The European Commission’s New Initiatives for Digital Platforms

The European Commission (“EC”) is seeking to upgrade its toolbox for addressing competition issues in digital markets. In June 2020, the EC launched its initiative for a New Competition Tool (“NCT”), which allows the EC to impose behavioral and structural remedies in digital (and other) markets that current competition rules do not permit. In December 2020, the EC proposed two legislative initiatives: the Digital Services Act (“DSA”) and the Digital Markets Act (“DMA”). The main goals of these acts are “creat[ing] a safer digital space in which the fundamental rights of all users of digital services are protected” and “establish[ing] a level playing field to foster innovation, growth, and competitiveness, both in the European Single Market and globally.”

In particular, the DMA introduces rules for online platforms that act as “gatekeepers” in the digital sector. The focus on gatekeepers reflects the EC’s concern that these platforms can potentially foreclose access between consumers and rival businesses within their platforms. The EC will evaluate three criteria to determine whether a platform is a “gatekeeper” and thus subject to the new rules. The criteria are 1) “a size that impacts the internal market,” determined by the platform’s annual net sales vis-à-vis the size of the European Economic Area (EEA) and its member states; 2) “control of an important gateway for business users towards final consumers,” determined by number of active users and businesses; and 3) “an (expected) entrenched and durable position,” presumed if the platform has met the previous two criteria for at least three financial years.

If a platform is identified as a gatekeeper, the DMA will require the platform to follow certain rules. Specifically, the platform must allow third parties to “inter-operate” with the gatekeeper’s own services in certain specific situations, provide performance measuring tools for advertisers using their platform to carry out independent verifications, allow for business users to contract with their customers outside the gatekeeper’s platform, and provide their business users with access to the data generated by their activities on the gatekeeper’s platform. Additionally, gatekeepers may no longer block users from un-installing any pre-installed software, may not use the data obtained from their business users to compete with them, and may not restrict their users from accessing services that have been acquired outside the gatekeeper’s platform.

The EC’s proposed initiatives, through both the DSA and DMA, are a significant effort to bolster enforcement and increase accountability of online platforms in digital markets.

EI Senior Economist Jéssica Dutra consults on competition matters across a wide range of industries, including digital markets. Dr. Dutra also reviews issues pertaining to European competition policy.