In December 2020, the European Commission presented a proposal for a new regulation – the Digital Markets Act (DMA). The purpose of the regulation is to harmonize rules in the digital market to promote innovation and competition.
The Confederation of Swedish Enterprise has previously commented on the proposal, which is intended to be applied to core platform services, such as search engines, social networks, and online marketplaces that are provided or offered by what are referred to as gatekeepers. The proposal is now before the European Council and the European Parliament for deliberation.
When the DMA was discussed at a recent meeting of the Competitiveness Council, the most controversial issue was the participation of member states in the implementation of the new rules. Under the current proposals, the Commission would be the sole executive body of the new rules, but several member states want a more prominent role than has been proposed.
The Confederation believes that national competition authorities should be consulted before important decisions are taken within the framework of the new proposed advisory committee for digital markets. However, the Confederation does not consider that national competition authorities should be given a role in the application of the regulations. It would be more appropriate for the Commission, without further intervention from member states, to be given investigative, enforcement, and monitoring powers. This would ensure a harmonized and effective application of EU regulation, which are of course intended to apply to gatekeepers whose digital services are provided in at least three member states and whose impact is thus not limited to individual states. The Swedish government shares this position and believes that the Commission is best suited for this task due to the cross-border nature of gatekeepers.
Some member states have also called for the DMA to include an obligation for gatekeepers to notify all company acquisitions to the Commission. (Under current proposals gatekeepers would inform the Commission of all planned and completed company acquisitions). Gatekeepers have flourished by having successful business concepts, (investing venture capital and making considerable investment in competitive environments). In addition, their successful strategy has been to acquire innovative smaller competitors. In many cases, it has not been necessary to notify acquisitions, as acquired companies have a turnover lower than the notification thresholds that apply under national and European competition rules. This is despite that many of these small innovative companies have offered value due to their intellectual property assets and growth potential.
To deal with these types of situations, the Confederation believes that it should be considered whether aspects other than turnover of acquired companies should influence whether company mergers should be notified for review. However, any changes should not be strictly limited to gatekeepers, and should therefore not fall under the purview of the DMA. Even mergers where gatekeepers are not involved can be of such a nature that they should be reviewed. It is therefore logical that any changes should be made to the Merger Regulation (139/2004) to ensure consistency in company merger rules.
Pending such a revision and amendment of the Regulation, the Commission has published a new guide on how Article 22 of the Merger Regulation should be applied by national authorities. The article gives national competition authorities the opportunity to refer cases concerning acquisitions of companies below the threshold values to the Commission for review if these are deemed problematic in terms of competition. To date, this has not happened to any significant extent. Perhaps the Commission’s proposals will change that.
The DMA is also expected to be fiercely debated in the European Parliament. The changes being discussed include proposals to limit the scope of the regulations to actors with at least two core platform services, (compared to current proposals that would apply to at least one such service).
The Confederation sees no economic logic in introducing such a restriction. The requirements for gatekeepers, including, for example requirements for an extremely high turnover in the bloc and the provision of a core platform service in at least three member states, are convincing indications that the operator has a significant impact on the internal market. The risk of such competition issues that the DMA is intended to counteract – for example, the ability of a gatekeeper to promote their own services or products on their core platform service to the detriment of other business users of the service – is relevant already when a core platform service acts as an important network port for business users to reach end users. There is thus no reason to further limit the scope of the regulation by amending it from one to at least two core platforms.
Under current market conditions, the existing proposals would mean that the DMA would include the Netherlands-based Booking.com and a dozen non-European players. If limiting the scope from one to two core platforms, Booking.com – the only European player – would not be subject to the regulation. As the discussed limitation otherwise lacks clear justification based on economic grounds, it could be perceived as protectionist.
Discussions in the European Council and European Parliament may be delayed due to disagreements on several key issues. It remains to be seen whether the previous forecast, under which the DMA is expected to enter into force at the end of 2022 and can be applied six months thereafter, can become a reality.