“Friends of an effective Digital Markets Act” – France, Germany and Netherlands make far-reaching proposals to overhaul Draft Digital Markets Act

Europe

On 27-28 May 2021, EU presidency informed member states at the EU Competitiveness Council on progress achieved so far on the Commission’s proposals for a Digital Services Act (DSA) and a Digital Markets Act (DMA). In the morning of the first day of the council, France, Germany and the Netherlands published a non-paper with proposals to improve the DMA. The three member states, which refer to themselves as “Friends of an effective Digital Markets Act”, expressed their full support the goal of the proposed DMA to ensure a fair and contestable Single Market for digital services where companies and innovation can thrive and where users have genuine choices and control. However, in the “friends” view the Digital Markets Act (DMA) should be “re-enforced” in a number of areas “as well as put together in a broader perspective with modernised competition policy instruments”.

Specifically, the friends’ non-paper raises the following seven demands:

  1. More targeted scope: According to the friends, enforcement of the DMA could be prioritised by adding an additional criterion whether a platform offers an ecosystem of services for the gatekeeper definition. This would narrow the scope of the DMA, which in its current form might cover a range of more than ten companies.

  2. Relation between the DMA and competition law: The friends further point out that the DMA should complement European and national competition law, rather than weakening or substituting them. A coordination of both content and enforcement of DMA and competition law is required (which in the view of the friends is not ensured by the current proposal).

  3. National law should be able to set stricter rules for unilateral conduct: Not surprisingly, considering the national competition law initiatives for gatekeeper regulation, the friends demand that member states remain able to set and enforce national rules including national competition law applicable to the gatekeepers‘ unilateral conduct in line with the relationship between EU and national competition law as regulated by Regulation 1/2003 (which allows national law to set stricter rules for unilateral conduct).

  4. More flexibility for obligations and remedies: The friends propose that the DMA be complemented by broader principles or objectives, which allow “a fully-fledged tailor-made intervention” in addition to the obligations in Articles 5 and 6.

  5. Stronger role for member states:  Moreover, the friends demand that member states be effectively involved in the market investigation mechanism anticipated for the update of the DMA so that they can contribute to the law-making process.

  6. Avoidance of enforcement bottleneck: The friends are concerned the centralisation of the DMA enforcement at the Commission level will lead to a bottleneck (i.e. enforcement capacity and expertise, especially in the area of competition enforcement, but possibly also beyond, such as with market regulation, data analysts and IT experts.) Therefore, national authorities should have a stronger role in supporting the Commission in DMA enforcement. Private enforcement would further increase the effectiveness of the DMA.

  7. Stronger merger control vis-à-vis gatekeepers: In the friends’ view, Article 12 of the DMA proposal, which requires gatekeepers to inform the Commission about transactions, “lacks ambition”. The friends suggest modifying the merger control system under the EU Merger Regulation in two essential areas:

    • Merger control thresholds: Adding a threshold for acquisitions by gatekeepers of targets with relatively low turnover but high value.

    • Amending the substantive test to address cases of potentially predatory acquisitions.

These proposals are broad. In particular, the Commission had shied away from touching the EU Merger Regulation's threshold and substantive test as this could trigger lengthy discussions between member states that have held different views on this in the past. The “Friends of an effective Digital Markets Act” are apparently aware of these obstacles and point out that the enhancement of the merger-control rules must be swiftly attainable without delaying the timeline set for the DMA's adoption. They promise to constructively engage in the negotiations with the aim of concluding talks by the beginning of 2022. Support might come from other member states. Austria, Belgium and the Czech Republic called for – in a paper prepared for the delegations of the council – better instruments in merger control concerning Big Tech Giants, such as an introduction of a transaction-value threshold at the European level in order to tackle "killer mergers" and stated that “the Article 22 referral is not an effective solution” (see here for an article explaining the Commission’s new Art 22 EU Merger Regulation policy).

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