android Auth. (13 May 2024), https://www.androidauthority.com/stop-android-background-apps-664842.

^[16] Id.

^[17] Robert Triggs, iPhone 16 and 16 Pro vs Android Battery Life Test: Which Phones Last the Longest?, Android Auth. (19 October 2024), https://www.androidauthority.com/iphone-vs-android-battery-life-3490706.

Abstract

The integrated approach that many competition and privacy regulators have endorsed for oversight of the major online platforms, whose business models rely on collecting and processing large troves of personal data, has often been justified on grounds that competition and data protection are complementary ends. In this respect, Europe represents a testing ground for evaluating how privacy breaches may inform antitrust investigations. Indeed, the European Union’s General Data Protection Regulation (GDPR) and the recent German antitrust decision concerning Facebook may be considered polestars for this emerging regulatory approach that links market power and data power. This paper tests the degree to which such an approach is viable in concrete terms by analyzing how the European Commission and national competition authorities have applied data-protection rules and principles in antitrust proceedings. Notably, the paper aims to demonstrate the fallacy of characterizing the relationship between privacy and antitrust in terms of synergy and complementarity. Further, the paper maintains that the principles the European Court of Justice recently affirmed in its Meta decision do not appear to address the issue conclusively. The tension between these areas of law is illustrated by allegations raised in the numerous Apple ATT investigations concerning the strategic use of privacy as a business justification to pursue anticompetitive advantages. Rather than strengthening antitrust enforcement against gatekeepers and their data strategies, the inclusion of privacy harms in antitrust proceedings may turn out to be a potential curse for competition authorities, as it allows firms opportunities for regulatory gaming that can serve to undermine antitrust enforcement.

I.       Introduction

A significant share of the past decade’s academic literature on the role of data in digital markets has focused on the intersection of what had been previously thought of as the separate domains of privacy and antitrust. Given that data serves as a significant input for many of the major online platforms’ services and products, digital firms are eager to collect and process as much of it as possible. Such firms also use data-sharing agreements to obtain further data (i.e., information collected and provided by external suppliers) in order to improve their products and services. This is particularly true for those platforms whose business models rely on monetizing consumer information by selling targeted advertising and personalized sponsored content. In a market where platforms’ data-acquisition strategies are driven by the objective of granting sellers preferential access to consumer attention, personal data can represent an especially valuable portion of platforms’ information assets.[1] Moreover, given the social dimension of personal data, one user’s choice to share personal information with an online platform may generate externalities on other non-disclosing users (or non-users) by revealing information about them. Recent advances in machine learning may magnify the extent of these externalities, and raise questions about the effectiveness of data-protection regulations more generally.[2]

These dynamics have moved policymakers to take a greater interest in the degree to which data-accumulation strategies undermine individual privacy and entrench platforms’ market power. Some contend that the peculiar features of digital markets and the potential adverse uses of data in the digital economy require a regulatory approach that integrates privacy into antitrust enforcement and ensures close cooperation between antitrust authorities and data-protection regulators.[3]

According to this account, as network effects strengthen online firms’ market power, it becomes progressively more difficult to structure incentives for firms to compete on offering privacy-friendly products and services.[4] Conversely, these advocates claim, more competition in digital markets would lead to more privacy.[5]

Particular scrutiny is directed toward advertising-funded platforms that offer free services to attract users and thereby feed users’ data to the other side of the platform (i.e., advertisers), whose willingness to pay is strictly dependent on being able to deliver effective marketing through granular targeting or personalization. For their part, however, end users may not be aware of the value of their own data or may be induced to disclose private information. This could happen because users are attracted by zero-price services’ offers or, given the lack of available and comparable alternatives, in order to remain connected to their social, family, or work networks, users may feel compelled to accept take-it-or-leave-it terms that include the unwanted collection and use of their data.[6]

Some suggest that privacy should be included in antitrust assessments because suboptimal privacy offerings may be the result of anti-competitive behavior leading to decreased quality of products and services.[7] In this sense, privacy would represent a particularly significant factor to be taken into account in the merger-review process, as market concentration among companies that hold big data could further expand the merging firms’ tools to profile consumers and potentially invade their privacy.[8]

Finally, some advocates propose commingling antitrust and privacy regulation as part of a broader agenda to realign competition policy away from pure efficiency-oriented antitrust enforcement and instead toward a holistic approach that combines competition law with other fields of law, in order to take account of a broader swath of social interests.[9] In essence, privacy and antitrust would each help to cover the other’s purported Achilles heel.[10] While end users’ privacy interests would become relevant in investigating data-accumulation strategies that antitrust might otherwise fail to tackle, antitrust authorities would be more effective in ensuring data protection.[11]

Against the integrationist perspective, however, some scholars warn of risks that would attend transforming privacy infringements into per se antitrust violations.[12] Indeed, competition law and privacy regulation pursue different aims and deploy different tools. While privacy is not irrelevant to competition law and may constitute an important component of nonprice competition, the goals of competition and privacy are often at odds. Pushing these regulatory regimes to converge threatens to confuse, rather than strengthen, the enforcement of either.[13]

Further, the widely recognized “privacy paradox” illustrates that assessments of privacy are extremely subjective. Different consumers in differing contexts often express starkly different sensitivities about the protection of their personal data, rendering it challenging to provide accurate quality-driven assessments or even to set broadly acceptable baseline rules and policies.[14] More generally, an expansive approach that would treat privacy violations as sources of competitive harm potentially implies the need for antitrust investigations whenever dominant firms potentially violate any law, as they would acquire an advantage by saving costs or raising rivals’ costs.[15] Antitrust authorities would therefore become economy-wide regulators.

While some recent cases brought by U.S. antitrust authorities have also placed privacy concerns in a prominent position,[16] there are two reasons that Europe appears to represent the primary testing ground for an integrated approach for privacy and antitrust. First, European policymakers long have prided themselves as leaders in regulating digital markets, notably for a broad array of heterogeneous legislative initiatives that have in common their strenuous efforts to foster data sharing and their sponsors’ belief that the emergence of large technology platforms requires a bespoke approach.[17] In this sense, the initiative that blazed the path for the emerging integrationist perspective was the EU’s General Data Protection Regulation (GDPR), which assigned control rights over data to individuals and, in light of the emerging regulatory convergence of privacy and antitrust, introduced a general data-portability right for individuals, the rationale of which was inherently pro-competitive.[18]

Second, on the antitrust side of the ledger, the decision handed down by the German competition authority in the Facebook case was the first (and remains the primary) example of the trend toward enforcers asserting that competition law should be informed by data-protection principles and that data protection should enforced outside its usual legal context, with the goal of remedying the shortcomings of privacy law.[19]

Despite the purported synergies underpinning the respective policy goals of competition and data-protection law, however, their interests and objectives are not necessarily aligned.[20] In particular, there are signs that some major digital firms may interpret data-protection requirements in ways that risk distorting competition.[21] Namely, once privacy harms are included among the interests ostensibly protected in antitrust proceedings, platforms may have incentive to adjust their strategies to invoke data protection as a business justification for allegedly anticompetitive conduct.[22]

For example, some platforms justify their decisions to deny rivals access to their facilities on grounds that doing so would risk violating their users’ privacy.[23] App-store providers in particular have described some restrictions that may be interpreted as anticompetitive self-preferencing (e.g., requiring in-app purchases to be routed through their own in-app payment processor, limiting sideloading, and limiting app developers’ ability to communicate with end users about the availability of alternative payment options) as necessary to guarantee users’ security and privacy.[24]

The most debated example illustrating the growing tension between data protection and antitrust is Apple’s adoption of its “app tracking transparency” (ATT) policy, which creates new consent and notification requirements that change the way app developers can collect and use consumer data for mobile advertising on iOS. There very well could be privacy benefits associated with the new Apple framework, as it may enhance users’ privacy and control over their personal data. But ATT also would now differentiate between a user’s consent for Apple’s advertising services and consent for third-party advertising services. The ATT policy might therefore represent a form of discrimination that benefits Apple’s own advertising services and reinforces its position in app distribution to the detriment of rivals. For these reasons, the ATT policy is under investigation by several antitrust authorities.[25]

Given this backdrop, this paper seeks to investigate the intersection of privacy and competition law and to analyze how data-protection rules and principles have been applied in antitrust proceedings by the European Commission and by EU national competition authorities (NCAs). The analysis of the case law will illustrate how data protection has been progressively transformed from a weapon used by antitrust authorities to limit data accumulation to a shield exploited by digital platforms to justify potentially anticompetitive strategies and to game antitrust rules.

As a result, the paper aims to demonstrate the fallacy of the narrative that describes the relationship between privacy and antitrust in terms of synergy and complementarity. Such a paradigm, indeed, does not provide useful insights to solve the growing conflicts between the interests protected and the goals pursued by these different fields of law.

As has already happened with regard to the traditional intersection of intellectual-property protection and competition law, invoking a convergence of aims does not in itself sketch out a pragmatic solution. Notably, competition authorities’ cooperation with data-protection regulators may help to ensure a coherent and uniform interpretation and application of the GDPR, it will not help antitrust authorities to strike the balance between privacy benefits and anticompetitive restrictions. In such a scenario, competition law enforcers risk being forced, like Buridan’s Ass, to make a choice that cannot be made.[26]

The remainder of the paper is structured as follows. Section II examines the European cases in which privacy concerns have been addressed in antitrust proceedings to tackle data-accumulation strategies by large online platforms. Section III deals with the strategic use of privacy as a business justification for potential anticompetitive conduct, which emerges as a byproduct of promoting the integration of privacy and antitrust. Taking stock of the German Facebook case recently addressed by the Court of Justice of the European Union (CJEU),[27] Section IV illustrates how the intrinsic conflict between data-protection and competition law cannot be solved merely by invoking a purported synergy or complementarity. Section V concludes.

II.     Privacy as an Antitrust Sword Against Data-Accumulation Strategies

While data-protection and competition law serve different goals, it is commonly argued that the emergence of business models involving the collection and commercial use of personal data creates inevitable linkages between market power and data protection.[28] Notably, given that the key goal of the GDPR was to enable individuals to have control of their own personal data,[29] applying competition rules to digital markets could, it is asserted, promote precisely that control.[30] As a consequence, “previously separate policy areas become interlinked, and different regulatory authorities are increasingly required to consider a given set of issues from the perspective of contrasting policy aims and objectives.”[31]

From this perspective, combining data-protection and competition law is justified on grounds that a common aim they share is to avoid exploitation of personal data and restrictions on consumers’ privacy.[32] Since end users may experience less privacy and autonomy as a result of excessive data collection and use:

Reductions in privacy could also be a matter of abuse control, if an incumbent collects data by clearly breaching data protection law and if there is a strong interplay between the data collection and the undertaking’s market position.[33]

Indeed, from the standpoint of competition law, the idea has been advanced that the acquisition and exploitation of user information is itself the result of, or evidence of, market failure.[34] In particular, users of dominant advertiser-based platforms are said to suffer both from significant information asymmetries as a result of opaque data policies, and from platform lock-in, with no choice other than to consent to the harvesting and use of their data because of the lack of viable alternatives.[35]

On the data-protection side of the ledger, it is bears noting that, according to the GDPR, consent means any “freely given, specific, informed and unambiguous” indication of a data subject’s wishes—whether by statement or some other clear affirmative action—that signifies agreement to the processing of his or her personal data.[36] Further, the GDPR specifies the conditions for consent, which include that: the request for consent be presented in a manner clearly distinguishable from other matters; that it be in an intelligible and easily accessible form; that it use clear and plain language; that the data subject has the right to withdraw consent at any time; and that, when assessing whether consent is freely given, utmost account shall be taken of whether, inter alia, the performance of a contract—including the provision of a service—is conditional on consent to processing personal data not actually needed for the performance of that contract.[37]

A. Privacy Harm as an Antitrust Abuse

As the French and German competition authorities have argued in a joint paper:

[L]ooking at excessive trading conditions, especially terms and conditions which are imposed on consumers in order to use a service or product, data privacy regulations might be a useful benchmark to assess an exploitative conduct, especially in a context where most consumers do not read the conditions and terms of services and privacy policies of the various providers of the services that they use.[38]

From this perspective, privacy concerns support the use of antitrust intervention to limit data-accumulation strategies by treating the restriction on privacy as a form of exploitative abuse.

Another way that privacy interests can be leveraged by antitrust authorities to address competitive concerns about data accumulation is through the merger-review process. Indeed, “firms that gain a powerful position through a merger may be able to gain further market power through the collection of more consumer data and privacy degradation.”[39] The use of merger review is expected to be more effective to achieve privacy-policy goals given that, while an antitrust abuse investigation may at best neutralize or alleviate exploitation of data gathered by a dominant player, merger proceedings would prevent data accumulation in the first place.

1. The German Facebook case: Users’ privacy-exploitation claim

The Bundeskartellamt’s decision in Facebook undoubtedly represents the apex, to date, of enforcers’ application of the integrationist perspective.[40] According to the German competition authority, Facebook unlawfully exploited its dominant position in the German market for social networks by making the use of its social-networking service conditional on users granting extensive permission to collect and process their personal data. Notably, Facebook failed to make its users fully aware of the fact that it collected their personal data from sources other than the Facebook platform and then merged those data with personal information gathered through its own platform.[41] Further, Facebook put its users in the difficult position of either accepting this data policy or refraining from use of the social network in its entirety.

Indeed, even well-informed users would have not been able to voluntarily consent to such data collection and combination, as they would fear the alternative of no longer being able to access the social network.[42] Therefore, according to the German competition authority, when the data controller is in a dominant position, its users’ consent is insufficient under the GDPR, because the platform’s market power always puts users in the position of having to either take or leave any offers made.

Considering these findings, the Bundeskartellamt established a link between market power and privacy concerns. In its view, Facebook’s terms and conditions were neither justified under data-protection principles nor appropriate under competition-law standards. To comply with the GDPR, users should have been asked whether they voluntarily consent to the practice of combining data in their Facebook user accounts, which could not consist merely of ticking a box. Indeed, given Facebook’s superior market power, the user’s choice to either accept comprehensive data combination or to refrain from using the social network could not be regarded as voluntary consent.[43] The Bundeskartellamt therefore concluded that Facebook had infringed GDPR rules by depriving its users of the human right to control the processing of their personal data and of the constitutional right of informational self-determination.

This form of coercion is, however, also relevant to competition law, as it was the result of Facebook’s dominant position. Hence, Facebook’s conduct could be considered exploitative within the meaning of the general clause of Section 19(1) of the German Competition Act (GWB), according to which competition law applies in every case where one bargaining party is so powerful that it can dictate the terms of the contract, with the end result being the abolition of the contractual autonomy of the other bargaining party. From the Bundeskartellamt’s standpoint, if a dominant firm collects and analyzes users’ data pursuant to terms and conditions that do not comply with EU data-protection rules, it also violates antitrust law by acquiring an unfair competitive advantage over firms that do adhere to the GDPR.

In summary, while the primary concern in the Facebook case was an antitrust issue (i.e., the excessive quantity of data that Facebook accumulated in its unique dataset),[44] the Bundeskartellamt elaborated a theory of harm based primarily on protecting the constitutional right to informational self-determination. In other words, the competition authority invoked the right under which data-protection law affords individuals the power to decide freely and without coercion how their personal data is processed. Such reasoning is consistent with the case law of Section 19(1) GWB, which allows an antitrust authority to consider the protection of constitutional values and interests in assessing the practices of dominant firms. While the Bundeskartellamt contended that its proceedings against Facebook would also generally be possible under the EU’s antitrust provision on exploitative abuses (Article 102(a) TFEU),[45] Section 19 GWB offered a broader (and, hence, more legally convenient) general clause.[46]

This privacy-focused approach also manifested in the remedy that Meta presented, and which the Bundeskartellamt welcomed. To implement the German antitrust authority’s decision, Meta proposed several changes to the accounts center that would allow customers to decide whether they wanted to use all services separately, each with their own circumscribed functions, or to use additional functions across accounts, which would require sharing more personal data.[47] In the Bundeskartellamt’s view, this solution would allow Meta’s customers to make a largely free and informed decision.

The Bundeskartellamt’s approach in the Facebook case therefore appears quite distinctive and essentially German-specific, as well as particularly controversial with respect to the scope and boundaries of competition and data-protection enforcement.[48] Indeed, in ascertaining a privacy violation previously undetected by any data-protection authority, the Bundeskartellamt acted as a self-appointed enforcer of data-protection rules.

It also interpreted data-protection rules in ways that far exceed the limits of its legal competence, given that there is nothing in the GDPR that makes the quality of a user’s consent agreement contingent on the data controller’s market power. Indeed, the GDPR makes no distinction at all on the basis of a firm’s market power. Size does not matter when it comes to data-protection law; a dominant firm is just as bound by privacy rules as its smaller rivals. At the same time, from the perspective of competition law, following the Bundeskartellamt’s expansive stance, virtually every legal infringement by a dominant firm could amount to an antitrust violation.

Because of the thorny implications for the interface between antitrust and data-protection law, the Facebook decision unsurprisingly sparked a heated debate not only in the literature, but also between German courts.

The Higher Regional Court (Oberlandesgericht, or OLG) of Du?sseldorf suspended the landmark decision, expressing serious doubts about its legal basis and complaining that the Bundeskartellamt was “merely discussing a data protection issue, and not a competition problem.”[49] Pursuant to both European and German antitrust provisions, a charge of abuse of market power by a dominant undertaking requires a finding of anticompetitive conduct and, hence, damage to competition—namely, to the freedom of competition, that is “safeguarding competition and the openness of market access.”[50] Therefore, dominant undertakings carry a special responsibility only in the domain of competition, rather than for compliance with the entire legal system by avoiding any violation of the law.[51] Further, in the appellate court’s view, no influence was exerted on users, as Facebook’s terms of service simply require them to weigh the benefits of using an ad-financed (and, therefore, free) social network against the consequences of Facebook’s use of the additional data that it gathers.

However, the Federal Supreme Court (Bundesgerichtshof, or BGH) overturned the OLG’s judgment and held that Facebook must comply with the Bundeskartellamt’s decision.[52] The BGH’s reasoning did, however, differ from the Bundeskartellamt’s. According to the Federal Supreme Court,  it is inconclusive whether Facebook’s processing and use of personal data complied with the GDPR. The court’s decision turned instead on Facebook’s terms of service, which the BGH found are abusive if they deprive Facebook users of any choice in whether they wish to use the network in a more personalized manner (thus, linking their experience to Facebook’s potentially unlimited access to characteristics that include their off-Facebook use of the internet more generally) or whether they wanted a level of personalization that was based solely on data that they themselves share on Facebook.[53]

Notably, the BGH found that Facebook’s data processing constitutes an “imposed extension of services,” as users receive an indispensable service only in combination with another undesired service.[54] Accordingly, such a practice was evaluated as both an exploitative and an exclusionary abuse. The lack of options available to users affects their personal autonomy and the exercise of their right to informational self-determination, as protected by the GDPR. Given lock-in effects that serve as barriers for network users who would otherwise like to switch providers, the BGH found that this lack of options exploits users in a manner relevant under competition law since, under effective competition, one would expect more diverse market offerings for social networks.[55] Further, the terms of service could also impede competition for online advertising, allowing Facebook to protect its dominant position against rivals, as they would be able to improve their offerings due to privileged access to a considerably larger database.[56]

As a result of this clash among the German courts, the Higher Regional Court of Du?sseldorf decided to refer the case to the CJEU, adding a new twist to the Facebook saga.[57] In particular, the OLG of Du?sseldorf raised seven questions about the interpretation of the GDPR, fundamentally asking the CJEU to untie the knot and clarify the competence of a competition authority to determine and penalize a GDPR breach; the prohibition on processing sensitive personal data and the conditions applicable to consenting to their use; the lawfulness of processing personal data in light of certain justification; and the validity of a user’s consent to processing personal data given to an undertaking in a dominant position.[58]

It is also worth noting the different approaches taken by other authorities concerning the very same Facebook conduct. Notably, the Italian competition authority evaluated such practices as violations of the Consumer Code (instead of the competition law),[59] while in Belgium, the Court of First Instance of Brussels found a violation of privacy rules.[60]

2. The Digital Markets Act: Rivals’ exclusion and primacy of data-protection interests over competition-policy goals

The Facebook case has already influenced the broader debate about the limits of competition law to address certain features of digital markets effectively. The EU’s Digital Markets Act (DMA)—which was explicitly grounded in the assumption that competition law alone is unfit to tackle certain challenges and systemic problems posed by the platform economy—specifically prohibits combining personal data across a gatekeeper’s services, a provision clearly inspired by the German investigation.[61]

Notably, pursuant to Article 5(2) DMA, a gatekeeper shall not: (a) process—for the purpose of providing online-advertising services—end users’ personal data using third-party services that themselves make use of the gatekeeper’s core platform services; (b) combine personal data from the relevant core platform service with personal data from any further core platform services, or from any other services provided by the gatekeeper, or with personal data from third-party services; (c) cross-use personal data from the relevant core platform service in other services provided separately by the gatekeeper, including other core platform services, and vice versa; and (d) sign end users into the gatekeeper’s other services in order to combine personal data, “unless the end user has been presented with the specific choice and has given consent” within the meaning of the GDPR.

Further, according to Recital 36—given that gatekeepers process personal data from a significantly larger number of third parties than other undertakings—data processing for the purpose of providing online-advertising services gives gatekeeper platforms potential “advantages in terms of accumulation of data,” thereby “raising barriers to entry.” To ensure that gatekeepers do not unfairly undermine the “contestability” of core platform services, gatekeepers should enable end users to “freely choose to opt-in” to such data processing and sign-in practices. This may be accomplished by offering a less-personalized but equivalent alternative, and without making the use of (or certain functions of) the core platform service conditional on the end user’s consent.[62]

Moreover, in light of Recital 37, when a gatekeeper does request consent, it should proactively present a “user-friendly solution” to the end user to provide, modify, or withdraw consent in an explicit, clear, and straightforward manner. In particular, consent should be given by a clear affirmative action or statement establishing a freely given, specific, informed and unambiguous indication of agreement by the end user, as defined in the GDPR.

Lastly, it should be as easy to withdraw consent as to give it. Gatekeepers should not design, organize, or operate their online interfaces in a way that deceives, manipulates, or otherwise materially distorts or impairs end users’ ability to freely give or withdraw consent.[63] In particular, gatekeepers should not be allowed to prompt end users more than once a year to give consent for a data-processing purpose for which the user either did not initially give consent or actively withdrew consent.

The idea that only opt-in mechanisms can produce effective consent within the meaning of the GDPR is confirmed by the obligation under Article 6(10) DMA, which imposes on gatekeepers the duty to provide business users, or third parties authorized by a business user, access to aggregated and non-aggregated data (including personal data) generated in the context of using the relevant core platform services.[64]

The provision under Article 5(2) DMA provides interesting insights into the relationship between data-protection and competition law. By emphasizing that the primary concern is online gatekeepers’ data-accumulation strategies, the DMA’s approach differs from the one the Bundeskartellamt pursued in Facebook. Rather than focusing on potential harms to users’ self-determination and digital identity, the DMA points to a pure antitrust harm related to market contestability. Therefore, even if “[t]he data protection and privacy interests of end users are relevant to any assessment of potential negative effects of the observed practice of gatekeepers to collect and accumulate large amounts of data from end users,”[65] the primary interest protected is a competitive one—namely to avoid foreclosure against rivals.

From this perspective, it may be argued that the DMA adopts an integrated approach that takes data-protection principles into account within a competitive assessment of gatekeepers’ conduct. The very last part of the provision, however, demonstrates the opposite. By subordinating the prohibitions to respect the GDPR, European authorities arguably acknowledge the potential tensions between data-protection interests and competition-policy goals. Moreover, in the event of such a conflict, the DMA affirms the primacy of the former. Indeed, all the forms of conduct listed in Article 5(2) are forbidden “unless” the end user has been presented with a specific choice and given consent within the meaning of the GDPR.

3. New German platform-specific antitrust rules and the Google case

There is another interesting and ongoing German investigation regarding Google’s data-processing terms. Notably, in January 2023, the Bundeskartellamt issued a statement of objections against Google claiming that, under the company’s current terms, users are not given “sufficient choice” as to how their data are processed across services.[66]

The antitrust authority noted that Google’s business model relies heavily on processing user data and that its current terms allow the company to combine various data from various services and use them, for example, to create very detailed user profiles that the company can exploit for advertising and other purposes, or to train functions provided by Google services. Google may, for various purposes, collect and process data across services, which include both its own widely used services (Google Search, YouTube, Google Play, Google Maps, and Google Assistant), as well as numerous third-party websites and apps. Bundeskartellamt President Andreas Mundt stated that this grants Google a “strategic advantage” over other companies.[67]

According to the Bundeskartellamt’s preliminary assessment, the choices offered to users are too general and insufficiently transparent. The authority contends that sufficient choice would require that users be able to limit data processing to the specific service used. In addition, they also must be able to differentiate between the purposes for which the data are processed. Moreover, the choices must not be devised in a way that would make consenting to data processing across services easier than not consenting to it.

The framing of the Google investigation is similar to that of the Facebook case. The antitrust authority is fundamentally concerned with a data-accumulation strategy that it contends confers to Google a critical competitive advantage. And given that having access to more user data than rivals have cannot in itself be considered anticompetitive, privacy concerns are exploited to limit such a strategy.

There is, however, a significant difference worth highlighting. In the Google case, the Bundeskartellamt’s position benefits from a new provision of Section 19a GWB,[68] which empowers national competition authorities to tackle platform-specific practices that are similar and functionally equivalent to those prohibited under the DMA.[69] Notably, since January 2021, the Bundeskartellamt has had the power to designate undertakings of “paramount significance for competition across markets.” The factors relevant to this designation include a platform’s dominant position in one or more markets; financial strength or access to other resources; vertical integration and activities in otherwise related markets; access to data relevant for competition; and the importance of the activities for third parties’ access to supply and sales markets and related influence on third parties’ business activities. Google has been the first platform to be designated as of paramount significance for competition across markets.[70]

Once the designation is completed, the Bundeskartellamt can prohibit such undertakings from engaging in anticompetitive practices. In particular, the new provision introduces a list of seven types of abusive practices that are prohibited, unless the undertaking is able to demonstrate that the conduct at issue is objectively justified. While the targeted practices are similar to those captured by the DMA, the main differences are that the German list is considered exhaustive and the practices at issue are not prohibited per se. Instead, it introduces a reversal of the burden of proof, allowing firms to provide objective justifications for their conduct, which is not allowed under the DMA.

For the sake of this analysis, pursuant to paragraph 4 of Section 19a GWB, the Bundeskartellamt may prohibit an undertaking of paramount significance for competition across markets from creating or appreciably raising barriers to market entry (or otherwise impeding other undertakings) by processing data relevant for competition that have been collected by the undertaking, or demanding terms and conditions that permit such processing—in particular, making the use of its services conditional on a user agreeing to data processing by the undertaking’s other services or by a third-party provider without “sufficient choice” as to whether, how, and for what purpose such data are processed.

As mentioned, while the Google investigation resembles the background of the Facebook decision, the introduction of Section 19a(4) GWB has relevant implications. The new provision is clearly inspired by the strategy investigated in Facebook and, as already enshrined in the DMA, essentially aims to ease enforcement, avoiding the hurdles and burdens of standard antitrust analysis. Practically speaking, the Bundeskartellamt therefore does not need to struggle to find a proper theory of harm and can easily avoid the odyssey it experienced in Facebook. Moreover, the new provision’s wording changes the legal landscape, distinguishing the Google investigation from both the parallel DMA provision and the Facebook decision. Indeed, by relying on the lack of “sufficient choice” for users, Section 19a(4) GWB does not include any reference to the GDPR, thus allowing the Bundeskartellamt to provide an autonomous interpretation. With regard to the comparison with Facebook, on the other hand, Section 19a(4) GWB—just like the DMA—aims to promote contestability in the market (“creating or appreciably raising barriers to market entry”). Hence, data accumulation is prohibited to the extent that it excludes rivals, rather than whether it exploits users’ privacy.

That the German provision is effective has been confirmed by Google’s decision to end the proceeding by submitting commitments.[71] Under those commitments, Google will give its users the option to grant free, specific, informed, and unambiguous consent to have their data processed across services.[72] Google will also offer corresponding choice options for particular combinations of data and services, and will design selection dialogues to avoid dark patterns, thus not guiding users manipulatively towards cross-service data processing.

It is worth noting that Google’s commitments involve more than 25 services, with only those services that the European Commission has since designated as core platform services under the DMA (i.e., Google Shopping, Google Play, Google Maps, Google Search, YouTube, Google Android, Google Chrome and Google’s online-advertising services) excluded from the list. While this was intended to avoid practical conflicts with application of the DMA, it also represents an acknowledgment that the DMA and German antitrust law pursue the very same goals. Indeed, as stated in the decision, Google’s commitments “are intended to correspond in substance to an extension of Google’s obligations under Article 5(2) DMA” to further services and, therefore, “in case of doubt, the terms used in the Commitments are to be interpreted in accordance with their meaning in the DMA.”[73]

B. Privacy Harm in Merger Analysis: The European Commission’s Case Law

Given this broad consensus regarding synergies between data-protection and competition law in digital markets, it is somewhat surprising how reluctant the European Commission has been to implement this integrated approach in the context of merger analysis.[74] Indeed, while acknowledging privacy’s role as a parameter of competition between online platforms, the Commission has to date not blocked any merger on the grounds of protecting individuals’ control over personal data, and it has nearly always approved unconditionally those mergers that raised privacy concerns.

Notably, in the days before the GDPR, the Commission authorized the Google/DoubleClick merger, in the process affirming that antitrust and data-protection rules had wholly separate scopes.[75] While it could have determined that the combined data-collection activities of two players active in the online-advertising industry raised concentration concerns and a possible unfair advantage in producing targeted advertising, the Commission’s assessment, under pure antitrust criteria, was that it was unlikely that the new entity would obtain a competitive advantage unmatchable by its rivals.[76] Further, the Commission underlined that its decision exclusively concerned an appraisal of the operation under competition rules, without prejudice to other obligations imposed on the parties by data-protection and privacy laws.[77]

This stance of maintaining separate regulatory spheres of inquiry was even more clearcut in the 2014 Facebook/WhatsApp merger.[78] Assessing the potential edge the combined entity might derive from controlling huge amounts of data, the Commission found that, regardless whether the merged entity would start using WhatsApp user data to improve targeted advertising on Facebook, there continued to be large troves of valuable internet user data that were not within Facebook’s exclusive control.[79] More importantly, the Commission stated that:

Any privacy-related concerns flowing from the increased concentration of data within the control of Facebook as a result of the Transaction do not fall within the scope of the EU competition law rules but within the scope of the EU data protection rules.[80]

The outcome and reasoning were the same in Microsoft/LinkedIn.[81] Consistent with the findings in Facebook/WhatsApp, the results of the Commission’s market investigation revealed that privacy is an important parameter of competition and a driver of customer choice.[82] But not only did the transaction not raise serious antitrust concerns in online advertising, given that combining the firms’ respective datasets did not appear to result in raising rivals’ barriers to entry or expansion,[83] but also:

[S]uch data combination could only be implemented by the merged entity to the extent it is allowed by applicable data protection rules. … Microsoft and LinkedIn are subject to relevant national data protection rules with respect to the collection, processing, storage and usage of personal data, which, subject to certain exceptions, limit their ability to process the dataset they maintain.[84]

Moreover, the Commission noted that the GDPR “may further limit Microsoft’s ability to have access to, and process, its users’ personal data in the future since the new rules will strengthen the existing rights and empower individuals with more control over their personal data.”[85]

In a nutshell, the Commission again chose to defer to privacy rules for protecting individuals’ personal data and analyzed the transaction’s antitrust issues while “[a]ssuming such data combination [was] allowed under the applicable data protection legislation.”[86] The Commission did not discuss whether the relevant markets under consideration were sufficiently competitive to provide users with the optimal level of privacy-friendly options. It didn’t establish any link between the merging firms’ market power and the variety of privacy-friendly tools and services they provided. Nor did it find any connection between such market power and the optimal quantity of personal data that the firms under scrutiny should have collected.

In Apple/Shazam, despite some concern that the acquisition would grant Apple access to commercially sensitive information about competitors of its Apple Music service, the Commission regarded it as unclear whether the merged entity would be able to put competing providers of digital-music streaming apps at a competitive disadvantage. And they again stressed that personal-data processing remained subject to the GDPR.[87]

The recent Google/Fitbit merger offered the Commission another opportunity to interrogate overlaps among data protection and antitrust. Ultimately, the Commission’s analysis focused on the data collected via Fitbit’s wearable devices and the interoperability of wearable devices with Google’s Android operating system for smartphones.[88] While some market participants complained that, in combining those databases, Google could obtain a competitive advantage in the digital health-care sector that would leave competitors unable to compete, others (including the European Data Protection Board) raised privacy concerns on grounds that the merger would make it increasingly difficult for users to track the purposes for which their health data would be used.[89]

To address such issues, Google offered (and the Commission accepted) commitments to maintain a technical separation of Fitbit user data by storing them in a data silo separate from any Google data used for advertising; that it will not use the health and wellness data collected from users’ wrist-worn wearable devices and other Fitbit devices for Google Ads; and it will ensure that users have an effective choice to grant or deny the use of health and wellness data stored in their Google Account or Fitbit Account by other Google services.

With regard to privacy concerns, the Commission reminded those involved that the parties are held accountable to implement appropriate technical and organizational measures to ensure that data processing is performed in accordance with the GDPR.[90] More specifically, the Commission noted that the GDPR is designed to enhance transparency over data processing, accountability by data controllers and, ultimately, users’ control over their data.[91] The Commission found no evidence that privacy was an important parameter of competition in wearables and underlined that any privacy or data-protection decision or initiative the parties might adopt would have to comply with the data-protection rules set out by the GDPR.[92]

The Commission addressed similar privacy issues arising from the combination of datasets in Microsoft/Nuance[93] and Meta/Kustomer,[94] each time noting that GDPR served as the appropriate safeguard.

Moreover, the Commission appears to retain this “separatist” stance, as confirmed recently by its unconditional approval of a joint venture among Deutsche Telekom, Orange, Telefo?nica, and Vodafone, which will offer a platform to support brands and publishers’ digital-marketing and advertising activities in France, Germany, Italy, Spain, and the United Kingdom.[95] Subject to a user’s consent (i.e., on an opt-in basis only), the joint venture will generate a unique digital code derived from the user’s mobile or fixed-network subscription that will allow brands and publishers to recognize users on their websites or applications on a pseudonymous basis, group them under various categories, and tailor their content to specific user groups.

Whatever privacy and security benefits or harms might arise from the operation, the Commission was ultimately guided in its decision by the lack of competition concerns. Moreover, the Commission declared that it has been in contact with data-protection authorities during its investigation and that data-protection rules are fully applicable, irrespective of the merger’s clearance.

III.   Privacy as a Shield Against Antitrust Allegations

Amid these limited and somewhat confused attempts to address privacy concerns in digital markets by integrating data-protection rules and competition-law enforcement, a novel and challenging phenomenon has emerged. Taking stock of some authorities’ willingness to grant primacy to data protection in the context of antitrust interventions, some platforms have implemented changes to their ecosystems with the declared aim of ensuring increased privacy to end users. For instance, Apple and Google have developed policies to restrict third parties from sharing user data through apps in the platforms’ respective operating systems and websites in their respective browsers.[96] These policies include Apple’s ATT, Intelligent Tracking Prevention, and iCloud Private Relay, and Google’s Android Privacy Sandbox and Chrome Privacy Sandbox. To a certain extent, the DMA may have even encouraged some of these design choices by apparently endorsing the view that only opt-in systems can ensure effective consent within the meaning of the GDPR.

The suspicion is that such facially noble intentions may actually conceal a goal of achieving anticompetitive advantages at the expense of rivals and business users. Therefore, it appears that a new form of regulatory gaming is on the horizon. Particularly in online-advertising markets, privacy may be weaponized as a business justification for potentially anticompetitive conduct and data-protection requirements may be leveraged to distort competition. The relevance and dangerousness of such hypotheses are confirmed by certain antitrust investigations launched recent years, which the following paragraphs will analyze.

A. Apple’s ATT Policy

As illustrated above, data represents a primary input for platforms whose business models rely on monetizing consumer information by selling targeted advertising and personalized sponsored content. In digital markets, advertisers benefit from access to detailed (and hence, highly valuable) user data, such as browsing behavior, profiles on company websites, demographic information, shopping habits, and past purchase history, especially given the potential to use that data across advertising platforms.[97] Therefore, the effectiveness of targeted advertising and the overall profitability of advertising-based business models rely on data tracking.

To enhance users’ privacy protection, however, regulatory interventions like the GDPR aim to reduce data collection and mitigate platforms’ tracking by requiring explicit consent for users’ individual-behavior data to be used for targeted advertising.[98] In addition, some platforms have adopted (or announced) privacy-centric policies that would limit third parties’ ability to track data, thus affecting the profitability and revenues of their advertising strategies.[99]

Apple’s ATT policy is a paramount example of such product changes. With the iOS 14.5 privacy update, Apple introduced an opt-in mechanism that imposes more restrictive rules on competing app developers than those the company applies to itself. The differential treatment mostly concerns features that prompt users to grant apps permission to track them. Without consumers opting into this prompt, developers cannot access their identifiers for advertisers (IDFA), which are used to monitor users’ activity across apps.

The wording of the prompts ATT offers for user consent may unduly influence users to withhold consent from third-party apps. For apps developed by Apple itself, the consent prompt focuses on the positive aspects of personalized services, rather than the tracking of users’ browsing activity. In contrast, the prompt for third-party app developers places greater emphasis on other companies’ app and website tracking activities (without explaining the term “track”) and does not provide information about the benefits that users could derive from personalized advertising. Moreover, even if the user gives consent to be tracked, third-party app developers remain unable to share the same data that would allow for the personalization of ads, and measure their effectiveness, on another app. Indeed, for third-party app developers, the ATT framework introduces a double opt-in, requiring the user to consent to being tracked for each access to different apps, even if these apps are linked.

This model illustrates an apparent tension between data-protection interests and antitrust goals. While the ATT policy has been framed as a privacy-protecting measure, it is not just the level of privacy chosen by Apple in its digital ecosystem that is at issue, but also the competitive implications that arise from the choice to adopt discriminatory privacy policies. Indeed, the differentiated treatment imposed on third-party app developers appears likely to reduce their advertising revenues, and hence their level of competitiveness vis-à-vis Apple, and could eventually enhance the dominance of the iOS ecosystem.

Notably, the ATT framework may hinder competitors’ ability to sell advertising space, in ways that redound to Apple’s own advantage—in particular, benefiting the company’s own direct sales and advertising-intermediation platforms. Further, limiting third parties’ ability to profile users may reduce business-model differentiation. The advertising-based monetization model used by free and freemium apps may be rendered less sustainable, causing these apps to exit the market or gradually shift to the fee-supported model. This would come at the expense of end consumers, for whom the possibility of choosing free or lower-priced apps could be reduced.[100]

For these reasons, the ATT framework is currently under scrutiny by antitrust authorities in France,[101] Germany,[102] Italy,[103] and Poland,[104] who suspect that Apple is masking an anticompetitive strategy under the guise of privacy protection. Similar doubts have been raised by the UK Competition and Markets Authority in its market study on mobile ecosystems.[105]

Given these kinds of market responses, it is difficult to see how an integrated approach to data-protection and competition law could be implemented in practice. Contrasting the Italian and French investigations may provide useful insights into this conundrum. The Italian competition authority correctly stated that the case does not implicate the level of privacy chosen by Apple, but rather its decision to adopt a differentiated policy at the expense of its rivals.[106] Conversely, in evaluating whether to issue an interim measure against Apple, France’s Autorité de la Concurrence solicited input from the domestic data-protection regulator (the Commission Nationale de L’Informatique et des Liberte?s, or CNIL), which de facto prevented the competition authority from ordering interim measures. Indeed, in the CNIL’s view, the changes proposed by Apple could be of genuine benefit to both users and app publishers.[107] In particular, the ATT prompt would give users more control over their personal data by allowing them to make choices in a simple and informed manner,[108] and would allow app publishers to collect informed consent as required by the applicable regulation.

It is worth noting, however, that while all the other competition authorities are investigating Apple’s policy as a potential form of discriminatory self-preferencing, the French authority has initially evaluated whether the introduction of the ATT prompt would result in imposing unfair trading conditions or a supplementary obligation, in breach of Article 102(a) and (d) TFEU. The complaint’s investigation on the merits of the case will allow the French authority to assess whether ATT does or does not result in a form of discrimination.

B. Google’s Privacy Sandbox

Concerns regarding the potential impact of privacy policies on digital-advertising competition and publishers’ ability to generate revenue have also been against Google’s proposals to remove third-party cookies and other functionalities from its Chrome browser. In particular, Google’s Privacy Sandbox project would disable third-party cookies on the Chrome browser and Chromium browser engine, with the stated goal of better protecting consumer privacy. The project would replace those cookies with a new set of tools for targeting advertising and other functionalities. Therefore, similar to Apple’s ATT policy, Google’s planned privacy changes raise concerns about anticompetitive discrimination against rivals.

Indeed, in 2021, the European Commission initiated antitrust proceedings to investigate the effects of Google’s privacy policies on online display advertising and online display advertising-intermediation markets. The inquiry focused on whether Google had violated EU competition rules by favoring—through a broad range of practices—its own online display advertising-technology services in the ad tech supply chain, to the detriment of competing providers of advertising-technology services, advertisers, and online publishers.[109] Notably, the Commission also examined restrictions on third parties’ ability to access data about user identity or user behavior, which remained available to Google’s own advertising-intermediation services, as well as Google’s announced plans to cease making advertising identifiers available to third parties on Android mobile devices whenever a user opts out of personalized advertising.

