News Update Competition
2 November 2020
More and more regulators and governments are pushing towards an unprecedented regulation of digital platforms, notably those acting as gatekeepers. This update provides a brief overview of the most significant recent developments in this field in the Netherlands, the European Union ("EU"), and the United States ("US").
Digital gatekeepersWhat are digital gatekeepers? According to Margrethe Vestager, Executive Vice-President of the European Commission ("the Commission"), they are "tricky to define". The EC Digital Services Act ("DSA") proposal describes gatekeepers as companies that hold a substantial amount of market power because the digital services that they offer resemble essential facilities. Similar definitions were used in the US House Judiciary Committee's Subcommittee on Antitrust, Commercial, and Administrative Law report of 6 October 2020 and in the Dutch Ministry of Economic Affairs and Climate Policy's 2019 Digital Gatekeepers Report.
In short, digital gatekeepers are companies that provide proprietary digital marketplaces, such as Amazon, Apple's Appstore and Facebook. These gatekeepers develop and facilitate multi-sided digital markets that benefit both suppliers and buyers (e.g. by bringing them together). In providing the marketplace, the gatekeepers also set the rules granting access to the marketplace (this is why they are called gatekeepers). The theory of harm is that their control at the gate can distort competition on the platform, particularly if they themselves compete with other suppliers on the platform.
Regulatory developmentsThe Netherlands
The Netherlands Authority for Consumers and Markets ("ACM") first paid attention to this subject in its 2018 Annual Report and its 2018 Signaal Advisory Report. Both ACM reports discuss the necessity of regulating digital platforms to keep facilitating fair competition on the relevant markets. In addition, the Dutch government's Digitalisation Strategy of 1 June 2018 also touched on the subject.
Mona Keijzer, State Secretary for Economic Affairs and Climate Policy, commissioned the 2019 Digital Gatekeepers Report on gatekeepers' potential exclusionary conduct. The report analysed competition in digital markets and the factors that determine when digital platforms actually have gatekeeper positions. These insights have subsequently been used by the government to formulate its position on modernising competition policy in relation to digital platforms.
The Dutch position has the following points:
1. The EU competition rules (Articles 101 and 102 TFEU) can also be applied in the digital economy.
2. The EU guidelines must be amended so that competition authorities can apply the best enforcement methods.
3. An authority at the EU level should be able to impose ex ante (before the event) measures on large platforms with a gatekeeper position.
4. The jurisdictional thresholds for notifying mergers must be adjusted to enable European merger control to assess all relevant concentrations in the digital economy.
Following various national initiatives, the Commission published its digital strategy, Shaping Europe's Digital Future, in February 2020. One of its goals is to modernise and update the regulatory toolbox of competition authorities by introducing new legislation that features two complementary pillars:
1. First, creating new investigative tools to address structural competition problems on tipping markets. These are network markets (markets where the value of a product increases when many consumers use the same or compatible products) which are on the verge of tipping, allowing a company to develop a monopoly (on markets that have already tipped, the classic instruments of Article 102 TFEU apply). The Commission plans to use the new tool to not only investigate markets that are at risk of tipping but also assess situations where markets do not deliver competitive outcomes, even though no anti-competitive conduct has been established;
2. Second, developing an ex ante regulatory instrument (the gatekeeper instrument) to control the market power of gatekeepers at an early stage.
Additionally, the initiatives are likely to lead to more practical intervention by regulators within the EU, especially considering the fact that the new tools will allow for the pre-emptive regulation of certain activities which, currently, can only be addressed through abuse of dominance investigations (based on Article 102 TFEU). These kinds of cases usually take years to settle. The Commission has indicated that it will present its legislative framework for the Digital Markets Act ("DMA") in early December 2020. For now, it is clear that the DMA will contain both the above described pillars and that the investigative tools regarding tipping markets will primarily target the digital sector. Most recently, Margrethe Vestager announced on 29 October 2020 that the DMA will ban the misuse of business user data by platforms as well as their self-preferencing in search results.
The United States
On 6 October 2020, The US House Judiciary Committee issued a 450-page report on the state of competition in digital markets. The report focuses on Google, Apple, Facebook and Amazon ("GAFA"). The Judiciary Committee requested in-depth information from the GAFA companies and experts in the field. The public hearings with GAFA executives attracted a lot of media attention. The report recommends several possible remedies to (i) restore competition in the digital economy, (ii) strengthen competition law and (iii) stimulate competition enforcement. The recommendations include:
1. prohibiting platforms from self-preferencing;
2. requiring platforms to make their services compatible with competing networks to allow for interoperability and data portability;
3. establishing a standard to proscribe strategic acquisitions that reduce competition; and
4. improving the Clayton Act, the Sherman Act, and the Federal Trade Commission Act, to bring these laws into line with the challenges of the digital economy.
The Senate, the other chamber of the US Congress, is currently interrogating Big Tech executives on another sensitive issue, i.e. to what extent they are responsible for the content that is published (or not published) on their platforms. This is the famous Section 230 of the Communications Decency Act that spares social media sites from being held liable for the posts, photos and videos they allow or remove.