“Friends of an effective Digital Markets Act” part 2 – France, Germany and Netherlands publish second joint position paper with proposals to amend the DMA

Europe

In May 2021, France, Germany and the Netherlands published a non-paper with proposals to improve the Digital Markets Act (DMA). In this paper, the three member states, which refer to themselves as “Friends of an effective Digital Markets Act”, expressed full support for the proposed DMA's goal to ensure a fair and contestable Single Market for digital services. However, the friends also suggested that the DMA should be “re-enforced” and submitted several proposals to amend both the substantive rules of the DMA and the way they are enforced (see our article here). On 8 September, the friends published a second joint position paper comprised of concrete draft amendments for two key elements of their proposal:

  • the introduction of tailor-made remedies; and

  • a stronger role for national authorities in the enforcement of the DMA.

If the amendment proposals are adopted, this would significantly change both the content of the DMA and the way the DMA is enforced.

1. First amendment proposal: Tailor-made remediation

In the May paper, the friends called for more flexibility for obligations and remedies and proposed that the DMA be complemented by broader principles, which would allow “a fully-fledged tailor-made intervention” in addition to the obligations in Articles 5 and 6. In the meantime, the three member states have further developed this proposal. In the new position paper, they support the self-executing character of the obligations in Articles 5 and 6 and appear to have given up the idea of a general clause based on broader principles for intervention. Instead, they propose adding an Article 16a to the DMA, which would give the European Commission the ability to impose additional “tailor-made” remedies on a gatekeeper following a market investigation to examine whether additional obligations are required for a certain gatekeeper.  Such tailor-made remedies would be based on a pre-defined list of measures:

  1. access to platforms (including interoperability obligations, obligations to give access to essential API’s and obligations to use common standards);

  2. data-related interventions (including data mobility obligations, obligations to provide access to essential data and data silos);

  3. fair commercial relations (including non-discrimination obligations, bans on distortionary self-preferencing and obligations to make use of fair contractual terms);

  4. end-users and business users open choices (including obligations to “proactively” offer options to users, regulation of defaults and design of choice architecture).

These measures would then be “tailored” for a specific gatekeeper.

A key element of the “tailor-made remediation tool” would be markets investigation to be carried out by Commission before imposing any additional obligations (i.e. proposed Article 16a (1). Additional remedies would only be imposed if: (i) the preliminary results of the market investigation showed that the existing obligations in Articles 5 or 6 are not sufficient to ensure fairness and market contestability in a particular case under investigation; and (ii) competition law alone is not sufficient to “adequately and timely” address the issues (i.e. proposed Article 16a (2). The mechanism of the proposed Article 16a resembles the two-step procedure under section 19a German Act against Restraints of Competition (ARC), the digital gatekeeper regulation provision introduced in January 2021. Under section 19a ARC, the German competition authority first carries out an investigation whether a certain company qualifies as a company with “paramount significance for competition across markets” and, if it does, the authority issues a respective order. In the second step, the authority can then issue a specific prohibition order based on a catalogue of measures set out in the law.

2. Second amendment proposal: stronger role for national authorities

Another key demand of the friends from their May paper was a stronger role for member states in the enforcement of the DMA. (The DMA proposal by the Commission foresees only a very limited involvement of the member states through an advisory committee, an instrument, which, in the context of the EU Merger Regulation, many consider a toothless tiger). The call for greater involvement of member states (and their authorities) was echoed and strongly advocated by all EU National Competition Authorities (NCAs) in a separate paper in June (“How national competition agencies can strengthen the DMA”).

Now the friends are also presenting a concrete proposal for adapting the DMA to achieve this. They acknowledge that centralising “certain powers” at the EU level improves effectiveness and prevents fragmentation. After all, the justification for the DMA proposal is the finding by the Commission that regulatory initiatives by member states cannot fully address unfair practices and lack of contestability in digital markets. The Commission is concerned that without action at the EU level, initiatives by member states could lead to a fragmentation of the Internal Market. Notwithstanding this basic principle, according to the friends, enforcing the DMA will need a “substantial dedicated staff with expertise to match the resources of the gatekeepers”. In the friends' view, the necessary resources to get on par with the gatekeepers can and should be contributed by the National Competition Authorities.

The friends therefore propose to add a new chapter, “Cooperation and coordination with national competition authorities”, to the DMA. Under the rules in this new chapter:

  • national competition authorities would be allowed to make use of investigative and monitoring powers under the DMA on their own initiative. The Commission would also have the option to involve a National Competition Authority in the enforcement of the DMA and refer the enforcement of obligations to this authority (proposed new article “role of national competition authorities”).

  • the European Competition Network (ECN) – a cooperation mechanism of the Commission and the national competition authorities in all EU member states under the EU antitrust procedure regulation – would also be responsible for cooperation concerning the DMA. Cooperation in the ECN would follow the principles of application of EU antitrust rules with the difference, however, that these rules are generally applied in a decentralised manner, whereas (also under the “friends” proposal) the Commission is primarily responsible for enforcement of the DMA with NCAs taking care of monitoring and investigations (proposed new article “Cooperation network”).

  • A Digital Markets Advisory Group consisting of the national competition authorities (with the option of including other authorities designated by the member states) would on a permanent basis “provide the Commission with expertise” for the purpose of enforcing this Regulation (i.e. proposed new article “Digital Markets Advisory Group”). In this sense, the friends suggest adding a procedure to extend the territorial scope of the content of a decision adopted by a national competition authority to the DMA, which is clearly a tribute to the member states who have forged ahead with gatekeeper regulations and are already creating facts (i.e. proposed Article 36 ha).

Compared to the first wide-ranging friends’ paper, which came close to a fundamental critique of the DMA, the second position paper is focused and appears more constructive. At the same time, the three heavyweight member stares make clear that they will strongly push for the two elements of the demands they consider central: more flexibility for the DMA and a stronger role for member state authorities. They stress that amendments to achieve this are “urgently needed to ensure that the DMA can be fully effective”. The concrete proposals underline their demands and will likely be the basis for negotiations in the upcoming so-called trialogue talks between the European Parliament, member states and the Commission.

The DMA is scheduled for adoption in the first half of 2022.

For more information, contact your CMS client partner or CMS experts Dr Björn Herbers and Roderick Nieuwmeyer.