The Commission declared that it would “take into account the need to protect user privacy, in accordance with EU laws in this respect,” underscoring that “[c]ompetition law and data protection laws must work hand in hand to ensure that display advertising markets operate on a level playing field in which all market participants protect user privacy in the same manner.”[110]

A similar investigation was launched that same year by the UK Competition and Markets Authority (CMA).[111] The CMA subsequently accepted commitments from Google designed to ensure consistent use of data by both third parties and Google’s own digital-advertising businesses through the use of safeguards to support privacy without self-preferencing.[112] In considering how best to address legitimate privacy concerns without distorting competition, the CMA highlighted the relevance of the close partnership with the UK Information Commissioner’s Office (ICO), the public body tasked with the enforcement of the Data Protection Act 2018, which is the UK’s implementation of the GDPR.[113]

IV.   The Failure of the Integrated Approach

The call for integrating privacy into antitrust enforcement reflects the policy goal of curbing ever-increasing personal-data collection and processing by a few large online platforms, who monetize such data by selling targeted advertising. Toward this aim, competition and data-protection laws are described as synergistic, as the economic features of digital markets generate connections between market power and data power. Against this background, rather than relying on the GDPR, scholars and policymakers ask competition law to step in to address the perceived problem of data-protection authorities lacking capacity to address privacy concerns effectively, as well as the extreme difficulty of forbidding data accumulation under antitrust provisions. Therefore, rather than reflecting a natural connection, data-protection and competition laws are fundamentally obtorto collo complementary, as each are considered weak in isolation.

Four primary theories of harm have been advanced to bring antitrust and privacy issues together.[114]

According to the first theory, there is a close relationship between (the lack of) competition in digital markets and privacy violations. In a competitive market, this theory asserts, firms would compete to offer privacy-friendly products and services, but the economic features of digital markets strengthen gatekeepers’ power, regardless of their willingness to deliver privacy-enhancing solutions.[115]

The second theory centers on risks arising from potential “databases of intentions” and primarily invokes the role of merger control.[116] Under this view, mergers among companies that hold significant data assets require more stringent scrutiny, as such mergers would grant the new entity tools to better profile individuals and invade their privacy.

A further attempt to justify commingling antitrust and privacy relies on assessing the quality of products and services as privacy-friendly.[117] As consumer welfare is not solely dependent on prices and output, products and services viewed as not privacy-friendly or that intrude into users’ privacy may be considered low-quality and therefore harm consumer welfare.

Finally, it has been argued that privacy policies could be applied by antitrust enforcers when they are implemented by dominant players that rely on data as a primary input of their products and services—e.g., by forcing individuals to accept take-it-or-leave-it terms involving the unwanted collection and use of their data.[118]

This overview of EU antitrust proceedings, however, demonstrates that none of these four theories of harm has been successful and that the much-invoked integrated approach is more proclaimed than adopted in practice. Indeed, neither other NCAs nor the European Commission have ever shared the Bundeskartellamt’s stance of considering a GDPR violation as a benchmark for finding a dominant firm’s practice to be abusive. Further, in the context of merger analysis, the Commission has systematically stated that any privacy-related concerns resulting from data collection and processing are within the scope of the GDPR enforcement.

Even in Germany, the Bundeskartellamt’s approach has been sufficiently controversial to spark a clash among courts and a request for clarification from the CJEU. The recent update of the GWB seems to confirm the limits of such an approach, as the new Section 19a provides an antitrust authority with a convenient shortcut to target Facebook-like data-accumulation strategies on grounds of market contestability—namely, prohibiting rivals’ foreclosure rather than users’ privacy exploitation.

In addition, these EU antitrust proceedings demonstrate that twisting competition-law enforcement may be counterproductive. Indeed, the growing phenomenon of digital platforms adopting privacy policies as justification for potentially anticompetitive conduct does not fit the narrative of the complementarity of antitrust and privacy.[119] Emerging as a byproduct of the Facebook investigation, the Apple ATT case illustrates the intrinsic tension between these areas of law, highlighting the urgency of determining how to strike a balance between conflicting interests. From this perspective, the Facebook and Apple ATT cases are two faces of the same coin. Each results from the strategic use of privacy in antitrust proceedings by both competition authorities and digital platforms, respectively.

Moreover, the French episode of Apple ATT shows that proposing cooperation between authorities is just rhetoric unfit to resolve these tensions. It is regularly affirmed that any tension between competition and data protection law “can be reconciled through careful consideration of the issues on a case-by-case basis, with consistent and appropriate application of competition and data protection law, and through continued close cooperation” between the authorities.[120] Nonetheless, in the French Apple ATT case, the data-protection regulator’s intervention actually jeopardized the antitrust investigation, demonstrating how the different goals pursued under antitrust and privacy provisions may be irreconcilable in practice.

Finally, the EU’s solution to alleged failures by antitrust and privacy regulators in addressing data accumulation in digital markets has ultimately been crafted outside the traditional competition-law framework and according to a regulation that resolves any potential conflict between competition and data-protection policy goals once and for all. Even the DMA, however, does not fully square with any of the aforementioned theories of harm, as it introduces a pure privacy exception.[121] Indeed, tackling data collection and processing by digital gatekeepers, Article 5(2) DMA prohibits personal-data accumulation strategies unless they are compliant with the GDPR—namely, unless users have been presented with the specific choice and given consent according to data-protection rules. Therefore, rather than providing criteria to evaluate case by case how to strike a balance among the interests involved, the DMA establishes competition-policy deference to privacy, finding that, where personal-data collection and processing by large online platforms are involved, privacy is the greater good.

A. The CJEU’s Judgment in Meta

Given this background, the CJEU’s July 2023 judgment in Meta was much-awaited, representing the season finale of the German Facebook saga.[122]

The decision is in line with the opinion delivered by the Advocate General (AG) Athanasios Rantos.[123] As Rantos had argued, “conduct relating to data processing may breach competition rules even if it complies with the GDPR; conversely, unlawful conduct under the GDPR does not automatically mean that it breaches competition rules.”[124] Therefore, the lawfulness of conduct under antitrust provisions “is not apparent from its compliance or lack of compliance with the GDPR or other legal rules.”[125] Further, according to well-settled CJEU principles, the antitrust assessment requires demonstrating that a dominant undertaking used means other than those within the scope of competition on the merits and, toward this aim, the court must take account of the circumstances of the case, including the relevant legal and economic context.[126] “In that respect, the compliance or non-compliance of that conduct with the provisions of the GDPR, not taken in isolation but considering all the circumstances of the case, may be a vital clue as to whether that conduct entails resorting to methods prevailing under merit-based competition.”[127] Indeed, “access to personal data and the fact that it is possible to process such data have become a significant parameter of competition between undertakings in the digital economy. Therefore, excluding the rules on the protection of personal data from the legal framework to be taken into consideration by the competition authorities when examining an abuse of a dominant position would disregard the reality of this economic development and would be liable to undermine the effectiveness of competition law.”[128]

It follows that. “in the context of the examination of an abuse of a dominant position by an undertaking on a particular market, it may be necessary for the competition authority of the Member State concerned also to examine whether that undertaking’s conduct complies with rules other than those relating to competition law, such as the rules on the protection of personal data laid down by the GDPR.”[129]

Rantos more explicitly distinguished the hypothesis under which an antitrust authority, when prosecuting a breach of competition provisions, rules “primarily” on an infringement of the GDPR from cases in which such evaluations are merely “incidental”:

[T]he examination of an abuse of a dominant position on the market may justify the interpretation, by a competition authority, of rules other than those relating to competition law, such as those of the GDPR, while specifying that such an examination is carried out in an incidental manner and is without prejudice to the application of that regulation by the competent supervisory authorities.[130]

Given the differing objectives of competition and data-protection law, however, where an antitrust authority identifies an infringement of the GDPR in the context of finding of abuse of a dominant position, it does not replace the data-protection supervisory authorities.[131] Therefore, when examining whether an undertaking’s conduct is consistent with the GDPR, competition authorities are required to consult and cooperate sincerely with the competent data-protection authority in order to ensure consistent application of that regulation.[132] In addition, where the data-protection authority has ruled on the application of certain provisions of the GDPR with respect to the same practice or similar practices, the competition authority cannot deviate from that interpretation, although it remains free to draw its own conclusions from the perspective of applying competition law.[133]

While these principles are compelling, they do not appear conclusive in addressing the issue, for two main reasons.

First, as competition authorities have significant leeway in framing their investigations, it will be extremely difficult in practice to demonstrate that they are primarily—rather than incidentally—tackling a data-protection breach. In this regard, the German Facebook investigation represents an illustrative example. In the press release announcing the launch of the proceedings, the Bundeskartellamt stated that Facebook’s terms and conditions violated data-protection law and may “also” be regarded as abuses of a dominant position.[134] Later in the press release, however, in a section concerning the preliminary assessment, the authority changed that perspective, asserting that Facebook’s contractual terms were unfair, quite apart from any privacy infringement, and that, in assessing the competitive impact of such a strategy, it was “also” applying data-protection principles. Further, the Bundeskartellamt ascertained a privacy violation previously undetected by any data-protection authority. If the Facebook case fulfills both requirements of an incidental assessment of a privacy breach and sincere cooperation with the data-protection authority, it will be difficult to imagine any antitrust investigation not passing the bar.[135]

Second, the judgment only examines a scenario in which a GDPR infringement may occur, while not being useful to unraveling the very different situation in which the adoption of a privacy-enhancing solution is invoked as justification for anticompetitive conduct. In that case, cooperation between competition and data-protection authorities has thus far proven to be a harbinger of new issues and conflicts, rather than a panacea for all of the problems.

Finally, the CJEU also addressed another crucial topic of the integration between antitrust and privacy—that being the meaning of “consent” under the GDPR, and especially the requirement of freedom of consent. Supporters of an integrated approach find the legal basis of the privacy/antitrust marriage in the GDPR to be pivotally centered on the role assigned to freely given consent.[136] Notably, they imagine that the GDPR provides the legal basis for a link between data power and market power by stating that, among other things, there is no freely given consent to personal-data processing where there is a “clear imbalance” between the data subject and the controller.[137] In this respect, if the controller holds a dominant position on the market, it is argued that such market power could lead to a clear imbalance in the sense described in the GDPR.

According to the CJEU, however, while it may create such an imbalance, the existence of a dominant position alone cannot, in principle, render the consent invalid.[138] Notably, the fact that the operator of an online social network holds a dominant position on the social-network market does not, as such, prevent users of that social network from validly giving their consent, within the meaning of the GDPR, to the processing of their personal data by that operator. Consequently, the validity of consent should be examined on a case-by-case basis.

Moreover, as observed by Rantos, this does not imply that for market power to be relevant for GDPR enforcement, it needs to be regarded as a dominant position within the meaning of competition law.[139] Therefore, the relationship between data-protection and competition law is not one of mutual respect. While a competition authority is required to cooperate with a data-protection regulator in the case of a privacy breach, and is bound by the interpretation the latter gives of the GDPR, the converse does not apply with regard to the notion of “clear imbalance” under the GDPR. Data-protection authorities are granted significant leeway to establish market power under the GDPR.[140]

V.     Conclusion

The features of digital markets and the emergence of a few large online gatekeepers whose business models revolve around collecting and processing large amounts of data may suggest a link between market power and data power. Accordingly, scholars and policymakers have supported regulatory measures intended to promote data sharing and to empower individuals with more control over their personal data. From a different perspective, this also has led to the idea that competition and data-protection are intertwined and therefore require an integrated approach where, despite holding different objectives, antitrust enforcement should also protect privacy interests.

The integrationist movement claims that unity makes strength. According to this view, while competition and data-protection laws are, in isolation, considered unfit to safeguard their respective interests, the inclusion of privacy harms into antitrust assessments would allow competition authorities to better tackle data-accumulation strategies, and that the enforcement of antitrust rules would be more effective in ensuring data protection.

The purported complementarity, or even synergy, between competition and data-protection law appears, however, difficult to detect in practice. The only case in which a GDPR breach has been considered a proper legal basis for an antitrust intervention is the rather controversial Bundeskartellamt Facebook decision. Further, recent legislative initiatives that have introduced provisions clearly inspired by Facebook and essentially motivated by the aim of bypassing the traditional antitrust analysis (e.g., Article 5(2)DMA and Section 19a GWB) confirm the failure of the integrationist narrative and awareness that it would be impossible to endorse the Bundeskartellamt’s stance. Moreover, whether or not one would argue that the DMA represents a concrete and advanced attempt at integrating data-protection concerns in competition policy, it is worth pointing out that Article 5(2)DMA actually establishes antitrust deference toward privacy.

As if this were not enough, the idea of commingling antitrust and privacy has generated a significant side effect. As a reaction to Facebook and the DMA, some platforms have, indeed, adopted policy changes to restrict user-data tracking on their ecosystems in ways that undermine the effectiveness of rivals’ targeted advertising. The strategic use of privacy as a business justification to pursue anticompetitive advantages testifies once again to the tension between these fields of law. Further, as shown by the French Apple ATT investigation, the call for close cooperation between the authorities is often just a useless and rhetorical expedient.

The proposal to integrate competition and data-protection law in digital markets has been submitted as a much-needed boost to strengthen antitrust enforcement against gatekeepers and their data strategies. Moving away from pure efficiency-oriented assessments to embrace broader social interests, advocates claim, would help ensure more aggressive and effective antitrust enforcement. Including privacy harms in antitrust proceedings turns out, instead, to be a potential curse for competition authorities, providing the major digital players with an opportunity for regulatory gaming to undermine antitrust enforcement.

This should serve as a cautionary tale about the risks of twisting rules to achieve policy outcomes and the importance of respecting the principles and scope of different areas of law.

[1] See Jacques Cre?mer, Yves-Alexander de Montjoye, & Heike Schweitzer, Competition Policy for the Digital Era, (2019) Report for the European Commission, 4, available at https://ec.europa.eu/competition/publications/reports/kd0419345enn.pdf (referring to the possibility that a dominant platform could have incentives to sell “monopoly positions” to sellers by showing buyers alternatives that do not meet their needs).

[2] See Alessandro Bonatti, The Platform Dimension of Digital Privacy, forthcoming in The Economics of Privacy, (Avi Goldfard & Catherine Tucker, eds.), University of Chicago Press; Daron Acemoglu, Ali Makhdoumi, Azarakhsh Malekian, & Asu Ozdaglar, Too Much Data: Prices and Inefficiencies in Data Markets, 14 Am Econ J Microecon 218 (2022); Shota Ichihashi, The Economics of Data Externalities, 196 J. Econ. Theory 105316 (2021); Omri Ben-Shahar, Data Pollution, 11 J. Leg. Anal. 104 (2019); Jay Pil Choi, Doh-Shin Jeon, & Byung-Cheol Kim, Privacy and Personal Data Collection with Information Externalities, 173 J. Public Econ. 113 (2019); see also Jeanine Miklós-Thal, Avi Goldfarb, Avery M. Haviv, & Catherine Tucker, Digital Hermits, NBER Working Paper No. 30920 (2023), (arguing that, as advances in machine learning allow firms to infer more accurately sensitive data from data that appears otherwise innocuous, users’ data-sharing decisions polarize between a group of users choosing to share no data and another group choosing to share all their data (sensitive or not sensitive)).

[3] See, e.g., Competition and Data Protection in Digital Markets: A Joint Statement Between the CMA and the ICO, UK Competition and Markets Authority and Information Commissioner’s Office, (2021) 5, https://www.gov.uk/government/publications/cma-ico-joint-statement-on-competition-and-data-protection-law [hereinafter “CMA-ICO Joint Statement”]; Privacy and Competitiveness in the Age of Big Data: The Interplay Between Data Protection, Competition Law and Consumer Protection in the Digital Economy, European Data Protection Supervisor (2014) https://edps.europa.eu/data-protection/our-work/publications/opinions/privacy-and-competitiveness-age-big-data_en.

[4] See, e.g., Investigation of Competition in Digital Markets’, Majority Staff Reports and Recommendations, U.S. House Energy and Commerce Subcommittee on Antitrust, Commercial, and Administrative Law (2020), 28, available at https://www.govinfo.gov/content/pkg/CPRT-117HPRT47832/pdf/CPRT-117HPRT47832.pdf [hereinafter, “Antitrust Subcommittee Report”]; Frank Pasquale, Privacy, Antitrust, and Power, 20 George Mason Law Rev. 1009 (2013); Pamela J. Harbour & Tara I. Koslov, Section 2 in a Web 2.0 World: An Expanded Vision of Relevant Product Markets, 76 Antitrust Law J. 769 (2010).

[5] See, e.g., Antitrust Subcommittee Report, supra note 4, 39, citing Howard A. Shelanski, Information, Innovation, and Competition Policy for the Internet, 161 U. Pa. L. Rev. 1663 (2013), to argue that “[t]he persistent collection and misuse of consumer data is an indicator of market power in the digital economy”; European Data Protection Supervisor, supra note 3, 35, stating that, where there are a limited number of operators or when one operator is dominant, “the concept of consent becomes more and more illusory;” see also, Online Platforms and Digital Advertising, UK Competition and Markets Authority (2020) para. 6.26, available at https://assets.publishing.service.gov.uk/media/5fa557668fa8f5788db46efc/Final_report_Digital_ALT_TEXT.pdf, stating that “[i]n a more competitive market, we would expect that it would be clear to consumers what data is collected about them and how it is used and, crucially, the consumer would have more control. We would then expect platforms to compete with one another to persuade consumers of the benefits of sharing their data or adopt different business models for more privacy-conscious consumers.” However, see also James C. Cooper & John M. Yun, Antitrust & Privacy: It’s Complicated, J. Law Technol. Policy 343 (2022), finding no systematic relationship between privacy ratings and market concentration.

[6] See, e.g., Report on Social Media Services, Australian Competition & Consumer Commission (2023), 128, https://www.accc.gov.au/media-release/accc-report-on-social-media-reinforces-the-need-for-more-protections-for-consumers-and-small-business; Rebecca Kelly Slaughter, The FTC’s Approach to Consumer Privacy, Federal Trade Commission (2019) 3, available at https://www.ftc.gov/system/files/documents/public_statements/1513009/slaughter_remarks_at_ftc_approach_to_consumer_privacy_hearing_4-10-19.pdf.

[7] Antitrust Subcommittee Report, supra note 4, 28; Maurice E. Stucke & Ariel Ezrachi, When Competition Fails to Optimise Quality: A Look at Search Engines, 18 Yale J. Law Technol. 70 (2016).

[8] Pamela J. Harbour, Dissenting Statement in the Matter of Google/DoubleClick, Federal Trade Commission (2007), 4, available at https://www.ftc.gov/sites/default/files/documents/public_statements/statement-matter-google/doubleclick/071220harbour_0.pdf.

[9] For a critical perspective, see Giuseppe Colangelo, In Fairness We (Should Not) Trust: The Duplicity of the EU Competition Policy Mantra in Digital Markets, Antitrust Bulletin (forthcoming).

[10] See Cristina Caffarra & Johnny Ryan, Why Privacy Experts Need a Place at the Antitrust Table, ProMarket (2021) https://www.promarket.org/2021/07/28/privacy-experts-antitrust-data-harms-digital-platforms, arguing that “[t]here is a market power crisis and a privacy crisis, and they compound each other.”

[11] See, e.g., Wolfgang Kerber & Karsten K. Zolna, The German Facebook Case: The Law and Economics of the Relationship Between Competition and Data Protection Law, 54 Eur. J. Law Econ. 217 (2022), arguing that digital markets exhibit two types of market failure (i.e., competition problems on the one hand, and information and behavioral problems on the other) and suggesting that the effectiveness of enforcement should also be an important criterion for determining which policy should deal with a case if both laws can be applied. Accordingly, if data-protection law is uncapable of dealing effectively with privacy issues and competition law appears better able to overcome this challenge, then the competition authority should step in as the lead enforcer. On the enforcement failure of old and new data-protection regimes, see Filippo Lancieri, Narrowing Data Protection’s Enforcement Gap, 74 Maine Law Rev. 15 (2022).

[12] For an overview of various theories that have emerged in the literature, see Erika M. Douglas, The New Antitrust/Data Privacy Law Interface, Yale L.J. F. 647 (2021); Giuseppe Colangelo & Mariateresa Maggiolino, Data Protection in Attention Markets: Protecting Privacy Through Competition? 8 J. Eur. Compet. Law Pract. 363 (2017). See also, Consumer Data Rights and Competition Background: Note by the Secretariat, OECD (2020), available at https://one.oecd.org/document/DAF/COMP(2020)1/en/pdf, and Geoffrey A. Manne & Ben Sperry, The Problems and Perils of Bootstrapping Privacy and Data into an Antitrust Framework, CPI Antitrust Chronicle 2 (2015), exploring the difficulties associated with incorporating consumer-data considerations into competition policy and enforcement.

[13] See Noah Joshua Phillips, Remarks at the Mentor Group Paris Forum, Federal Trade Commission (2019), 13-15, https://www.ftc.gov/news-events/news/speeches/remarks-commissioner-noah-joshua-phillips-mentor-group-paris-forum; and Maureen K. Ohlhausen & Ben Rossen, Privacy and Competition: Discord or Harmony? 67 Antitrust Bulletin 552 (2022).

[14] See, e.g., Susan Athey, Christian Catalini, & Catherine E. Tucker, The Digital Privacy Paradox: Small Money, Small Costs, Small Talk, NBER Working Paper No. 23488 (2017); Alessandro Acquisti, Curtis Taylor, & Liad Wagman, The Economics of Privacy, 54 J Econ Lit 442 (2016). See also, Avi Goldfarb & Catherine Tucker, Shifts in Privacy Concerns, 102 Am Econ Rev: Papers and Proceedings 349 (2012), noting that individuals’ privacy preferences evolve over time; notably, as people grow older. they get more privacy-conscious. See also Jeffrey T. Prince & Scott Wallsten, How Much Is Privacy Worth Around the World and Across Platforms?, 31 J Econ Manag Strategy. 841 (2022), estimating individuals’ valuation of online privacy across countries (United States, Mexico, Brazil, Colombia, Argentina, and Germany) and data types (personal information on finances, biometrics, location, networks, communications, and web browsing), and finding that Germans value privacy more than people in the United States and Latin American countries do and that, across countries, people most value privacy for financial and biometric information.

[15] Giuseppe Colangelo & Mariateresa Maggiolino, Antitrust Über Alles. Whither Competition Law After Facebook?, 42 World Competition Law and Economics Review 355 (2019).

[16] See, e.g., Federal Trade Commission v. Facebook, Case No. 1:20-cv-03590 (D.D.C. 2021), para. 163, arguing that “[t]he benefits to users of additional competition include some or all of the following: … variety of data protection privacy options for users, including, but not limited to, options regarding data gathering and data usage practices”; and U.S. et al. v. Google, No. 1:20-cv-03010 (D.D.C. 2020), para. 167, arguing that “[b]y restricting competition in general search services, Google’s conduct has harmed consumers by reducing the quality of general search services (including dimensions such as privacy, data protection, and use of consumer data), lessening choice in general search services, and impeding innovation.” See also, Executive Order on Promoting Competition in the American Economy, The White House (2021), https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy, urging federal agencies to pay closer attention to “unfair data collection and surveillance practices that may damage competition, consumer autonomy, and consumer privacy.”

[17] See Margrethe Vestager, Tearing Down Big Tech’s Walls, Project Syndicate (2023) https://www.project-syndicate.org/commentary/eu-big-tech-legislation-digital-services-markets-by-margrethe-vestager-2023-03, stating that “[w]e are proud that Europe has become the cradle of tech regulation globally.”

[18] Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 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. See Bert-Jaap Koops, The Trouble with European Data Protection Law, 4 Int. Data Priv. Law 4, 44 (2014), arguing that “[b]y its nature, data portability would be more at home in the regulation of unfair business practices or electronic commerce, or perhaps competition law—all domains that regulate abuse of power by commercial providers to lock-in consumers.”

[19] Bundeskartellamt, 7 February 2019, Case B6-22/16.

[20] CMA-ICO Joint Statement, supra note 3, 18-19.

[21] Ibid., 23.

[22] Douglas, supra note 12.

[23] See, e.g., hiQ Labs v. LinkedIn, 938 F.3d 985 (9th Cir. 2019), affirmed 31 F.4th 1180 (9^th Cir. 2022), allowing hiQ continued access to LinkedIn users’ profile information in the name of competition. Notably, the court pointed out that hiQ’s entire business depends on being able to access public LinkedIn member profiles and that, at the same time, there is little evidence that LinkedIn users who choose to make their profiles public actually maintain an expectation of privacy with respect to the information that they post publicly. Therefore, “even if some users retain some privacy interests in their information notwithstanding their decision to make their profiles public, we cannot, on the record before us, conclude that those interests—or more specifically, LinkedIn’s interest in preventing hiQ from scraping those profiles—are significant enough to outweigh hiQ’s interest in continuing its business, which depends on accessing, analyzing, and communicating information derived from public LinkedIn profiles.”

[24] See, e.g., Epic Games v. Apple, 559 F. Supp. 3d 898, 922–23 (N.D. Cal. 2021), affirmed in part and reversed in part 2023 U.S. App. LEXIS 9775 (9^th Cir. 2023), finding that Apple’s restrictions are designed to improve device security and user privacy; and District Court (Rechtbank) of Rotterdam, 24 December 2021, Case No. ROT 21/4781 and ROT 21/4782, dismissing the arguments that Apple’s in-app payment system is needed for security and privacy.

[25] See, e.g., Autorità Garante della Concorrenza e del Mercato, 11 May 2023, Case A561; Press Release, Bundeskartellamt Reviews Apple’s Tracking Rules for Third-Party Apps, Bundeskartellamt (2022), https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2022/14_06_2022_Apple.html; Autorité de la Concurrence, 17 March 2021, Decision 21-D-07, Apple, https://www.autoritedelaconcurrence.fr/en/decision/regarding-request-interim-measures-submitted-associations-interactive-advertising-bureau; Apple – The President of UOKiK Initiates an Investigation, Urz?d Ochrony Konkurencji i Konsumentów (2021), https://uokik.gov.pl/news.php?news_id=18092. See also, Mobile Ecosystems: Market Study Final Report, UK Competition and Markets Authority (2022) Chapter 6 and Appendix J, https://www.gov.uk/cma-cases/mobile-ecosystems-market-study.

[26] Phillips, supra note 13, 15.

[27] CJEU (Grand Chamber), 4 July 2023, Case C-252/21, Meta Platforms v. Bundeskartellamt, EU:C:2023:537.

[28] See, e.g., European Data Protection Supervisor, supra note 3, 26, stating that “clearly power is achieved through control over massive volumes of data on service users.”

[29] See GDPR, supra note 18, Recital 7.

[30] European Data Protection Supervisor, supra note 3, 26.

[31] CMA-ICO Joint Statement, supra note 3, 5.

[32] Nicholas Economides & Ioannis Lianos, Restrictions on Privacy and Exploitation in the Digital Economy: A Market Failure Perspective, 17 J. Competition Law Econ. 765 (2021).

[33] Competition Law and Data, Autorité de la Concurrence and Bundeskartellamt (2016), 25, available at https://www.bundeskartellamt.de/SharedDocs/Publikation/DE/Berichte/Big%20Data%20Papier.pdf?__blob=publicationFile&v=2.

[34] Economides & Lianos, supra note 32.

[35] Ibid., 770-771.

[36] GDPR, supra note 18, Article 4(11).

[37] Ibid., Article 7.

[38] Autorité de la Concurrence and Bundeskartellamt, supra note 33, 25. See also Australian Competition & Consumer Commission, supra note 6, 41, arguing that exploitative conduct involves the use of market power to “give less and charge more” and that, for consumers, this may involve lower-quality services or the excessive costs of providing personal data to access services.

[39] Autorité de la Concurrence and Bundeskartellamt, supra note 33, 24.

[40] Facebook, supra note 19. For a comment on the different episodes of the Facebook saga, see, e.g., Kerber and Zolna, supra note 11; Anne C. Witt, Excessive Data Collection as a Form of Anticompetitive Conduct: The German Facebook Case, 66 Antitrust Bulletin 276 (2021); Marco Botta and Klaus Wiedemann, The interaction of EU competition, consumer, and data protection law in the digital economy: the regulatory dilemma in the Facebook odyssey, 64 Antitrust Bulletin 428 (2019); Colangelo and Maggiolino, supra note 15.

[41] Facebook, supra note 19, paras. 778-780 and 792, stating that users could not have expected that the platform would analyse data emanating from other websites and, when they had the opportunity to read Facebook’s terms of service, users could barely understand the reasons why Facebook was processing and combining their data since Facebook’s terms of service were very complex, replete with links to other explanations, and significantly too opaque to allow ordinary users to understand its data policy.

[42] Ibid., section B(II), stating that voluntary consent to users’ information being processed cannot be assumed if their consent is a prerequisite for using the Facebook service in the first place.

[43] Ibid., para. 645, highlighting that GDPR’s Recitals 42 and 43 state that consent is not freely given where consumers have no alternative options, or where there are clear power imbalances. See also Inge Graef & Sean Van Berlo, Towards Smarter Regulation in the Areas of Competition, Data Protection and Consumer Law: Why Greater Power Should Come with Greater Responsibility, 12 Eur. J. Risk Regul. 674 (2021), arguing that, in formulating this two-way interaction between data-protection law and competition law, the Bundeskartellamt has not only incorporated data-protection principles into its competition analysis, but similarly transferred elements of competition law into data protection; and Orla Lynskey, Grappling With ‘Data Power’: Normative Nudges From Data Protection and Privacy, 20 Theor. Inq. Law 189 (2019), supporting the view that the GDPR provides a normative foundation for imposing a special responsibility on controllers holding data power, analogous to the special responsibility that competition law imposes on dominant firms.

[44] See Press Release, Bundeskartellamt Prohibits Facebook From Combining User Data From Different Sources, Bundeskartellamt (2019), https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Pressemitteilungen/2019/07_02_2019_Facebook.html;jsessionid=8A581062B36687451A3D1E7A5C256390.2_cid378?nn=3600108, arguing that “[t]he combination of data sources substantially contributed to the fact that Facebook was able to build a unique database for each individual user and thus to gain market power.”

[45] Facebook FAQs, Bundeskartellamt (2019), 6, https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Pressemitteilungen/2019/07_02_2019_Facebook_FAQs.pdf?__blob=publicationFile&v=6.

[46] See Colangelo & Maggiolino, supra note 15.

[47] Press Release, Meta (Facebook) Introduces New Accounts Center – An Important Step in the Implementation of the Bundeskartellamt’s Decision, Bundeskartellamt (2023), https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2023/07_06_Meta_Daten.html.

[48] Colangelo & Maggiolino, supra note 15.

[49] OLG Du?sseldorf, 26 August 2019, Case VI-Kart 1/19 (V), 10.

[50] Ibid., 11.

[51] Ibid., 12.

[52] Bundesgerichtshof, 23 June 2020, Case KVR 69/19.

[53] Ibid., para. 58.

[54] Ibid..

[55] Ibid., para. 86.

[56] Ibid., para. 94.

[57] OLG Du?sseldorf, 24 March 2021, Case Kart 2/19 (V).

[58] Meta, supra note 27.

[59] Autorità Garante della Concorrenza e del Mercato, 10 December 2018, Case PS11112, Facebook-Condivisione dati con terzi.

[60] Nederlandstalige Rechtbank van Eerste Aanleg te Brussel, 16 February 2018.

[61] Regulation (EU) 2022/1925 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act) [2022] OJ L 265/1, Article 5(2).

[62] Ibid., Recital 36.

[63] Ibid., Recital 37.

[64] For critical analysis of this issue and more generally on the controversial relationship between the DMA and the GDPR, see Alba Ribera Marti?nez, The Circularity of Consent in the DMA: A Close Look into the Prejudiced Substance of Articles 5(2) and 6(10), Concorrenza e Mercato (forthcoming). See also Marco Botta & Danielle Da Costa Leite Borges, User’s Consent Under Art. 5(2) Digital Markets Act (DMA): Exploring the Complex Relationship Between the DMA and the GDPR, EUI RSC Working Paper (forthcoming), arguing that, while respecting the general criteria indicated by Art. 7 GDPR, the users’ consent under Art. 5(2) DMA should be adjusted to the DMA peculiarity and that the DMA should be considered as a lex specialis, taking precedence over the GDPR in case of conflict. Previously, the revised e-Privacy Directive introduced an opt-in system for website cookies: see Directive 2009/136/EC amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services, Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector and Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws, (2009) OJ L 337/11, Article 5(3).

[65] DMA, supra note 61, Recital 72.

[66] Press Release, Statement of Objections Issued Against Google’s Data Processing Terms, Bundeskartellamt (2023), https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2023/11_01_2023_Google_Data_Processing_Terms.html.

[67] Ibid.

[68] Entwurf Eines Gesetzes zur A?nderung des Gesetzes Gegen Wettbewerbsbeschra?nkungen fu?r ein Fokussiertes, Proaktives und Digitales Wettbewerbsrecht 4.0 und Anderer Wettbewerbsrechtlicher Bestimmungen, Bundestag (2020), available at https://dserver.bundestag.de/btd/19/234/1923492.pdf.

[69] See Giuseppe Colangelo, The European Digital Markets Act and Antitrust Enforcement: A Liaison Dangereuse, 47 Eur. Law Rev. 597 (2022).

[70] Bundeskartellamt, 30 December 2021, Case B7-61/21, https://www.bundeskartellamt.de/SharedDocs/Entscheidung/EN/Entscheidungen/Missbrauchsaufsicht/2022/B7-61-22.html.

[71] Bundeskartellamt, 5 October 2023, Case B7-70/21.

[72] The Bundeskartellamt identified four main deficiencies to support its prohibition of Google’s data-processing terms (ibid., paras. 50-54). Namely, because of a lack of sufficient granularity in the settings options, users could not opt out of cross-service data processing or limit data processing to the Google service in which the data were generated. End users could only choose between accepting personalization across all services or opting out of personalization altogether. Further, users were not given sufficient choice within the meaning of Section 19a GWB, as in some cases, Google offers users no choice at all as to data-processing options. Furthermore, the settings options that Google offered lacked sufficient transparency—i.e., sufficiently concise and comprehensible indications providing users with sufficient information as to whether, how, and for what purpose Google processes data across services. Finally, when creating a Google account, a user’s options consent or reject consent were not equivalent.

[73] Ibid., para. 78.

[74] See, e.g., Inge Graef, Damian Clifford, & Peggy Valcke, Fairness and Enforcement: Bridging Competition, Data Protection, and Consumer Law, 8 Int. Data Priv. Law 200, 219-220 (2018).

[75] European Commission, 11 March 2008, Case COMP/M.4731. Previously, in a different setting (i.e., discussing an exchange-of-information case), the CJEU (23 November 2006, Case C-238/05, Asnef-Equifax, EU:C:2006:734, para. 63) affirmed that “any possible issues relating to the sensitivity of personal data are not, as such, a matter for competition law, they may be resolved on the basis of the relevant provisions governing data protection.”

[76] Google/DoubleClick, supra note 75, para. 364. See also para. 365, where the Commission noted that “that the combination of data about searches with data about users’ web surfing behaviour [wa]s already available to a number of Google’s competitors.”

[77] Ibid., para. 368.

[78] European Commission, 3 October 2014, Case COMP/M.7217.

[79] Ibid., para. 189.

[80] Ibid., para. 164.

[81] European Commission, 6 December 2016, Case COMP/M.8124.

[82] Ibid., fn 330.

[83] Ibid., para. 180.

[84] Ibid., para. 177.

[85] Ibid., para. 178.

[86] Ibid., para. 179.

[87] European Commission, 6 September 2018, Case COMP/M.8788, paras. 221 and 314.

[88] European Commission, 17 December 2020, Case COMP/M.9660.

[89] See, Statement on Privacy Implications of Mergers, European Data Protection Board (2020), available at https://edpb.europa.eu/sites/default/files/files/file1/edpb_statement_2020_privacyimplicationsofmergers_en.pdf, arguing that “(t)here are concerns that the possible further combination and accumulation of sensitive personal data regarding people in Europe by a major tech company could entail a high level of risk to the fundamental rights to privacy and to the protection of personal data.”

[90] Google/Fitbit, supra note 84, para. 410.

[91] Ibid., fn. 299.

[92] Ibid., fn. 300.

[93] European Commission, 21 December 2021, Case COMP/M.10290.

[94] European Commission, 27 January 2022, Case COMP/M.10262.

[95] Press Release, Commission Clears Creation of a Joint Venture by Deutsche Telekom, Orange, Telefo?nica and Vodafone, European Commission (2023), https://ec.europa.eu/commission/presscorner/detail/en/IP_23_721. Previously, in a similar vein, see European Commission, 4 September 2012, Case COMP/M.6314, Telefo?nica UK/Vodafone UK/ Everything Everywhere/ JV.

[96] UK Competition and Markets Authority, supra note 25, Appendix J.

[97] See, e.g., Nils Wernerfelt, Anna Tuchman, Bradley Shapiro, & Robert Moakler, Estimating the Value of Offsite Data to Advertisers on Meta, SSRN (2022) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4176208, finding that the costs to acquire new consumers through targeted advertisements increases tremendously without access to offsite data. On the value of external data and on the relevance (especially for small and medium-sized players) of gaining access to external data from large players in the marketplace, see also Xiaoxia Lei, Yixing Chen, & Ananya Sen, The Value of External Data for Digital Platforms: Evidence from a Field Experiment on Search Suggestions, SSRN (2023) https://ssrn.com/abstract=4452804.

[98] For a review of the economic literature on the GDPR and its unintended consequences on firms’ performance, innovation, competition, and market concentration, as well as its impact on personalized marketing channels, see Garrett A. Johnson, Economic Research on Privacy Regulation: Lessons from the GDPR and Beyond, (forthcoming) in The Economics of Privacy, supra note 2.

[99] See Reinhold Kesler, Digital Platforms Implement Privacy-Centric Policies: What Does It Mean for Competition?, CPI Antitrust Chronicle 1 (2022), and Daniel Sokol & Feng Zhu, Harming Competition and Consumers Under the Guise of Protecting Privacy: Review of Empirical Evidence, CPI Antitrust Chronicle 12 (2022), for a review of economic studies showing that advertising revenues decrease with limited tracking abilities and providing empirical evidence of reduced user tracking on Apple as a consequence of the ATT policy. See also Wernerfelt, Tuchman, Shapiro, & Moakler, supra note 97, finding that restrictions on offsite data particularly harms smaller advertisers.

[100] See Sokol & Zhu, supra note 99. See also Kesler, Digital Platforms Implement Privacy-Centric Policies: What Does It Mean For Competition?, supra note 99, suggesting that the ATT brings back paid apps and reinforces the industry trend toward more in-app payments. With regard to the possibility that the ATT framework may affect the developers’ incentives in the Apple ecosystem, see also Cristobal Cheyre, Benjamin T. Leyden, Sagar Baviskar, & Alessandro Acquisti, The Impact of Apple’s App Tracking Transparency Framework on the App Ecosystem, CESifo Working Paper No. 10456 (2023), https://www.cesifo.org/en/publications/2023/working-paper/impact-apples-app-tracking-transparency-framework-app-ecosystem, finding that developers did not withdraw from the market after ATT and instead adapted to operate under the new conditions. Further, see Ding Li & Hsin-Tien Tsai, Mobile Apps and Targeted Advertising: Competitive Effects of Data Exchange, SSRN (2022), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4088166, finding that apps’ inability to use tracking for advertising affects large apps to a greater degree, as they experience larger declines than smaller apps in download numbers and innovation.

[101] Autorité de la Concurrence, supra note 25.

[102] Bundeskartellamt, supra note 25.

[103] Autorità Garante della Concorrenza e del Mercato, supra note 25.

[104] Urz?d Ochrony Konkurencji i Konsumentów, supra note 25.

[105] UK Competition and Markets Authority, supra note 25.

[106] Autorità Garante della Concorrenza e del Mercato, supra note 25, para. 47.

[107] Autorité de la Concurrence, supra note 25. In a similar vein, see Anzo DeGiulio, Hanoom Lee, & Eleanor Birrell, “Ask App not to Track”: The Effect of Opt-In Tracking Authorization on Mobile Privacy, in Emerging Technologies for Authorization and Authentication (Andrea Saracino and Paolo Mori, eds.), Springer Cham (2022), 152, finding that opt-in authorizations are effective at enhancing data privacy. Conversely, see Chongwoo Choe, Noriaki Matsushima, & Shiva Shekhar, The Bright Side of the GDPR: Welfare-Improving Privacy Management, CESifo Working Paper No. 10617 (2023) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4558426, distinguishing among platforms’ business models and arguing that, if the firm’s revenue is largely usage-based rather than data-based, then both the firm’s profit and consumer surplus increase after the GDPR’s opt-in requirement, while if the firm’s revenue is largely from data monetization, then the opt-in can reduce the firm’s profit and consumer surplus.

[108] See also Catherine Armitage, Nick Botton, Louis Dejeu-Castang, & Laureline Lemoine, Study on the Impact of Recent Developments in Digital Advertising on Privacy, Publishers and Advertisers, AWO Belgium (2023) Report for the European Commission, 227, https://op.europa.eu/en/publication-detail/-/publication/8b950a43-a141-11ed-b508-01aa75ed71a1/language-en, arguing that consent prompts under the ATT policy are user-friendly, easily accessible, comprehensible and actionable; and UK Competition and Markets Authority, supra note 25, para. 6.163, acknowledging the privacy benefits associated with the introduction of ATT, as it enhances users’ control over their personal data and significantly improves developers’ compliance with data-protection law.

[109] Press Release, Commission Opens Investigation into Possible Anticompetitive Conduct by Google in the Online Advertising Technology Sector, European Commission (2021), https://ec.europa.eu/commission/presscorner/detail/en/ip_21_3143.

