Home PublicationsCommentary Event Recap: How the Digital Markets Act Could Reshape the EU’s Digital Economy

Event Recap: How the Digital Markets Act Could Reshape the EU’s Digital Economy

by Eline Chivot

The European Commission’s proposals for a Digital Services Act (DSA) and a Digital Markets Act (DMA) to be released on December 15, 2020 can be an opportunity to modernize the online environment, but EU policymakers should tread carefully considering the impacts these proposals could have on businesses and consumers, panelists agreed during a discussion hosted by the Center for Data Innovation.

The Commission’s objective with these proposals is to increase the transparency of large online platforms, to consolidate an ecosystem in which European SMEs and startups can flourish, to strengthen the digital single market, and to enhance the EU’s regulatory environment for digital technologies. According to Deirdre Clune, Member of the European Parliament for the EPP Group and Ricardo Castanheira, Digital Counselor at the Permanent Representation of Portugal to the European Union, this involves tackling various practices in order to ensure transparency and fair market conditions so that neither European nor non-European platforms could gain an unfair advantage, such as by offering restrictive terms of use. The regulations would ensure consumers have free choice, can easily switch between interoperable alternatives, and are more aware of what purchasing goods or services on different platforms. Discussants recognized the need to maintain the core principles of the existing e-commerce legislation, while also creating a forward-looking, future-proof regulatory framework for the online environment. Castanheira noted that this goal is in line with the priorities of Portugal, which will soon take over the Presidency of the EU Council.

Carel Maske, Senior Attorney at Microsoft, cautioned that policymakers should further clarify the nature of the problem they are trying to solve, as well as the objective: Are policymakers trying to protect innovation, competition, European companies, or consumer welfare? All speakers agreed policymakers should clearly define the scope of the DMA and consider the diversity of business models it would apply to. According to Eline Chivot, Senior Policy Analyst at the Center for Data Innovation, if the intent is to cover the entire tech industry with one standard set of rules, EU policymakers have a difficult task ahead of them. The lack of a narrow definition of “gatekeeping platform” and their activities could lead to a wide scope, and therefore unintended consequences.

While Chivot mentioned that most of the companies targeted by the legislation would happen to be non-European and that subjecting large platforms to asymmetrical rules may introduce regulatory fragmentation, Clune noted that the debate over online platforms would not have been different if these firms had been European. Recalling that both non-European and European platforms could fall into the scope depending on the criteria proposed, Castanheira cautioned that the objective behind the proposals should not be to damage competition and create additional burden for non-European firms, but rather to ensure the EU continues to be a strong and fair regulator, to strengthen what should be a fair trading environment for all companies—European, non-European, Chinese, or American.

Most speakers emphasized that banning certain practices on platforms could be detrimental to certain services and their users. To illustrate these trade-offs, Bartlomiej Telejko, EU Public Policy Manager at Google, took the example of Google Search and Maps. Banning practices such as bundling would amount to restricting the ability of platforms to add innovative features to their services, such as Google Maps which, since its emergence 10 years ago, has enabled a more convenient user experience. For instance, users no longer have to click through a list of links to find the physical address of a shop, as they can consult it straight away on the main search page. The question policymakers should consider is whether users prefer Google’s current version or the one from 10 years ago, without these features. The proposals should therefore involve an in-depth, fact-based, business model-based analysis to fine-tune the list of practices, a discussion as to which trade-offs may be or may not be desirable, and tailored remedies. Chivot noted that other sectors and industries, such as department stores and supermarkets, have implemented some of these practices for years without it having led to regulatory upheaval.

EU policymakers want to update the current framework because the current tools available to them are not fit for the type of issues that they aim to address in the online economy. Panelists explained that while existing competition rules and antitrust laws are good, they could be improved. Indeed, they cannot control certain aspects of digital markets, such as network effects, and thus should be modernized. Market investigation tools could help gain a better understanding of how business models operate, and then carefully consider the practices that may be of concern, because it provides necessary time and space for this process.

You may also like

Show Buttons
Hide Buttons