[110] Ibid.

[111] Press Release, Investigation into Google’s ‘Privacy Sandbox’ Browser Changes, UK Competition and Markets Authority (2021), https://www.gov.uk/cma-cases/investigation-into-googles-privacy-sandbox-browser-changes.

[112] Ibid.

[113] See also UK Competition and Markets Authority, supra note 25, para. 10.19, stating that “[w]orking closely with the ICO, the CMA now has a role in overseeing the development of Google’s proposals for replacements to third-party cookies, so that they protect privacy without unduly restricting competition and harming consumers.”

[114] Colangelo & Maggiolino, supra note 12.

[115] See, e.g., UK Competition and Markets Authority, supra note 5; Antitrust Subcommittee Report, supra note 4; Pasquale, supra note 4; Harbour & Koslov, supra note 4.

[116] Harbour, supra note 8.

[117] Antitrust Subcommittee Report, supra note 4; Stucke & Ezrachi, supra note 7.

[118] See Autorité de la Concurrence and Bundeskartellamt, supra note 33. See also Australian Competition & Consumer Commission, supra note 6; Slaughter, supra note 6.

[119] Douglas, supra note 12, 667.

[120] See, e.g., CMA-ICO Joint Statement, supra note 3, 26.

[121] At best, it may be argued that the DMA, supra note 61, Recitals 36 and 72, supports the theory of harm that, because of network effects and other structural features of digital markets, the strengthening of gatekeepers’ power lowers their incentives to compete through offering high levels of privacy. These Recitals consider that ensuring data protection facilitates contestability of core platform services by avoiding the risks that gatekeepers raise barriers to entry and allow other undertakings to differentiate themselves better through the use of superior privacy guarantees.

[122] Meta, supra note 27.

[123] Opinion of the Advocate General Athanasios Rantos, 20 September 2022, Case C-252/21, EU:C:2022:704.

[124] Ibid., fn 18.

[125] Ibid., para. 23.

[126] See CJEU, 17 February 2011, Case C-52/09, Konkurrensverket v. TeliaSonera Sverige AB, EU:C:2011:83; 27 March 2012, Case C-209/10, Post Danmark A/S v. Konkurrencerådet, EU:C:2012:172; 6 October 2015, Case C-23/14, Post Danmark A/S v. Konkurrencerådet (Post Danmark II) EU:C:2015:651; 6 September 2017, Case C-413/14 P, Intel v. Commission, EU:C:2017:632; 30 January 2020, Case C-307/18, Generics (UK) and Others v. Competition and Markets Authority, EU:C:2020:52; 25 March 2021, Case C-152/19 P, Deutsche Telekom v. Commission (Deutsche Telekom II), EU:C:2021:238; 12 May 2022, Case C-377/20, Servizio Elettrico Nazionale SpA v. Autorità Garante della Concorrenza e del Mercato, EU:C:2022:379.

[127] Meta, supra note 27, para. 47, quoting Rantos, supra note 123, para. 23.

[128] Meta, supra note 27, para. 51.

[129] Ibid., para. 48.

[130] Rantos, supra note 123, para. 24.

[131] Meta, supra note 27, para. 49.

[132] Ibid., paras. 52 and 54.

[133] Ibid., para. 56. See also Rantos, supra note 120, paras. 29-30.

[134] See Giuseppe Colangelo & Mariateresa Maggiolino, Data Accumulation and the Privacy-Antitrust Interface: Insights from the Facebook Case, 8 Int. Data Priv. Law 224 (2018).

[135] See also Peter Georg Picht, CJEU on Facebook: GDPR Processing Justifications and Application Competence, SSRN (2023) 3, https://ssrn.com/abstract=4521320, arguing that it is doubtful whether informal communications, as apparently held by the Bundeskartellamt with one of the competent GDPR authorities, sufficiently protect party rights.

[136] See, e.g., Klaus Wiedemann, Data Protection and Competition Law Enforcement
in the Digital Economy: Why a Coherent and Consistent Approach is Necessary, 52 IIC 915 (2021), arguing that the regulation of consent to the processing of personal data under the GDPR serves as a dogmatic link between data-protection and competition law, as the freedom to choose granted by the GDPR to users whose personal data are monetized shares significant overlaps with the economic freedom acknowledged in competition-law jurisprudence.

[137] GDPR, supra note 18, para. 74.

[138] Meta, supra note 27, paras. 147 and 149. See also Rantos, supra note 123, para. 75.

[139] Rantos, supra note 123, para. 75.

[140] For an analysis of the critical implications, see Alessia Sophia D’Amico, Market Power and the GDPR: Can Consent Given to Dominant Companies Ever Be Freely Given?, SSRN (2023), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4492347. See also Peter Georg Picht & Ce?dric Akeret, Back to Stage One? – AG Rantos’ Opinion in the Meta (Facebook) Case, SSRN (2023), 4, https://ssrn.com/abstract=4414591, considering the question of whether GDPR market power can be not only less than competition-law dominance but also of a different nature—e.g., based on a set of parameters that would not suffice, as such, to establish market power in the competition-law sense.

The European Commission appears resolved to tear down Apple’s “walled garden.” Following a complaint filed by Spotify, the Commission has already fined Apple an exorbitant €1.8 billion for allegedly abusing its dominant position in the market for distributing streaming-music apps to iPhone and iPad users (a case where Apple was found to be dominant in a narrowly defined product market encompassing only its own products).

Read the full piece here.

If you live in Europe, you may have noticed issues with some familiar online services. From consent forms to reduced functionality and new fees, there is a sense that platforms like Amazon, Google, Meta, and Apple are changing the way they do business. 

Many of these changes are the result of a new European regulation called the Digital Markets Act (DMA), which seeks to increase competition in online markets. Under the DMA, so-called “gatekeepers” must allow rivals to access their platforms. Having taken effect March 7, firms now must comply with the regulation, which explains why we are seeing these changes unfold today.

Read the full piece here.

Background: The European Union’s Digital Markets Act (DMA), which went into effect in November 2022,  requires online platforms deemed to be “gatekeepers” to make their services interoperable. Interoperability refers to the ability of different systems, devices, or applications to communicate and exchange information. Importantly, the DMA envisions horizontal interoperability for messaging services, as well as vertical interoperability obligations. These include the ability to install third-party app stores and to install applications through sideloading, along with ensuring access to operating systems’ critical functionalities and specific devices’ hardware capabilities.

However… While interoperability requirements can reduce switching costs between platforms and possibly  help consumers avoid being “locked-in” to inferior products, the net effects on new technology and greater competition are mostly speculative. Claims that mandatory interoperability is a “super tool” for platform competition rely on excessive switching costs between platforms effectively serving as a barrier to entry. The rise of new social networks like TikTok and messaging services like Discord suggests that network effects may be less pervasive than previously thought. Many consumers are perfectly comfortable with “multi-homing” and using multiple platforms. 

Network Effects Are Everywhere; Network Harms Are More Specific

Consumers in any market—not exclusively or even predominantly digital markets—strike a balance between using multiple providers (multi-homing) and remaining loyal to just one. Network effects can give incumbents an advantage over challengers, but identifying that a given market has network effects does not, in itself, justify mandating interoperability. For any potential interoperability mandate, we must ask how costly it is for consumers to multi-home. 

For example, a consumer may find it low-cost to download multiple apps—such as Zelle, PayPal, or Venmo—that each allow one to send money to a friend. By contrast, it may be quite costly to gain followers on a new social-media platform. Interoperability mandates have tended to focus on markets that already have low switching costs, hence limiting potential gains.

Lock-In Can Increase Competition

We say a consumer is “locked-in” when high switching costs make it difficult for them to switch suppliers even when quality changes. But markets subject to lock-in may still see fierce competition for users. Companies compete upfront to attract such consumers through tactics like penetration pricing, introductory offers, and price wars. This “competition for the market” can effectively substitute for standard compatible competition and might even be more intense, as it reduces differentiation. It is not a simple linear relationship, where lower switching costs are always better for consumers.

Interoperability Isn’t Always Good

Interoperability proponents argue that it levels the playing field between tech giants and smaller competitors. The debate often imagines a low-quality incumbent using lock-in to keep a high-quality challenger at bay. But we don’t necessarily want everything to be interoperable. It would be a problem if, e.g., everyone’s door keys were interoperable. The analogous problem in tech is cybersecurity. More interconnected systems are more vulnerable to cyberattacks and data breaches. Mandating interoperability, such as between messaging services, can inadvertently expose users to greater security risks by creating additional points of access for bad actors.

Static Standards and Dynamic Markets

There are many examples of interoperability resulting from the voluntary adoption of standards. Credit-card companies manage vast, interoperable payment networks; screwdrivers work with screws made by various manufacturers; and U.S. colleges accept credits from other institutions. 

Interoperability also tends to evolve over time and regulators should not imagine the current system will last forever. Bluetooth was initially developed for wireless communication between devices like headsets and phones, but has evolved to also enable seamless connectivity among various speakers, keyboards, smartwatches, and so forth—all from different manufacturers. This standardization has greatly simplified wireless connections and improved user experience.

Calculate Costs in Addition to Benefits

While a literature review on switching costs and network effects by esteemed scholars Joseph Farrell and Paul Klemperer concluded that “firms probably seek incompatibility too often. We therefore favor thoughtfully pro-compatibility public policy,” they also recognize that competition to be the dominant platform “can adequately replace ordinary compatible competition, and can even be fiercer than compatible competition by weakening differentiation.”

Moreover, the theoretical papers they considered mostly ask whether increasing or decreasing switching costs increases consumer welfare. Mandates implemented through public policy tend to be more blunt and, after accounting for factors like increased security risks, are less likely to pass a cost-benefit test. Consumers often come across situations where interoperability might provide some benefits, but where the costs outweigh the gains. Policymakers should take the same approach.

For more on this issue, see “Antitrust Unchained: The EU’s Case Against Self-Preferencing” by Giuseppe Colangelo; “Privacy and Security Implications of Regulation of Digital Services in the EU and in the US” by Mikolaj Barczentewicz; and “Mandatory Interoperability Is Not a ‘Super Tool’ for Platform Competition” by Samuel Bowman.

Abstract

The Digital Markets Act (DMA) is a rare bird in competition policy. Indeed, it is a hybrid framework incorporating the institutional setting of a regulatory tool as well as the conduct already targeted by antitrust authorities in proceedings against digital platforms. From a policy perspective, the DMA seeks to prevent some anticompetitive practices. To this end, the EU legislator has construed an intricate set of provisions pursuing different policy goals. After setting out these goals in relation to the proclaimed legal interests protected by the DMA (i.e., contestability and fairness), the paper gauges them against the benchmark of the European Commission’s capabilities in its enforcement. Relying on the first round of compliance reports issued by gatekeepers in March 2024, the analysis aims to provide adequate pathways to measure the DMA’s success. Accordingly, the paper maps out market scenarios where policymakers can assert that the DMA’s enforcement has been effective.

I. Introduction

The adoption of the Digital Markets Act (DMA or Regulation) follows a clear premise.[1] EU competition law is deemed ineffective to police anticompetitive conduct in digital markets.[2] The alleged failure derived from slow-paced antitrust sanctioning proceedings as well as the complex construction of theories of harm revolving around novel types of digital conduct.[3] According to such a narrative, competition authorities took too long to set forth their cases and, even when they managed to do so, intense litigation further slowed the enforcement of antitrust provisions. Furthermore, even when litigation resulted in a victory for enforcers, remedies came short of working as the antiseptic means to restore the competitive process to its original undistorted state.[4] In summary, by this view, EU competition law failed to deliver effective enforcement with respect to the fast-paced, complex, and intricate nature of digital players and ecosystems.[5]

Against this backdrop, the DMA is expected to address such an enforcement failure. Therefore, effective enforcement shall be the norm as a result of its application. To this aim, the path chosen by the EU legislator to turn this desire into reality is not entirely consistent with the acquis construed around competition law.[6] Indeed, the DMA reverses the burden of intervention against the targets of its regulation (i.e., the gatekeepers) to demonstrate they comply with the substantive provisions enshrined under Articles 5, 6, and 7 in the fashion of per se obligations. Pursuant to Article 11 DMA, in March 2024, the first designated gatekeepers submitted their compliance reports, setting forth the technical implementations and changes to their business models they believed to satisfy the threshold of the DMA’s effective enforcement.[7]

Stemming from the gatekeepers’ reaction to the Regulation, the European Commission (EC), as the sole enforcer of the DMA, faces a challenging task. Indeed, although the regulatory intervention was advertised as self-executing to sidestep the protracted litigation associated with competition law enforcement, the opening of non-compliance investigations by the EC suggests legal disputes are poised to become commonplace.[8] From this perspective, these initial results question the call to discard the purportedly ineffective principles-based antitrust approach and advocate for a rules-based model in order to facilitate enforcement, thus ensuring the quick and effective implementation of the new rules. [9] If the adoption of bright-line rules does not seem to be able to lower the number of legal disputes, it may also expose the Regulation to significant risks of circumvention strategies, which would further undermine its effective implementation requiring additional time-delaying procedures.[10] Moreover, as these investigations are apparently extensions of previous (and sometimes ongoing) competition cases, the DMA is being used to reexamine and relitigate antitrust investigations. After all, while its role is not to endorse the compliance solutions presented by gatekeepers, at the same time the EC is not vested with the powers to assert what compliance should look like.

Against this background, one can easily determine that the DMA is a hybrid instrument in more than one aspect.

From its institutional design and setting, the regulatory framework adapts the tradition of regulation over essential facilities to the functioning of digital competition.[11] By this token, the enforcement strategies the EC may apply to the different solutions presented by the gatekeepers are diverse in nature.[12] The EC’s recent enforcement actions are good proof of that. First, the EC continues to pursue punitive proceedings against gatekeepers under the DMA, without the burden of the procedural safeguards of traditional antitrust proceedings.[13] Second, the EC holds investigatory powers to verify the accuracy and truthfulness of gatekeepers’ statements in their compliance reports, without the need to trigger non-compliance procedures.[14] Third, the DMA provides sufficient scope for the EC to suspend the enforceability of some of its provisions.[15] Finally, Article 8 DMA enshrines the gatekeeper’s and the EC’s capacity to engage in a non-adversarial dialogue where they can iterate their opinions on how compliance should look like.

From the substantive perspective, the DMA’s obligations do not correspond with a single idea of enforcement. The EC has constantly repeated that the DMA is not output-oriented.[16] Instead, the Regulation is set to pave the way for business users to grasp the business opportunities the regulatory instrument seeks to restore. As a result, it is quite complex to determine where effective enforcement lies since impacts on consumers are not directly secured nor ensured via the DMA’s application. Further, one cannot simply assert that effective enforcement is achieved, and no further regulatory intervention is needed, when a certain number of competitors populate the gatekeeper’s core platform services. This metric is inadequate for assessing the restoration of competitive conditions because, although many companies may be present in the market, the structural challenges may still persist. Therefore, one must turn to the few yardsticks the letter of the law provides for to define this threshold of effective enforcement.

In this scenario, this paper aims to investigate the true measure of the Regulation’s success. Therefore, it will examine whether the DMA includes specific metrics to evaluate its success and assess the challenges and risks the European Commission may face in meeting these criteria. Further, the paper cautions against the assumption that, if the DMA meets its own benchmarks, it will automatically be successful for consumers. The DMA’s success metrics do not necessarily align with those that measure consumer success. Even though the Regulation is intended to benefit end users, it is possible that, even if the DMA achieves its own objectives, its implementation may not deliver positive outcomes for consumers.

Both the EC and the gatekeepers have shied away from providing any indication of how success for the DMA should be defined. In fact, the EC directly transferred the whole responsibility of this task onto the gatekeepers by compelling them to detail within their compliance reports how each one of their technical implementations complied with the broader objectives of contestability and fairness and with each provision’s goal.[17] To this call, gatekeepers evaded any type of definite response. The reaction is just a logical consequence of the configuration of the EC’s stick-and-carrot enforcement of the DMA. If the gatekeepers are to set out the indicators for the DMA’s compliance, then the EC could easily hold them accountable for deviating from that conduct in the coming years.

The paper disentangles this conundrum by unveiling the underlying principles of the regulatory instrument. In the absence of clear guidance, it is challenging to determine the appropriate steps to take. Therefore, the paper clarifies the DMA’s main secret, i.e., its policy direction. Notably, the paper uncovers the following five main policy goals enshrined by the DMA: i) market modelling; ii) consumer choice; iii) eliminating restrictions that favor the platform’s openness; iv) neutralizing competitive advantages; and v) enhancing transparency.

To this end, the paper integrates various aspects of the Regulation’s nature and substantive provisions. First, it sets out the policy outcomes that the DMA seeks to achieve by considering the main benchmarks the Regulation puts forth in terms of its objectives, the indicators for compliance per provision, and the long-term goals of each one of these provisions. Therefore, the paper engages with the objectives of contestability and fairness, the results expected via the application of each of the provisions under Articles 5, 6, and 7, and the overall policy goal pursued by the EU legislator. Their conjunct application results in the categorization of the provisions into three main groups. On the one side, those provisions aimed at addressing conflicts of interest originated from gatekeeper presence in the market, which correspond with the concept of fairness and intra-platform competition under the DMA.[18] On the other side, those mandates are designed to trigger potential competition in the form of new entrants or the restoring of the conditions for effective competition of gatekeepers’ existing competitors, which conform to the idea of contestability and inter-platform competition enshrined under the DMA.[19] Both legal interests, however, are not necessarily contradictory. They can complement each other, as they address different aspects of the competitive dynamics within digital ecosystems. In fact, the paper identifies a third category of provisions seeking to maximize both legal interests simultaneously through hybrid mandates.

Second, the paper provides a comprehensive overview of the EC’s capacity to monitor gatekeeper behavior, considering its multi-dimensional toolbox of remedies and powers. In relation to the DMA’s legal interests and long-term policy goals, the paper reveals the EC’s enforcement capabilities, translating them into potential challenges that the public authority must overcome to ensure effective enforcement.

Finally, the paper captures the unintended consequences that DMA’s provisions may entail in practice. This last step of the analysis details the side effects that business and end users may have already suffered because of the gatekeepers’ compliance solutions starting in March 2024, as well as through the impacts that compliance with one DMA’s provision may entail with respect to another one. In this context, the paper examines the inherent contradiction in the foundational roots of the DMA. While the latter aims to deliver results for consumers by ensuring contestability and fairness, it is not output-oriented. Therefore, the DMA’s immediate effects might contradict its primary goal of securing better outcomes for consumers. In other words, even if the DMA satisfies its own metrics for promoting fairness and contestability, this does not necessarily mean that its enforcement will provide benefits to consumers.

The paper is structured as follows. Section 2 explores the meaning of the legal interests protected by the DMA and provides a classification of the provisions accordingly. Section 3 outlines the DMA’s long-term policy goals by examining its provisions in relation to the EC’s enforcement capabilities. Section 4 analyzes Alphabet’s compliance with Article 5(4) DMA as a case study to demonstrate the correlation and challenges in the DMA’s effective enforcement. Section 5 concludes.

II. Metrics for defining the Commission’s effective enforcement

Article 1(1) DMA sets out the main objectives of the Regulation, i.e., to ensure contestable and fair digital markets. These goals come within the wider purpose according to which the DMA aims at levelling the playing field of digital markets.^[20] In light of the economic characteristics commonly associated with most of digital platforms (e.g., extreme scale economies, very strong network effects or a significant degree of dependence on both business users and end users)^[21], the DMA reverses the antitrust error-cost framework by establishing per se obligations upon the designated targets.^[22] Once a gatekeeper is designated under the Regulation, it must comply with the mandates set forth in Articles 5, 6, and 7 in a period of six months.^[23]

The shift to the regulatory approach is substantial from the compliance viewpoint. Instead of the burden of initial intervention and proof lying with the antitrust enforcer, the target must demonstrate how it integrates compliance solutions into its business model in line with the DMA’s objectives of contestability and fairness.^[24] In this context, one would expect the DMA’s obligations and aims to be eminently easy to apply and pursue in practice. In fact, EC officials have constantly remarked on the fact that the DMA sets out clear rules, hence gatekeepers know exactly what compliance should look like.^[25]

However, such a legal certainty is not a given. Indeed, as opposed to the obligations under Article 5, termed self-executing obligations^[26], Articles 6 and 7 establish a set of obligations open to further specification, through the venue of regulatory dialogue illustrated in Article 8. Therefore, there is an implicit recognition that at least Articles 6 and 7 DMA are not so clearcut regarding the technical transformations they require.^[27]

From the substantive perspective, the provisions apply irrespective of the underlying premises of the gatekeeper’s business model. That is to say, the DMA does not directly address the formula by which gatekeepers claim to create and capture value in digital markets. Hence, the same bar of compliance applies to all core platform services (CPSs) catered by gatekeepers, regardless of the extent to which they feed on strong network effects, data advantages, or the mechanics of market tipping and whether those economic characteristics evolve over time.^[28]

Based on this premise, the DMA supports, thus, the application of a vast array of obligations following a clear pattern of ensuring contestable and fair markets for all businesses. The concepts of fairness and contestability act as touchstones to the enforcement in more than one way.^[29] First, being the main objectives of the Regulation, they influence all the EC’s actions in interpreting the DMA’s provisions. Accordingly, each one of the solutions presented by the gatekeepers must correspond to these objectives. Second, contestability and fairness permeate the regulatory mandates contained under Articles 5, 6, and 7 DMA. Therefore, they also play a role in fleshing out the policy outcomes that each of the twenty-three mandates outlined in the aforementioned articles seek to achieve.

A. Contestability as potential competition

As set out under Article 1(1) and Recital 32 DMA, contestability is a means to an end. It is a means to eliminate barriers to entry and expansion undermining the ability of undertakings to contest, based on competition on the merits, the gatekeeper’s position in the markets as well as to impact the innovation potential of the wider platform economy. This objective is clearly linked to the economic features of CPSs that imbalance competition and innovation.^[30]

Recital 32 states that the lack of contestability is not a matter of the number of competitors which populate the market. Instead, in order to promote inter-platform competition, the locus of attention is focused on the presence of barriers to entry or expansion hindering the exercise of competition at the platform level.^[31] By this token, the DMA builds on the traditional economic definitions set out by Bain in the 1950s, following the structuralist approach.^[32] Accordingly, entry to a market is assumed unprofitable until information asymmetries and market imperfections can be compensated.

Stemming from these findings, inter-platform competition can be easily translated into the elimination of barriers to entry and expansion. However, such a task is not easy to perform in practice. Indeed, similarly to its institutional design, the Regulation does not define what economic characteristics of the digital platforms are to be understood as those barriers to entry and expansion undermining inter-platform competition. In fact, the DMA sets out in the abstract the economic features that have led digital markets to tip the scales in favor of gatekeepers. But it does not indicate whether all of them are barriers to entry and expansion or even whether they may be reversed via the imposition of antitrust-like remedies. Such a determination is not trivial insofar as economists have been discussing for decades now whether a particular economic characteristic is a barrier to entry and expansion.^[33]

In a similar vein, the DMA presumes that all these economic features apply equally to all CPSs and gatekeepers across the board. Nonetheless, economic reality trumps this one-size-fits-all approach. Some CPSs are not as contestable as others. For instance, switching costs are not as intense on web browsers as they are on online social networking services. In a similar vein, within the same category of CPSs, it may well be the case that contesting a gatekeeper’s position may be easier than disputing another incumbent’s situation in the market. One such example is that of a number-independent interpersonal communications services (NIICS). The EC has only designated two NIICS belonging to the same gatekeeper (i.e., Meta’s WhatsApp and Messenger). However, the same economic characteristics (and, thus, the barriers to entry and expansion hindering the competitors’ capacity to contest the market position) do not apply to them with the same intensity and degree.[34] Even though both build on strong network effects, Meta’s WhatsApp service is much more prominent in its position as the by-default messaging service end users access in the EU. Albeit the same network effects apply to some extent to Messenger, they only influence market outcomes in proportion to their link with the CPSs integrated into Facebook.

Finally, contestability under the DMA is primarily adversarial. In other words, it can only be enhanced when one or several business users compete with the gatekeeper’s position, regardless of the value proposition each offers to end users. Therefore, it may be the case that the DMA may only facilitate the replacement of gatekeepers without addressing diversification, meaning increased contestability could simply replicate the gatekeeper’s operations across the board.^[35]

Against this backdrop, the paper translates the wider contestability objective into an identifiable metric to perform its analysis. To this end, the paper identifies those provisions and scenarios that would promote potential competition, understood as the springboard for existing and new sources of competition to become successful.^[36] Indeed, by eliminating barriers to entry and expansion, the DMA strives to trigger the emergence of competitors in two fundamental manners. First, by enhancing the competitive situation of existing rivals, which have populated the market alongside gatekeepers. Second, by creating favourable market conditions to foster market entries at the inter-platform level with the capacity to successfully compete against gatekeepers. Under Section 3, the paper sets out those DMA’s provisions that (individually or in conjunction with the goal of fairness) pursue one of these manifestations of potential competition.[37]

B. Fairness as conflicts of interest: value appropriation and conditions of access and competition

The DMA’s depiction of fairness addresses intra-platform competition with reference to imbalances between the rights and obligations of business users where the gatekeepers obtain a disproportionate advantage.[38] Accordingly, the unfairness of terms and conditions for the use of their CPSs has led gatekeepers to hinder business users from fully capturing the benefits of their own contribution to the markets. Thus, the fairness objective under the DMA is redistributive in nature.^[39] It is claimed gatekeepers have unfairly appropriated monopoly rents from the value that business users create on their platforms. The regulatory tool aims to correct this by redistributing these rents to business users.^[40]

Notwithstanding, the Regulation does not point out what type of redistribution applies, namely whether surplus must be allocated depending on each business user’s value brought to the market or whether the appropriation of value should take place unrelated to their economic profits. By this token, the value of fairness under the DMA cannot be categorized into a single manifestation that will narrow the gap between an unfair and a fair outcome.^[41] More than a tractable metric for identifying effective enforcement, fairness is a value bearing an amorphous nature, depending on the individual consideration of the configuration of the market and the CPS’s economic characteristics.

Following upon the DMA’s silence, the paper translates the fairness value into a single scenario that applies across the board to identify unfair conduct in the eyes of the regulation, i.e., the presence of conflicts of interest. The DMA’s scope of application predetermines this finding. Indeed, for an undertaking to qualify as a gatekeeper, it must provide a CPS which is an important gateway for business users to reach end users, aside from bearing a significant impact on the internal market and enjoying an entrenched and durable position in doing so.^[42] Therefore, the presence of a potential conflict of interest is implied in the designation of the gatekeeper.

A clear comparison can be made with reference to those cases where the Court of Justice (CJEU) has recognized that the dominant undertaking’s conflict of interest predetermines market outcomes.^[43] Following this same line of reasoning, the DMA embeds fairness in its foundational rationale, subtly implementing this principle through its per se mandates. In this regard, the DMA seeks to eliminate conflicts of interest concerning both the access conditions and competitive landscape of CPSs. On the one hand, the DMA removes all discriminatory conditions of access so that potential competition may crystallize. This is the reason behind the fact the Regulation highlights that contestability and fairness are intertwined, thus stating that a single provision may address both goals.^[44] On the other hand, the DMA revamps previously unfair distribution channels within ecosystems by compelling gatekeepers to adjust to digital business models that lack market dominance.[45]

In other words, the DMA weaponizes the goal of fairness to redistribute both value and control throughout gatekeeper ecosystems.

The redistribution of control across ecosystems entails co-responsibility on the part of business users. As opposed to the confrontational nature of contestability, fairness as outlined in the DMA is rooted in the Socratic paradigm, wherein each economic operator should be rewarded according to their efforts. Consequently, fairness is implied to apply to both the activities of gatekeepers (who may be rewarded for their role in shaping digital ecosystems) and business users.

C. The classification of the provisions according to their metrics

Stemming from the intertwinement of both metrics, each of the DMA’s provisions can be categorized into one of three categories illustrated in Table 1.

Table 1. DMA’s provisions depending on their metrics

Several provisions aim at narrowing down the conflicts of interest embroidered into the conditions of access and/or competition to the gatekeeper’s business models in isolation. This is only logical, given that the Regulation is mainly based on the presence of a gatekeeping power and on the related risks created by the leveraging of their advantages from one area of their activity to another. Therefore, such provisions pursue the disintermediation of the designated gatekeepers from their prominent positions within the markets they operate in. For instance, the DMA discontinues the gatekeeper’s capacity to leverage data generated by its business users when it competes with them, under Article 6(2) ordering a data siloing obligation.

A few obligations seek to restore potential competition as a standalone metric to their success. These provisions report a quasi-automatic increase in the number of competitors entering the market as a result of their implementation. As means of example, Article 6(4) DMA cements potential entries at the downstream and upstream level regarding app distribution by compelling gatekeepers to allow and technically enable third-party app stores and apps to interoperate with their operating systems.

Finally, most provisions have a hybrid nature as a single metric cannot be clearly defined for them because of their expected impact on both existing and potential competition whilst eliminating conflicts of interest.

After all, the Regulation has not been designed as a closed system of protection reporting clear legal interests per each provision. Although one could identify certain provisions to confer the power to business users to narrow the gatekeeper’s conflicts of interest to a minimum, the absence of these conflicts of interest will also entail, in the medium-to-long-term, a higher propensity and incentive for entrants to compete on the merits with the gatekeeper, thus fostering inter-platform (rather than just intra-platform) competition.

III. The matrix in practice

The DMA compels the EC to effectively enforce its provisions. From the first round of compliance reports issued by the six gatekeepers designated in September 2023, the task looks moving-target-like and complex.

As a first step, it is worth noting that there are three types of DMA’s mandates depending on the scope of their application. The twenty-three provisions do not necessarily apply to all CPS categories. Notably, as illustrated in Table 2, most provisions only apply to specific CPSs, while several provisions are even wider in scope than the CPS categories. Therefore, the DMA’s locus of attention is not necessarily ascribed to the designation exercise performed by the EC.

Table 2. Scope of DMA’s provisions

Further, irrespective of their scope, the provisions do not apply in a vacuum. That is to say, the solutions put forward by gatekeepers in their compliance reports do not exclusively impact the services falling under designation. Indeed, in most cases, the provisions target secondary or complementary services belonging to business users. Therefore, the gatekeepers’ adjustments to their business models have a clear external vocation, rather than representing a mere internal restructuring.

When descended into reality, under each provision one can derive the desirable policy goal the EU legislator wishes to achieve. The legal interests of the DMA are, thus, translated into a myriad of policy outcomes with two different origins.

On the one hand, the DMA seeks to restore the competitive conditions that the antitrust framework allegedly failed to achieve in digital markets. By doing that, the DMA aims at achieving solutions competition law is deemed unable to ensure. This is particularly salient if one looks at the self-preferencing prohibition under Article 6(5) DMA. Inspired by the EC’s investigation in Google Shopping, the DMA imposes an outright ban deriving from a novel theory of harm the CJEU has not backed yet.[46] A similar example can be drawn out from Article 5(2) DMA, which has been inspired by the German Facebook case.[47] Even though the national competition authority enforced the siloing obligation as the primary solution to Facebook’s data processing, the practical effects of the remedy were limited.[48]

On the other hand, the DMA pursues independent and complementary policy goals of its own. To the extent the regulatory instrument remains distinct from competition law, considerations of public policy can be integrated without the need to address how they intersect and overlap with the need to increase consumer welfare. Consequently, the DMA eliminates the concept of consumer harm, while also incorporating consumer protection-focused policy decisions into the regulatory framework. For instance, the gatekeepers reporting duties under the DMA encompass the submission of compliance reports as outlined in Article 11. Additionally, these obligations extend to the gatekeepers’ requirements to submit audited reports detailing the consumer profiling techniques they employ within their CPSs under Article 15. The primary aim of this second obligation is to promote transparency and understanding regarding how consumers perceive gatekeepers’ profiling activities. The rationale is that end users might be encouraged to stop using the gatekeeper’s CPSs once they become aware of the significant consequences of their personal data being processed.

In the next Sections, the paper will untangle the outcomes of both policy strands pursued by the DMA breaking down each provision to understand the EC’s enforcement capabilities against gatekeepers’ compliance reports and their potential unintended consequences when observed from the practical viewpoint. As the principles of proportionality and necessity lie at the core of the DMA’s effective enforcement, compliance should take place in the least burdensome way for gatekeepers in those cases where more than one alternative and equally effective solutions may be introduced. Further, the application of the principle of proportionality requires such measures to be benchmarked against the yardstick of the DMA’s legal interests, i.e., contestability and fairness.

A two-step process must, therefore, necessarily apply to the DMA, since all its provisions do not necessarily target the same policy goal, nor do they protect the same legal interests. When confronted with the question of whether the gatekeepers’ compliance solutions demonstrate effective enforcement, the first step requires the enforcer to establish what legal interest is pursued (i.e., the triggering of potential competition or the narrowing down of the gatekeeper’s conflicts of interest). Section 2.C already conducted this exercise, as shown in Table 1.

The second phase of the analysis translates these legal interests into long-term expectations. In other words, the declared contestability and fairness take various forms when actualized. Therefore, the paper distinguishes between legal interests and policy goals. The former are evident when reading the DMA’s letter of the law, whereas the latter are obscured by the myriad policy choices embedded in the Regulation. Section 3.A aims to uncover the policy goals behind each provision and Section 3.B outlines the enforcement capabilities the EC will need to address in relation to these goals.

A. The DMA’s policy goals

The DMA’s legal interests outlined under Section 2 co-exist with additional policy goals pursued by each of its provisions. Therefore, from the perspective of regulatory theory, the DMA brings together aspects of both a goals-based and a rules-based regulation.^[49] While it shifts the responsibility of intervention onto the subjects of the Regulation, compelling them to evaluate the most effective way to adhere to its goals of contestability and fairness, at the same time, the obligations under Articles 5, 6, and 7 DMA provide for specific prescriptions and proscriptions of conduct. Thus, rather than investigating whether the gatekeeper’s compliance is consistent with the goals set out by the Regulation, the EC analyses whether they comply with the substantive provisions.

As depicted in Table 3, on one side of the spectrum the DMA functions as a market modelling tool. Indeed, some provisions are designed with an additional motive in mind, i.e., to carve out a particular view of the architecture and design of digital ecosystems. As the outcome is apparently predetermined, the regulatory intervention prevents gatekeepers from selecting one option from a variety of potential solutions that could meet the compliance standard. For example, Article 5(2) prohibits data combinations across core platform services. Thus, business models based on behavioral advertising are seen as presumptively undesirable.[50] EC representatives have even highlighted that the DMA requires gatekeepers to offer users a less personalized alternative to its services, which may consist of contextual advertising.^[51]

Moving along the spectrum to more alleviated forms of intervention, a wide range of provisions build upon the DMA’s preference towards the openness of digital ecosystems.^[52] Accordingly, on the one hand, some of the mandates of the provisions aspire to open markets to trigger more consumer choice. For instance, Article 6(4) allows alternative operators to distribute their app stores and apps on the gatekeeper’s ecosystems without relying on proprietary technologies. On the other hand, the paradigm of openness entails business users should not be hindered from competing in gatekeeping environments. Due to this reason, several provisions unfasten the restrictions gatekeepers may impose upon the entry of certain functionality on their CPSs. As means of an example, Article 5(4) prohibits the gatekeeper’s anti-steering restrictions.

Moreover, some of the provisions pursue the detachment of those competitive advantages which, in principle, the gatekeeper enjoys due to its condition as a prominent player in digital markets. Such advantages are not identified as choke points to be eliminated by the least restrictive measures imposed by the Regulation. On the contrary, these provisions aim at neutralizing the gatekeeper’s CPSs in an all-encompassing fashion. The clearest example is enshrined in Article 6(2) DMA, which neutralizes the gatekeeper’s capacity to leverage business user data generated on its CPSs to compete with them. All the gatekeeper’s CPSs are comprised under the obligation as a matter of scope and every type of competition between the gatekeeper and the business user remains captured. In parallel, Article 6(5) introduces the self-preferencing prohibition hindering the gatekeeper’s capacity to treat more favorably, in ranking, related indexing and crawling, its own services and products vis-à-vis those of its business users. Under the assumption the provision is not sufficiently wide, Article 6(5) adds on that the gatekeeper shall apply fair, transparent, and non-discriminatory conditions to such ranking.

Finally, the least intense form of regulatory intervention is that of enhancing transparency, especially in online advertising services. As acknowledged in Recital 45, the choice is based on the failure of EU data protection regulation.[53] The conditions under which gatekeepers provide online advertising services to business users are considered opaque and non-transparent because of the gatekeeper’s practices and the complexity of modern-day programmatic advertising. Thus, the legislator imprints the need to restore transparency in favor of business users in online advertising services via Articles 5(9) and 5(10) to resolve a failure which is not necessarily indicative of the presence of gatekeeping power. Alternatively, the transparency policy goal permeates consumer-protection objectives into the competition policy-based regulation by different means by, for instance, approximating the DMA’s content to the spirit of the P2B Regulation.^[54] Article 5(6) is a good proxy for illustrating this point. Indeed, Article 5(6) does not shape gatekeeper decision-making into any given direction. It recognizes a right to business and end users so they can exercise it before public authorities without any type of impediment deriving from the target’s gatekeeping power.

Table 3. DMA’s provisions according to their metrics and policy goals

From a quantitative perspective, such an analysis demonstrates that the DMA’s policy goals are not embodied in the least intrusive means of the neutralization of competitive advantages nor of the enhancement of transparency. On the contrary, most of the DMA’s provisions target a particular view of how digital markets should look like from a policy perspective. Therefore, the Regulation cannot be said to be agnostic regarding the business model transformation it imposes upon the gatekeepers. It points towards the clear preference for choosing market outcomes via the market modelling provisions under Articles 5(2), 5(3), 6(11), and 7 DMA. In parallel, it mandates ecosystem openness, irrespective of the gatekeeper’s configuration of its business model and decision-making processes, prior to the full application of the obligations.

Alternatively, from a qualitative viewpoint, Table 3 confirms a finding already pointed out in Table 1. Most obligations are not directly fine-tuned to strengthen potential competition in the market. In fact, there is a clear preponderance of hybrid mandates alongside those provisions aimed at narrowing down the gatekeeper’s conflicts of interest in different forms.

 B. Enforcement capabilities

Stemming from the theoretical background of the DMA’s legal interests and policy goals, the EC’s effective enforcement can only be measured if confronted with practical reality. The initial six designated gatekeepers already applied the Regulation’s obligations across their business models and submitted their compliance reports in March 2024. EC officials have already termed some of the solutions presented by the gatekeepers as blatant infringements of the spirit and letter of the Regulation.^[55]

Two main cornerstones to the DMA’s enforcement loom over the EC’s capabilities in transforming the Regulation’s mandates into reality, namely, information asymmetries and the provisions’ interplay with other pieces of the EU law and ongoing antitrust proceedings.

With regard to the former, the DMA addresses the problems of the lack of information at the EC’s disposal to engage with the dynamics of digital platforms by shifting the responsibility onto gatekeepers. Therefore, they are required to submit compliance reports (Article 11) and the auditing of their consumer profiling techniques (Article 15).^[56] However, reviewing the various compliance reports submitted, such a solution does not necessarily appear decisive.

For instance, the prohibition under Article 5(2) is supposed to be self-executing and, therefore, applied by default. From the technical perspective, this shift entails the CPSs’ data infrastructures transformation into siloed datasets which cannot interact with each other, absent the end user’s consent. In practice, Alphabet applied this approach by restricting data flows of personal data across its eight core platform services vis-à-vis the siloing of its non-CPS designated services.^[57] The same enforcement strategy has not been followed by other gatekeepers, such as ByteDance, which refused to put forward substantial technical solutions. Indeed, according to ByteDance, TikTok’s advertising services are an integral part of the TikTok entertainment platform, no combinations of personal data apply from different services when it creates user profiles for personalized advertising. Therefore, it asserted that the current configuration of its data infrastructure already complies with the obligation under Article 5(2).^[58]

If the EC may gain some knowledge of the gatekeeper’s data processing activities via the obligation under Article 15 DMA, without the target’s active engagement in unveiling its own data infrastructure, a profound interpretation of the compliance report cannot be performed.^[59] Therefore, at first glance, when monitoring the provision’s enforcement, the EC can only trust the gatekeeper’s assessment. It is not completely unsurprising that those provisions directed at modelling the market in a particular direction are the most impacted by this motion. Bearing in mind they devise an idea of the expected market outcome, those results may conflict and oppose the policy goals set out by other pieces of EU regulation, providing sufficient grounds for an impending tension in the EC’s enforcement capabilities, especially in light of its obligations deriving from the principle of sincere cooperation under Article 4(3) TEU.

Furthermore, as the DMA is a piece of legislation within the wider corpus of EU law, the EC’s enforcement capabilities cannot be measured in a vacuum. Despite the Regulation’s assertion that its application takes place without prejudice to any other piece of EU regulations and to the application of competition law, the distinction of where the EC’s enforcement starts and ends is not straightforward.[60] The EC may have to look outwards to enforce the DMA’s mandates. For instance, when sharing search data generated on online search engines under Article 6(11), the gatekeeper’s anonymization task cannot be interpreted without reference to the understanding of anonymization under EU data protection regulation. Due to this reason, the DMA provides for several fora of discussion with data protection supervisory authorities to substantively engage on these points of law.^[61] In parallel, notwithstanding the DMA applies without prejudice to the application of competition rules, some of the gatekeepers’ compliance solutions mimic the remedies already offered within antitrust proceedings, in advance of the DMA’s adoption. This is the case of both Meta and Amazon with regard to the technical implementations of the obligations under Articles 6(2) and 6(5). Their solutions did not go any further in scope or substance than what they had already convened with the European Commission in their Facebook Marketplace and Amazon Buy Box and Marketplace proceedings.^[62]

Aside from both characteristics, the provisions following distinct policy goals bear different challenges regarding the EC’s enforcement capabilities to the exclusion of any other category of provisions.

Circling back to those provisions pursuing the neutralization of competitive advantages, for instance, the EC is at a clear crossroads. Information asymmetries persist with the gatekeepers, creating issues not only with their overall incentive for disclosing data but also with specific challenges arising from the implementation of the DMA’s provisions. If gatekeepers were to disclose their compliance strategies to reduce information imbalances when submitting their reports, assessing compliance with such provisions would still be entirely unclear. Because the obligations are mainly negative in nature and require an abstract demonstration of neutrality, gatekeepers can effectively obscure the decision-making process, making it more difficult for the EC to monitor enforcement.

As a matter of example, Amazon’s compliance with the data siloing obligation under Article 6(2) DMA demonstrates this point. In the illustration of its compliance solution, the gatekeeper did not substantially engage with the process of decision-making underlying its operations. Instead, it referenced, in the abstract, its efforts to silo data through the different technical systems it has in place. By this token, Amazon remarked the presence of various automated systems, algorithms, models, and tools that feed into the decisions where it may be perceived to act in competition with third-party sellers via selection, inventory, and pricing decisions. In summary, Amazon declared that, upon a review of the data inputs drawn from each of its automated systems, it could confirm that none of them ingest or use non-public third-party seller data. No further reference or explanation was provided by the gatekeeper. Despite the reversal of the burden of intervention, the gatekeeper does not present any evidence to the effect of demonstrating compliance with the negative obligation. The EC is, thus, expected to trust the gatekeeper’s word and explanations at face value.

Moving to those provisions targeting the openness of platforms and digital ecosystems, the compliance reports show the gatekeepers’ clear predilection to avoid relaying power out of their hands. Indeed, they shift the gatekeeper’s ability to make rules away from being the sole decision-maker towards the next most viable option for exerting their gatekeeping power, namely enabling business users to conduct their activities within their platforms. In other words, gatekeepers can no longer completely block access to their platforms as they could before the DMA came into effect. However, they have found ways to delay business users’ requests for access by implementing entitlement procedures.

Apple’s enforcement strategy is quite salient in this respect, as it was arguably the digital ecosystem with the smallest degree of openness prior to the DMA’s application. Pursuant to Article 6(4) DMA, the gatekeeper is required to allow alternative operators of app stores and apps to distribute these services via different means to its proprietary App Store. However, Apple has not relinquished  all its decision-making capacity when it comes to app distribution on iOS.^[63] Alternative app store operators must go through an entitlement process, managed and designed by the gatekeeper, to receive authorization to operate on iOS. Apple has not included the entitlement requirements into its first compliance report, but it updated and uploaded information on its developer’s webpage the conditions these alternative operators will have to comply to exert the opportunities for openness provided by the DMA.^[64] Such rules include the need to follow the notarization process, enabling Apple to filter through requests for access focusing on reasons of security, privacy, and the maintenance of device integrity. Without a positive answer from Apple on notarization, the business user will not be able to benefit from Article 6(4).[65] On top of this process, Apple establishes additional requirements to authorise the business user’s operations as an alternative app store, such as submitting a new binary for the app store’s sole distribution on iOS in the EU or providing Apple with a standby letter of credit from an A-rated financial institution in the amount of EUR 1.000.000.

Similar challenges involve the evaluation of the effective application of provisions pursuing market modelling and openness. While the DMA aims at introducing opportunities business users must grasp to thrive in the CPSs’ markets, some compliance reports show that the venues for the enhancement of inter and intra-platform competition are a matter of the business users’ discretion. Notably, some gatekeepers present their business users with a binary option. They may either stick with the choices and conditions they had before the DMA came into effect or choose to adopt the compliance solutions proposed under the entitlement conditions set by the gatekeeper. This is precisely the model Apple presented to its business users. However, in this context, compliance with the regulation does not apply by default.[66]

Considering the array of challenges the EC will encounter while monitoring DMA’s enforcement, it is clear that a complex network of obstacles lies ahead. These hurdles are not straightforward in theory and vary in practice, depending on the gatekeepers and their enforcement strategies outlined in compliance reports.

C. The impact on consumers

The concept of consumer welfare or consumer harm does not influence the EC’s analysis of the mandates within the Regulation. At least, this is the DMA’s legal stance on its impacts on consumers. For instance, Recital 23 eliminates the possibility for gatekeepers to present efficiencies or justifications on economic grounds to the EC.[67] Similarly, non-compliance procedures initiated by the Commission due to violations of Articles 5, 6, and 7 DMA do not require proof that consumer harm is directly caused by the gatekeeper’s conduct.[68] In turn, however, the interventions of EC officials reiterate that the changes introduced by the DMA must also please customers.[69]

The EC’s stance is based on a policy choice. Specifically, if gatekeepers cannot delay proceedings by presenting extensive economic reports and evidence that the competition authority must disprove, then the Regulation has a better chance of being effectively implemented and remaining responsive to digital dynamics. However, this choice does not necessarily align with the functioning of digital markets. In fact, the DMA’s focus on fostering opportunities for business users, rather than producing direct outcomes for consumers, highlights the disconnect between the Regulation’s goals and its eventual impacts on the different markets corresponding to the CPSs.

In this context, the DMA may result in both intended and unintended consequences for consumers. The Regulation’s opportunities-oriented approach presents the DMA’s chances of success in two different lights. On one hand, the DMA may achieve its intended outcomes by creating more opportunities for business users, which will, in most cases, provide more consumer choice. However, diversification does not necessarily follow from the enhancement of consumer choice. For instance, new entrants or existing business users in those markets may replicate the quality and business models of gatekeepers. Therefore, expanding consumer choice is not simply about increasing supply to enhance consumer satisfaction.

On the other hand, the DMA may also lead to some unintended consequences for consumers, particularly due to changes introduced by gatekeepers in user journeys across their services. In other words, consumers might perceive a decrease in the quality of services provided by gatekeepers if the usual distribution of these services is disrupted to implement DMA-driven solutions.

A paradigmatic example of user experience degradation that may result from the DMA’s implementation is provided by Google Maps. Under the DMA, gatekeepers are required to treat rival downstream services as favorably as their own to ensure platform neutrality. As a result, to avoid the risk of being accused of self-preferencing by offering preferential placement to its specialized Maps unit, Google decided not to allow users to go directly from Google Search to Maps in one click. Consequently, users can no longer click on the location image to access Maps directly. However, is has been reported that removing Google’s one-click advantage led to higher search costs for users without significantly boosting the discovery or adoption of alternative mapping services in the short run.[70] As a consequence, it may be questioned whether a provision that increases search costs for consumers but has a negligible effect on product substitution can be considered a success.

In some cases, relying on the DMA’s anti-circumvention clause, the EC has already raised concerns about the impacts on user experience proposed by gatekeepers in their compliance reports.[71] The provision ensures that gatekeepers cannot degrade the quality of their services due to DMA compliance or worsen the conditions under which consumers provide informed consent throughout their user experience. Therefore, this aspect of the Regulation does not necessarily address the concept of consumer harm and welfare, but rather its effect on consumer protection.

IV. Putting theory into practice: a case study of Alphabet’s proposed compliance with the anti-steering prohibition

Evaluating effective enforcement is a significant challenge. As illustrated in the previous Sections, given the DMA’s broad spectrum relating to its legal interests and policy goals, enforcement is anticipated to be multi-faceted, nuanced, and essentially unpredictable in terms of the outcomes expected from the Regulation’s mandates.

Therefore, the paper proposes a practical method to assess whether a specific compliance solution aligns with the concept of effective enforcement or necessitates further scrutiny under the measures outlined in the DMA. It fundamentally reveals the obscured aspects of the DMA’s enforcement strategy, aiming to balance its recognized legal interests with the often-overlooked long-term policy goals its provisions express and aim to achieve. In doing so, the paper illustrates a dual-layered enforcement approach that must not only uphold the DMA’s broader objectives but also align with the policy direction embedded by the EU legislator. This dichotomy within the DMA’s framework is crucial for anticipating the EC’s enforcement capabilities and determining how to address them effectively.

To examine the necessity of considering the secretive nature of long-term policy goals, the paper employs a case study of the non-compliance procedure initiated by the EC against Alphabet. The procedure addresses potential infringement of Article 5(4) DMA related to the Google Play intermediation service.

According to Alphabet’s compliance report, it now provides additional means for developers to communicate and promote offers to end users as well as by providing them with the capacity to directly conclude contracts via these means. Alphabet has opened this possibility for app developers via its new External Offers program. Developers must agree with the terms and conditions of that program to enjoy the possibility of steering their users to promotional offers. Aside from that, participation in the program by the app developer is subject to Google’s approval. For instance, some of the eligibility criteria fleshed out by Alphabet include the fact that developers must only direct end users to their own digital features or that they are directly responsible for providing support to users in their external transactions. In this respect, the most salient aspect of the compliance solution relates to the fee structure Alphabet imposes upon developers when they redirect their end users to promotional offers. Under the assumption the app developer acquired those end users due to its presence on Alphabet’s Google Play, the gatekeeper charges a 5% initial acquisition fee on the offers catered through the in-app digital features and services during the two years following the initial external transaction on top of an ongoing services fee of up to 7% for those same offers. Only after these two years stemming from the end user’s initial acquisition, the developer may opt out from receiving Play services and paying the ongoing services fee.

The first step of the analysis necessarily stems from its categorization in line with the legal interest it purports. Article 5(4) DMA seeks to promote intra-platform competition by narrowing down gatekeeping power in setting rules driving downstream competitors away from the digital ecosystem. The rationale underlying the anti-steering provision relates to the fact that a gatekeeper will not earn revenues from those services its downstream competitors realize outside its digital ecosystem.

Against this background, Article 5(4) pursues the legal interest of reducing conflicts of interest as a standalone metric. Upstream competition among platforms is not directly concerned and, as such, the provision does not fall within the definition of a hybrid obligation as depicted under Section 2.C. Establishing the provision’s legal interest sets the path for the anticipated results that one can intuitively expect the provision to achieve. In the case at stake, the legislator may intend to boost traffic from downstream services offered through digital ecosystems to their own websites by separating the completion of a transaction from the operator’s presence in a specific digital ecosystem. Therefore, an increase in the number of app developers offering such functionalities and the prevalence of more promotional offers providing those links would serve as initial indicators of effective compliance with the provision.^[72]

Once the legal interest has been identified, one must set out the provision’s scope in relation to the CPSs included to compare it with the scope of the compliance solutions proposed by the gatekeeper. According to the terms of Article 5(4), the provision is wider in scope to the CPS categories. It compels the gatekeeper to allow business users to communicate and promote offers to end users acquired via its core platform service or through other channels, and to conclude contracts with those end users. Looking at Alphabet’s proposed solution, the initial acquisition and ongoing services fees imposed on developers as a take-it-or-leave-it choice does not seem to align with the provision’s scope. Indeed, on the one hand, the anti-steering provision spans through all types of communications and channels. Thus, the absence of a compliance solution for the rest of Alphabet’s CPSs and channels is not coherent with the obligation. On the other hand, Article 5(4) does not solely focus on end users benefiting from a CPS, but on all categories of end users who depend on the gatekeeper’s ecosystem. In this context, it becomes possible to analyses the terms introduced by Alphabet regarding its fee structure when end users are directed to promotional offers from in-app services provided by app developers.

Continuing with the analysis, it is critical to determine the provision’s nature in the context of the broader policy goals pursued by the EU legislator. Article 5(4) aims at enhancing the openness of the ecosystem at the downstream level by removing previous restrictions on directing end users towards promotional offers. To this end, Article 5(4) includes a clear and active mandate to eliminate anti-steering restrictions from the terms and conditions imposed by gatekeepers on their counterparts. This enables transactions to take place outside of the gatekeepers’ ecosystems. Both the legal interest and policy goal remain, therefore, closely correlated in terms of their identification, even though one does not necessarily automatically follow from the other.

Given this context, the EC’s enforcement capabilities closely align with both the legal interest and policy goal of the provision. As the provision aims to promote openness in downstream markets, the primary enforcement challenges arise from Alphabet’s entitlement processes. Indeed, Alphabet’s proposed compliance solution does not prescribe openness by default. Instead, the steering of users will only occur with Alphabet’s prior authorization of developers’ entitlement to provide link-outs within its services.

Finally, the potential side effects stemming from the provision’s compliance must be taken in mind. In the case of Article 5(4), there is an undeniable interplay with the separate obligation imposed by Article 6(12), according to which the gatekeeper must apply fair, reasonable, and non-discriminatory conditions of access for business users to its software application stores, online search engines, and online social networking services listed as CPSs. Therefore, within the context of Article 5(4), the EC must assess how fair conditions are set through developers’ entitlements, which should be included in the broader analysis of compliance with Article 6(12) DMA. However, what is deemed fair under Article 5(4), aimed at reducing conflicts of interest, might not be regarded similarly under a distinct provision.

In summary, the case study of Alphabet’s compliance with Article 5(4) DMA yields mixed results but reveals several clear findings. At first glance, it is relatively easy to discern whether the provision serves one legal interest over another. If the provision addresses issues within the downstream market concerning the CPS it operates in, then conflicts of interest are at play. Therefore, Alphabet’s solution should aim to rectify any imbalances in bargaining power imposed on business users in comparison to Alphabet’s own position. However, the new fee structure and the requirement for app developers to pay an ongoing service fee for Google Play for two years contradict this spirit.

Since the provision aims to foster intra-platform competition by mandating active conduct, it becomes apparent that Alphabet’s technical implementation does not meet the requirement of neutralizing competitive advantages. In fact, Alphabet’s compliance report states that developers were already allowed to communicate and promote offers to Google Play’s end users and conclude contracts with them prior to the DMA. According to the gatekeeper, developers always had the ability to communicate and promote offers to Google Play users through channels outside the app store, such as emails and text messages. Therefore, neutralizing competitive advantages would be irrelevant. However, the provision hints at a clear direction towards openness. Consequently, Alphabet’s compliance solution introduces new policies that enable in-app link outs as an additional means for developers to communicate and promote offers to end users.

In this context, understanding the provision’s policy goal is not crucial for assessing compliance with it at face value, but it is pivotal for two fundamental aspects of the analysis. First, it defines the long-term objective the provision aims to achieve. If compliance solutions meet the legal interest (i.e., fairness) but fall short of achieving the desired degree of openness, there will still be room for the enforcer to encourage the gatekeeper to implement a modified version of its compliance solution.

Secondly, elucidating a provision’s policy goal is crucial for highlighting potential challenges the EC may face in its enforcement efforts. Regarding Article 5(4) DMA, which aims to instill openness, the most significant challenge associated with fulfilling this hidden promise is intermediation. In other words, the DMA is unlikely to completely eliminate gatekeeping power when a dominant player still benefits from operating within an ecosystem. This correlation becomes apparent when considering Alphabet’s entitlement process to offer its in-app link outs to business users. Without first establishing the long-term policy goal, it would be difficult to determine whether the entitlement process should be evaluated based on fairness or if enforcement challenges arise from elsewhere.

Indeed, this is precisely what the paper has untangled for each provision, paving the way for the EC’s effective enforcement. It is not entirely clear what legal foundations will influence the EC’s enforcement strategy, apart from the broader concepts of contestability and fairness. The paper has shown that an additional layer, substantiating the DMA’s direction into specific policy goals, is crucial for understanding where the Regulation’s success lies. This also guides gatekeepers and enforcers in narrowing down their choices in terms of ecosystem design, architecture, and enforcement approach. To hold both gatekeepers and the EC to account, the paper illustrates the common ground they can reach by acknowledging the DMA’s policy goals. As a consequence, the EC’s enforcement actions should be constrained to these specific goals.

V. Concluding remarks

The adoption of the DMA has been accompanied by significant doubts and criticism, particularly due to its controversial relationship with competition law. Inspired by antitrust investigations, the new Regulation finds its roots and essential rationale in an alleged antitrust enforcement failure. Therefore, once adopted and applied, the main question is how to determine the DMA’s success. Namely, how to identify the conditions under which the implementation of the new rules has been effective for each obligation by achieving results that competition law would not be able to ensure.

This paper addresses this question by providing metrics to measure the DMA’s success. Notably, it shows that such a process requires unveiling the DMA’s hidden policy goals. Indeed, although contestability and fairness are the proclaimed protected legal interests, they do not represent the outcomes the EU legislator aimed to embed in the Regulation. Despite the EC’s desire to keep these aims somewhat hidden, four main policy goals influence the DMA’s provisions: market modelling, openness, neutralizing competitive advantages, and enhancing transparency. In this context, the EC’s enforcement capabilities are directly correlated with the long-term policy goals pursued by each provision.

Translating fairness and contestability into clear policy goals and thus unveiling the secret of the DMA provides two significant benefits. It guides and constrains gatekeepers in developing solutions to comply with the new rules. At the same time, it holds the EC accountable for its enforcement strategy, ensuring its actions are directed toward achieving specific market outcomes.

[1] Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act) [2022] OJ L 265/1.

[2] Ibid., Recital 5.

[3] See Margrethe Vestager, Remarks on the opening of non-compliance investigations under the Digital Markets Act, (2024) https://ec.europa.eu/commission/presscorner/detail/en/speech_24_1702 (all the links were last visited on 15 May 2024), stating that the DMA was born out of a reflection process “very much influenced by our antitrust enforcement experience where we have seen the temptation to flout the law. We have brought several antitrust cases in the tech sector which ultimately led to the DMA. These include cases against Google (Shopping, Android, AdSense and the on-going AdTech investigation), Apple (the AppStore and Apple Pay cases), or Amazon (Buy Box/Prime/Data).” See also Friso Bostoen, Understanding the Digital Markets Act, (2023) 68 The Antitrust Bulletin 264; Marco Cappai and Giuseppe Colangelo, Taming digital gatekeepers: the more regulatory approach to antitrust law, (2021) 41 Computer Law & Security Review 105559; Filomena Chirico, Digital Markets Act: A Regulatory Perspective, (2021) 12 Journal of European Competition Law & Practice 493.

[4] The paradigmatical case used as an example of the ineffective enforcement of EU competition law is the European Commission’s decision in Google Shopping (Case AT.39740, [2017] C(2017) 4444 final).

[5] Commission Staff Working Document, Impact Assessment Report accompanying the Proposal for a Regulation of the European Parliament and of the Council on contestability and fair markets in the digital sector (Digital Markets Act), [2020] SWD/2020/363 final, paras. 2-4 and 9-14.

[6] On the shift from the EU competition law acquis to the regulatory-like instrument and its impact on judicial review, see Pablo Ibáñez Colomo, The Draft Digital Markets Act: A Legal and Institutional Analysis, (2021) 12 Journal of Competition Law & Practice 573.

[7] Gatekeepers’ compliance reports are available at https://digital-markets-act-cases.ec.europa.eu/reports/compliance-reports. On the relevance of compliance reports, see Jacques Cremer, David Dinielli, Paul Heidhues, Gene Kimmelman, Giorgio Monti, Rupprecht Podszun, Monika Schnitzer, Fiona Scott Morton, and Alexandre de Streel, Enforcing the Digital Markets Act: Institutional Choices, Compliance, and Antitrust, (2023) 11 Journal of Antitrust Enforcement 315. For a brief overview of the compliance reports, see Alba Ribera Martínez, Full (Regulatory) Steam Ahead: Gatekeepers Issue the First Wave of DMA Compliance Reports, (2024) https://competitionlawblog.kluwercompetitionlaw.com/2024/03/11/full-regulatory-steam-ahead-gatekeepers-issue-the-first-wave-of-dma-compliance-reports/. In May 2024, Booking was added to the list of gatekeepers for its online intermediation service: see European Commission, Commission designates Booking as a gatekeeper and opens a market investigation into X, (2024) https://ec.europa.eu/commission/presscorner/detail/en/IP_24_2561.

[8] See European Commission, Commission opens non-compliance investigations against Alphabet, Apple and Meta under the Digital Markets Act, (2024) https://digital-markets-act.ec.europa.eu/commission-opens-non-compliance-investigations-against-alphabet-apple-and-meta-under-digital-markets-2024-03-25_en, opening five non-compliance procedures against Google with regards to Articles 5(4) and 6(5), Apple with regards to Articles 5(4) and 6(3) as well as against Meta regarding Article 5(2) DMA. More recently, see also European Commission, Commission sends preliminary findings to Apple and opens additional non-compliance investigation against Apple, (2024) opening an additional non-compliance procedure against Apple with regards to Article 6(4), https://digital-markets-act.ec.europa.eu/commission-sends-preliminary-findings-apple-and-opens-additional-non-compliance-investigation-2024-06-24_en.

[9] The discussion also encompasses the decision-making process within antitrust enforcement, debating between the rule of reason and bright-line rules: see, e.g., Daniel A. Hanley, In Praise of Rules-Based Antitrust, (2024) 2 CPI Antitrust Chronicle 20.

[10] For a proposal on how to operationalize the general anti-circumvention provision under Article 13 DMA, see Jens-Uwe Franck and Martin Peitz, The Digital Markets Act and the Whack-A-Mole Challenge, (2024) 61 Common Market Law Review 299.

[11] Pierre Larouche and Alexandre de Streel, The European Digital Markets Act: A Revolution Grounded on Traditions, (2021) 12 Journal of European Competition Law & Practice 542.

[12] On the idea of the DMA’s hybrid nature from an institutional perspective, see also Anna Tzanaki and Julian Nowag, The Institutional Framework of the DMA: From Hybrid to Mature?, (2024) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4574518.

[13] DMA, supra note 1, Article 30. In principle, as noted by Anna Tzanaki and Julian Nowag, The DMA’s Cooperative Compliance Setup: Punishment as Ultima Ration, (2024) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4692533, the sanctioning of the gatekeepers should come as a last resource solution. See also Alba Ribera Martínez, Rocking the Contestability and Fairness Foundations: Multi-Level Governance and Trust Relations for Futureproofing the DMA’s Effectiveness, (2023) 104 European Yearbook of International Economic Law 1, noting that the EC must preserve, to some degree, trust relationships with each of the gatekeepers.

[14] The EC can direct requests for information (Article 21 DMA), carry out interviews, and take statements from any natural or legal person (Article 22 DMA), conduct inspections (Article 23 DMA) as well as retain documents deemed to be relevant to assess the implementation of, and compliance, with the obligations under Articles 5, 6, and 7 (Article 26 DMA). See European Commission, supra note 9, confirming that it would take investigatory steps regarding Amazon’s compliance with the self-preferencing prohibition under Article 6(5) and regarding Apple’s new fee structure and terms and conditions applied for the alternative distribution of apps on its ecosystem under Article 6(4). Moreover, the EC also set out that it had issued retention orders on the documents in Alphabet’s, Amazon’s, Apple’s, Meta’s, and Microsoft’s possession to secure future enforcement.

[15] See DMA, supra note 1, Articles 9 and 10.

[16] See Richard Feasey and Alexandre de Streel, DMA Output Indicators, (2023) CERRE Draft Issue Paper, https://cerre.eu/wp-content/uploads/2023/07/CERRE-Draft-Issue-Paper-DMA-Output-Indicators.pdf. EC officials have repeatedly highlighted that the transformation of the DMA of the structures of digital markets will be dependent on how business users grasp new opportunities and benefits open to them because of its application, but outcomes are not directly expected as a result: see Olivier Guersent, Keynote Speech at the Annual CRA Brussels Conference, (2023) https://competition-policy.ec.europa.eu/system/files/2023-12/20231206_CRA_conference_Olivier-Guersent_speech.pdf.

[17] The shift was made clear via the European Commission’s regulatory template on Article 11 DMA: see European Commission, Template Form for Reporting Pursuant to Article 11 of Regulation (EU) 2022/1925 (Digital Markets Act) (Compliance Report), (2023) https://digital-markets-act.ec.europa.eu/document/download/904debdf-2eb3-469a-8bbc-e62e5e356fb1_en?filename=Article%2011%20DMA%20-%20Compliance%20Report%20Template%20Form.pdf.

[18] Nicolas Petit, The Proposed Digital Markets Act (DMA): A Legal and Policy Review, (2021) 12 Journal of European Competition Law & Practice 536. On the concept of fairness, see Giuseppe Colangelo, In Fairness We (Should Not) Trust: The Duplicity of the EU Competition Policy Mantra in Digital Markets, (2023) 68 The Antitrust Bulletin 618.

[19] On the concept of contestability in the context of the DMA, see Alba Ribera Martínez, The DMA’s Ithaca: Contestable and Fair Markets, (2023) 46 World Competition 429.

^[20] See DMA, supra note 1, Recital 54, and European Commission, Inception Impact Assessment, (2020) https://ec.europa.eu/info/law/better-regulation/.

^[21] See DMA, supra note 1, Recital 2, remarking on all these economic features as reasons justifying its proportionality.

^[22] For an analysis of the reversal of the error-cost framework, see Elias Deutscher, Reshaping Digital Competition: The New Platform Regulations and the Future of Modern Antitrust, (2022) 67 The Antitrust Bulletin 302. Regarding the nature of the DMA’s provisions as per se rules, see Petit supra note 21, 529.

^[23] DMA, supra note 1, Article 3(10).

^[24] Colomo, supra note 6, 562.

^[25] For instance, see Nicholas Hirst, Tech gatekeepers face enforcement action if not compliant with DMA by March, Koenig says, (2024) https://mlexmarketinsight.com/news/insight/tech-gatekeepers-face-enforcement-action-if-not-compliant-with-dma-by-march-koenig-says.

^[26] Chirico, supra note 3, 495. The categorization of those provisions as self-executing is not completely straightforward, insofar as it is not particularly clear how gatekeepers should comply with some of the mandates contained under Article 5, most notably the prohibition on processing, cross-using and combining personal data across core platform services.

^[27] This differentiation has clear repercussions on the DMA’s public enforcement regarding the terms of engagement between the EC and the gatekeeper, but it also has a clear impact on private enforcement, see Assimakis P. Komninos, The Digital Markets Act and Private Enforcement: Proposals for an Optimal System of Enforcement, (2021) N. Charbit and S. Gachot (eds.), Eleanor M. Fox: Antitrust Ambassador to the World, Concurrences, 425.

^[28] On this same point, see David J. Teece and Henry J. Kahwaty, Is the Proposed Digital Markets Act the Cure for Europe’s Platform Ills? Evidence from the European Commission’s Impact Assessment, (2021) 5, https://www.thinkbrg.com/insights/publications/digital-markets-act-eu-impact-assessment/.

^[29] On the multi-dimensional nature of the notions of contestability and fairness, see Ribera Martínez, supra note 13, 14.

^[30] DMA, supra note 1, Recital 32. See also Oliver Budzinski, Sophia Gaenssle, and Annika Stöhr, Outstanding relevance across markets: A new concept of market power? (2020) 3 Concurrences 38.

^[31] Bostoen, supra note 3, 266. In a similar vein, arguing that digital regulation promoting contestability is aimed at diminishing the benefits from network effects and data advantages, see Lazar Radic, Geoffrey A. Manne, and Dirk Auer, Regulate for What? A Closer Look at the Rationale and Goals of Digital Competition Regulations, (2024) ICLE White Paper, https://laweconcenter.org/resources/regulate-for-what-a-closer-look-at-the-rationale-and-goals-of-digital-competition-regulations/.

^[32]  Joe S. Bain, Barriers to New Competition: Their Character and Consequences in Manufacturing Industries, (1956) Cambridge: Harvard University Press. The recognition of this structuralist approach under the DMA, from an economic perspective, derives from Amelia Fletcher, Jacques Crémer, Paul Heidhues, Gene Kimmelman, Giorgio Monti, Rupprecht Podszun, Monika Schnitzer, Fiona Scott Morton, and Alexandre de Streel, The Effective Use of Economics in the EU Digital Markets Act, (2024) 20 Journal of Competition Law & Economics 1.

^[33] The discussion is illustrated in Preston R. Fee, Hugo M. Mialon, and Michael A. Williams, What Is a Barrier to Entry? (2004) 94 American Economic Review 465, building on Bain’s work but also on George J. Stigler, The organization of industry, (1968) Homewood: Irwin, and Franklin M. Fisher, Diagnosing Monopoly, (1979) 19 Quarterly Review of Economics and Business 23.

[34] See General Court, Case T-1077/23, ByteDance v Commission, EU:T:2024:478, para. 183, recognizing that different CPSs may be characterized by different degrees of intensity in terms of multi-homing.

^[35] This impact is also noted in John Davies, Valérie Meunier, Gianmarco Calanchi, and Angelos Stenimachitis, A Missed Opportunity: The European Union’s New Powers over Digital Platforms, (2022) 67 The Antitrust Bulletin 505.

^[36] On the concept of potential competition, see Herbert Hovenkamp, Potential Competition, (forthcoming) Antitrust Law Journal.

[37] See also Petit, supra note 18, 540.

[38] DMA, supra note 1, Recital 33.

^[39] Pablo Ibáñez Colomo, The New EU Competition Law, (2024) Oxford: Blommsbury, 133.

^[40] For an in-depth analysis of the rents that digital platforms may appropriate, see Nicolas Petit and David J. Teece, Innovating Big Tech firms and competition policy: favoring dynamic over static competition, (2021) 30 Industrial and Corporate Change 1168.

^[41] On this same complexity, see Torsten Körber, Lessons from the hare and the tortoise: Legally imposed self-regulation, proportionality and the right to defence under the DMA, (2021) Neue Zeitschrift für Kartellrecht 4.

^[42] DMA, supra note 1, Article 3(1). On the contrary, the EC has not designated two NIICS surpassing the thresholds under Article 3(2) due to their lack of control over the operations of their business users (i.e., Gmail and Outlook.com): see Decision, 5 September 2023, [2023] C(2023)6101 final, paras. 136, 144, and 145; and Decision, 5 September 2023, [2023] C(2023)6106 final, paras. 104 and 109. Further analysis of these criteria can be found in Alba Ribera Martínez, The Requisite Legal Standard of the Digital Markets Act’s Designation Process, (2024) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4681963.

^[43] For the digital sphere, see General Court, 10 November 2021, Case T-612/17, Google v. European Commission (Google Shopping), ECLI:EU:T:2021:763, and further analysis in Giuseppe Colangelo, Antitrust Unchained: The EU’s Case Against Self-Preferencing, (2023) 72 GRUR International 538. For non-platformed markets, see CJEU, 21 December 2023, Case C-333/21, European Superleague Company, ECLI:EU:C:2023:1011, para. 133; on its potential nexus to digital markets, see Jean-Christophe Roda, What if the Super League Case Was About the Digital Market? (forthcoming) Journal of European Competition Law & Practice.

^[44] DMA, supra note 1, Recital 34.

[45] See Petit, supra note 18, 531, arguing that DMA’s provisions do not always require entry to the platform.

[46] Supra notes 4 and 43.

[47] Bundeskartellamt, 7 February 2019, Case B6-22/16. For an analysis of the different episodes of the Facebook saga, including the judgement delivered by CJEU, 4 July 2023, Case C-252/21, Meta Platforms v. Bundeskartellamt, EU:C:2023:537, see, e.g., Giuseppe Colangelo, The privacy/antitrust curse: insights from GDPR application in competition law proceedings, (2023) ICLE Working Paper, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4599974.

[48] The German competition authority only secured commitments from Meta ensuring that Facebook and Instagram accounts would not be prima facie linked: see Bundeskartellamt, (2023) Meta (Facebook) introduces new accounts center – an important step in the implementation of the Bundeskartellamt’s decision, https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2023/07_06_2023_Meta_Daten.html?nn=295782.

^[49] The interplay between both is nothing new to regulatory theory, as established by Lawrence A. Cunningham, A Prescription to Retire the Rethoric of “Principles-Based Systems” in Corporate Law, Securities Regulation, and Accounting, (2007) 60 Vanderbilt Law Review 1413.

[50] This approach is derived from the European Data Protection Board’s opinion on Meta’s pay or consent model: see European Data Protection Board, Opinion 08/2024 on Valid Consent in the Context of Consent or Pay Models Implemented by Large Online Platforms, (2024) https://www.edpb.europa.eu/system/files/2024-04/edpb_opinion_202408_consentorpay_en.pdf.

^[51] See Thierry Breton, Answer given on behalf of the European Commission, (2024) E-003434/2023(ASW), https://www.europarl.europa.eu/doceo/document/E-9-2023-000479-ASW_EN.pdf. In a similar vein, the European Commission stated that, for end users to make informed choices about Meta’s pay-or-consent model, there must be a third option offering free services without relying on behavioral advertising: see European Commission, Directorate-General for Competition and Directorate-General for Communications Networks, Content and Technology, Commission sends preliminary findings to Meta over its “Pay or Consent” model for breach of the Digital Markets Act (2024), https://digital-markets-act.ec.europa.eu/commission-sends-preliminary-findings-meta-over-its-pay-or-consent-model-breach-digital-markets-act-2024-07-01_en.

^[52] See Vestager, supra note 3.

[53] 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.

^[54] Regulation (EU) 2019/1150 on promoting fairness and transparency for business users of online intermediation services [2019] OJ L 186/57.

^[55] See Margrethe Vestager’s opinion before the Committee on Internal Market and Consumer Protection, (2024) https://multimedia.europarl.europa.eu/en/webstreaming/committees_20240403-0900-COMMITTEE-IMCO. The six non-compliance procedures triggered by the European Commission in the span of four months since the application of the substantive provisions enshrine this same idea.

^[56] Regarding the interplay of information asymmetries between competition authorities and firms, see Luís Cabral, Justus Haucap, Geoffrey Parker, Georgios Petropoulos, Tommaso Valletti, and Marshall Van Alstyne, The EU Digital Markets Act: A Report from a Panel of Economic Experts, (2021) Joint Research Centre of the European Commission, https://publications.jrc.ec.europa.eu/repository/handle/JRC122910.

^[57] Despite the gatekeeper included these technical transformations in its compliance report, it presented those same solutions in the compliance workshop organized by the European Commission in late March 2024: for the recording of the event see Compliance with the DMA: Google, (2024) https://webcast.ec.europa.eu/compliance-with-the-dma-google-2024-03-21.

^[58] See ByteDance, Compliance Report (Non-confidential Version) under Article 11 of Regulation (EU) 2022/1925 of the European Parliament and of the Council (Digital Markets Act), (2024) para. 10, https://sf16-va.tiktokcdn.com/obj/eden-va2/uhkklyeh7othpu/Bytedance%20DMA%20Compliance%20Report%20Public%20Overview.pdf.

^[59] For instance, in its report pursuant to Article 15, ByteDance did not provide much information in this regard.

[60] DMA, supra note 1, Recital 12 and Article 1(6).

^[61] Such a case is that of the High-Level Group set out pursuant Article 40 DMA: see Commission Decision 23 March 2023, C(2023) 1833 final. Within the High-Level Group, a sub-group has been constituted to interpret the concept of consent in the sense of Articles 4(11) and 7 GDPR: see Directorate-General for Communications Networks, Content and Technology and Directorate-General for Competition, Kick-off Meeting of the Article 5(2) Digital Markets Act sub-group of the High-Level Group for the Digital Markets Act, (2024) https://ec.europa.eu/transparency/expert-groups-register/core/api/front/document/104022/download.

^[62] In fact, they both recognized such replication in the interventions of their representatives in the compliance workshops organized by the European Commission. For the recordings, see Amazon, Compliance with the DMA, (2024) https://webcast.ec.europa.eu/compliance-with-the-dma-amazon-2024-03-20, and Meta, Compliance with the DMA, (2024) https://webcast.ec.europa.eu/compliance-with-the-dma-meta-2024-03-19.

^[63] A substantive analysis of the changes proposed by Apple is addressed in Alba Ribera Martínez, Ecosystem Orchestrator, No More? Apple’s Proposed Changes to its Distribution of Apps and Overall Architecture, (2024) https://competitionlawblog.kluwercompetitionlaw.com/2024/01/29/ecosystem-orchestrator-no-more-apples-proposed-changes-to-its-distribution-of-apps-and-overall-architecture/.

^[64] The requirements may be found in Apple, Apple announces changes to iOS, Safari and the App Store in the European Union, (2024), https://www.apple.com/newsroom/2024/01/apple-announces-changes-to-ios-safari-and-the-app-store-in-the-european-union/, and Apple, Update on apps distributed in the European Union, (2024) https://developer.apple.com/support/dma-and-apps-in-the-eu/.

[65] Even though consumers may access the first alternative app stores on iOS, the notarization process raised concerns for Epic when it attempted to submit its own binary for launching the Epic Games Store on iOS: see Christopher Dring, Apple calls Epic ‘verifiably untrustworthy’ and blocks Fortnite and App Store on iOS, (2024), https://www.gamesindustry.biz/apple-calls-epic-verifiably-untrustworthy-and-blocks-bid-to-launch-fortnite-and-mobile-store-on-ios#:~:text=The%20move%20followed%20the%20introduction,true%20competition%20on%20iOS%20devices.%22. On alternative app marketplaces, see Callum Booth, We tested Aptoide, the first free iPhone app store alternative, (2024), https://www.theverge.com/24172642/aptoide-ios-game-marketplace-hands-on-europe.

[66] The European Commission has already raised concerns that Apple’s new terms and conditions do not apply to all developers: see Commission decision opening a proceeding pursuant to Article 20(1) of Regulation (EU) 2022/1925 of the European Parliament and of the Council on contestable and fair markets in the digital sector, Case DMA.100109 – Apple – Online Intermediation Services – app stores – App Store – Article 5(4), C(2024) 2056 final, paras 7-9.

[67] See also General Court, supra note 34.

[68] In fact, most of the non-compliance procedures initiated by the European Commission due to gatekeepers’ implementation of their compliance solutions focus on their breach of legal requirements rather than on the concept of consumer harm itself: see, e.g., Commission decision opening a proceeding pursuant to Article 20(1) of Regulation (EU) 2022/1925 of the European Parliament and of the Council on contestable and fair markets in the digital sector, Case DMA.100193 – Alphabet – Online Search Engine – Google Search – Article 6(5), C(2024) 2053 final.

[69] Lewis Crofts, DMA gatekeepers must please customers, not just regulator, EU’s Vestager says, (2024) https://mlexmarketinsight.com/news/insight/dma-gatekeepers-must-please-customers-not-just-regulator-eu-s-vestager-says.

[70] See Louis-Daniel Pape and Michelangelo Rossi, Is Competition Only One Click Away? The Digital Markets Act Impact on Google Maps, (2024) CESifo Working Paper No. 11226,  https://www.cesifo.org/en/publications/2024/working-paper/competition-only-one-click-away-digital-markets-act-impact-google, reporting that, despite a significant increase in Google’s search volume for the query terms maps and google maps, traffic data shows a non-significant decrease in visits to Google Maps, suggesting minimal migration to alternative services.

[71] See European Commission, Commission sends preliminary findings to Apple and opens additional non-compliance investigation against Apple under the Digital Markets Act, supra note 8, taking issue with “Apple’s multi-step user journey to download and install alternative app stores or apps on iPhones.”

^[72] Stakeholders have already begun expressing concerns regarding Apple’s compliance with the same obligation. This concern arises from the fact that only 38 applications have been received by app developers out of the 65,000 registered developers who cater for in-app purchases: see Rachel Graf and Leah Nylen, Apple Says No Major App Developers Accept New Outside Payments, (2024), https://www.bloomberg.com/news/articles/2024-05-10/apple-says-no-major-app-developers-accept-new-outside-payments?embedded-checkout=true.

Google recently announced that it has changed its plans to phase out third-party cookies in the Chrome web browser. The company had previously planned to disable third-party cookies in Chrome, a change supported by many in the privacy-stakeholder community, but which was met with criticism from the adtech industry and competition lawyers. Google’s new plans face similar criticism, while raising additional concerns from privacy advocates.

In short, Google is caught between EU privacy laws like the General Data Protection Regulation (GDPR) and competition laws like the Digital Markets Act (DMA). And despite claims that those laws are not in conflict, this episode very clearly shows how different interpretations are clearly in tension.

Read the full piece here.

Reasonable people may disagree about their merits, but digital-competition regulations are now the law of the land in many jurisdictions, including the EU and the UK. Policymakers in those jurisdictions will thus need to successfully navigate heretofore uncharted waters in order to implement these regulations reasonably. In recent comments that we submitted to the UK’s Competition and Markets Authority on the recently passed Digital Markets, Competition and Consumers (DMCC) bill, we tried to outline precisely that sort of “positive agenda” for digital-competition enforcement.

Read the full piece here.

Among the less-discussed requirements of the European Union’s Digital Markets Act (DMA) is the data-sharing obligation created by Article 6(11). This provision requires firms designated under the law as “gatekeepers” to share “ranking, query, click and view data” with third-party online search engines, while ensuring that any personal data is anonymized.

Given how restrictively the notion of “anonymization” has been interpreted under the EU’s General Data Protection Regulation (GDPR), the DMA creates significant tension without pointing to a clear resolution. Sophie Stalla-Bourdillon and Bárbara da Rosa Lazarotto recently published a helpful analysis of the relevant legal questions on the European Law Blog. In this post, I will examine Google’s proposed solution.

Read the full piece here.

It’s easy for politicians to make unrealistic promises. Indeed, without a healthy skepticism on the part of the public, they can grow like weeds. In the world of digital policy, the European Union’s Digital Markets Act (DMA) has proven fertile ground for just such promises. We’ve been told that large digital platforms are the source of many economic and social ills, and that handing more discretionary power to the government can solve these problems with no apparent side effects or costs.

Read the full piece here.

When it was passed into law, the European Union’s Digital Markets Act (DMA) was heralded by supporters as a key step toward fairness and contestability in online markets. It has unfortunately become increasingly clear that reality might not live up to those expectations. Indeed, there is mounting evidence that European consumers’ online experiences have been degraded following the DMA’s entry into force.

The perception that the DMA has been a failure is beginning to motivate a not insignificant amount of finger pointing in Brussels. So-called “gatekeeper” firms have blamed heavy-handed regulation for their degraded services, while smaller rivals finger “malicious compliance.”

Read the full piece here.

It’s been an eventful two weeks for those following the story of the European Union’s implementation of the Digital Markets Act. On April 18, the European Commission began a series of workshops with the companies designated as “gatekeepers” under the DMA: Apple, Meta, Alphabet, Amazon, ByteDance, and Microsoft. And even as those workshops were still ongoing, the Commission announced noncompliance investigations against Alphabet, Apple, and Meta. Finally, the European Parliament’s Internal Market and Consumer Protection Committee (IMCO) held its own session on DMA implementation.

Many aspects of those developments are worth commenting on, and you can expect more competition-related analysis on Truth on the Market soon. Here, I will focus on what these developments mean for data privacy and security.

Read the full piece here.

Less than a month has passed since President Donald Trump’s inauguration, but it is already clear that tariffs will be central to his administration’s economic policy and geopolitical strategy. Following an initial round of tariff threats against Mexico and Canada, and hiked tariffs on China, Trump is setting his sights on new targets—the European Union chief among them. Most recently, Trump declared that he will treat value-added taxes (VAT) like those assessed by EU members to be a form of tariff, and to assess equivalent reciprocal tariffs in return.

Counterintuitively, this might actually be good news for Europe’s tech sector.

Read the full piece here.

As the incoming Trump administration contemplates ways to promote U.S. economic growth and innovation, it may wish to consider two possible new global competition-policy initiatives. These actions, if successful, could help protect American (and foreign) firms from foreign government impediments to effective competition.

Read the full piece here.

Everyone in Europe, and across the international competition-law sphere, seems to have their own interpretation these days of former Italian Prime Minister and European Central Bank President Mario Draghi’s recent report “The Future of European Competitiveness” (a.k.a., the “Draghi report”). And, of course, those various interpretations, unsurprisingly, inevitably match the interpreter’s policy preferences.

This is not necessarily the fault of those commenting on the report. As The Economist notes: “Mr. Draghi’s recommendations are so numerous that policymakers will be able to pick and choose from among them.” But despite these somewhat equivocal prescriptions, the report makes at least one thing crystal clear: the EU’s regulatory zeal is not the success story its proponents make it out to be.

This is most evidently true in the area of digital markets, where the EU has enacted several sweeping regulations in recent years: the General Data Protection Regulation (GDPR), the Digital Services Act (DSA), the Digital Markets Act (DMA), and the AI Act. As I explain below, the Draghi report ought to be received by other jurisdictions as an admonition to be cautious about following the European example when it comes to digital markets regulation.

Read the full piece here.

The European Union’s implementation of the Digital Markets Act (DMA), whose stated goal is to bring more “fairness” and “contestability” to digital markets, could offer some important regulatory lessons to those countries around the world that have been rushing to emulate the Old Continent.

Read the full piece here.

In order to promote competition in digital markets,^[1] Latin American countries should not copy and paste “solutions” from other jurisdictions, but rather design their own set of policies. In short, Latin American countries—like my own, Peru—should not “put the cart before the horse” and regulate markets that are not yet mature.

Read the full piece here.

Competition authorities and policymakers around the world have devoted a growing proportion of their time and resources over the last decade to digital markets. Typically, this attention has been accompanied by vocal antipathy toward large digital platforms, as regulators and lawmakers invoke the need to “rein in digital monopolies” that allegedly cause a broad array of social harms.

As I detail in a new International Center for Law & Economics (ICLE) white paper, Latin America has been no exception to this trend. Competition authorities in Latin America have targeted digital markets by initiating cases, investigations, and studies similar to those in Europe and the United States. At the same time, the region’s competition agencies have come under harsh criticism for allegedly being “too technocratic” and “too narrowly focused” on consumer welfare. Some populists have attacked competition agencies for being “neoliberal institutions,” with calls to curb their powers or take away their independence.

As I argue in the ICLE white paper, Latin American agencies should resist these pressures and use their scarce enforcement resources to address behavior that truly hurts consumers and distorts competition. Toward that end, digital markets need not (and likely should not) be their primary concern.

Read the full piece here.

Abstract

The rise of digital markets has kicked off public-policy debates around the globe premised on the assumption that such markets’ special characteristics pose unique challenges for antitrust enforcement. This has led several Latin American policymakers and agencies to consider the enactment of ex-ante regulation or “digital competition regulations” (DCRs) similar to the European Union’s Digital Markets Act (DMA). Some Latin American agencies and policymakers (e.g., in Mexico and Brazil) are already well on their way toward exploring that path. This paper challenges the fundamental premise that digital markets require de novo approaches to competition law, and recommends that Latin American jurisdictions follow their own policy path based on the region’s market and political realities and challenges.

The introduction briefly explains how Latin American legislation—particularly competition laws—long have been inspired by European counterparts. It also describes the “power competition” among developed countries that creates incentives for European policymakers to seek to expand their regulatory sphere of influence—in the case of the EU pushing Latin America to adopt its path, this can fairly be described as a modern “Reconquista” of sorts.

Section 1 reviews public-policy reports on the digital economy in Latin America in order to identify any shortcomings or regulatory bottlenecks. It concludes that while competition in digital markets is important, insufficiently competitive digital markets are not among Latin America’s most urgent public-policy priorities. Indeed, Section 1B illustrates that the region’s digital markets are “reasonably competitive.” While some actors, such as Google and Microsoft, appear to enjoy large and durable market shares, which could indicate excess market power, other so-called “Big Tech” platforms have much smaller market shares and face significant competition. In fact, new actors are thriving in the e-commerce, FinTech, ride-hailing, and food-delivery markets. This suggests that barriers to entry are much lower than proponents of DCRs often make them out to be.

Moreover, as highlighted in Section 2A, digital markets generally do not exhibit the kind of “market failures” that warrant ex-ante regulation. They are not characterized by natural monopolies, significant negative externalities, public goods, or informational asymmetries. Section 2B explores arguments made by DCR proponents that antitrust law is too slow and cumbersome to address competition issues in digital markets. Section 2C analyzes a number of key cases, investigations, and advocacy reports produced by Latin American competition agencies, which demonstrate that much can be done to address purported competition problems by employing the procedures and remedies of traditional antitrust law (even if Latin American agencies have not actually done much).

Finally, Section 3 examines possible reforms of those policies that hinder Latin American firms and innovators from growing and creating more digital services and products. We conclude that Latin American entrepreneurs would benefit greatly from regulatory and licensing reform; greater incentives for private investment (especially in telecommunications infrastructure); elimination of legal barriers to entry; labor and tax reforms; the alleviation of unnecessary regulatory burdens; and better provision of public goods, such as infrastructure and education, in order to unleash the market’s talent and creativity.

Introduction

European law has long influenced legislation in Latin America. This was most obvious during the colonial era, when most countries were either Spanish, Portuguese, or French colonies, but the trend has continued long after the United States gained more economic and political influence in the region. Examples can be found in the civil codes of several Latin American countries that were approved in the late 1970s and early 1980. These codes were strongly influenced by Italy’s Codice Civile of 1942.[1]

In recent times, the growing influence of the European Union has manifested itself in various ways. One area where this has been most apparent is data privacy. The enactment of the EU General Data Protection Regulation (GDPR) in 2016 resulted in the proliferation of data-privacy laws across Latin America that were substantially similar to the GDPR,[2] even despite mounting evidence that the GDPR hindered venture-capital investment and increased market concentration in Europe.[3]

Competition law has not been immune to this influence. According to Alfonso Miranda, “the structure of EU competition law has been adopted by the legislations of the Latin-American countries and by the Andean Community of Nations – CAN.”[4] Likewise, Julián Peña explains that while the “economic reasoning” of U.S. antitrust law has had a major influence in Latin America, “most of the competition legal framework in Latin America during this period has been mainly influenced by the European model (e.g., Argentina, Brazil, and Peru), whether in substance (e.g., abuse of dominant position) or in the procedure.”[5] In Argentina, as German Coloma notes, Act 22,262 enacted in 1980, “implied a movement towards rules that were analogous to European standards, since Articles 1 and 2 of Act 22,262 were clearly inspired by Articles 85 and 86 of the Treaty of Rome.”[6]

Against this backdrop, there is a growing sense that European law is once again set to influence policy in Latin America, this time in digital-competition policy. Due to geopolitical considerations, the European Union is looking to increase its influence in the region (as well as the presence of its domestic firms) by imposing its regulatory model for the digital sphere.[7] This strategy can be seen as part of an unfolding “great power competition.”[8]

Unfortunately, there is reason to believe Europe’s digital regulations are not guided solely by concern for consumer welfare, and are instead crafted to promote the interests of European firms. There is, indeed, some indirect evidence of the protectionist motivations of the EU’s Digital Markets Act (DMA).[9] French President Emmanuel Macron declared in 2020: “If we want technological sovereignty, we’ll have to have to adapt our competition law, which has perhaps been too much focused solely on the consumer and not enough on defending European champions.”[10] As Meredith Broadbent has explained:

…the DMA threatens to impose heavy-handed antitrust measures and to exclusively levy punitive fines on large U.S. firms, while leaving other countries’ tech firms—namely European, Chinese, and perhaps Russian companies supplying essentially the same services—untouched. Europe’s success in assuming the role of global standards-setter in the area of privacy under the GDPR has energized Brussels, as it seeks further control over the business practices of successful U.S. companies.[11]

Despite this evidence, policymakers, regulators, and competition agencies around the world have in recent years rushed to introduce so-called “digital competition regulations” (DCRs),[12] inspired primarily by the DMA. Latin American policymakers and agencies are no exception.[13] The Andean Community (CAN), for instance, is considering specific regulations for digital markets. In late 2022, CAN General Secretary Jorge Hernando Pedraza declared:

We are sure that this initiative will strengthen the specialized knowledge of digital markets at the regional level and the application of community rules for the investigation and sanction of anticompetitive practices and abuse of dominance in the Andean region, without prejudice to the evaluation of the possible development of specific regulations for digital markets, as part of our agenda.[14] (emphasis added)

In Mexico, the Federal Economic Competition Commission (COFECE) published a digital-strategy report[15] that proposed creating a digital-markets competition unit similar to the one recently implemented in the United Kingdom.[16] COFECE’s strategy contemplates:

Whether or not it is necessary to identify, under specific categories, digital platforms with certain capacities to influence or distort markets; [and]

Whether or not it is necessary to consider specific regulation to delimit the conduct of digital platforms that fall into said categories or that may otherwise distort markets.[17] (emphasis added)

In Peru, the National Institute for the Defense of Competition and Protection of Intellectual Property (INDECOPI) has proposed—in a market report on the financial-technology (FinTech) sector—studying the possibility of enacting “open banking” or “open finance” regulations to “level the information playing field.”[18]

Brazil, however, appears to be “leading the race,” as it is the only Latin American country with an actual regulatory proposal. In October 2022, Federal Deputy João Maia introduced Bill No. 2768/2022 on digital markets regulation.[19] The bill’s statement of reasons included a discussion about the need to avoid imposing “absolute prohibitions” on digital platforms, but it also included a non-rebuttable presumption that any company with annual operational income of more than R$70 million should be considered a “gatekeeper” (“detentores de controle de acceso essencial”). The measure would mandate that these gatekeepers give “equal and non-discriminatory treatment” to “professional users” and “not to refuse to provide access to their digital platforms to professional users.”

The bill also specifically mentioned the DMA in its statement of reasons:

In the European Commission, the ‘Digital Markets Act,’ aimed at the so-called ‘gatekeepers’ in the digital world, is quite detailed and was approved in 2022.

We believe it is appropriate to introduce regulation in line with the European Commission, but in a much less detailed way. This is because we are dealing with issues of extreme relevance, which require regulatory responses much faster than what is possible in defense of competition but which are sufficiently new to indicate that it is not appropriate to place an ex-ante straitjacket on economic agents, with a series of absolute prohibitions.[20]

More recently, Brazil’s Ministry of Finance unveiled its report on the economics and competition dynamics of digital platforms.[21] The report did not recommend implementing DCRs but instead called for a “more flexible,” quasi-regulatory approach similar to the existing regulatory regimes in Germany, Japan, and the United Kingdom. This would entail, the ministry reports, applying “case-by-case specific obligations” to “systemically relevant digital platforms.”

In short, while it remains unclear the extent to which DCRs will be implemented in Latin America, there is no doubt that Europe and the DMA exerts at least some influence among Latin American policymakers. This raises a crucial question: is the EU’s approach sensible? And even if it is sensible for the EU, does that necessarily make it an appropriate regulatory approach in the context of Latin America? These questions are analyzed in the following sections.

I. If DCRs Are the Solution, What’s the Problem?

This section reviews public-policy reports on the digital economy in Latin America in order to identify relevant shortcomings and bottlenecks. While competition concerns remain important across the region, they are not among the most urgent public-policy priorities for Latin America. Moreover, Part B illustrates that the region’s digital markets are “reasonably competitive.” While some actors—such as Google and Microsoft—do appear to enjoy large and durable market shares, which could indicate excess market power, other so-called “Big Tech” platforms have much smaller market shares and face significant competition. Indeed, new actors are thriving in the e-commerce, FinTech, ride-hailing, and food-delivery markets. This suggests that barriers to entry are much lower than DCR proponents often make them out to be.

A. Digital Markets in Latin America

Before considering new regulations, Latin American countries should think carefully about their policy objectives and the best way to accomplish them. Among the questions that must be asked:

• Is there a need to “tame” large digital platforms?
• Do these platforms somehow constrain growth and innovation?
• Do they create inefficiencies or inequities?
• Are “contestability” and/or “fairness” insufficient in digital markets?

It is safe to say that there is little evidence that would merit answering any of these questions affirmatively. If anything, Latin American societies need greater access to and use of digital platforms so that citizens can more readily access information, education, markets, and opportunities.

One important problem is that the proposed DCRs discussed in the introductory section are grounded primarily on theoretical concerns about competition—not the diagnosis of actual competition problems (or any other sort of market problems) in the Latin American digital economy. In contrast, most public-policy reports that actually analyze the Latin American digital economy see it as a tool to enhance economic growth, knowledge, productivity, and social inclusion, and highlight its enormous growth in recent years.

A 2013 report by the United Nations’ Economic Commission for Latin America and the Caribbean (ECLAC), for example, found that:

After two decades of implementing policies that have emphasized the development of infrastructure, access to the Internet and the diffusion of ICTs, evidence shows a significant share of the digital economy in GDP. ECLAC estimates indicate that, on average for Argentina, Brazil, Chile and Mexico, it reaches at least 3.2%, a non-negligible figure if we consider that in the 27 countries of the European Union the corresponding percentage is 5%.[22]

But unlike in the United States or (to a lesser degree) Europe, information and communications technology (ICT) has not led to broad productivity increases in Latin America. Rather than insufficient competition, the primary reason for this appears to be “the existence of barriers to the use of ICTs as a source of increased productivity and growth.”[23] Latin American firms lack the management efficiencies, human capital, and broader infrastructure that their counterparts in the United States and Europe enjoy.[24] Failures to engage in effective state modernization or to proper education on the use of ICT may also play a role.[25]

A more recent OECD report, produced in concert with the EU and the United Nations, underscored that this “digital divide” has served as a barrier that impedes Latin Americans from taking advantage of ICT to foster growth and productivity,[26] and noted the region still has a “high and increasing” productivity gap with developed economies.[27] Citing the Digital Ecosystem Development Index’s measurements of the impact of digitalization on economic development, the report notes that:

Despite significant advances in the last 15 years, LAC’s digital ecosystem is at an intermediate level of development (index value 48.7 on a scale of 0 to 100), compared with Africa (34.2), Asia-Pacific (42.1), the Middle East and North Africa (55.4), the OECD area (66.8), Western Europe (67.6) and North America (75.4).[28]

While the index does mention “competitive intensity” as one of the area in which Latin America continues to fall short, this referred only to competition in telecommunications services (mobile services, fixed broadband, mobile broadband and cable TV).[29]

But as I have argued, a lack of competition in “digital markets” or digital platforms is not the primary problem holding back the productive use of digital technologies in Latin America. More basic problems like access to digital services and a general lack of knowledge about how to use ICT remain the main bottlenecks. While Latin American countries have experienced significant growth in internet access—the percentage of the population who use the internet regularly nearly doubled from 2010 to 2018, reaching 68%,[30] while more recent data suggest that 75% of the population now uses the internet[31]—there remains a large gap in the quality of access.

[D]espite improvements, connection speeds are below the world average, limiting types of services and apps available. Low connection speed prevents simultaneous apps, a critical issue during the coronavirus (Covid?19) pandemic.[32]

Moreover, in Latin American markets where relatively few people have the skills to use ICT, it is significantly harder for entrepreneurs to exploit opportunities on digital platforms, let alone to create their own platforms and complementary services. This, naturally, also applies to business users who are unable to take advantage of digital services. The fact is that:

Less than half of Latin Americans have used a computer or have sufficient skills to use computers for basic professional tasks. …

The most common daily activities among those with computer skills were using the Internet for information gathering (73%) and email (69%), followed by real?time communications, such as videoconference or chat. Only 8% used computers for programming. Computer and Internet use varies by country. In Mexico, 15% use ICT to conduct transactions at least once per week, compared with 30% in Chile.[33] (emphasis added)

According to the OECD’s 2019 “Shaping the Digital Transformation in Latin America” report:

In terms of broadband access and use, although relevant advances have been made, there is still a long way to go. As noted above, some 38% of the population of LAC was not yet connected to the Internet in 2017, implying that some 237 million people were considered to be “offline”. Brazil, Mexico and Colombia, alone, for their size and populations, jointly still need to connect around 133 million people. In addition, that estimate does not yet qualify for the type or quality of Internet access. From the 391 million connected people in LAC, for example, only one-quarter of them, or 103 million, had a fixed broadband subscription at the end of 2017 (Figure 2.1). However, progress is being made rapidly, and more than 40 million more people were connected to a fixed network at the end of 2017 than in 2014 (OECD/IDB, 2016). Moreover, some 86 million additional people were online in 2017 compared to 2014. [34]

The report also highlighted lack of skills as a barrier to ICT adoption:

Skills levels are poor in the region, due to the low quality of primary and secondary education and structural barriers. Young Latin Americans perform poorly in reading, mathematics and science compared to their counterparts in OECD countries. Between 23 and 70% of young Latin Americans enrolled in school do not acquire basic-level proficiency in reading, mathematics and science, according to PISA results. (…) less than 3.6% of LAC students perform among the highest levels of proficiency in either mathematics, reading or science. In contrast, 15% of students in OECD countries perform in the top in at least one of these subjects.

This constitutes an obstacle to further develop more specific skills and may hamper innovation. While the latest PISA results show a moderate improvement over time in students’ learning outcomes, results remain poor compared to many other regions in the world.

(…) 43 million young Latin Americans aged 15 to 29, or 31% of the youth population, have not completed secondary education and are not enrolled in school. Even those who graduate suffer from poor quality education and transition into adult life with skills far down the ranks in comparative international evaluations such as PISA.[35] (citations omitted, emphasis added).

The 2019 OECD report did mention that “ensuring sufficient competition in the digital economy is also a challenge” and that “competition authorities must be prepared with flexible tools and co-operate across borders to address transnational competition issues.”[36] It also included a section on “Competition in the Digital Economy,” which noted that “digital technologies and data lead to greater competition in many markets” but that they “also have demonstrated a potential to tilt others toward greater concentration, market power or even dominance.”[37]

It is important to point out, however, that the report mentioned only potential competition problems or challenges to competition agencies. The report did not reference any data regarding harms to competition, or highlight any market trends that suggest rising concentration or market power. More importantly, the report did not suggest any major policy changes, let alone endorse DCRs or any other kind of regulation. Instead, it recommended greater coordination among the various jurisdictions’ competition agencies, as well as with other (e.g., consumer-protection or data-privacy) agencies within their own jurisdictions:

As digital transformation continues to affect competition, it may lead to some new challenges for competition policy frameworks that were designed with traditional products in mind. One such challenge is that digitalisation may introduce new dimensions of competition in markets, as well as new ways to achieve anticompetitive outcomes, such as the use of algorithms to collude. In addition, a range of issues will require competition authorities to enhance their advocacy efforts and deepen their co-operation with consumer protection, data protection and other regulators. These include the use of consumer data under the relevant data protection safeguards as a competitive asset when providing products at no cost, or when developing personalised prices.

Co-operation may be needed across borders to ensure that common standards are applied and that information is available to regulators. Bilateral and regional enforcement may also be useful, for example joint decision making between jurisdictions, although it is important that clear rules exist to indicate how enforcement actions are to be addressed if there are bodies with overlapping responsibilities.[38]

In other worse, even if there are reasonable concerns about competition in the “digital economy,” no putative competition problem (i.e., strategic barriers to entry implemented by a dominant incumbent) should be considered the primary constraint on the use of digital services and products to foster growth and productivity in the region (or even to its beneficial use by individuals). Most diagnoses about the state and impact of the digital economy in Latin America identify far more fundamental problems. Digital-markets regulation, therefore, should not be a public-policy priority for Latin America.

Despite this conclusion, some DCR proponents nonetheless point to “lack of competition” as a valid reason to adopt ex-ante regulation. Part B will explore if the evidence on this point.[39]

B. Are Digital Markets Competitive in Latin America?

As Section 2 will explore in greater depth,[40] most DCRs have a broad scope and are designed to cover all “digital markets,” including myriad products and services—from search engines to online marketplaces to operating systems to streaming platforms.[41] If a single body of rules is meant to regulate all “digital markets” due to an alleged lack of competition, all or most markets covered by those rules must show symptoms of a “decline in competition.” If digital markets instead offer evidence that competition is sufficiently vigorous, that should be reason enough to reevaluate the scope of DCRs, if not to abandon them altogether.

There are few comprehensive assessments of the state of competition in Latin American digital markets,[42] but it is possible to find reports and statistics covering such markets as e-commerce, FinTech, and ride-hailing platforms that show consistent growth and entry. Market share and market concentration are, of course, imperfect proxies for competition,[43] but the available evidence does not appear to support the common contention that “Big Tech” companies are “monopolies” in Latin America.

Google is arguably the only company that enjoys a dominant position—in its case, in the search-engine market in Latin America. Not only does it have an extremely large market share in the region—93.27% in 2024[44]—but it has also maintained that position for more than a decade.[45] Microsoft also enjoys extremely high market shares in the operating-system market, especially if the desktop OS market is measured separately from mobile. In the desktop OS market, Microsoft, owner of Windows, is the clear leader, with 88.42% market share,[46] followed distantly by Apple’s OSX, with a 4.56% market share.[47] In the mobile OS market Google’s Android has an 83.43% market share, followed by Apple’s iOS with a 16.33% market share.[48]

This does not mean, however, that these firms can exercise market power without any consequence. In recent years, mobile devices can substitute for desktops for a growing number of use cases.[49] Microsoft, therefore, is not only constrained by its edge competitors in the desktop OS market, but also by what participants in the mobile OS market are doing to enhance the experience of tablet and smartphone users. Google, in turn, faces potential competition in the search-engine market from artificial intelligence (AI) chatbots like ChatGPT and from AI search applications developed by Microsoft, Meta, and other firms.[50] Even if we assume that Google has incontestable monopoly power, regulation would be difficult to implement.[51]

Other “usual suspects” of market dominance, such as Meta or Amazon, have smaller but still important market shares. Meta, the owner of Facebook and Instagram, has a large market share in the social-media space: 71.87%, if Facebook (48.92%) and Instagram (22.95%) are lumped together.[52] Facebook’s market share is, however, declining, and newer platforms like TikTok are gaining users.[53] Indeed, TikTok has had an extraordinary rate of growth, attracting an annual average of 340 million active new users worldwide from 2018 to 2022.[54] The example of TikTok demonstrates how a new competitor with an attractive product can challenge an established incumbent like Meta, despite lacking its network effects, scale, or data advantages.

Conversely, Amazon may be the “big tech” company facing the most competition in Latin America; it is sometimes even the underdog against the regional “unicorn” Mercado Libre or other local platforms. A recent report about online marketplaces across Latin America and the Caribbean found that “(a)s of August 2022, there were 893 B2C or C2C online marketplaces in the LAC region, accounting for 2,876 websites (URLs).”[55] As shown in Table 1, there are more than 20 marketplaces that have averaged a more than 1% share of online traffic from 2019–2021.

TABLE 1: Share of Marketplace Traffic in Latin America, 2019-2021 (%)

SOURCE: Estefanía Lotitto and Bernardo Díaz de Astarloa (2023)

It is important to note that the list only includes marketplaces focused specifically on Latin American and Caribbean countries. The full number of competitors might be even larger, as the list does not take into account online traffic to international marketplaces where Latin American consumers also shop.

Report authors Estefanía Lotitto & Bernardo Díaz de Astarloa acknowledge that there has been significant entry in the e-commerce market, but suggest that Latin American governments should nonetheless “monitor competition patterns in the e-commerce market to avoid dominant positions and mitigate economic risks associated with competition between traditional SMEs who lack the capabilities to operate effectively in digital channels and large, established marketplaces.”[56] The authors do not explain what kind of monitoring these government should be doing, but given that also do not endorse any changes to the legal system, it is fair to assume they do not have DCRs in mind.

According to the OECD, e-commerce in Latin America:

While it remains relatively small (…), it is growing rapidly: revenues reached USD 45.4 billion in 2017 compared to USD 29.8 billion in 2015. While not all e-commerce firms are platforms (e.g., many traditional retailers also sell their products on their own websites), many of the largest players in e-commerce in Latin America are platforms: the main e-commerce retailers in Latin America include MercadoLibre, Amazon, B2W Digital, Alibaba, eBay, CNova, Apple, Walmart, Google Shopping, Buscape.[57]

Given this backdrop of growing demand, it would be extremely difficult for an alleged monopolist to exercise market power, as that demand would not be satisfied by the restriction of output; it would instead likely attract new sellers.[58] In the case of e-commerce (as in most, if not all, digital markets), low barriers to entry facilitate such additional competition.[59]

In the case of Amazon, for instance, there is empirical evidence that it not only competes in Mexico but competes intensively with other distribution channels, and has a net-positive welfare effect on Mexican consumers. A 2022 paper found that “e-commerce and brick-and-mortar retailers in Mexico operate in a single, highly competitive retail market” and that “Amazon’s entry has generated a significant pro-competitive effect by reducing brick-and-mortar retail prices and increasing product selection for Mexican consumers.”[60]

The recent entry of other marketplaces into the region (e.g., Shein) suggests that the e-commerce market is highly competitive. Moreover, there is a substantial margin for expansion, which suggests that demand could grow even more: “For instance, in 2017, 35% of Chileans had purchased online, compared to 27% in Brazil, 13% in Mexico, and 8% in Colombia.”[61]

Recently, Aeropost—a U.S. shipping and logistics company already operating in other Latin American and Caribbean countries—entered to compete in the Peruvian e-commerce market with the inauguration of its own marketplace. The business journal Semana Económica explains that “(t)he company – specialized in importing products from the United States to Latin America – seeks to take advantage of the growth of electronic commerce in the region.”[62] The company‘s CEO highlighted the relatively low penetration of e-commerce in the country: “(w)hen we talk about e-commerce in Latin America, the numbers are still very small compared to total retail. So, it is about opening, about making the pie grow, and not about the percentage of the market you have.”[63]

Regarding the FinTech market, the evidence also suggests a market experiencing consistent growth and entry:

One study identified 703 Fintech start-ups in 16 Latin American countries in 2017 (IDB and Finovista, 2017), of which 33% were in Brazil, 26% in Mexico, 12%, in Colombia, 10% in Argentina and 9% in Chile. A year later, the study identified 1,166 companies in the region, representing a 66% increase from the previous year (IDB and Finovista, 2018). The main business segments in which these Fintech start-ups are active include payments and remittances (24%), lending (18%), enterprise financial management (15%), personal financial management (8%) and crowdfunding (8%) (IDB and Finovista, 2018, p. 15).[64]

INDECOPI’s report on the FinTech sector found that the number of FinTech companies operating in Peru has been growing at an annual rate of 15%, reaching 154 companies in 2022 from 50 in 2014.[65]

FinTech, importantly, is not only competitive, but it is also “boosting competition.” As Bas Bakker et al. explained: “(t)he proliferation of new financial technology and digital banks is associated with a reduction in lending spreads. (…) fintech companies do not just compete with banks and insurance companies; they also provide banks and insurance companies with new technologies and services.”[66] The growth of FinTech services has also improved financial inclusion:

About three-quarters of digital banks’ customers are previously unbanked and underbanked consumers and small and medium enterprises (SMEs). A higher level of fintech adoption is associated with lower income inequality. Alternative finance has boosted access to finance for micro, small, and medium enterprises—sectors that have been underserved by the traditional banking system.[67]

Ride-hailing and food delivery may be the digital markets experiencing the most intense regional competition. According to The Economist, “(i)n 2021 Latin American startups attracted around $16bn in investment, roughly as much as in the previous ten years combined.”[68] Many of those firms are digital platforms that:

Aim to make life more convenient—groceries or takeaway food delivered to your door, for example. The likes of Cornershop, a Chilean app that started in 2015 and was bought by Uber in 2020, and Rappi, a Colombian app, are now used across the region. Both have expanded to do more, including delivering small parcels and running errands.[69]

Apps like Uber, Cabify, and Didi disrupted the traditional private-transport market in Latin America. Using Brazilian municipal data from 2014-2016, Guilherme Mendes Resende and Ricardo Carvalho de Andrade Lima found: “Uber’s entry into the market resulted in an average reduction of 56.8 percent in the number of rides from [the other] cab-hailing apps in the cities where the platform operates.”[70]

While there are some companies with large market shares in these markets, the landscape is highly competitive. As Scott Beyer has noted:

While Uber and Didi do in fact dominate LatAm rideshare, it hasn’t been easy. And in food delivery, they’re actually losing to the region’s homegrown companies. In either case, government regulation (or lack thereof) dictates their trajectory. (…)

Uber and Didi are both expanding in these regions, and see in urbanized Latin America a particularly alluring battleground. (…).

I saw the battle play out in my first stop, Mexico City. Uber dominated Mexico for years, but now has less market share there than Didi. It was easy to see why: each time I needed a ride, I’d find Didi had slightly lower prices.

But once getting further down into LatAm, I found the market got more crowded—namely for food delivery. Three regional apps now beat both Uber and Didi in delivery market share. PedidosYa, based in Uruguay, is dominating Central and far South America. Rappi, a delivery and finance app, wins its home country of Colombia and several surrounding ones. iFood, based in Sao Paulo, is all over Brazil, by far the region’s biggest market. These apps draw global investors and generate lots of buzz.[71]

There is also evidence that Latin American digital economy is not only competitive, but that it has made “traditional” industries more competitive. For example, COFECE’s digital-strategy report recognized that:

So far, the arrival of some technological giants in the Mexican markets has generated competitive pressure for traditional companies. For example, the growing activity of companies such as Google and Facebook in the advertising market may have the effect that important companies established in this market face greater competition and work hard to satisfy the demands of their consumers. Something similar could happen in sectors such as retail sales, finance, mobility and entertainment, whose traditional markets present significant levels of concentration, and which with the arrival of companies such as Amazon, Uber, Cabify, Didi, various Fintech, Apple and Netflix could benefit from the competition process.[72]

Similarly, Esteban Greco and María Fernanda Viecens found that:

Digital players act as disruptive suppliers with respect to traditional players. In various markets it is observed that it is digital developments that exert competitive pressure on the market, and those that provide innovative products and technological alternatives, resulting in the competitive process including both traditional and digital players. So, in such cases, more than digital markets, digital players are observed breaking into traditional markets and exerting competitive pressure on established suppliers.[73]

In summary, there is evidence of market growth and entry in various digital markets across Latin America, suggesting that barriers to entry are low. If that is indeed the case, firms’ attempts to exercise market power would be disciplined by competition. Therefore, a general “lack of competition” in digital markets is a poor rationale to create DCRs in Latin America.

II. Are DCRs Needed Where There Is Sufficient Competition?

DCR proposals rest on the premise that digital markets “dominated by large digital platforms” (so-called “Big Tech” firms) are not and cannot be sufficiently competitive due to certain “characteristics” that make them prone to concentration and monopoly. Thus, even if certain digital markets appear to be competitive, the argument goes, it is inevitable that they will eventually become monopolies, and regulation is needed to prevent that. Giuseppe Colangelo summarizes the argument well:

The distinctive features of digital markets apparently require a rethinking of the antitrust regime. The presence of strong economies of scale, extreme indirect network effects, remarkable economies of scope due to the role of data as a critical input, and conglomerate effects, along with consumers’ behavioural biases and single-homing tendencies, represent significant barriers to entry that make digital markets highly concentrated, prone to tipping, and not easily contestable. Therefore, large incumbent players appear not to be under threat and hard to dislodge. Moreover, digital platforms act as gatekeepers (either by controlling the access of third-party firms to their users or controlling the consumption of products and services by their users) and regulators (due to their rule-setting role within their ecosystem), and frequently play a dual role, being simultaneously operators for the marketplace and sellers of their own products and services in competition with rival sellers.[74]

In addition to the aforementioned “characteristics,” problems in digital markets also allegedly arise from failures inherent to antitrust enforcement:

In light of this, mounting criticism against current competition policy allege that lax antitrust enforcement, flawed judicial rules that reflect unsound economic theories or unsupported empirical claims, and the limited effectiveness of the antitrust toolkit have contributed to a significant increase in concentration in digital markets. Furthermore, antitrust litigation and enforcement are deemed to be too protracted and expensive, causing ambiguity, draining resources, and privileging incumbents. Despite the Department of Justice’s Antitrust Division (DOJ) ongoing reviewing of whether and how certain online platforms have achieved market power and are engaging in anticompetitive practices and the Federal Trade Commission’s (FTC) launching of an ex post evaluation of BigTech acquisitions, there is strong skepticism and criticism surrounding the efficacy of antitrust investigations. Too little, too late.[75]

Proponents argue that DCRs could prevent or rapidly address these problems. Some of the proposed reforms are not actually labeled as “regulations,” but rather as “competition-law reforms.” Most, however, are sector-specific (“digital markets”) and include specific ex-ante rules and duties (with prescribed penalties in the case of breach). Also, their application would not be based on the consumer-welfare effects of the regulated conduct.[76] Therefore, for the purposes of this paper, these initiatives will also be considered ex-ante regulation.[77]

In general, the proposed regulations would introduce prohibitions and restrictions on certain practices, such as so-called “self-preferencing” or the use of third-party data, and special duties, such as “interoperability” and data sharing by digital platforms with “considerable economic power” (or “gatekeepers”).[78] Some also give competition agencies or new regulators the ability to impose specific remedies.[79]

A. Market Failure in Digital Markets

According to economic theory and long-tested economic principles, ex-ante regulation is justified only in the presence of “market failures.”[80] A market failure is “a situation where the private market fails to produce the optimal level of a particular good,”[81] or as former U.S. Supreme Court Justice Stephen Breyer put it, “an alleged inability of the marketplace to deal with particular structural problems.”[82] The four market failures most commonly accepted in the economic literature are information problems, externalities, natural monopolies, and public goods.[83]

Of course, other rationales have been put forward in the political debate surrounding DCRs (distributive concerns; “fairness,” as in the case of the DMA; central planning; human rights). Nonetheless, mainstream policy discussion and regulatory best practices have long required evidence that a market is not working properly in order to justify extraordinary interventions.[84] As Thom Lambert points out:

[B]ecause the point of market failure-correcting government interventions is to enhance social welfare, such interventions are not justified if they would themselves create losses greater than those occasioned by the market failures they are aimed at correcting. Wise policy, therefore, requires consideration of the ways in which government interventions may reduce welfare.[85]

Tellingly, the DMA—the “original blueprint”[86] for DCRs—does not mention the term “market failure” or argue that any of the above-mentioned market failures are present in digital markets.[87] Likewise, Brazilian Bill No. 2768 follows suit and fails to explain which market failure would justify the regulation of digital markets in Brazil.

Instead, DCR proposals tend to mention “characteristics” of digital markets that (in some cases) lead to highly concentrated markets and a lack of market contestability that could be labelled as “quasi-market failures.” Those “quasi-market failures” allegedly make entry and surpassing incumbent market leaders difficult, even if they do not actually impede competition. As Colangelo has described it: “strong economies of scale, extreme indirect network effects, remarkable economies of scope due the role of data as a critical input, and conglomerate effects, along with consumers’ behavioural biases and single-homing tendencies.”[88]

The DMA recitals mention, e.g., that:

…core platform services feature a number of characteristics that can be exploited by the undertakings providing them. An example of such characteristics of core platform services is extreme scale economies, which often result from nearly zero marginal costs to add business users or end users. Other such characteristics of core platform services are very strong network effects, an ability to connect many business users with many end users through the multisidedness of these services, a significant degree of dependence of both business users and end users, lock-in effects, a lack of multi-homing for the same purpose by end users, vertical integration, and data driven-advantages. All these characteristics, combined with unfair practices by undertakings providing the core platform services, can have the effect of substantially undermining the contestability of the core platform services, as well as impacting the fairness of the commercial relationship between undertakings providing such services and their business users and end users.[89]

These “characteristics” are not alleged to be market failures, as they do not impede competition or make it undesirable. That is why Justice Breyer’s emphasis on “structural” problems is important.[90] Not every condition that characterizes a market as failing to precisely fit the model of perfect competition is necessarily relevant for the purposes of public policy. The high cost of regulatory interventions demands that we intervene only to address those conditions that have a considerable impact, and only where they would remain in place over the long term in the absence of intervention.

To be sure, it is possible to find some level of informational asymmetry or (positive) externalities in digital markets, but not to such degree that they would fail to be addressed by market competition (actual or potential) or by such general rules as data protection or consumer protection. It is also possible to find digital markets where a firm has some degree of monopoly power. In most digital markets, however, there is little to no evidence of significant market power, nor of a tendency toward “natural monopoly” (that is, a case where it is not possible or desirable to replace the monopolist).[91]

Digital markets do not present a “new type” of market power. As Herbert Hovenkamp has explained:

There is little empirical support for the proposition that digital-platform markets are winner-take-all. Rather, the landscape for digital markets resembles the one for markets generally: some of them are more conducive to single-firm dominance than others. Some resemble markets with a dominant firm plus a competitive fringe. Others enjoy competition among more evenly sized rivals. (…)

For digital platforms, several factors point in different directions, making categorical treatment impossible. On the one hand, network effects can be a substantial entry barrier. Particularly in markets where significant product differentiation is impossible, a large base on one or both sides of a platform, which places newcomers at a significant disadvantage, can be a powerful entry deterrent. The same thing can be said of accumulation of large amounts of consumer data or large intellectual property portfolios. Offsetting these barriers are low consumer-switching costs and widespread multi-homing, which are common in platform markets; these factors, in contrast, encourage new entry. Product differentiation is also an avenue for new entry, as is high technological turnover.[92] (emphasis added).

In 2001, in the second edition of his “Antitrust Law” treatise, Richard Posner explained, in reference to what was then called the “new economy”, that:

Because of the extraordinary rate of innovation not only in computer software but also in communications technology, the extraordinary amount of capital available worldwide for investment in new enterprises, and the rapidity with which new networks that are primarily electronic can be put into service, the networks that have emerged in the new economy do not seem particularly secure against competition. We have seen all manner of firms rise and fall in this industry-falling sometimes from what had seemed a secure monopoly position. The gale of creative destruction that Schumpeter described, in which a sequence of temporary monopolies operates to maximize innovation that confers social benefits far in excess of the social costs of the short-lived monopoly prices that the process also gives rise to, may be the reality of the new economy. This is especially likely because quality competition tends to dominate price competition in the software industry. The quality-adjusted price of software has fallen steadily simply because quality improvements have vastly outrun price increases.[93]

In the same vein, Thom Lambert has analyzed several common indicators of market power and concluded that (at least, in general) we cannot assume that there is a general trend toward monopoly in digital markets. He finds that consumer prices on most platforms do not appear to be rising (in fact, most of their services are offered at zero monetary cost). There is also little evidence that advertising prices are rising.[94] Regarding the quality of digital products and services, Lambert finds that:

GAFA firms are hardly fat monopolists enjoying the quiet life that results from a lack of competition. They are better characterized as relentless innovators that continually improve their offerings for the benefit of consumers.[95]

Jonathan Barnett observes that “while digital markets tend to converge on ‘winner-take-most’ outcomes, that is often not the end of the story.”[96] He offers several examples of market incumbents that have lost their market-leadership position, or that have at the least been forced to confront the menace of innovative entrants:

In the social networking market, Facebook has faced stiff competition since 2019 from TikTok, which by some recent estimates (as of 2022) accounts for 20% of the global social-media networking market (as compared to 46% for Facebook and Instagram). In the office productivity software market, Microsoft’s long-standing leadership has been contested recently by Google’s Workspace applications suite, which by one estimate as of 2022 accounted for almost half of the global market. In the mobile device communications market, initial leaders such as Motorola, Nokia, Ericsson, and Blackberry enjoyed large market shares in the 1990s—in 1999, Nokia and Motorola accounted for 27% and 17% of the global market³¹—but were rapidly dislodged in the mid-2000s by Apple’s iPhone and Android-based devices produced by Samsung and other firms. In the online shopping market, Amazon has faced robust competition from Walmart and, in apparel, now faces robust competition from Shein and Temu. In the search market, Google has always faced competition in “vertical” search markets from leading providers in those segments, such as Expedia and Booking.com in travel, Zillow and Redfin in real estate, and Yahoo!, Bloomberg and Reuters in finance.[97]

In a book that examined digital platforms through the lens of natural-monopoly theory,[98] Francesco Ducci focused on three case studies of “big” digital platforms, and only in the case of general or horizontal search (Google) did he find features of a natural monopoly.[99] His findings are debatable, but even assuming that they are correct, Ducci also warns that “a real-world regulator for horizontal search is likely to face a number of insurmountable limitations and challenges, especially in technologically fast and fluid industries.”[100]

In the case of e-commerce platforms like Amazon, Ducci concluded that “(d)espite the fact that network externalities give rise to large e-commerce marketplaces and the physical infrastructure of online shopping for logistics and delivery is characterized by some scale economies, neither effect is strong enough to give rise to a natural monopoly.”[101]

Finally, in the case of ride-hailing platforms (like Uber), Ducci concludes that the evidence is ambiguous:

Ride-hailing platforms are not necessarily natural monopolies. Fixed costs of entry are not very high, and the positive effects of network externalities are likely to taper off after a certain critical mass is reached. Especially in larger cities, these factors may leave room for competition between networks, which can create a number of positive effects on prices, fees, and quality of the services. The technological features of ride-hailing platform can, however, increase the chances of natural monopolies compared to the traditional taxi dispatch systems, by pushing the frontier of efficient scale toward larger networks and geographic areas.[102]

It is worth discussing the “network effects” argument in digital markets. If a firm moves fast and gets the first customers, network-effects theory holds that the presence of those customers would, in turn, attract still more customers and sellers, who will attract even more. This growth would result, allegedly, in a single firm monopolizing the market. But as David Evans and Richard Schmalensee point out, that result is far from inevitable:

Systematic research on online platforms by several authors, including one of us, shows considerable churn in leadership for online platforms over periods shorter than a decade. Then there is the collection of dead or withered platforms that dot this sector, including Blackberry and Windows in smartphone operating systems, AOL in messaging, Orkut in social networking, and Yahoo in mass online media.^[103]

In the same vein, Christopher Yoo explains that:

Despite attempts by recent reports to equate network effects with market failure, an examination of both the theoretical and empirical literature make clear that the relationship between network effects and market failure is more complex. Indeed, history is littered with once-leading digital companies that can attest to the reality that network effects are not sufficient by themselves to protect the dominance of early-market leaders. Considerations such as variation in the value of connections and the existence of countervailing externalities make the relationship between network effects and market failure ambiguous. In addition, network-effects based theories depend on the satisfaction of structural preconditions that must be shown in individual cases. Even when those preconditions are met, alternative institutional solutions exist that can mitigate or even dissipate the impact of network effects.[104]

Even those open to ex-ante regulations for digital markets acknowledge that there are considerable challenges, especially if the intent is to regulate digital platforms like “essential facilities.” Jean Tirole, for instance, acknowledges that it is possible to regulate a “stable essential facility,” but that the fast-moving nature of digital markets makes it difficult for regulators to identify them, collect the appropriate data, and promulgate and enforce the appropriate rules.^[105]

This is probably why the European Commission’s Regulatory Scrutiny Board—an independent body within the Commission that advises commissioners and evaluates the impact of proposed regulations—has, according to one report, “expressed concern about the lack of evidence supporting the DMA’s underlying assumptions concerning the purported negative effects of certain platform practices.”[106]

It is also important to consider that most proposed DCRs are designed as a single body of rules that would cover all “digital markets,” as if such markets were homogeneous. But as the International Center for Law & Economics (ICLE) explained at a 2022 meeting of the OECD’s Competition Committee:

The digital economy spans from online retail to real estate listings to concert tickets to travel booking to social media. Consequently, there is not a universally defined digital market. While digital markets are dynamic and evolving, as many markets are, digital market innovations in some segments are not as groundbreaking as they once were. In a similar manner, prominent digital market characteristics are not unique to digital markets. Print newspapers are multi-sided markets. Broadcast radio is zero-price.^[107] (emphasis added)

Those differences are important enough to believe that the broad regulation of “digital markets” is misguided. As Herbert Hovenkamp has explained:

… broad regulation is ill-suited for digital platforms because they are so disparate…. They sell different products, albeit with some overlap, and only some of these products are digital. They deal with customers and diverse sets of third parties in different ways. What they have in common is that they are very large and that a sizeable portion of their operating technology is digital.^[108] (emphasis added)

Platforms like Google Search, Amazon’s marketplace, Uber, and Spotify are so different from one another that it is highly unlikely that any single body of regulation could be both necessary and reasonable for all of those markets. Some of these markets have market leaders with a significant market share and few competitors; some are more fragmented and have more competitors with evenly distributed market shares. Some of them have strong “network effects” (payment systems), and some have milder “network effects” (streaming of video and audio). Some rely on extremely specific user data in order to deliver a valuable service, while others can work with more general data.

These idiosyncrasies mean that some rules will be useless in some markets, but will be enforced nonetheless, and generate compliance costs that could be passed on to consumers. Think of, e.g., data-sharing mandates that require the compulsory transfer of information to other platforms or “business users,” even if it is not useful to them. In other cases, the rules will not be useless, because they will affect the market where they are applied (i.e., they will benefit some business users and some consumers), but could have unintended consequences (i.e., harm to consumers in general). As Lazar Radic has pointed out:

There are a range of risks and possible unintended consequences associated with the DMA, such as the privacy dangers of sideloading and interoperability mandates; worsening product quality as a result of blanket bans on self-preferencing; decreased innovation; obstruction of the rule of law; and double and even triple jeopardy because of the overlaps between the DMA and EU competition rules.[109]

It is also important to consider that, even if they were warranted, DCRs create barriers to entry, regulatory risks, and restrictions on the monetization of business assets—all of which could make the affected markets less attractive, and thereby deter market entry. There is already anecdotal evidence that the DMA is having such consequences. As Alba Ribera has explained:

One of the greatest examples of the dichotomy that arises between the different types of consequences that can be generated by the regulatory capture of digital ecosystems can be found in Meta’s recent decision not to launch its new service Threads in the European Economic Space. To the extent that its service could be interpreted as falling within the definition of a “core platform service” belonging to the category of “online social networks” (listed by the DMA), Meta decided to refrain from entering the European market, due to the disproportionate burden that the demanding obligations imposed by the DMA would entail. It should be noted that Threads is still an entrant service in the online social networking market, in contrast to the predominant position occupied by X (previously known as Twitter). In this way, we observe that the categorization as a core platform service unifies and eliminates all the nuances that free competition entails with respect to incoming services in the markets.^[110]

It also should be noted that DCRs would likely have a greater impact in developing economies where digital markets are not yet mature. More developed economies might, indeed, be able to afford any inefficiencies that stem from DCRs.^[111]

For instance, regulations could make online goods and services more expensive. Facebook is already experimenting with a new business model in which consumers would see no advertising (and thus, there would be no data collection—or less data collection for marketing purposes, at least) but would instead have to pay to subscribe.[112] If this model were to become generalized, it may be good for some users. Privacy-minded American and European consumers would probably be able to afford such subscriptions. But the same could hardly be said for Latin American consumers—who, on average, earn less than a third the income of their European counterparts.[113]

From the perspective of the companies that own and operate digital platforms and services, if DMA-like regulations make emerging markets less profitable, the companies could simply leave or choose not to enter such markets. As Geoffrey Manne and Dirk Auer have explained, “to regulate competition, you first need to attract competition.”^[114]

While empirical research on the impact of DCRs is scarce, a recent paper by Ke Rong, D. Daniel Sokol, Di Zhou, & Feng Zhu[115] analyzing the impact of China’s “Anti-Monopoly Guidelines for the Platform Economy”[116] finds that:

This regulation has made the investment climate less attractive for startups, evidenced by a 26.73% decrease in the monthly number of investments and an 18.72% drop in newly established companies in affected industries. Contrary to expectations, the Platform Guidelines have not fostered greater competition.[117]

The recently published “The Future of European Competitiveness” report[118] (commonly known as the “Draghi Report”) underscores the impact that regulation can have on competitiveness, growth, and innovation. While the report appears to endorse the DMA, it does acknowledge that regulations like the GDPR have had a negative impact, and cautions against the administrative burden that the DMA could impose:

…while the ambitions of the EU’s GDPR and AI Act are commendable, their complexity and risk of overlaps and inconsistencies can undermine developments in the field of AI by EU industry actors. (…) This calls for developing simplified rules and enforcing harmonised implementation of the GDPR in the Member States, while removing regulatory overlaps with the AI Act (…). This would ensure that EU companies are not penalised in the development and adoption of frontier AI. With the DMA and DSA, the EU has also adopted pioneering legislation to ensure that digital competition and fair online market practices are enforced. This aims to protect smaller innovators and players from the dominance of Very Large Online Platforms, and to safeguard citizens, creators and IP holders from lack of accountability by the responsible platforms. While it is early to fully gauge the impact of these landmarks regulations, their implementation must avoid producing administrative and compliance burdens and legal uncertainties as the GDPR’s and must be enforced within shorter timeframes and more stringent processes for compliance provisions.[119]

Precisely because there is a significant growth and productivity gap between Latin America and other developed countries—greater even than that between Europe and the United States—Latin America cannot afford to implement regulations that could hinder its competitiveness. The Draghi Report points out that:

EU economic growth has been persistently slower than in the US over the past two decades, while China has been rapidly catching up. The EU-US gap in the level of GDP at 2015 prices has gradually widened from slightly more than 15% in 2002 to 30% in 2023, while on a purchasing power parity (PPP) basis a gap of 12% has emerged.[120]

But Latin American countries’ GDP gap with the United States is even larger and, in some cases, growing (see Figure 1). The primary culprit behind this gap is productivity, which is only about half that of the United States.[121]

In sum, there are several reasons to believe that no solid rationale exists to regulate Latin American digital markets: not any of them specifically, and not in general. Moreover, there are good reasons to believe that such regulations would do more harm than good for competition and consumers.

FIGURE 1: Per-Capita GDP, US and Select Latin American Countries, 1960-2023 (Constant 2015 US$)

SOURCE: World Bank, OECD[122]

B. Costs and Benefits of Regulation Versus Antitrust

Those reports that do recommend adoption of DCRs often highlight the alleged shortcomings of traditional antitrust law—i.e., that it is “too slow” or “too hard to win” for plaintiffs—as the primary justification to pursue ex-ante regulation. As Giuseppe Colangelo has explained:

… the regulatory approaches recently advanced do not seem to reflect the distinctive features of digital markets, but rather the need to design enforcement short-cuts to cope with growing concerns that antitrust law is unable to address potential anticompetitive practices by large online platforms. Hence, in most of the mentioned reports, the revival of regulation seems supported more by an alleged antitrust enforcement failure rather than true a market failure. The goal is indeed to fill alleged enforcement gaps in the current antitrust rules by introducing tools aimed at lowering legal standards and evidentiary burdens in order to address anti-competitive practices that standard antitrust analysis would struggle to tackle.^[123]

This may be a reasonable cause for regulation (although an “institutional failure,” rather than a market failure). Few would disagree that antitrust cases should be faster. Competition agencies and courts, generally speaking, should have more resources and more expeditious procedures to adjudicate cases before market structures and dynamics change and render any potential remedy useless.[124] But the fact that cases are “hard to win” is not a valid reason. Indeed, this is arguably a feature, and not a bug, of antitrust law, especially in the context of “abuse of dominance” or “monopolization” cases.^[125]

In replacing standard antitrust-law concepts like “relevant markets,” “monopoly power,” “dominant position,” and “consumer harm” with concepts like “core platforms services” and “gatekeepers,” DCRs provide procedural shortcuts to condemn some business models and practices. While these shortcuts may reduce administrative costs, these putative benefits are easily overstated. Only a few weeks after the DMA entered into force, and only a week after compliance workshops held with the newly designated “gatekeepers”, the European Commission announced that it was initiating noncompliance proceedings against three companies because their compliance proposals fell “short of effective compliance” with the new DMA rules.[126] If gatekeepers decide to appeal the seemingly inevitable noncompliance decisions, these proceedings could take months or even years of litigation before they are resolved.

Perhaps more importantly, these procedural shortcuts have a cost: they amount to the per-se prohibition of business models and practices that usually provide benefits for consumers, such as lower prices and a safer user experience. These costs are compounded by the fact that, as mentioned,[127] the language of DCRs is often overly broad. As Lazar Radic, Geoffrey Manne, and Dirk Auer have explained:

… digital markets tend to be very different from those traditionally subject to price regulation and access regimes. And even in those industries, price regulation and access regimes raise many difficulties, such as identifying appropriate price/cost ratios and fleshing out the nonprice aspects of the goods/services or regulated firms.

Those difficulties are compounded in the fast-moving digital space, where innovation cycles are faster, and where yesterday’s prices and nonprice factors may no longer be relevant today.[128]

To pick one such obligation, the application of “common-carrier” laws to digital platforms would not have a positive impact for consumers, in that “by questioning the core of digital platform business models and affecting their governance design, these interventions entrust public authorities with mammoth tasks that could ultimately jeopardize the profitability of app-store ecosystems.”[129] Apple’s App Store is one such example. As Randal Picker explained:

Would Apple have an obligation to carry—here meaning pre-install—any app requesting that? I hope that merely to state the idea is to make clear why that would be an outcome that would be physically impossible and would create a terrible consumer experience. No blocking of apps found to contain malware, no limits on pornography, no limits on apps that help that help people violate the law or evade law enforcement. Part of what consumers want from app stores (or presumably any store, online or offline) is some assurance of quality and filtering for safety and other important social values. And all of the problems that consumers experience in searching through the app stores would come directly to their devices. So don’t pre-install apps, but pre-install links, say an incredibly long browser ballot for all apps on your device. Again, self-refuting I hope.[130] (emphasis added).

The ban on “self-preferencing” would also have adverse effects for consumers. As Thom Lambert noted in a piece critical of the proposed American Innovation and Choice Online Act (AICOA) in the United States,[131] the pre-installation of services like the iPhone’s Siri involves “self-preferencing” or discrimination among business users of Apple’s iOS platform. But consumers value having a device that is ready to be used. Consumers also like the fact that Google’s search results for a restaurant or a museum offer directions to the place, which implicates the self-preferencing of Google Maps.[132]^,[133]

DCRs’ rigidity comes, at least partially, from the fact that regulators act with limited information (because they design the rules to be applied to an activity before that activity takes place). In the case of antitrust laws, agencies and courts apply the law to activities whose effects can be assessed, if imperfectly. In that sense, antitrust laws are more precise than DCRs, which rest on presumptions that certain categories of conduct are generally harmful:

… in real economies with positive transactions and information costs, the performance of the two systems will differ. Because ex-post liability systems evaluate the activities of firms later in time after information on the effects of an activity has been revealed, the information advantage favors the use of ex-post liability systems when there is heterogeneity that is known to the regulated firms (but not the regulator) ex-ante.[134] (emphasis added)

Moreover, antitrust laws are more flexible than ex-ante regulation and more likely to be appropriate for a broader range of markets and business models.^[135] As Richard Posner illustrates, while per-se rules are generally simpler and cheaper to enforce, they tend to be either underinclusive or overinclusive. When the application of such rules is determined by facts like a platform’s size or numbers of users, which are disconnected from its goals, they are “especially apt to fail.”[136]

As Geoffrey Manne has pointed out, the “common-law approach” of antitrust can be a form of error cost avoidance, leading to less Type I errors than is the case with regulation.[137] Since the “specification of detailed, ex-ante rules will ensure costly, erroneous outcomes where conduct is not clearly harmful, our understanding of its effects is indeterminate, or technological change alters either the effects of certain conduct or our understanding of it.”[138] Moreover, a case-by-case approach “is readily amenable to Bayesian updating, and as more information is gleaned (both through experience and the development of economic science), the common law approach incorporates it into the analysis.”[139]

It is important to note here that most of the practices banned by the DMA and similar regulations (and proposals) around the world are vertical restraints (contracts or other type of restraints between economic agents at different levels of the production chain), that therefore warrant a “rule-of-reason” analysis. As Jonathan Barnett explains:

The predominance of the rule of reason concerning these practices rests on a solid evidentiary foundation. Scholarship by economists and legal academics has shown that vertical restraints typically fall into the category of difficult-to-diagnose, lower to moderate-risk practices identified by Judge Taft in 1898. The most comprehensive and widely-cited review of the literature finds that, while there  is variation in theoretical models of the competitive effects of tying practices, “the empirical evidence concerning the effects of vertical restraints on consumer well-being is surprisingly consistent … when manufacturers choose to impose such restraints, not only do they make themselves better off but they also typically allow consumers to benefit from higher quality products and better service provision.” Given the complexity involved in diagnosing the competitive effects of vertical restraints, coupled with a body of evidence indicating that these practices typically benefit consumers in real-world markets, the courts’ and agencies’ fact-intensive, case-specific approach is a prudent course of action.[140] (citations omitted, italics in the original)

Even the 2019 “Cremer Report,”[141] which concluded that there are aspects of digital markets where “regulation might be appropriate,” acknowledged the relative superiority of antitrust laws to deal with any possible competition problem in digital markets:

Competition law can and should, for the foreseeable future, continue to accompany and guide the evolution of the platform economy. Its case law method is particularly well suited for the current state of evolution of the platform economy: a still experimental stage, where the efficiencies of different forms of organisation are not yet well understood and our knowledge and understanding still needs to evolve step by step.[142]

In Europe and the United States, the myriad cases initiated indicate that the “antitrust toolkit” is sufficient to address possible competition concerns in digital markets. As Giuseppe Colangelo explains,[143] the obligations introduced by the DMA appear to be based on past and current antitrust investigations. For example, the DMA prohibition on combining personal data across platforms appears to have been inspired by the Bundeskartellamt case against Facebook;[144] the prohibition on most-favored nation (MFN) clauses resembles the e-book case against Amazon.[145] The aforementioned rule on self-preferencing appears to have been inspired by the Google Shopping case.[146] Radic, Manne, and Auer also note that:

… the DMA covers conduct identical to that which the Commission has pursued under EU competition law. For instance, Google Shopping was a self-preferencing case that would fall under Article 6(5) of the DMA.130 Cases AT.40462 and AT.40703, which related to Amazon’s use of nonpublic trader data when competing on the Amazon Marketplace and its supposed bias when awarding the “Buy Box,” would now be caught by Articles 6(2) and 6(5) of the DMA.131 Apple’s anti-steering provisions—for which the Commission issued a fine mere days before the DMA’s entry into force—would be prohibited by Article 5(4) of the DMA.[147]

The fact that these cases have not been summarily dismissed, and that some cases have been adjudicated in the European Commission’s favor, tells us that the substantive rules and evidentiary burden of EU antitrust laws can be applied to digital markets. Therefore, it would be wise for Latin America to, at the least, wait for the outcome of the pending antitrust cases in Europe and the United States before rushing to adopt DCRs covering similar conduct. That would grant time to observe and analyze the results of the DMA’s “natural experiment” before opting to regulate digital markets.[148]

Another relative advantage of antitrust is that the risk is low that it would encourage “rent seeking.” Indeed, in a paper assessing the relative benefits and costs (and possible complementarity) of antitrust and regulation in network industries, Dennis Carlton and Randall Picker conclude that antitrust laws are less susceptible to “regulatory capture” because regulation to affect special interests more directly.[149] Jean Tirole also underscores that regulation creates concerns about regulatory capture.[150]

From the perspective of the rule of law, it is also important to point out that DCRs tend to grant enforcers a great degree of discretion, which in turn fosters incentives for arbitrariness and abuse. This, of course, depends on how a specific piece of regulation is drafted and implemented. Policymakers should be cautious about following the DMA template. As Pablo Ibañez Colomo points out, “the Commission is not subject to the boundaries defined over the years in the case law. [The DMA] expands the leeway through very choice of goals and benchmarks, which are inherently broad and vague.”[151] The European regulation does not contemplate clear and specific requirements that trigger its application, but rather:

… identifies a number of factors that the Commission is entitled to consider in its analysis, such as the size of the undertaking, the features of the activity (for instance, whether there are network effects or data-driven advantages and whether there is customer lock-in). However, nowhere does Article 3(8) provide that all factors be present, or that they be weighed against one another. It is explicit about the fact that it may take into account ‘some or all’ of them.[152]

To summarize, despite the alleged “technical challenges” that digital markets present to the methodology and procedures of antitrust, it remains much better suited to address any possible competition issues than regulation. As Richard Posner concluded more than 20 years ago, “antitrust doctrine is sufficiently supple, and sufficiently informed by economic theory, to cope effectively with the distinctive-seeming antitrust problems that the new economy presents.”[153]

C. Is Latin American Competition Law up to the Task?

The reality of antitrust enforcement in Latin America suggests an even more cautious approach. While the legal toolkit available to Latin American competition agencies is more or less the same as it is in Europe and the United States (that is, without approving DCRs or specific provisions for digital markets within competition law), such agencies’ experience and budgets is significantly more modest.

According to a 2019 OECD report, “competition authorities in Latin America and the Caribbean have dealt with very few enforcement cases involving digital platforms to date.”[154] A more recent report from Juan David Gutiérrez and Manuel Abarca confirms that finding:

Only Argentina, Brazil, Chile, Mexico, and Uruguay have conducted and finalised antitrust investigations in cases that involve digital markets. In other words, between 2015 and 2022, only 22 per cent of LAC’s jurisdictions studied in this research (five out of 23) adopted definitive decisions in antitrust cases in digital markets.[155]

Andrés Fuchs and Nader Mufdi similarly note that Latin American agencies have scant experience with antitrust enforcement in digital markets:

… the list of cases included in a recent report published by the Free Competition Program of the Pontificia Universidad Católica de Chile illustrates in a good way the differences that exist in number and content among cases that have taken place in Europe and the United States, and the LAC region as a whole. Certainly, beyond a couple of procedures carried out by the Conselho Administrativo de Defesa Econômica (CADE) against Google, in Latin America it has not been possible to find a case that challenges the large platforms that capture the attention of the authorities of the United States and Europe.

In short, if observed as a whole, the Latin American reality is still far from the major cases that draw the attention of the institutions, media and academia of the countries that have traditionally taken the lead in competition law. Although it is possible to observe the existence of a relevant number of cases that would include some digital component, the truth is that, both in quantity and relevance, the cases that we observe in Latin America differ considerably from the legal battles that today take place in the developed world. Certainly, the differences that persist in the cases of Latin America compared to those that have taken place in Europe and the United States are consistent with the lag experienced by digital markets in this part of the world compared to the economies in which, at date, its proliferation has been more significant.[156]

Of course, the relative scarcity of antitrust enforcement in digital markets is not necessarily negative; fewer cases initiated does not necessarily mean there has been underenforcement. It could very well be that there is not enough merit to initiate more antitrust cases in digital markets (i.e., that harmful behavior is being deterred or precluded by competition on the market), or that Latin American authorities can simply stand back and reap the benefits of enforcement initiatives elsewhere.

As Fuchs and Mufdi note, the differences in enforcement could be explained by the “lag” in these markets. Latin America does not have (perhaps apart from Mercado Libre, the Colombian delivery app Rappi, and some important actors in the digital-payments sector) many notable digital platforms that could plausibly initiate antitrust conflicts with “Big Tech” companies. It also does not have many major “complementors” to such companies (such as Yelp or Spotify) that could compete with them in their “niche” markets.

Another hypothesis is that Latin American agencies are using their (relatively scarce) resources efficiently and prioritizing the prosecution of cases in markets where the payoff could be better. Agencies already constrained by limited resources should prioritize that conduct that most harms consumers (such as cartels) and markets that could be “growth multipliers” like transportation and logistics. As the World Bank has emphasized:^[157]

While there are many ways to promote competition, tackling cartels can yield immediate and tangible benefits, especially for poor households, with little risks of unintended consequences for the business environment. Worldwide, much of the recent policy dialogue on competition issues has focused on information technology, especially social networks and online commerce platforms, as well as the broader rise of global corporate market power. Policies designed to address the potential anticompetitive impacts of these developments are complex and risk undermining the business environment by weakening incentives for firms to innovate and grow. By contrast, cartels can be identified and eliminated, or prevented from forming, through relatively simple, well-established policies and enforcement mechanisms.

Despite the relatively small number of cases brought by competition agencies in Latin America, there are a few cases that allow us to conclude that, as in the EU, antitrust law can be used to address types of conduct covered by DCRs.

In Argentina, for instance, the National Commission for the Defense of Competition (CNDC, after its Spanish acronym) launched an investigation and issued interim measures ordering WhatsApp Inc. not to update its terms and conditions in ways that would allow sharing data collected through that platform with the other integrated platforms similarly owned by Meta—notably, Facebook and Instagram.[158] According to the decision, which applies “standard” Argentinian competition law, such conduct is an “unreasonable collection of data” that would be an “exploitative abuse of a dominant position” by Meta. The decision is not only similar to the Bundeskartellamt decision against Meta’s Facebook mentioned in Section 2B, but it also cites that decision. It is also similar to the data-sharing prohibition contained in Article 5.2(c) of the DMA.

The Brazilian Administrative Council for Economic Defense (CADE, after its Portuguese acronym) has been the most active agency in the region.[159] It initiated cases regarding the MFN clauses applied by online travel agencies (OTA) like Expedia do Brasil, Decolar.com and Booking.com.[160] This move resembled similar cases initiated in the European Union, and the prohibition of MFN clauses contained in Article 5.3 of the DMA. Brazil has also seen a “self-preferencing” case in which the e-commerce media group Informacao e Tecnologia Ltda. (owner of the price-comparison websites Buscapé and Bondfaro) alleged that Google was abusing its dominant position by favoring its own process-comparison service with a privileged position in search results.[161] Again, this was another case that resembled both a prior European competition-law case and a prohibition contained in the DMA and most DCRs.

While both cases were dismissed in the end, they were not dismissed on grounds that the facts in the case were outside the scope of competition law, or because it was exceedingly difficult to analyze those. They were dropped because the parties reached a settlement in the first case and because CADE determined that there were efficient alternatives to Google’s products and data in the second.[162] As mentioned, nothing in the substance or the procedural aspects of Latin American competition law should lead anyone to conclude that antitrust law cannot be used to address any potentially anticompetitive conduct by digital platforms.

Another important consideration when analyzing proposed DCRs in Latin America is the institutional constraints that Latin American competition agencies already face. In those jurisdictions that have approved DCRs, it has been necessary to create new offices or hire significantly more personnel to enforce these additional rules.[163] Agencies in Latin America already face significant budgetary and human-capital constraints to discharge their existing duties. As explained by a recent World Bank report:

LAC competition agencies are understaffed and underfunded compared to peers from other regions (figure 2.11). The average competition budget is lower in LAC than the OECD and significantly affected by a few larger jurisdictions in LAC with a particularly high competition budget.51 While budgets alone do not provide a flawless gauge of the region’s antitrust activity and agencies’ ideal size in staffing and budget is justifiably tied to the size of the local industry, these budget and staffing data offer insights into agencies’ capacity and positioning within governmental policy priorities.[164]

For example, INDECOPI, the Peruvian competition agency, has just 46 staff dedicated to enforcing antitrust laws (including merger control, market studies, and anticompetitive conduct). This amounts to only 1.4 staff per million inhabitants, significantly smaller than the OECD average of nine staff per million. The Latin American average is four staff per million inhabitants, which is more than Peru but still less than half the OECD average.[165]

Beyond the institutional constraints, Latin American competition agencies should probably focus on more humble priorities than “tame huge global digital platforms.” A recent World Bank report posits that competition may be the missing ingredient for growth in the region. It finds that competition is less vigorous in Latin American markets than in peer nations in other regions, with fewer ex-officio investigations, less use of leniency programs, and fewer dawn raids. This suggests that many cartels remain undetected.[166]

It would be wise to ensure that Latin American competition agencies have sufficient budgets and human capital to fulfill their existing mission before even considering assigning them new tasks.

III. Reforms to Address the Real Bottlenecks in Latin American Digital Markets

While digital markets in Latin America appear to be “reasonably competitive,” as noted in Section 1B, the region does not need to be complacent on this front. In line with the shortcomings and barriers identified in Section IA, much needs to be done to increase the positive impact that digital economies could have on the region’s welfare, productivity, and growth.

A 2019 OECD report about the digital transformation of Latin America lists a number of key policy areas that the countries in the region should consider:

…in order to create and maintain a healthy digital environment that promotes diversity and helps seize the benefits of the digital transformation, including productivity growth. These include: enhancing access to broadband networks to reduce digital divides, strengthening the diffusion of digital technologies, fostering healthy business dynamism and efficient resource reallocation to enable the growth of digitally intensive firms and SMEs, supporting the development of skills and finally, creating new opportunities for trade.[167] (emphasis in the original)

Among these potential reforms, the most urgent—especially considering the implementation time it would require—is to reform telecommunications regulation in order to promote more investment in infrastructure and universal access. While the number of people in Latin America with mobile-internet access has nearly doubled in recent years, significant gaps in coverage and usage remain. According to GSMA Intelligence:

Some 190 million people across the region (of the 230 million unconnected), in both urban and rural areas, live in locations with mobile internet network coverage but do not access the internet. Despite a continued decline in service prices, this usage gap remains due to a lack of affordability. Low income levels in some population segments are an important factor, but regressive, short-termist tax policies also artificially raise the price of internet connectivity for low-income populations.[168]

The World Bank Latin American Economic Outlook 2020 report also underscored that:

Access to broadband and connection quality remain uneven among and within LAC countries. There are several initiatives to improve connectivity, primarily in broadband, along with specific initiatives to facilitate infrastructure deployment by easing the rights of way.[169]

The report mentions that “regulatory frameworks must promote competition and investment arising from the increasing convergence of networks and services in the digital economy.”[170] But it also emphasizes that “a stable and predictable regulatory framework fosters long?term investment in communication infrastructure and digital innovation”[171] and that:

In a sector where return on investment is often measured in decades, guaranteeing regulatory stability, transparency and legal certainty helps firms prepare business plans and ultimately facilitates investment.[172]

The report also detailed several strategies to expand internet access and use for disadvantaged populations, both on the demand and supply side, which could be replicated in other countries:

On the demand side, Latin Americans have difficulty accessing the Internet, mostly owing to the cost of ICT devices and provider fees. Income inequality exacerbates affordability barriers, as low?income households tend to have a much lower income than the average (OECD/IDB, 2016). On the supply side, among other barriers, limited telecommunications infrastructure, tax burdens, inefficiencies in service provision, price distortions due to lack of competition and adequate regulation limit the reach of ICT services for a significant share of the population (West, 2015).

Supply?side initiatives that have increased Internet affordability include enhanced competition, effective broadband expansion strategies, efficient spectrum allocation and infrastructure?sharing models (A4AI, 2019). Peru’s Internet para Todos (Internet for all) aims to bring 4G mobile Internet access to 6 million people in more than 30 000 rural areas by the end of 2021. This partnership between Telefónica, Facebook, IDB (Inter?American Development Bank) Invest and CAF – Development Bank of Latin America – enables operators to use communication infrastructure to expand coverage in rural areas. Telefónica has 3 130 towers across Peru; Internet para Todos aims to install an additional 866 by 2021. This programme also constitutes a growth opportunity for Telefónica by offering the possibility to test new business models and technologies in new locations and potentially expand the customer base in new markets (MAEUEC, 2020). The long?term goal is to replicate the approach in other LAC countries, where some 100 million still have no Internet access (IDB, 2020).[173]

Another potential barrier to digital markets in Latin America (which often need the support of online-payment solutions) is financial inclusion:

Data from the World Bank shows that 55.1% of the Latin America and Caribbean population over 15 had an account with a financial institution or a mobile-money service provider in 2017. The distribution of account ownership however varies across countries ranging from 30% to over 70% in some countries (see Figure 3 below). In addition to a bank account, having a credit and/or a debit card are also important means to make purchases online. These means of payment remain relatively limited in Latin American and Caribbean countries, suggesting an important link between Fintech market development and access to e-commerce.[174]

Lotitto and Diaz also highlight this shortcoming:

A consistent feature of the marketplace landscape in the LAC region is the prevalence of websites that do not allow users to finalize transactions digitally. Most likely, this reflects gaps in the development and adoption of electronic payments solutions and integration of marketplaces with logistics solutions. These two dimensions are key to fully develop e-commerce ecosystems.[175]

Even more fundamental than improved physical infrastructure are the region’s deficiencies in basic “legal infrastructure” for entrepreneurship (property rights, contract enforcement, a proper rule of law). In his “The Mystery of Capital,” Hernando de Soto contemplated why only the United States has produced a Bill Gates, writing:

Apart from his personal genius, how much of his success is due to his cultural background and his “Protestant ethic”? And how much is due to the legal property system of the United States?

How many software innovations could he have made without patents to protect them? How many deals and long-term projects could he have carried without enforceable contracts? How many risks could he have taken at the beginning without limited liability systems and insurance policies?[176]

If Latin America wants entrepreneurs and creators like Bill Gates, Steve Jobs, Sergey Brin, Larry Page, or Mark Zuckerberg, the region’s governments must start with the essential reforms needed to establish a proper rule of law. The countries of Latin America should reform their judiciary and administrative procedures to protect property rights and enforce contracts effectively. They should create a friendly business environment, with less burdens and red tape, and better public services. Currently, the region is far from that standard. Chile is the best-positioned Latin American country in the World Bank’s “Ease of Doing Business” survey, ranking in 59th place.[177]

According to the OECD’s 2023 economic survey for Peru:

… weakness of the rule of law reduces the attractiveness of Peru’s business environment. A strong rule of law is supposed to not only protect private parties from arbitrary action and infringement of property rights by the state, but also to ensure a level playing field for economic interactions between private parties. It provides for security of property rights and contract enforcement (…), necessary incentives for private sector investment and innovation. However, in Peru, high corruption and unpredictable and inefficient judicial system result in weak de facto property rights, as perceived by the business community (…). The poor efficiency of the legal framework in settling disputes (…) limits businesses’ willingness to bear the risk of, for example, contracting with unknown business partners, or hiring formal workers given high legal uncertainty about the interpretation of strict employment protection regulations.[178]

Education and intellectual property also play important roles. Another OECD report focused on public policies to foster digital transformation noted that it is crucial to “(s)trengthen the diffusion of digital technologies and related practices and business models across the economy (…) fostering investment in tangible (machinery and equipment) and in intangible capital, notably in complementary assets such as skills, organizational changes, process innovation, intellectual property, R&D, new systems and new business models,”[179] as well as to “(s)upport the development of skills that people will need to succeed in the digital world of work, notably sound cognitive skills, ICT skills, specialist skills and the ability to cope with change and keep learning.”[180]

The OECD’s “Shaping the Digital Transformation” report suggested that “(p)olicies to promote ICT investment and the diffusion of digital toots should pay particular attention to the challenges faced by SMEs to adopt and benefit from ICTs”[181] and that “(t)o help SMEs overcome barriers to effective use of advanced digital tools, governments need to enhance support and better target policies to SMEs.” [182] Examples of such approaches include schemes to facilitate the adoption of tools that may be new to SMEs, like cloud computing; promoting better use of intellectual property and other intangibles (for instance, reducing the cost to register a brand); creating exemptions from certain rules for SMEs in order to facilitate regulatory compliance; and implementing programs to raise awareness of and create opportunities for linkages between SMEs and larger firms.[183]

Regarding education, the same report proposed:

Skills-enhancing programmes for youth that combine classroom teaching, workplace learning and job search services help young Latin Americans transition to employment. Training interventions for youth in the region, such as Jóvenes con más y mejor trabajo in Argentina, ProJovem in Brazil, Plan Nacional de Lenguas Digitales in Chile, Jóvenes en Acción in Colombia, Puntos Mexico Conectado in Mexico and ProJoven in Peru, prove that comprehensive interventions have positive results on youth employability, earnings and especially job quality (ILO, 2016a). Public spending in training programmes in LAC ranges from 0.02% of GDP in Peru to more than 0.30% in Colombia and Costa Rica, compared to an OECD average of 0.14%. At secondary and tertiary levels, Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico and Peru are making significant advances in coverage, quality and adequacy of the programmes to meet the needs of the private sector.

Training programmes that respond to the needs of the marketplace, thanks to private sector participation in their design and implementation, facilitate youth’s transition into quality jobs and better earnings. Impact evaluations of the early experiences of these programmes in LAC show that coordinating course content with the private sector as well as providing participants with a stipend, are central for programmes to work well. Although foundational skills are important, individuals should be trained to participate in knowledge-based and skills-based economies. General education and TVET should expand their links with the region’s productive sector to underpin on-the-job-training systems, which should be a cornerstone of education and training across the life cycle.[184]

Upgrading human capital is paramount to maximizing technology’s benefits for productivity. But in addition to fostering specific skills, what is needed more generally is:

…improving Latin American youth’s skills involves strengthening the coverage and quality of the education system and promoting lifelong comprehensive skills-enhancing policies. Broader reforms of the education system are expected to increase access to, and quality and pertinences of, primary, secondary and tertiary education.[185]

IV. Conclusion

The case for ex-ante regulation of digital markets is weak, even in mature digital markets like the United States and Europe. It is weaker still in regions like Latin America, which do not present a general “lack of competition” problem or market failures in such markets. Some digital markets even show vibrant competition, as in the case of e-commerce, FinTech, ride-hailing, and food delivery.

Latin America has more pressing problems to address. Before even thinking of regulating digital markets, the region’s policymakers should be thinking about ways to attract companies operating in digital markets to invest in the region[186] and should facilitate the creation of new ones. For that, legal reform is indeed needed. But not to the antitrust laws, and certainly not to implement DCRs. The focus should instead be on policies like implementing proper “rule-of-law” mechanisms, removing regulatory barriers, improving access to infrastructure, increasing the use of telecommunications networks, and fostering better access to education (both in general and specifically regarding the proper skills to use digital products and services).

Rather than inviting a “Regulatory Reconquista” from Europe in the form of DMA-like regulation, Latin America should follow its own path. Before any new regulation is to be approved, Latin American policymakers should follow their own analysis and rationale. At the very least, Latin America should take a cautious “wait and see” approach to the DMA’s implementation in the EU, and the adjudication of major pending antitrust cases against digital platforms in both Europe and the United States.

[1] Jan Kleinheisterkamp, Latin America, Influence of European Private Law, in The Max Planck Encyclopedia of European Private Law (Jürgen Basedow et al., eds., 2012), at 1032.

[2] See Arturo J. Carrillo & Matías Jackson, Follow the Leader? A Comparative Law Study of the EU’s General Data Protection Regulation’s Impact in Latin America, 16 Vienna J. Int’l Const. L. 177 (2022).

[3] See, e.g., Jian Jia, Ginger Zhe Jin, & Liad Wagman, The Short-Run Effects of GDPR on Technology Venture Investment (Nat’l Bureau of Econ. Research Working Paper No. 25248, 2019), https://ssrn.com/abstract=3278912; Garrett Johnson, Economic Research on Privacy Regulation: Lessons From the GDPR and Beyond, in The Economics of Privacy (Avi Goldfarb & Catherine Tucker eds., 2024); see also, more generally, Michal Gal & Oshrit Aviv, The Competitive Effects of the GDPR, 16 J. Competition L. & Econ. 349 (2020).

[4] Alfonso Miranda Londoño, Competition Law in Latin America. Main Trends and Features 5, Cent. Estud. Derecho Competencia (Apr. 2012), available at https://centrocedec.files.wordpress.com/2010/06/cornell-lacompetition-20123.pdf.

[5] Julian Peña, Las Políticas De Competencia en América Latina Post-Consenso de Washington, Cent. Compentencia (Mar. 31, 2021), at 7-8, available at https://centrocompetencia.com/wp-content/uploads/2021/03/Julian-Pena.pdf.

[6] See Germán Coloma, The Argentine Competition Law and Its Enforcement, in Competition Law and Policy in Latin America (Eleanor Fox & Daniel Sokol, eds., 2009), at 94; Acts 11,210 and 12,906, from 1933 and 1946, respectively, were rarely enforced.

[7] Aida Sanchez Alonso, Brussels Looks to Regain Influence in Latin America, as Leaders’ Summit Begins, Euronews (Jul. 17, 2023), https://www.euronews.com/my-europe/2023/07/17/brussels-looks-to-regain-influence-in-latin-america-as-leaders-summit-begins (“After eight years without any high-level summits, Europe wants to regain influence in the region, realising that the war in Ukraine has changed the rules of the game when it comes to geopolitics. China has also been massively investing in the region, something Brussels is looking to counter.”)

[8] Thibault Schrepel, The Expected Impact of “Great Power Competition” on Antitrust Policy, Network L. Rev. (May 17, 2023), https://www.networklawreview.org/great-power-competition.

[9] Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on Contestable and Fair Markets in the Digital Sector and Amending Directives (EU) 2019/1937 and (EU) 2020/1828, 2022 O.J. (L 265) 1 (hereinafter “DMA” or “Digital Markets Act”).

[10] Barbara Moens & Paola Tamma, Macron and Merkel Defy Brussels with Push for Industrial Champions, POLÍTICO EU (May 18, 2020), https://www.politico.eu/article/macron-and-merkel-defy-brussels-with-push-for-industrial-champions.

[11] Meredith Broadbent, Implications of the Digital Markets Act for Transatlantic Cooperation, Cent’r for Strategic & Int’l Studies (Sep. 15, 2021), at 19, https://www.csis.org/analysis/implications-digital-markets-act-transatlantic-cooperation.

[12] The term “digital competition regulation” or “DCR” will be used to differentiate the ex-ante regulation of digital markets for purposes connected (even if only purportedly) to competition from other regulations intended to serve other policy goals, such as the General Data Protection Regulation (Regulation (EU) 2016/679) or the EU AI Act. DCRs include both extant rules and those currently under consideration. Context on legislative status will be provided where available and appropriate.

[13] Lazar Radic, Geoffrey A. Manne, & Dirk Auer, Regulate for What? A Closer Look at the Rationales and Goals of Digital Competition Regulations, Int’l Ctr. L. Econ. (Aug. 1, 2024), forthcoming 22 Berkeley Bus. L.J., https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4929628.

[14] See Press Release, Países de la Comunidad Andina Dialogaron Sobre Libre Competencia Comunictaria y Mercados Digitales, Comunidad Andina (Nov. 28, 2022), https://www.comunidadandina.org/notas-de-prensa/paises-de-la-comunidad-andina-dialogaron-sobre-libre-competencia-comunitaria-y-mercados-digitales (free translation of the following text in Spanish: “Estamos seguros de que esta iniciativa fortalecerá a nivel regional el conocimiento especializado de los mercados digitales y la aplicación en la normativa comunitaria para la investigación y sanción por prácticas anticompetitivas y de abuso de posición de dominio en la región andina, sin perjuicio, de evaluar la posible elaboración de una normativa exclusiva para mercados digitales, como parte de nuestra agenda.”)

[15] Estrategia Digital, Com. Fed. Competencia Econ. (COFECE), (Mar. 30, 2020), available at https://www.cofece.mx/wp-content/uploads/2020/03/EstrategiaDigital_V10.pdf.

[16] Initially proposed as part of the final report of the UK’s Digital Competition Expert Panel (also known as the “Furman report”), a Digital Markets Unit is authorized to be created within the Competition and Markets Authority by virtue of the Digital Markets, Competition and Consumers Bill. See Jason Furman et al., Unlocking Digital Competition: Report of the Digital Competition Expert Panel (Mar. 2019), available at https://assets.publishing.service.gov.uk/media/5c88150ee5274a230219c35f/unlocking_digital_competition_furman_review_web.pdf.

[17] COFECE, supra note 15, at 12.

[18] Estudio de Mercado del Sector Fintech en el Peru, Inst. Nac. Def. Competencia Prot. Prop. Intelect. (INDECOPI), (Sep. 30, 2023), at 138-139, available at https://cdn.www.gob.pe/uploads/document/file/6215160/5476585-estudio-de-mercado-del-sector-fintech-en-peru.pdf?v=1713476412.

[19] PL 2768/2022, Dispõe Sobre a Organização, o Funcionamento e a Operação das Plataformas Digitais Que Oferecem Serviços ao Público Brasileiro e dá Outras Providências, Câmara dos Deputados (Nov. 10, 2022), available at https://www.camara.leg.br/proposicoesWeb/fichadetramitacao?idProposicao=2337417.

[20] Id. at 9 (free translation of the following text in Portuguese: “Já na Comissão Europeia, o ‘Digital Markets Act,’ direcionado aos chamados ‘controladores de acesso’ (gatekeepers) no mundo digital, é bastante detalhado e foi aprovado em 2022. Acreditamos que cabe introduzir uma regulação na linha da Comissão Européia, mas de forma bem menos detalhada. Isso porque estamos lidando com questões de extrema relevância, que exigem respostas regulatórias bem mais rápidas do que o que é possível na defesa da concorrência, mas suficientemente novas para indicar não ser cabível colocar uma camisa de força ex-ante nos agentes econômicos, com uma série de proibições absolutas.”)

[21] Plataformas Digitais: Aspectos Economicos e Concorrenciais e Recomendacoes para Aprimoramentos Regulatórios No Brasil, Minist. Fazenda (Oct. 10, 2024), available at https://www.gov.br/fazenda/pt-br/central-de-conteudo/publicacoes/relatorios/relatorio-plataformas-consolidado.pdf.

[22] Economía Digital Para el Cambio Estructural y la Igualdad, Econ. Comm. Lat. Am. Caribb. (ECLAC), (2013), at 97, available at https://repositorio.cepal.org/server/api/core/bitstreams/ce419364-f83a-4ef3-a9dd-91c9c295b273/content (free translation of the following text in Spanish: “Después de dos décadas de implementación de políticas que han enfatizado el desarrollo de la infraestructura, el acceso a Internet y la difusión de las TIC, la evidencia muestra una importante participación de la economía digital en el PIB. Estimaciones de la CEPAL indican que, en promedio para Argentina, Brasil, Chile y México, alcanza al menos a 3,2%, cifra no despreciable si se considera que en los 27 países de la Unión Europea el porcentaje correspondiente es 5%.”)

[23] Id. at 39.

[24] Id.

[25] Id.

[26] Latin American Economic Outlook 2020: Digital Transformation for Building Back Better, Organ. Econ. Co-oper. Dev. (Sep. 24, 2020, https://doi.org/10.1787/e6e864fb-en.

[27] Id. at 83.

[28] Id. at 94.

[29] Metodología del Índice de Desarrollo del Ecosistema Digital (IDED), Banco Desarro. Am. Lat. Caribe (Jan. 2017), available at https://scioteca.caf.com/bitstream/handle/123456789/1052/METODOLOGIA%20DE%20IDED.pdf.

[30] OECD, supra note 26, at 96.

[31] Individuals Using the Internet (% of population) – Latin America & Caribbean, World Bank, https://data.worldbank.org/indicator/IT.NET.USER.ZS?locations=ZJ (last visited Sep. 29, 2024).

[32] OECD, supra note 26, at 96.

[33] Id. at 127-128.

[34] Shaping the Digital Transformation in Latin America: Strengthening Productivity, Improving Lives, Organ. Econ. Co-oper. Dev. (2019), at 17, https://www.oecd-ilibrary.org/docserver/8bb3c9f1-en.pdfexpires=1727657393&id=id&accname=guest&checksum=15F0525182C411C03A98395D05010716.

[35] Id. at 57.

[36] Id. at 13.

[37] Id. at 75.

[38] Id. at 75-76.

[39] In Section 2A, we explain why regulation of digital markets is not warranted under the standard “market failure rationale.”

[40] See, infra, Section 2.

[41] The DMA Art. 2(2) defines “core platform services” as including: online intermediation services, online search engines, online social-networking services, video-sharing platform services; number-independent interpersonal communications services; operating systems; web browsers; virtual assistants; cloud-computing services; and online advertising services, including any advertising networks, advertising exchanges, and any other advertising-intermediation services provided by an undertaking that provides any of the abovementioned core platform services.

[42] Other than the legal research and the advocacy reports by competition agencies cited in Section 2C.

[43] Richard A. Posner & William M. Landes, Market Power in Antitrust Cases, 94 Harv. L. Rev. 937, 947-951 (1980).

[44] Search Engine Market Share South America– August 2024, Statcounter, https://gs.statcounter.com/search-engine-market-share/all/south-america (last visited Sep. 29, 2024).

[45] In 2014, it had nearly the same market share, 93.25%; see Search Engine Market Share South America– Jan – Dec 2014, Statcounter, https://gs.statcounter.com/search-engine-market-share/all/south-america/2014 (last visited Sep. 29, 2024).

[46] Desktop Operating System Market Share South America, Statcounter, https://gs.statcounter.com/os-market-share/desktop/south-america (last visited Sep. 30, 2024).

[47] Id.

[48] Mobile Operating System Market Share South America- Aug 2023-Aug 2024, Statcounter, https://gs.statcounter.com/os-market-share/mobile/south-america (last visited Sep. 30, 2024).

[49] Imed Bouchrika, Mobile vs Desktop Usage Statistics for 2024, Research.com (Jun. 13, 2024), https://research.com/software/mobile-vs-desktop-usage.

[50] Jonathan Barnett, Illusions of Dominance: Revisiting the Market Power Assumption in Platform Ecosystems, 86 Antitrust L. J. 1, 13 (2024).

[51] See note 100 and accompanying text.

[52] Social Media Stats South America- Aug 2023-Aug 2024, Statcounter, https://gs.statcounter.com/social-media-stats/all/south-america (last visited Sep. 29, 2024). Computation of market-shares statistics does not include TikTok, but does include YouTube.

[53] Matteo Ceurvels, Facebook and Twitter Poised to Shed Users in Latin America, Emarketer (Apr. 10, 2023), https://www.emarketer.com/content/facebook-twitter-due-shed-users-latin-america.

[54] See Katharina Buchholz, The Rapid Rise of TikTok, Statista (Oct. 7, 2022), www.statista.com/chart/28412/social-media-users-by-network-amo.

[55] Estefanía Lotitto & Bernardo Díaz de Astarloa, The Landscape of B2C E-Commerce Marketplaces in Latin America and the Caribbean, Econ. Comm. Lat. Am. Caribb. (ECLAC), (2023), at 13, https://www.cepal.org/es/node/58098.

[56] Id. at 32.

[57] Latin American and Caribbean Competition Forum – Session III: Practical Approaches to Assessing Digital Platform Markets for Competition Law Enforcement, Organ. Econ. Co-oper. Dev. (Sep. 2019), at 12, available at https://one.oecd.org/document/DAF/COMP/LACF(2019)4/en/pdf.

[58] See Landes & Posner, supra note 43, at 950. Jonathan Barnett makes a similar point regarding cloud computing: “Regulators assert that cloud providers have natural incentives to exploit locked-in users. In a market in which users can multihome across cloud providers and retain data on-premises, this assertion does not withstand scrutiny. A provider that extracts immediate gains by degrading the quality of service for existing clients—an observable signal of provider opportunism—would be short-sighted since it would likely sacrifice a far larger stream of future gains as a result of decreased usage by existing clients and lost usage from potential clients. Given that the cloud market is still in its relatively early stages, the number of potential clients that have not yet migrated to cloud based data services almost certainly exceeds by a large measure the number of existing clients.” See Barnett, supra note 50, at 47.

[59] See Hovenkamp, infra note 92 and accompanying text; see also Daniel D. Sokol & Jingyuan (Mary) Ma, Understanding Online Markets and Antitrust Analysis, 15 Nw. J. Tech. & Intell. Prop. 43 (2017).

[60] Raymundo Campos, Alejandro Castañeda, Aurora Ramírez, & Carlos Ruiz, Amazon’s Effect on Prices: The Case of Mexico (El Colegio de Me?xico, Centro de Estudios Econ. Working Paper No. II-2022, 2022), available at https://cee.colmex.mx/dts/2022/DT-2022-2.pdf.

[61] OECD, supra note 57 at 13.

[62] Aeropost Ingresó a Competir en el Mercado de E-Commerce en el Perú, Semana Económica (Nov. 23, 2023), https://semanaeconomica.com/sectores-empresas/comercio/aeropost-ingreso-a-competir-en-el-mercado-de-e-commerce-en-el-peru.

[63] Id.

[64] OECD, supra note 57, at 114-15.

[65] See INDECOPI, supra note 18, at 24-25.

[66] Bas B. Bakker et al., The Rise and Impact of Fintech in Latin America, Fintech Notes (2023), https://www.elibrary.imf.org/view/journals/063/2023/003/article-A001-en.xml.

[67] Id.

[68] The Future Is Bright for Latin American Startups, The Economist (Nov. 13, 2023), https://www.economist.com/the-world-ahead/2023/11/13/the-future-is-bright-for-latin-american-startups.

[69] Id.

[70] Guilherme Mendes Resende & Ricardo Carvalho de Andrade Lima, Evaluating the Competition Effects of Uber’s Entry into the Brazilian Incumbent Cab-Hailing App Segment, 14 J. Competition L. & Econ. 608–637 (2018), https://academic.oup.com/jcle/article-abstract/14/4/608/5528532; Juan David Gutiérrez & Manuel Abarca, Mind the Gap: Assessing Ride-Hailing Apps in Latin America and the Caribbean, Kluwer Competition L. Blog (Mar. 17, 2023), https://competitionlawblog.kluwercompetitionlaw.com/2023/03/17/mind-the-gap-assessing-ride-hailing-apps-in-latin-america-and-the-caribbean.

[71] Scott Beyer, Latin America’s Food Delivery Wars, Catalyst (May 8, 2023), https://catalyst.independent.org/2023/05/08/latam-delivery.

[72] COFECE, supra note 15, at 6 (free translation of the following text in Spanish: “Hasta el momento, la llegada de algunos gigantes tecnológicos a los mercados mexicanos ha generado presión competitiva para las empresas tradicionales. Por ejemplo, la creciente actividad de empresas como Google y Facebook en el mercado de la publicidad puede tener como efecto que importantes empresas establecidas en este mercado enfrenten mayor competencia y trabajen arduamente por satisfacer las demandas de sus consumidores. Algo similar podría suceder en sectores como el de ventas al por menor, finanzas, movilidad y entretenimiento, cuyos mercados tradicionales presentan importantes niveles de concentración, y que con la llegada de empresas como Amazon, Uber, Cabify, Didi, diversas Fintech, Apple y Netflix podrían beneficiarse del proceso de competencia.”)

[73] Esteban Greco & María Fernanda Viecens, Economía Digital en América Latina: Reflexiones Sobre las Concentraciones Económicas en la Región, 21 Revista de Derecho Administrativo 146, 158-159 (2022), (free translation of the following text in Spanish: “Los jugadores digitales actúan como oferentes disruptivos respecto de los jugadores tradicionales. En diversos mercados se observa que son los desarrollos digitales los que ejercen presión competitiva sobre el mercado, y los que proveen productos novedosos y alternativas tecnológicas, resultando que el proceso competitivo incluye tanto a jugadores tradicionales como digitales. Entonces, en tales casos, más que mercados digitales se observan jugadores digitales irrumpiendo en mercados tradicionales y ejerciendo presión competitiva sobre oferentes establecidos.”)

[74] Giuseppe Colangelo, Evaluating the Case for Regulation of Digital Platforms, in The Gai Report on the Digital Economy (2020), at 905.

[75] Id. at 905-906.

[76] See Analytical Note on the G7 Inventory of New Rules for Digital Markets Organ. Econ. Co-Oper. Dev. (2023), available at https://www.oecd.org/competition/analytical-note-on-the-G7-inventory-of-new-rules-for-digital-markets-2023.pdf.

[77] See Bruce H. Kobayashi & Joshua D. Wright, Antitrust and Ex-Ante Sector Regulation, in The GAI Report on the Digital Economy (2020), at 869, Table 1; see also Pablo Ibañez Colomo, The New EU Competition Law (2023), at 125. (“The path eventually chosen by the Commission and the EU legislature is the enactment of sector-specific legislation, comparable in several respects to the one that applies to telecommunications and energy (electricity and gas) activities. At least formally speaking, the DMA is not a competition law regime. In fact, the Preamble itself is explicit about the role of the regulatory apparatus as a complement to Articles 101 and 102 TFEU.”)

[78] Colangelo, supra note 74, at 927-928; see also Radic, Manne, & Auer, supra note 12.

[79] Colangelo, supra note 74, at 914.

[80] See Robert Cooter & Tomas Ulen, Law and Economics (3d. ed., 2000), at 40-43; W. Kip Viscusi, Joseph E. Harrington Jr. & John M. Vernon, Economics of Regulation and Antitrust (4d. ed., 2005), 376-379.

[81] Henry Butler, Christopher R. Drahozal & Joanna Shepherd, Economic Analysis for Lawyers (3d. ed. 2014), at 125-126.

[82] Stephen Breyer, Regulation and its Reform (1982), at 15.

[83] Butler et al., supra note 81, at 26; Cooter & Ulen, supra note 80, at 40-43; Viscusi et al., supra note 80.

[84] See Breyer, supra note 82; see also Regulatory Impact Assessment: OECD Best Practice Principles for Regulatory Policy, Organ. Econ. Co-oper. Dev. (Feb. 25, 2020), https://doi.org/10.1787/7a9638cb-en.

[85] Thomas Lambert, Tech Platforms and Market Power: What’s the Optimal Policy Response? (Mercatus Ctr. Working Paper, 2021), at 14, tech-platforms-and-market-power-whats-optimal-policy-response.

[86] Radic, Manne, & Auer, supra note 12, at 21.

[87] See DMA, recitals 2-5.

[88] See Colangelo, supra note 74.

[89] See DMA, recital 2.

[90] See Breyer, supra note 82.

[91] Cooter & Ulen, supra note 80, at 40. (“The public policies for correcting the shortcomings of monopoly are to replace monopoly with competition where possible, or to regulate the price charged by the monopolist. The first policy is the rationale for the antitrust laws. But sometimes is not possible or even desirable to replace a monopoly. Natural monopolies, such as public utilities, are an example; those monopolies are allowed to continue in existence but government regulates their prices.”)

[92] Herbert Hovenkamp, Antitrust and Platform Monopoly, 130 Yale L. J. 1952, 1978 (2021).

[93] Richard Posner, Antitrust Law (2nd. ed., 2001), 248-250.

[94] Lambert, supra note 85, at 24-25.

[95] Id.

[96] Jonathan Barnett, Does the European Union’s Digital Markets Act Provide an Appropriate Model for Maintaining Competition in California’s Innovation Economy? (report commissioned by the Chamber of Progress, Dec. 2023), at 17, available at http://www.clrc.ca.gov/pub/2024/MM24-05.pdf.

[97] Id.

[98] Francesco Ducci, Natural Monopolies in Digital Platform Markets (2020).

[99] Id. at 73.

[100] Id. at 74.

[101] Id. at 95.

[102] Id. at 124.

[103] David S. Evans & Richard Schmalensee, Debunking the “Network Effects” Bogeyman, 40 Regulation 36, 39 (2017-2018), available at https://www.cato.org/sites/cato.org/files/serials/files/regulation/2017/12/regulation-v40n4-1.pdf.

[104] Christopher Yoo, Network Effects in Action, in The GAI Report on the Digital Economy (2020), at 191, available at https://gaidigitalreport.com/wp-content/uploads/2020/11/Yoo-Network-Effects-in-Action.pdf.

[105] Jean Tirole, Competition and the Industrial Challenge for the Digital Age, 15 Annual Rev. Econ. 573, 581 (2023), https://www.annualreviews.org/content/journals/10.1146/annurev-economics-090622-024222.

[106] Foo Yun Chee, Watchdog Highlights Shortcomings in EU Rules to Curb Tech Companies, Reuters (Dec. 21, 2020), https://www.reuters.com/article/business/watchdog-highlights-shortcomings-in-eu-rules-to-curb-tech-companies-idUSKBN28V1KR.

^[107] See The Evolving Concept of Market Power in the Digital Economy – Summaries of Contributions, Organ. Econ. Co-oper. Dev. (Jun. 22, 2022), available at https://one.oecd.org/document/DAF/COMP/WD(2022)63/en/pdf.

[108] Herbert Hovenkamp, Antitrust and Platform Monopoly, 130 Yale L. J. 1952, 1956 (2021).

[109] Lazar Radic, Digital-Market Regulation: One Size Does Not Fit All, Truth Mark. (Apr.17, 2023), https://truthonthemarket.com/2023/04/17/digital-market-regulation-one-size-does-not-fit-all.

[110] Alba Ribera, La Regulación de los Ecosistemas Digitales Frente a las Relaciones Complejas de los Operadores Económicos, Centro Competencia, (May 10, 2023), https://centrocompetencia.com/regulacion-ecosistemas-digitales-relaciones-complejas-operadores-economicos (free translation of the original text in Spanish: “Uno de los mayores ejemplos de la dicotomía que se erige entre los distintos tipos de consecuencias que se pueden generar por la captura regulatoria de los ecosistemas digitales lo podemos encontrar en la reciente decisión de Meta, de no lanzar su nuevo servicio Threads en el Espacio Económico Europeo. En la medida en que su servicio podría interpretarse de forma que cayera dentro de la definición de un ‘servicio básico de plataforma’ perteneciente a la categoría de redes sociales en línea’ (listada por la LMD), Meta decidió abstenerse de entrar en el mercado europeo, por la carga desproporcionada que le supondría las exigentes obligaciones impuestas por la LMD. Cabe notar que Threads es aún un servicio entrante en el mercado de redes sociales en línea, en contraste con la posición predominante ocupada por la actual X (anteriormente conocida como Twitter). De esta forma, observamos que la categorización como servicio básico de plataforma unifica y elimina todos los matices que el propio juego de la libre competencia opera respecto de servicios entrantes en los mercados.”); The service was made available in the European Union later in the year. See Imram Rahman-Jones & Tome Gerken, Threads: Meta’s Rival to Elon Musk’s X Launches in EU, Br. Broadcast. Corp. (Dec. 14, 2023), https://www.bbc.com/news/technology-67695643.

[111] Radic, supra note 109 (“While perhaps the EU—the world’s third largest economy—can afford to impose costly and burdensome regulation on digital companies because it has considerable leverage to ensure (with some, though as we have seen, by no means absolute, certainty) that they will not desert the European market, smaller economies that are unlikely to be seen by GAMA as essential markets are playing a different game.”)

[112] See Press Release, Facebook and Instagram to Offer Subscription for No Ads in Europe, Meta (Oct. 30, 2023), https://about.fb.com/news/2023/10/facebook-and-instagram-to-offer-subscription-for-no-ads-in-europe.

[113] See GDP Per Capita, Current Prices, Int’l. Monet. Fund, https://www.imf.org/external/datamapper/NGDPDPC@WEO/OEMDC/ADVEC/WEOWORLD/WE (last visited Sep. 29, 2024).

[114] See Geoffrey Manne & Dirk Auer, Brussels Effect or Brussels Defect: Digital Regulation in Emerging Markets, Truth Mark. (Dec. 20, 2022), https://truthonthemarket.com/2022/12/20/brussels-effect-or-brussels-defect-digital-regulation-in-emerging-markets. The argument presented is about South Africa, but may be even more relevant to Latin America.

[115] Ke Rong, D. Daniel Sokol, Di Zhou, & Feng Zhu, Antitrust Platform Regulation and Entrepreneurship: Evidence from China (Harvard Business Sch. Tech & Operations Mgt. Unit Working Paper No. 24-039, USC Class Research Paper No. 24-16, 2024), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4697283.

[116] Anti-Monopoly Guidelines, State Counc. People’s Repub. China, https://www.gov.cn/xinwen/2021-02/07/content_5585758.htm (last visited Dec. 20, 2024). The Chinese anti-monopoly guidelines for the platform economy do not include all the obligations and prohibitions included in digital market regulations like the DMA, but they do regulate “unfair price practices” and whether some “relevant platforms are necessary facilities.”

[117] Rong, Sokol, Zhou, & Zhu, supra note 115, at 13.

[118] Mario Draghi, The Future of European Competitiveness, Eur. Comm. (Sep. 2024), https://commission.europa.eu/topics/strengthening-european-competitiveness/eu-competitiveness-looking-ahead_en.

[119] Id., at 79.

[120] Id., at 8.

[121] Eduardo Fernández-Arias & Nicolás Fernández-Arias, The Latin American Growth Shortfall: Productivity and Inequality, (UNDP LAC Working Paper Series, Mar. 2021), at 4, 8, https://www.undp.org/latin-america/publications/latin-american-growth-shortfall-productivity-and-inequality.

[122] National Accounts Data Files, World Bank, https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?end=2023&locations=US-BR-MX-AR-PA-PE-CL-CO&name_desc=false&start=1961&view=chart (last visited Mar. 9, 2025).

[123] Colangelo, supra note 74, at 930.

[124] While acknowledging the relative “slowness” of antitrust procedures and these may be more relevant for Latin America, see Lambert, supra note 85, at 17. (“It is important, however, not to overstate these limitations. As precedents develop, antitrust becomes both more determinate (as business planners, enforcers, and courts may look to past judgments to predict how courts will assess the reasonableness of a challenged practice) and faster (as the growing pattern of precedents deters conduct likely to generate an adverse judgment). In the early days of new business models and market structures, legal expectations are unclear, and adjudication is required to establish them. As precedents develop around novel markets and practices, antitrust’s directives become clearer and generate more immediate effects.”)

[125] Regulators often run the risk of condemning business practices and models that they don’t fully understand; even the businesses that implement them don’t always fully know or understand the impact of such practices. See Frank Easterbrook, The Limits of Antitrust, 63 Tex. L. Rev. 1 (1984).

[126] Press Release, Commission Opens Non-Compliance Investigations Against Alphabet, Apple and Meta Under the Digital Markets Act, Eur. Comm. (Mar. 25, 2024), https://digital-markets-act.ec.europa.eu/commission-opens-non-compliance-investigations-against-alphabet-apple-and-meta-under-digital-markets-2024-03-25_en.

[127] See notes 107 and 108 and accompanying text.

[128] Radic, Manne, & Auer, supra note 12, at. 69.

[129] See Giuseppe Colangelo & Oscar Borgogno, App Stores as Public Utilities? Truth Mark. (Jan. 19, 2022), https://truthonthemarket.com/2022/01/19/app-stores-as-public-utilities.

[130] Randal Picker, Prepared of Randal Picker, Investigation into the State of Competition in the Digital Market Place, U.S. House Judic. Subcomm. Antitrust Commer. Adm. Law (May 11, 2020), at 31, available at https://picker.uchicago.edu/PickerHouseStatement.100.pdf.

[131] S.2992 – American Innovation and Choice Online Act, 117th Congress (2021-2022), https://www.congress.gov/bill/117th-congress/senate-bill/2992/text.

[132] See Jeremy Torres, Pourquoi Google Maps ne Fonctionne Plus Directement Dans la Recherche Google, Liberation (last updated Mar. 5, 2024), https://www.liberation.fr/economie/pourquoi-google-maps-ne-fonctionne-plus-directement-dans-la-recherche-google-et-comment-y-remedier-20240304_2WCOEUZ5IJADFMSTFPQXY2KBTA.

[133] Thomas A. Lambert, AICOA Is Neither Urgently Needed Nor Good: A Response to Professors Scott Morton, Salop, and Dinielli, Truth Mark. (Jul. 25, 2022), https://truthonthemarket.com/2022/07/25/aicoa-is-neither-urgently-needed-nor-good-a-response-to-professors-scott-morton-salop-and-dinielli.

[134] Kobayashi & Wright, supra note 77, at 869-870. Kobayashi and Wright acknowledge that “this advantage may not be important when such heterogeneity is minimal or when it cannot be predicted ex-ante by the regulated firms. Moreover, the absence of effective ex-post remedies may favor the ex-ante approach even with heterogeneity.” As we explain in Section 2B, digital markets are heterogeneous.

[135] Lambert, supra note 124, at 14 (“Because they are more rigid and prescriptive than antitrust’s flexible standards, and thus less likely to be appropriate for a broad range of diverse firms, ex ante rules addressing market power concerns tend to be limited in scope. They are usually tailored for a particular industry or group of firms. Antitrust’s standards are focused on ends rather than specific means, and are therefore less likely to ‘misfire’ when applied broadly.”).

[136] Posner, supra note 93, at 39 (“Rules are generally simpler and cheaper to enforce than standards and provide clearer guidance both to the people subject to them and to the courts that administer them. But they are often either underinclusive or overinclusive, and sometimes they are both at the same time. They are especially apt to fail as a sensible method of lawmaking when the relation of the rule’s purpose to the fact of facts that it makes determinative or legality is unclear. In such cases, the decision whether to characterize the case as falling within the domain of the rule may depend on the same factors that would determine legality under a standard.”).

[137] Even in civil-law countries (as most, if not all, countries in Latin America are), antitrust laws are generally designed as ex-post rules with general prohibitions. While some specific practices may be listed as anticompetitive, courts and competition agencies have circumscribed, through the caselaw, the precise boundaries of anticompetitive behavior.

[138] Geoffrey A. Manne, Error Costs in Digital Markets, in The Gai Report On The Digital Economy (2020), at 38-39.

[139] Id.

[140] Barnett, supra note 96, at 15.

[141] Jacques Crémer, Yves-Alexandre De Montjoye, & Heike Schweitzer, Competition Policy for The Digital Era, Eur. Comm. (2019), at 126.

[142] Id. at 70.

[143] Giuseppe Colangelo, The Digital Markets Act and EU Antitrust Enforcement: Double & Triple Jeopardy, Int’l Ctr. L. Econ. (Mar. 23, 2022), at 7, available at the-digital-markets-act-and-eu-antitrust-enforcement-double-triple-jeopardy.

[144] Case B6-22/16 Facebook, Bundeskartellamt (Feb. 6, 2019), available at https://www.bundeskartellamt.de/SharedDocs/Entscheidung/EN/Entscheidungen/Missbrauchsaufsicht/2019/B6-22-16.pdf.

[145] Case AT.40153, E-book MFNs and Related Matters (Amazon), Eur. Comm. (May 4, 2017), available at https://ec.europa.eu/competition/antitrust/cases/dec_docs/40153/40153_4392_3.pdf.

[146] Case AT.39740 Google Search (Shopping), Eur. Comm. (Jun. 27, 2017), available at https://ec.europa.eu/competition/antitrust/cases/dec_docs/39740/39740_14996_3.pdf.

[147] Radic, Manne, & Auer, supra note 12, at 33.

[148] Lambert, supra note 85,  at 53-54.

[149] Dennis W. Carlton & Randall C. Picker, Antitrust and Regulation (Nat’l Bureau Econ. Research Working Paper No. 12902, 2007), at 50-51, available at, https://www.nber.org/system/files/working_papers/w12902/w12902.pdf. (“Regulation created numerous inefficiencies and benefited special groups. In response to criticisms of regulation, antitrust either completely or partially replaced regulation and antitrust was used as a complement and sometimes as a constraint on regulators in many industries. The deregulated network industries that we examined all show a similar pattern: after deregulation, there is massive consolidation, a lessening of the reliance on interconnection from other firms, a decline in either wages or employment or both, and a fall in prices with a reduction or end to any cross subsidy. Consumers benefit, special interests are harmed… The relative advantages and disadvantages of each mechanism became clearer over time. Regulation produced cross-subsidies and favors to special interests, but was able to specify prices and specific rules of how firms should deal with each other. Antitrust, especially when it became economically coherent within the past 30 years or so, showed itself to be reasonably good at promoting competition, avoiding the favoring of special interests, but not good at formulating specific rules for particular industries.”)

[150] Tirole, supra note 105, at 580.

[151] Ibañez Colomo, supra note 78, at 131.

[152] Id.

[153] Posner, supra note 93, at 256. (Posner does acknowledge that “the institutional structure of antitrust enforcement” could be troublesome when applying antitrust laws to the “new economy.” But he suggests addressing those difficulties within the realm of antitrust law, with some reforms to streamline procedures and allow the use of more technical expertise.)

[154] OECD, supra note 57, at 6.

[155] Juan David Gutiérrez & Manuel Abarca, Challenges to Competition and Innovation in Digital Markets. Insights from Latin American cases, in Digital Platforms, Competition Law, and Regulation: Comparative Perspectives (Kalpana Tyagi, et al. eds., 2024), at 164-165. (These figures do not include merger-control cases or advocacy reports, where the authors found that “… in the same period, LAC’s competition authorities assessed a significant number of digital markets cases in their merger control processes and advocacy activities. Merger control cases that involve digital markets were assessed in 43 per cent of the jurisdictions with mandatory merger control (six out of 14). The jurisdictions that dealt with digital merger cases were Argentina, Brazil, Colombia, Chile, Ecuador, and Mexico. Competition advocacy reports, market studies and competition assessments of regulatory projects related to digital markets were published in 48 per cent of LAC’s jurisdictions studied in this chapter (11 out of 23). These are Brazil, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Mexico, Panama, Paraguay, Peru, and Uruguay. Furthermore, the explicit prioritisation of a ‘digital antitrust agenda’ by the competition agencies of Colombia, El Salvador, Mexico, and Peru may render additional cases soon.”)

[156] Andrés Fuchs & Nader Mufdi, Derecho de la Competencia y Regulación de Mercados Digitales: Desafíos y Propuestas para Latinoamérica, Diàlogos Cent. Competencia (Jul. 2021), at 12, available at https://centrocompetencia.com/wp-content/uploads/2021/07/Fuchs-y-Mufdi-Derecho-de-la-Competencia-y-Regulacion-de-mercado-digitales-Desafios-y-Propuestas-para-Latinoamerica.pdf.

[157] Fixing Markets, Not Prices: Policy Options to Tackle Economic Cartels in Latin America and the Caribbean, World Bank (2021), at 8, available at https://documents1.worldbank.org/curated/en/148021625810668365/pdf/Fixing-Markets-Not-Prices-Policy-Options-to-Tackle-Economic-Cartels-in-Latin-America-and-the-Caribbean.pdf.

[158] Dictamen Firma Conjunta Número, Com. Nac. Def. Competencia (2021), at 56, available at https://www.argentina.gob.ar/sites/default/files/2017/02/cond_1767.pdf.

[159] See Luiz Azevedo de Almeida Hoffmann & Rafael Rossini Parisi, Abuse of Dominance in Digital Markets – Contribution from Brazil (Session II, OECD Global Forum on Competition, Dec. 2020), available at https://cdn.cade.gov.br/Relatoriorios%20de%20gestao/2020/Cap.%201/Abuse%20of%20dominance%20in%20digital%20markets.pdf.

[160] See Administrative Inquiry No. 08700.005679/2016-13 (Braz.).

[161] See Administrative Proceeding No. 08012.0101483/2011-94 (Braz.).

[162] Almeida & Parisi, supra note 159, at 5.

[163] See Dirk Auer & Lazar Radic, The Legacy of Neo-Brandeisianism: History or Footnote?, Network L. Rev. (Jul. 9, 2024), https://www.networklawreview.org/auer-radic-brandeisianism. (“For example, in 2021 the UK created a “Digital Markets Unit” (DMU) within the Competition and Markets Authority, which is now charged with enforcing the DMCC. The DMU’s headcount is set to rise from 70 in 2022 to 200 by the end of 2024. For its part, the EU currently has 80 staff assigned to enforce the DMA.”)

[164] Latin America and the Caribbean Economic Review, April 2024 – Competition: The Missing Ingredient for Growth?, World Bank (Apr. 2024), at 48, available at https://openknowledge.worldbank.org/bitstreams/184bce21-8fec-4b14-acad-9ee256e7db93/download.

[165] OECD Economic Surveys: Peru 2023, Organ. Econ. Co-Oper. Dev. (2023), at 62, https://doi.org/10.1787/081e0906-en.

[166] World Bank, supra note 156, at 49.

[167] OECD, supra note 34, at 4.

[168] Pau Castellas, Lucrecia Corvalan, & Facundo Rattel, Connectivity Gaps in Latin America. A Roadmap for Argentina, Brazil, Colombia, Costa Rica and Ecuador, GSMA Intell. (Mar. 2023), available at https://www.gsma.com/latinamerica/wp-content/uploads/2023/03/FINAL-Brechas-de-conectividad-en-America-Latina_-LONG-report-ENGLISH-DIGITAL-30-03-2023.pdf.

[169] OECD, supra note 26, at 98.

[170] Id. at 174.

[171] Id. at 175.

[172] Id.

[173] Id. at 126.

[174] OECD, supra note 57, at 13-14.

[175] Lotitto & Diaz, supra note 55, at 32

[176] Hernando De Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (2000), 223-224.

[177] Ease of Doing Business Rankings, World Bank (2020), available at https://archive.doingbusiness.org/content/dam/doingBusiness/pdf/db2020/Doing-Business-2020_rankings.pdf.

[178] OECD, supra note 157, at 1.

[179] Shaping the Digital Transformation in Latin America: Strengthening Productivity, Improving Lives, Organ. Econ. Co-Oper. Dev. (2019), at 8, available at https://read.oecd-ilibrary.org/science-and-technology/shaping-the-digital-transformation-in-latin-america_8bb3c9f1-en.

[180] Id.

[181] Id. at 29

[182] Id.

[183] Id. at 30.

[184] Id. at 59.

[185] Id. at 59.

[186] Most digital platforms, of course, are already available in Latin America, but do not necessarily serve Latin American markets at full capacity. Think, for example, of a marketplace that allows consumers to buy goods from vendors in the United States, but does has no logistics operations or relations with local vendors in the user’s country.

ICLE Director of Competition Policy Dirk Auer joined as a panelist in a webinar organized by ECIPE on platform regulation and merger policy in the EU, and the implications for member states’ attractiveness for digital investment. Video of the full panel is embedded below.

The European Commission late last month published the full list of its “gatekeeper” designations under the Digital Markets Act (DMA). Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft—the six designated gatekeepers—now have six months to comply with the DMA’s list of obligations and restrictions with respect to their core platform services (CPS), or they stand to face hefty fines and onerous remedies (see here and here for our initial reactions).

Read the full piece here.

Abstract

Seeking to boost funding for the next generation of telecommunications infrastructure, European Union (EU) policymakers have proposed mandating that some large online platforms pay a special usage fee to network operators. Framed as a way to ensure that the largest users of internet infrastructure contribute their “fair share” to telecommunications networks, the proposal would be another unnecessary and harmful regulatory intervention. These comments paper seek to demonstrate that the fair-share debate itself is, in fact, the byproduct of an earlier intrusive government initiative: net-neutrality regulation. Like net neutrality’s anti-discrimination rules, a “fair share” tax would represent a solution that doesn’t work to a problem that doesn’t exist. Moreover, the debate reflects the EU’s fundamentally misguided inclination toward an industrial-policy approach to the digital transformation, built on the unsound belief that innovation can be delivered via regulation and by subsidizing legacy domestic firms with rents transferred from successful global players. Rather than continuing to interfere in market dynamics and private negotiations without any solid evidence of market failure, the EU should instead learn from its past mistakes and acknowledge the limited scope for regulation in these dynamic markets.

I. Introduction

“[W]e have a vision, and we have a goal,”[1] European Commissioner Thierry Breton said in a February 2023 speech in Helsinki announcing the launch of a public consultation on the future of connectivity and infrastructure in the European Union (EU).[2] The consultation’s stated goal is to keep pace with transformative technological developments and to make Europe a digital leader by boosting deployment of forward-looking telecommunications infrastructure. Toward this end, the European Commission argues, it is essential that the regulatory framework is fit for purpose, with adequate funding to support the required investments.[3]

Given that ambitious goal, these comments investigate the likelihood that this vision can become a reality.

As part of the 2030 Digital Decade policy program,[4] European policymakers are seeking a means to equip Europe with the next generation of connectivity infrastructure. The primary solution offered—one that has the backing of incumbent European telecom operators (telcos)—is to make some large online platforms (so-called “Big Tech”) contribute to the cost of telecom networks. The proposal has been justified on grounds that Big Tech firms use a large share of bandwidth, while the telcos have seen a decline in their returns on investment.[5]

Essentially, the proposal would constitute a direct welfare transfer from online content and application providers (CAPs) or over-the-top service providers (OTTs) to benefit telcos and other internet service providers (ISPs). This would be accomplished by setting a data-transmission threshold and charging CAPs a fee when they transmit data exceeding that threshold. Indeed, the questionnaire the Commission released as part of the public consultation does not ask whether such a levy is needed, but merely seeks input on how it should be structured.[6]

Unsurprisingly, telcos have described the fair-share tax as “a once in a lifetime opportunity to recover digital leadership in Europe.”[7] Telco operators argue that a few Big Tech firms generate a significant portion of all internet traffic, but do not adequately contribute to the development of such networks.[8] These concerns find support in the recent European Declaration on Digital Rights and Principles for the Digital Decade, which calls for a framework through which “all market actors benefiting from the digital transformation assume their social responsibilities and make a fair and proportionate contribution to the costs of public goods, services and infrastructures, for the benefit of all Europeans.”[9]

EU policymakers have also explored the need to encourage consolidation in the telecom industry in order to sustain investments that will stanch “Europe’s progressive technological decline.”[10] Under this vision, the path to promote investment and spur innovation in Europe’s digital future would be forged not only through rent transfers from CAPs to telcos, but also by defeating “excessive competition” in the telecom section.[11]

We argue here that the current debate stems, instead, from earlier invasive and unnecessary regulatory initiatives. Notably, the “fair share” proposal is the poison fruit of net-neutrality regulation, which has prevented telcos from monetizing their networks. In an alternative framework, the telecom sector could have instead been permitted to manage the transmission of content and services according to their value for end users, anticipated bandwidth use, or a host of other quality requirements upon which various CAPs depend.

Rather than acknowledging the limits of regulation, the fair-share proposal reflects the Commission’s persistent distrust of market forces and private-ordering mechanisms. Further, the debate represents just the latest instance of a more generalized EU industrial-policy approach to the digital transformation. This approach rests on the unsound belief that innovation can be delivered through regulation and by subsidizing legacy domestic EU firms through the transfer of rents from successful global players.

Having in this section provided an overview of the conflict between telecom operators and CAPs, Section II frames the “fair share” debate within the broader EU industrial-policy approach to the digital transformation, noting similarities with earlier efforts to support the EU’s audiovisual and publishing industries. Section III investigates the controversial relationship between “fair share” duties and net-neutrality rules. Section IV points out the limited role for regulation and the principles that should guide government intervention in fast-moving industries. Section V concludes.

II. A Solution in Search of a Problem

The 2030 Digital Decade policy program highlights the need to foster investment in high-speed telecommunications networks if the EU is to meet the connectivity targets established in the path to the digital transformation.[12]

Data traffic represents the critical determinant of telecom networks’ size and capacity. EU telcos claim, however, that exponential growth of internet traffic has left them unable to earn viable returns on network investments.[13] According to the telcos, traffic growth is disproportionately driven by a small number of OTTs, who provide relatively little direct economic contribution to network rollout.

According to a report for the European Telecommunications Network Operators Association (ETNO), just six firms generated roughly 56% of all network traffic, with Google accounting for 21%; Meta accounting for 15.4%; Netflix accounting for 9.4%; Apple accounting for 4.2%; Amazon accounting for 3.7%; and Microsoft accounting for 3.3%.[14] Further, a study conducted by Frontier Economics on behalf of Deutsche Telekom, Orange, Telefo?nica, and Vodafone estimated that traffic driven by OTTs could generate annual costs for EU telcos of €36 to 40 billion.[15] Such findings are often cited by telcos to make the case that OTTs are free riding on their network investments and need to be made to more equitably share the burden:

Digital platforms are profiting from hyper scaling business models at little cost while network operators shoulder the required investments in connectivity. At the same time our retail markets are in perpetual decline in terms of profitability.[16]

To address the concern of free riding, telcos have proposed a sending-party-network-pays system, which would mandate that the largest online platforms pay usage fees to compensate network operators.[17] In singling out the largest platforms for exceptional treatment, the proposal resembles how EU institutions already approach the regulation of “gatekeepers” under the Digital Markets Act (DMA) and “very large online platforms” under the Digital Services Act (DSA).[18] The proposal would establish a direct compensation mechanism, rather than private negotiations among the relevant parties, because it assumes that network operators are not positioned to negotiate fair terms with leading OTTs due to the latter’s alleged strong market positions, asymmetric bargaining power, and a lack of a level regulatory playing field.

The telcos point to the revenue and market capitalization enjoyed by the largest OTTs as demonstrating that the services Big Tech provides are essential for consumers.[19] But while the growth in traffic volume for the OTTs’ services creates additional costs for network operators, the telcos contend that they cannot respond to that growth in demand with higher retail prices, both because of strong competition in the retail telecommunications market and due to regulatory interventions at the wholesale level.[20] These factors, they contend, have created an uneven regulatory playing field between OTTs and telcos. Moreover, they argue that this uneven playing field has contributed to declining profit margins for telcos’ traditional retail revenue streams and that, consequently, telcos’ costs of capital are now higher than their returns on capital.

For their part, OTTs argue that they contribute to the internet ecosystem with investments in content-delivery networks and infrastructure—such as data centers, undersea cables, and satellites—and by creating content that is attractive to consumers, who in turn buy access from the ISPs to consume that content.[21] Therefore, they argue, it is the end users who generate traffic by consuming content, and they already pay ISPs through their subscriptions.

This debate over how network costs should be allocated is not new, and nor is the idea of a sending-party-network-pays system. The Body of European Regulators for Electronic Communications (BEREC) rejected a similar proposal 10 years ago, arguing that requests for dataflows stem not from content providers, but from retail ISPs’ own customers. BEREC further contended that increased demand for broadband access can be attributed to the success of content providers.[22]

Indeed, broadband networks are two-sided markets that bring together CAPs and end users. ISPs derive revenue from end users, who in turn pay for internet service to gain access to OTTs’ content. Since both sides of the market (content providers and end users) contribute to the cost of internet connectivity, BEREC found that “[t]here is no evidence that operators’ network costs are already not fully covered and paid for in the Internet value chain.”[23]

Further, BEREC acknowledged that the current “model has enabled a high level of innovation, growth in Internet connectivity, and the development of a vast array of content and applications, to the ultimate benefit of the end user.”[24] Therefore, “the nature of services to be delivered across the network, and the charging mechanisms applied to them, should continue to be left to commercial negotiations among stakeholders.”[25]

While prevailing internet traffic volumes are notably higher today than those observed a decade ago, it does not appear that BEREC regards the recent changes in traffic patterns as sufficient to modify its underlying assumptions regarding the sending-party-network-pays regime.[26] Indeed, in a recent preliminary assessment of a proposed direct compensation mechanism to benefit telcos, BEREC confirmed that it feels “the 2012 conclusions are still valid” and that the sending-party-network-pays model would provide ISPs “the ability to exploit the termination monopoly” and could be of “significant harm to the internet ecosystem.”[27]

BEREC also questioned the assumption that an increase in traffic directly translates into higher costs, noting that the costs of network upgrades necessary to handle increased traffic volumes are small relative to total network costs, and that upgrades come with significant increases in capacity.[28] In other words, BEREC found that rising traffic volumes do not directly lead to significant incremental costs relative to total network costs.[29]

Finally, BEREC once again found no evidence of free riding along the value chain,[30] finding that the IP-interconnection ecosystem remains largely competitive and that costs for internet connectivity are typically covered by ISPs’ customers.

It would be reasonable to assume that if there had been such a significant free-riding, this would have been reflected in ISPs financial statements and also in loss warnings.[31]

BEREC’s preliminary findings and continued skepticism of replacing freely negotiated internet interconnections with mandated network-usage fees are supported by studies that similarly find a lack of evidence of free riding;[32] report significant investments by CAPs to support network infrastructure;[33] and raise concerns about the potential side effects of a sending-party-network-pays model on the proper functioning of internet connectivity.[34]

A study conducted by WIK-Consult for the Federal Network Agency Germany (Bundesnetzagentur) confirmed that the IP-interconnection ecosystem is largely competitive and warned against the kinds of potential unintended consequences already seen in South Korea, the only country thus far that has mandated sending-party-network-pays billing.[35] South Korea provides a cautionary tale about the adverse effects that stem from interference in voluntary negotiations. Indeed, there is evidence that the competitive distortions between CAPs and ISPs generated by the Korean initiative had negative effects for consumers in terms of costs and the degradation of quality.[36]

Some EU member states have also been skeptical of telcos’ pleas and of the idea more generally that charging a toll on the internet is an appropriate strategy to promote network investments.[37] According to these members, the proposed “fair share” toll would pose considerable risks to the internet ecosystem and is likely to cause considerable harm to businesses and consumers. Indeed, as the envisaged data-transmission tax will affect the most popular services and content, a huge percentage of consumers are expected to bear the relative cost, as targeted OTTs eventually pass the new fees paid to ISPs downstream.[38] These concerns were expressed in a letter from Austria, Estonia, Finland, Germany, Ireland, and the Netherlands that urged the Commission to publish the Broadband Cost Reduction Directive (BCRD) review without discussion of the “fair share” debate.[39] In their view, while the revised BCRD should aim to accelerate the deployment of very high-capacity networks, the fair-share proposal is a distinct topic that requires a proper evidence-based assessment of its own merits.

A. Blaming and Taxing Digital Platforms

From a broader perspective, the “fair share” debate reflects the EU’s recent industrial-policy approach to the digital transformation.

The internet has deeply transformed traditional industries by favoring the emergence of new business models and creating opportunities for new players to enter those markets. Because of these challenges, some legacy incumbents struggle to keep pace with innovation and new forms of competition, disrupting entire industries. It is no secret that Europe has lagged behind in the digital economy and that established European companies have suffered most from the emergence of digital markets, as they have thus far been unable to develop competitive platform-based ecosystems.

Against this backdrop, European institutions have looked to subsidies as the solution to rescue some legacy players. Such interventions have been justified by policymakers on grounds of alleged market failures or the importance of public interests at stake. Such claims are not new, and public deliberation would ordinarily turn to evaluating whether the claimed market failures are real and whether the measures identified to promote future competition and innovation are effective. But EU policymakers have managed to evade such questions by insisting that the rescues they obviously seek not rely directly on subsidies from the European public.[40] Instead, the proposed subsidies would come from private, largely U.S.-based firms.

In sum, the manifesto for the new protectionist EU industrial policy is to “blame and tax Big Tech.” This narrative holds that the success of a few large online platforms is the cause of the purported market failures, and that it is therefore fair to tax their success and force them to share their profits.[41] The approach is shortsighted but, from the perspective of EU policymakers, certainly convenient.

The internet’s impact on business models is seen as particularly threatening to the media industry. In light of new technologies to transmit audiovisual-media services, European institutions argued for a regulatory framework that would ensure “optimal conditions of competitiveness” for European media and safeguard certain “public interests, such as cultural diversity.”[42]

The policy solutions identified by the revised Audiovisual Media Services (AVMS) Directive are twofold.[43] First, European works are required to represent at least 30% of on-demand audiovisual-media services’ catalogs, and the services are require to ensure the prominence of those works.[44] Second, to ensure adequate levels of investment in European works, EU member states are permitted to impose financial obligations (including requiring direct investments in content and mandated contributions to the national fund) on media-service providers established within their territory, or on the basis of revenues the providers generate from services that are provided in and targeted toward the member state’s territory.[45]

In other words, to counter U.S. platforms’ dominance in the European video-on-demand (VOD) market,[46] the new AVMS Directive targets large foreign companies by imposing content quotas and financial obligations under a regime that has been termed the “Netflix tax.”[47] While this protectionist intervention to rescue the European audiovisual market is ostensibly made in the name of the public interest, both of the envisaged measures more accurately reflect resentment of the global players’ success than they do concern for Europe’s noble cultural diversity.[48]

Shortly after the AVMS Directive’s enactment, taxing Big Tech also became the preferred solution to rescue the European publishing industry.[49] Seeking to address a purported gap in value between digital platforms and news publishers, the Directive on Copyright in the Digital Single Market granted the latter a right to control and receive compensation for the reproduction and availability of online summaries of their news articles.[50] Indeed, publishers claim that the sustainability of their entire industry has been jeopardized by the emergence of digital gatekeepers, which capture most of the advertising revenue without bearing the cost of the investments needed to produce news content. It is alleged that this unfair split of revenues is the result of asymmetric bargaining power, which makes it difficult for press publishers to negotiate with Big Tech on an equal footing.[51]

In sum, the news publishers’ case that free riding and asymmetry of bargaining power justify their request for revenue sharing are the same arguments used by telcos to support their own “fair share” proposal. The publishing industry’s struggles, however, started swell before the emergence of digital platforms. Newspapers’ business models were first hit by the advent of the internet, which changed consumption habits and enabled the growth of new forms of journalism.[52] Moreover, digital platforms arguably play a complementary role to news sites, as legacy publishers benefit from inbound links that drive audience traffic. Indeed, empirical evidence does not support the free-riding narrative.[53] It may be sound policy to support publishers in their digital transformation but, as argued some years ago, “[t]axing new digital players will not save press publishing industry and legacy business models.”[54]

Such findings also apply to the telcos. Indeed, as is evident from this brief analysis, there are strong similarities between the audiovisual market and the publishing industry when it comes to the fair share of network costs. All of these policy initiatives stem from European industries’ inability to keep the pace with the digital transformation that has been enhanced by the spread of high-speed internet. While the internet revolution has enabled the emergence of new global players, legacy European companies are struggling to adapt their business models and strategies in order to compete.

In this context, policymakers frequently invoke the need to protect public interests as justification for regulatory interventions they claim would correct purported market failures, but that instead merely alter the prevailing market dynamics. Indeed, protectionist interventions that impose financial obligations on successful players will not address the problems in question, and will therefore be ineffective at achieving the goal of closing the competition gap between European firms and the global players. Moreover, as discussed in the next section, taxing online providers in the telecommunications sector, specifically, would appear to be clearly at odds with the rationale that underlies European efforts to enforce the net-neutrality regulation.[55]

III. The Net-Neutrality Problem

The European Commission’s “fair share” proposal is of dubious compatibility with net neutrality, which was the flagship initiative delivered by the Commission in the previous political term. Indeed, the Commission has appeared anxious to reassure the public that there is no going back on net neutrality and that it remains “strongly committed” to protecting a neutral and open internet.[56] But there are manifest concerns that direct compensation from large OTTs to ISPs would endanger the principle of net neutrality.[57] Indeed, the fair-share proposal appears at odds with both the legal obligations of net neutrality and its underlying economic rationale.

Net neutrality has always been a particularly contentious topic, as confirmed by the transatlantic divergence on the topic. While the EU regulation remains in force, the U.S. Federal Communications Commission’s (FCC) 2015 Open Internet Order was repealed in 2018 by the superseding Restoring Internet Freedom Order.[58] The FCC reverted to its pre-2015 position, concluding that the benefits of a market-based, light-touch regime for internet governance outweigh those of utility-style, common-carrier regulation. Quoting then-FCC Chairman Ajit Pai, “there was no problem to solve. The Internet was not broken in 2015. We were not living in a digital dystopia.”[59]

Given the assumption that broadband providers enjoy endemic market power, a common feature of net-neutrality regulations is the imposition of non-discrimination rules that ensure all internet traffic is treated equally. As terminating-access monopolists, ISPs are deemed gatekeepers for edge providers that seek to reach their end-user subscribers—hence, they may discriminate against the former and impose restrictions on the latter. Toward this end, the 2015 Open Internet Order imposed three ex ante bright-line rules preventing U.S. ISPs from blocking content, throttling traffic, or discriminating against specific content for a fee (so-called “paid prioritization”).[60] These rules were predicated on the belief that there was a need to protect and promote openness, since “the Internet’s openness promotes innovation, investment, competition, free expression, and other national broadband goals.”[61]

In a similar vein, by establishing common rules to safeguard equal and non-discriminatory treatment of internet traffic, the EU Regulation pointed to the need to protect end-users and guarantee the continued functioning of the internet ecosystem as an engine of innovation:[62]

The internet has developed over the past decades as an open platform for innovation with low access barriers for end-users, providers of content, applications and services and providers of internet access services. … However, a significant number of end-users are affected by traffic management practices which block or slow down specific applications or services.[63]

Indeed, proponents of net neutrality typically claim that allowing ISPs to treat different CAPs differently through, e.g., paid prioritization would stifle innovation by hindering the entrance of new content providers. This, in turn, would negatively affect the welfare of end-users through rising subscription fees, less variety of content, and reduced quality of connections.[64] Opponents, on the other hand, question the very economic logic of net-neutrality regulation, maintaining that it would increase regulatory costs, dampen ISPs’ incentives to invest in broadband capacity, and harm both consumers and content providers.[65]

Moreover, these types of regulations explicitly prevent ISPs from bargaining with CAPs in ways that would allow ISPs to seek payment for excessive network usage. Thus, some substantial portion of the “problem” that “fair share” seeks to correct directly arises from telcos being constrained from arm’s-length negotiations with CAPs.

Net-neutrality opponents also contest the claim that ISPs have and use market power in ways that lead to market foreclosure, arguing that this is not supported by empirical evidence.[66] A related concern is that vertically integrated ISPs with market power could potentially self-preference their own content.[67] But even if a vertically integrated ISP had market power, it is not obvious that compromising the quality of content requested by end users would be profit maximizing.[68] That is, even in this extreme hypothetical, the threat of user defection because of degraded quality mutes or answers the concern.

More generally, the economic literature has stressed that the consequences of net-neutrality regulation depend on precise policy choices, how they are implemented, and how long-run economic trade-offs play out.[69] Strict net neutrality may lead to socially inefficient allocations of traffic, as well as traffic inflation. It would thereby harm efficiency by distorting both ISPs and content providers’ investments and service-quality choices.[70]

Given the ambiguous effects of net neutrality’s anti-discrimination rules, the most controversial issue concerns whether any value is added value by enforcing a net-neutrality regime through an ex ante regulatory ban, rather than traditional ex post case-by-case antitrust enforcement.[71] Indeed, net neutrality introduces a blanket ban of practices that would not be per se antitrust violations.[72] Notably, net neutrality de facto prevents broadband providers from introducing vertical contractual restraints, which have typically proven to be welfare enhancing more often than anticompetitive.[73] Therefore, there is a risk that, in the name of leveling the playing field, net neutrality focuses on competitor welfare rather than consumer welfare.[74] In sum, given the ambiguous welfare effects of discrimination, it is impossible to establish in advance whether the purported exclusionary effects outweigh their potential procompetitive benefits. Hence, there is no economic support for an ex ante absolute prohibition.

The “fair share” solution of taxing Big Tech to fund broadband-network improvements also appears to violate both the economic rationale for and legal obligation of equal treatment under net neutrality. By only imposing fees on OTTs that transmit data exceeding a certain threshold, the “fair share” proposal clearly discriminates against some online services and content—that is, the largest ones. With regard to the economic rationale, net neutrality has been justified on the grounds that broadband providers enjoy endemic market power as terminating-access monopolies. It would therefore be strange to impose an intervention to restore “fairness” in the relationship between network operators and content providers on the premise that the former suffers from an asymmetry of bargaining power. Indeed, under EU net-neutrality rules, ISPs are assumed to have insurmountable bargaining power, even though the “fair share” proposal presumes them to be powerless before Big Tech.

Indeed, as noted above, net neutrality is a primary driver of the current “fair share” debate. Allowing paid prioritization between ISPs and CAPs likely would have prevented the emergence of these claims. Indeed, it could be argued that, on the one hand, net neutrality has tilted the balance in favor of large OTTs[75] and, on the other hand, paid prioritization would be the efficient market answer to different content offerings.

Notably, conventional economic principles justify vertical restraints and discriminatory practice, as online content varies in terms of value for consumers, bandwidth use, and quality requirements.[76] Indeed, as was raised years ago during the U.S. net-neutrality debate, a ban on paid prioritization is inconsistent with a well-developed body of literature showing that it is impossible to determine ex ante whether any specific instance of paid prioritization will have positive or negative effects for consumers.[77] Moreover, restraints on prioritization are likely to thwart a range of welfare-increasing business models on the internet and to chill further pricing innovations.[78]

Therefore, the fair-share proposal struggles to address the same fundamental question already raised in the case of net neutrality: whether a regulatory intervention is justified in the first place.

IV. Regulatory Humility and Lessons Unlearned

According to the economic literature, regulatory intervention is only justified under limited circumstances. The case for regulation is best substantiated where it can correct market failures, such as when free and unrestricted competition is unable to allocate resources efficiently.[79] Even under the romantic assumption that regulation serves consumers’ interests and policymakers have sufficient information and enforcement powers to both promote the public interest and maximize social welfare, the primary focus of regulation will still be to tackle market failures.[80]

Outside those examples of market failure, effective competition is commonly accepted to be the best regulator, as it has been empirically demonstrated to lead to lower prices, better quality, and greater innovation.[81] Without a proper justification, regulation negatively interferes in market dynamics by generating inefficiencies, introducing artificial barriers to entry, and deterring technological innovation.

Calibrating regulation is extremely difficult. Although regulation is expected to be forward-looking, it may lack flexibility, and the imposition of rigid sets of rules can risk enshrining a static view of the market at the expense of its dynamic evolution. Moreover, consistent with both private-interest and public-choice theory, government intervention is often prone to capture by special interests, rather than promoting general social welfare.

Although these are limits of regulation generally, they are particularly critical in fast-moving industries, where it is challenging to design a future-proof framework.[82] Therefore, especially when dealing with digital transformations, it is appropriate to embrace regulatory humility, acknowledge the inherent limits of regulation, and refrain either from picking winners and losers in the marketplace or from preemptively intervening in the absence of solid evidence of market failure and consumer harm.[83] Notably, the market-failure approach assumes that government activity should be limited to the minimal amount of intervention sufficient to correct for specific failures.[84]

Further, interventions to correct market failures should neither require nor assume a particular technology. This would ensure much-needed flexibility to adapt the rules to rapidly changing realities, thus avoiding early obsolescence. It would also avoid the weaponization of regulation to protect incumbents’ market position by freezing investments and hindering the development of new technologies. In sum, the principles of minimal and technologically neutral intervention reflect a light-touch approach of regulatory self-restraint, with awareness that the market is generally better suited to promote innovation and that regulation scores poorly on dealing with the unexpected.

The EU’s net-neutrality rules departed from the principles of self-restraint and technological neutrality.[85] Despite the fact that there was no discernible evidence of a market failure, EU policymakers chose to interfere with the management of internet traffic. Moreover, they did so by imposing an outright ban on common marketplace practices whose effects are at least ambiguous, and hence deserving of case-by-case assessment. As a result, net neutrality picked winners (OTTs) and losers (ISPs). At the time, academics and other experts warned against the adoption of rigid regulation, which by definition cannot aspire to be future-proof and is apt to capture the dynamics of industries characterized by rapid innovation.[86]

Indeed, net neutrality did not anticipate the rise of OTT services. A fascinating slogan has apparently proven to be more influential than economic principles and reality. And now, “fair share” advocates want the EU to step into the breach created by net-neutrality regulation and impose further (likely inefficient) levies on Big Tech. The more rational course would be to reconsider the nature of net neutrality’s non-discrimination principles in the first place. Alas, the “fair share” proposal in fact shares several features with net-neutrality regulation, demonstrating that, rather than learn from previous mistakes, European institutions are ready to repeat them. In particular, the proposal at issue does not square with economics.

Indeed, the economic justification for the regulatory intervention is missing, as there is no evidence of a market failure to address. Quite the opposite, according to BEREC.[87] The current model has fostered innovation, growth in internet connectivity, and the development of a vast array of content and applications. In other words, it has generated significant benefits for end users. The increase in traffic volume has not altered this fundamental reality and the IP-interconnection ecosystem largely remains highly competitive. At the same time, there is no evidence of free riding by CAPs along the value chain. As a result, the adoption of a sending-party-network-pays model would represent an unwarranted threat to the internet ecosystem that would generate costs with little or no countervailing benefits.

It is even questionable whether increases in internet traffic have resulted in higher costs for the telcos, who also benefit from the demand for broadband access that has been driven by the success of OTTs’ content and services.[88] More generally, it is not clear how punishing the success of some OTTs would promote investment and innovation in the broadband market.

Further, rather than abiding by the principle of minimal intervention, the proposal would interfere with market dynamics by substituting a direct-compensation mechanism for private negotiations. The justification advanced for such an invasive intervention is the alleged asymmetry of the telcos’ bargaining position vis-à-vis large OTTs. The assertion is that OTTs enjoy this disproportionate bargaining position because of their market power and an uneven regulatory playing field. Leaving aside the inherent knowledge problem in a central regulator deciding how dynamic data flows should be valued, this explanation is at odds with the primary assumption of net neutrality—that the telcos play a gatekeeper role because of their control of access to the internet. In reality, both Big Tech and the ISPs are sufficiently competent parties that they should be able to negotiate mutually beneficial business terms among themselves.

If telcos face an uneven regulatory playing field, it is precisely because of net neutrality, which limits their ability to monetize their networks by discriminating among content and applications. Rather than acknowledge that interfering with market forces was the original mistake and that it is therefore time to restore private parties’ ability to freely negotiate the terms for content delivery, EU policymakers once again choose to blame the market.

If we acknowledge that internet traffic is generated by consumers (rather than by OTTs), payments into a fund managed by the European Commission would have the same welfare implications as direct payments.[89] Given that everyone benefits from the internet, if there is a policy issue regarding financing the next generation of telecommunications infrastructure, it makes more sense for that to be financed out of a fund born through general taxation.

The proposed tax on Big Tech has been framed as ensuring that they pay their “fair share” of network costs. But fairness is in the eye of the beholder. The term is so vague that it inherently grants policymakers greater discretion and room for intervention, all in the name of a purportedly noble cause.[90] Unfortunately, regulations that aren’t supported by market-failure framework are doomed to be captured by private interests. From this perspective, the “fair share” proposal is, indeed, consistent with public-choice theories of regulation that regard it as a rent-seeking device to benefit a small group of incumbents at the expense of rivals and consumers.

V. Conclusion

According to an old saying, history tends to repeat itself. This result is avoidable only if we learn from our mistakes.[91] Looking at the “fair share” debate, European institutions appear condemned to repeat the past.

When it comes to technology and innovation, Europe systematically lags behind the United States and China. In the best-case scenario, it is catching up, but there is a significant gap to close. This picture is captured by various proxies of technological progress, such as the number of patents, the amount of R&D expenditure, the amount of private investment in artificial intelligence, the location of so-called “unicorn” firms, and the number of leading research institutions in high-tech fields.[92]

There is another digital-economy scoreboard, however, on which Europe is the clear frontrunner. Namely, Europe celebrates its position as the leading regulator of digital markets.[93] Indeed, in less than a decade, Europe has delivered the GDPR, the DMA, the DSA, and countless data-sharing initiatives. Indeed, it would appear that regulation is at least a partial cause of the EU’s poor results in the digital economy. After all, EU policymakers’ primary concern should be to ensure that the regulatory framework is fit for purpose. But over the past decade, when the expected results didn’t arise or when there were unintended consequences, rather than question the treatment, EU policymakers routinely have suggested increasing the dosage.

Against this background, the idea of introducing a tax on CAPs to boost investments in the next generation of telecommunications infrastructure could be just considered another piece of the jigsaw.

However, it is worth remembering that the diminished bargaining position that telcos have vis-à-vis online platforms is the result of another EU regulation. Indeed, without the net-neutrality ban on paid prioritization, telcos would have been free to negotiate differentiated terms for the delivery of OTTs’ content and services. OTTs could have been charged according to bandwidth usage, through side payments for setting up optimized network nodes, or through any number of other mutually beneficial business arrangements.

Further, the proposal contradicts the central premise of net neutrality, which was that broadband providers’ position as internet gatekeepers threatens OTTs and end users. But rather than acknowledge the mistakes of that earlier unnecessary and myopic intervention, the EU is supporting another shortsighted initiative that would be at odds with the economic rationale and the legal provisions of current internet regulation.

Again, as BEREC stated in 2012, the internet “has developed well without regulatory intervention, through stakeholders’ coordination in the free market. Its ability to evolve over time and self-adapt has been key to its growth and success.”[94] More recently, this message has been reiterated, emphasizing that “[t]he internet’s ability to self-adapt has been and still is essential for its success and its innovative capability.”[95]

There was no evidence of market failure to justify net neutrality, and there isn’t a market failure to justify imposing a “fair share” tax for network costs. Therefore, like net-neutrality anti-discrimination rules, mandating some large online platforms to compensate network operators with a usage fee would be a solution that wouldn’t work to a problem that doesn’t exist.[96]

The “fair share” proposal also reflects another pattern of recent EU industrial policy already seen in the audiovisual and publishing industries. As the digital revolution challenges existing business models, thus requiring a radical transformation of entire economic sectors, some incumbents suffer in adapting to the new environment, which requires facing new rivals but also taking advantages of new opportunities. This is part of the natural evolution of the market, where the disruptive force of innovation is generally welcome.

The EU is, instead, apparently concerned about the welfare of some legacy incumbents, especially if they are EU-born companies. As a result, market dynamics are once again threatened by regulatory interventions that impose financial obligations on successful online (and largely foreign) players. Such protectionist initiatives are at odds with the fundamental principle of competitive neutrality, according to which governments actions should ensure that all enterprises face a level playing field, irrespective of factors such as their ownership, location, or legal form.[97] Moreover, they have already proven to be an ineffective means to help companies in reinventing themselves and filling their competitive gap.

In sum, the EU not only assumes that it could lead and deliver innovation through regulation, but also that an industry’s digital transformation could be achieved by subsidizing legacy homegrown companies with welfare transfers from successful foreign players.

Such a vision does not live up to the ambitious goals of the 2030 Digital Decade. Insofar as Europe will be a place where innovation is regulated, rather than invented, there will be no chance to reverse its technological decline and recover digital leadership. Taxing Big Tech will not make Europe great again.

[1] Thierry Breton, Getting Europe Ready for the Next Generation of Connectivity Infrastructure, European Commission (Feb. 6, 2023), https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_23_623.

[2] See Press release, Commission Presents New Initiatives, Laying the Ground for the Transformation of the Connectivity Sector in the EU, European Commission (Feb. 23, 2023), https://ec.europa.eu/commission/presscorner/detail/en/ip_23_985.

[3] Exploratory Consultation – The Future of the Electronic Communications Sector and Its Infrastructure, European Commission (Feb. 23, 2023), https://digital-strategy.ec.europa.eu/en/consultations/future-electronic-communications-sector-and-its-infrastructure (paras. 2.1 and 2.3, quantifying investment needs until 2030 of about 174 billion euros).

[4] Decision (EU) 2022/2481 of the European Parliament and of the Council Establishing the Digital Decade Policy Programme 2030 (Dec. 14, 2022), OJ L 323/4; see also, 2030 Digital Compass: The European Way for the Digital Decade, European Commission (Jan. 26, 2023), COM/2021/118 final.

[5] Breton, supra note 1; see European Commission, supra note 3, para 2.3, reporting that “some European providers of electronic communication networks and services, especially incumbents, claim that they suffer from a decreasing market valuation and lower return on investment, especially when compared to companies in the US.” The European Commission also mentioned that telcos’ claims regarding declining margins and rising costs are stem from current uncertainties (including high inflation, rising interest rates, and geopolitical tensions) that have led capital markets to focus on assets with better short-term returns and profitability and to prefer solutions that protect them from demand risk.

[6] This was also the opinion expressed by the German secretary at the Ministry for Digital Affairs and Transport (BMDV); see Christian Zentner, Kritik an Geplanter „Zwangsabgabe“ für Netflix und Co, Bundestag (March 2, 2023), https://www.bundestag.de/presse/hib/kurzmeldungen-936322 (finding the questionnaire to be “slightly tendentious”).

[7] Carlos Rodri?guez Cocina, You Have Not Seen This Movie Before: Fair Share Is Not a Remake, Telefónica (March 10, 2023), https://www.telefonica.com/en/communication-room/blog/you-have-not-seen-this-movie-before-fair-share-is-not-a-remake.

[8] Europe’s Internet Ecosystem: Socio-Economic Benefits of a Fairer Balance Between Tech Giants and Telecom Operators, Axon Partners Group Consulting (May 11, 2022), https://axonpartnersgroup.com/europes-internet-ecosystem-socio-economic-benefits-of-a-fairer-balance-between-tech-giants-and-telecom-operators (report prepared for the European Telecommunications Network Operators’ Association); Estimating OTT Traffic-Related Costs on European Telecommunications Networks, Frontier Economics (April 7, 2022), available at https://www.telekom.com/resource/blob/1003588/384180d6e69de08dd368cb0a9febf646/dl-frontier- g4-ott-report-stc-data.pdf (report for Deutsche Telekom, Orange, Telefonica, and Vodafone); see also, European Commission, supra note 3, Section 4 (describing the phenomenon as a “paradox” between increasing volumes of data on the infrastructures and alleged decreasing returns and appetite to invest in network infrastructure).

[9] European Declaration on Digital Rights and Principles for the Digital Decade, European Commission (2022), 28 final, 3.

[10] Alan Burkitt-Gray, Vestager Calls for EU to Centralise and Consolidate Telecoms, Capacity (Jan. 31, 2023) https://www.capacitymedia.com/article/2b7xs7payiktkefkh1hj4/news/vestager-calls-for-eu-to-centralise-and-consolidate-telecoms; see also, Breton, supra note 1.

[11] Id.

[12] Supra note 4.

[13] See, CEO Statement on the Role of Connectivity in Addressing Current EU Challenges (Sep. 26, 2022), available at https://etno.eu//downloads/news/ceo%20statement_sept.2022_26.9.pdf; see also, United Appeal of the Four Major European Telecommunications Companies (Feb. 14, 2022),  https://www.telekom.com/en/company/details/united-appeal-of-the-four-major-european-telecommunications-companies-646166.

[14] Axon, supra note 8; see also, 2023 Global Internet Phenomena Report, Sandvine (Jan. 2023) https://www.sandvine.com/global-internet-phenomena-report-2023-download?submissionGuid=7b66978f-d664-4f10-b50b-28a48700788f.

[15] Frontier Economics, supra note 8.

[16] United Appeal, supra note 13.

[17] Axon, supra note 8.

[18] Regulation (EU) 2022/1925 on Contestable and Fair Markets in the Digital Sector and Amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act), (2022) OJ L 265/1; Regulation (EU) 2022/2065 on a Single Market for Digital Services and Amending Directive 2000/31/EC (Digital Services Act), (2022) OJ L 277/1.

[19] Axon, supra note 8, 18.

[20] Id.

[21] See, e.g., Doing Our Part: How Google’s Network Helps Internet Content Reach Users, Google (Apr. 20, 2022) https://cloud.google.com/blog/products/infrastructure/google-network-infrastructure-investments; Network Fee Proposals Are Based on a False Premise, Meta (Mar. 23, 2023), https://about.fb.com/news/2023/03/network-fee-proposals-are-based-on-a-false-premise.

[22] BEREC’s Comments on the ETNO Proposal For ITU/WCIT Or Similar Initiatives Along These Lines, BoR(12) 120, Body of European Regulators for Electronic Communications (2012), 3; Report on IP-Interconnection Practices in the Context of Net Neutrality, BoR (17) 184, Body of European Regulators for Electronic Communications (2017), (finding the internet-protocol-interconnection market to be competitive); Neelie Kroes, Adapt or Die: What I Would Do If I Ran a Telecom Company (Oct. 1, 2014), https://ec.europa.eu/commission/presscorner/detail/de/SPEECH_14_647 (arguing that OTTs are driving digital demand: “[EU homes] are demanding greater and greater bandwidth, faster and faster speeds, and are prepared to pay for it. But how many of them would do that if there were no over the top services? If there were no Facebook, no YouTube, no Netflix, no Spotify?”); see also, Proposals for a Levy on Online Content Application Providers to Fund Network Operators. An Economic Assessment Prepared for the Dutch Ministry of Economic Affairs and Climate, Oxera (Feb. 27, 2023), 19, available at https://open.overheid.nl/documenten/ronl-8a56ac18a98a337315377fe38ac0041eb0dbe906/pdf, (noting that the cause of the traffic is the consumer’s initial request rather than the CAP’s fulfilment of that request).

[23] BEREC 2012, supra note 22, 4; see also, Oxera, supra note 22, 14 (arguing that there is no clear evidence that the absence of charging CAPs means that telcos are unable to raise revenues and cover their costs).

[24] BEREC 2012, supra note 22, 4.

[25] Id., 1.

[26] BEREC Preliminary Assessment of the Underlying Assumptions of Payments from Large CAPs to ISPs, BoR (22) 137, Body of European Regulators for Electronic Communications (2022), 4.

[27] Id., 4-5.

[28] Id., 7-8 (“BEREC considers in this regard the incremental costs necessary for the upgrade in capacity on a given network to handle more incoming traffic. These costs can incorporate to some extent technological upgrades as far as they are relevant for solving capacity issues. These costs have to be differentiated from the total network costs, which are mostly coverage costs.”).

[29] Id., 9

[30] Id., 11-14.

[31] Id., 13; see also, Plans for Charging Internet Toll by Large Telecom Companies Feared to Have Major Impact on European Consumers and Businesses, Government of the Netherlands (Feb. 27, 2023), https://www.rijksoverheid.nl/documenten/publicaties/2023/02/27/plans-for-charging-internet-toll-by-large-telecom-companies-feared-to-have-major-impact-on-european-consumers-and-businesses (arguing that “the large telecom operators seem to forget that consumers already pay for their Internet traffic, through their Internet subscription. The plea for an Internet toll actually implies that large telecom operators want to get paid twice.”).

[32] David Abecassis, Michael Kende, & Guniz Kama, IP Interconnection on the Internet: A European Perspective for 2022, Analysys Mason (Sep. 26, 2022), https://www.analysysmason.com/consulting-redirect/reports/ip-interconnection-european-perspective-2022; Volker Stocker & William Lehr, Regulatory Policy for Broadband: A Response to the “ETNO Report’s” Proposal for Intervention in Europe’s Internet Ecosystem, SSRN (Oct. 16, 2022), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4263096; Brian Williamson, An Internet Traffic Tax Would Harm Europe’s Digital Transformation, Communications Chambers (Jul. 2022), available at https://lisboncouncil.net/wp-content/uploads/2022/07/COMMUNICATIONS-CHAMBERS-Internet-Traffic-Tax-2.pdf.

[33] David Abecassis, Michael Kende, & Shahan Osman, The Impact of Tech Companies’ Network Investment on the Economics of Broadband ISPs, Analysys Mason (Oct. 12, 2022), https://www.analysysmason.com/consulting-redirect/reports/internet-content-application-providers-infrastructure-investment-2022.

[34] See, e.g., Connectivity Infrastructure and the Open Internet, BEUC: The European Consumer Organisation (Sep. 16, 2022), available at https://www.beuc.eu/sites/default/files/2022-09/BEUC-X-2022-096_Connectivity_Infrastructure-and-the_open_internet.pdf; Bijal Sanghani, Fair Share Debate and Potential Impact of SPNP on European IXPs and Internet Ecosystem, European Internet Exchange Association (Jan. 3, 2023), available at https://www.euro-ix.net/media/filer_public/1a/e4/1ae40d86-95ea-460a-920d-3b335c2439d4/spnp_impact_on_ixps_-_final.pdf.

[35] Karl-Heinz Neumann, et al., Competitive Conditions on Transit and Peering Markets, WIK-Consult (Feb. 28, 2022), available at https://www.bundesnetzagentur.de/EN/Areas/Telecommunications/Companies/Digitisation/Peering/download.pdf?__blob=publicationFile&v=1.

[36] Id., 36-38; see also Oxera, supra note 22, 28—33 (arguing that implementation of such a scheme would entail significant transaction and regulatory costs, as the regulator would be required to fulfil such recurring tasks as traffic analysis and verification, dispute settlement, and coordination with companies and other authorities).

[37] Government of the Netherlands, supra note 31; see also, Zentner, supra note 6 (stating that the telecommunications companies’ argument that such a levy would provide them with more money for network expansion does not hold water).

[38] Government of the Netherlands, supra note 31; Oxera, supra note 22 (predicting that only a limited portion of the additional revenue stream to telecom operators would be passed on to the internet subscribers in the form of slightly lower subscription fees, and that this would be offset by price increases from online services for subscriptions to, e.g., Spotify or Netflix more expensive).

[39] Call for Release of BCRD Revision – Refusal of Merge with Fair Share Debate, Austria, Estonia, Finland, Germany, Ireland, and the Netherlands (May 12, 2022), available at https://www.permanentrepresentations.nl/binaries/nlatio/documenten/publications/2022/12/05/call-for-release-of-bcrd-revision—refusal-of-merge-with-fair-share-debate/Call+for+release+of+BCRD+revision+-+Refusal+of+merge+with+fair+share+debate_def.pdf.

[40] See Breton, supra note 1 (arguing that the burden of financing connectivity infrastructure should not rest solely on the shoulders of member states or the EU budget).

[41] See Tobias Kretschmer, In Pursuit of Fairness? Infrastructure Investment in Digital Markets, SSRN (Sep. 20, 2022), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4230863 (arguing that a transfer from large OTTs to telcos would be equivalent to a tax on success and that this would appear to arbitrarily target a group of largely U.S.-based firms while letting at least partly European newcomers and/or smaller firms enjoy the same externalities at no cost).

[42] Directive 2010/13/EU on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services (Audiovisual Media Services Directive), [2010] OJ L 95/1, Recitals 4 and 12.

[43] Directive (EU) 2018/1808 amending Directive 2010/13/EU on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services (Audiovisual Media Services Directive) in view of changing market realities, [2018] OJ L 303/69.

[44] Id., Recital 35 and Article 13(1).

[45] Id., Recital 36 and Article 13 (2).

[46] For analysis of the EU market, see David Graham, et al., Study on the Promotion of European Works in Audiovisual Media Services, Attentional, KEA European Affairs, and Valdani Vicari & Associati (Aug. 28, 2020), https://digital-strategy.ec.europa.eu/en/library/study-promotion-european-works.

[47] See Sally Broughton Micova, The Audiovisual Media Services Directive: Balancing Liberalisation and Protection, E. Brogi & P.L. Parcu (eds.), Research Handbook on EU Media Law and Policy, Edward Elgar Publishing (2020), 264 (arguing that the AVMS Directive is a unique blend of the liberal-market approach typical of the EU’s single market and classic protectionism, stemming from a history of concern that American content and media services would dominate European screens, threatening its cultures and industries).

[48] Id.; see also Joe?lle Farchy, Gre?goire Bideau, & Steven Tallec, Content Quotas and Prominence on VOD Services: New Challenges for European Audiovisual Regulators, 28 Int. J. Cult. Policy 419 (2022), (noting that the objective of cultural diversity contains a great ambiguity and that “[b]eyond the incantatory discourse on the expected benefits of cultural diversity, the notion is in fact complex, and refers to multiple, sometimes contradictory aspects.”).

[49] On the dispute between news publishers and digital platforms, see Giuseppe Colangelo, Enforcing Copyright Through Antitrust? The Strange Case of News Publishers Against Digital Platforms, 10 J. Antitrust Enforc. 133 (May 10, 2021); Giuseppe Colangelo & Valerio Torti, Copyright, Online News Publishing and Aggregators: A Law and Economics Analysis of the EU Reform, 27 Int. J. Law Inf. Technol. 75 (Jan. 11, 2019).

[50] Directive (EU) 2019/790 of 17 April 2019 on copyright and related rights in the Digital Single Market and amending Directives 96/9/EC and 2001/29/EC, [2019] OJ L 130/92, Article 15.

[51] Id., Recitals 54 and 55.

[52] See, e.g., The Evolution of News and the Internet, Organisation for Economic Co-operation and Development (Jun. 11, 2010), available at https://www.oecd.org/sti/ieconomy/45559596.pdf; Potential Policy Recommendations to Support the Reinvention of Journalism, U.S. Federal Trade Commission (Jun. 2010), available at https://www.ftc.gov/sites/default/files/documents/public_events/how-will-journalism-survive-internet-age/new-staff-discussion.pdf; Bertin Martens, et al., The Digital Transformation of News Media and the Rise of Disinformation and Fake News – An Economic Perspective, Joint Research Center (Apr. 25, 2018), available at https://joint-research-centre.ec.europa.eu/system/files/2018-04/jrc111529.pdf; Martin Senftleben, et al., New Rights or New Business Models? An Inquiry into the Future of Publishing in the Digital Era, 48 IIC 538 (2017).

[53] Colangelo-Torti, supra note 49.

[54] Id., 90.

[55] Regulation (EU) 2015/2120 laying down measures concerning open internet access and amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services and Regulation (EU) No 531/2012 on roaming on public mobile communications networks within the Union, (2015) OJ L 310/1.

[56] European Commission, supra note 2.

[57] Government of the Netherlands, supra note 31; BEREC, supra note 26, 5.

[58] Restoring Internet Freedom Order, Federal Communications Commission (2018) 33 FCC Rcd 311.

[59] Ajit Pai, FCC Releases Restoring Internet Freedom Order, Federal Communications Commission (Jan. 4, 2018) 1, https://www.fcc.gov/document/fcc-releases-restoring-internet-freedom-order/pai-statement.

[60] Open Internet Order, Federal Communications Commission (2015), 30 FCC Rcd 5601.