By Javier Santacruz, Lead Researcher at Spanish classical liberal think tank Civismo
Last month, the decision making process to get the EU’s so-called “Digital Services Package” has accelerated somewhat. This package includes the Digital Services Act (DSA), the Digital Markets Acts (DMA) and the Data Governance Act (DGA).
A closer look is warranted to analyse how these new regulations will be enforced, once they have been agreed. The new regulatory framework is meant to promote opening up markets for more competition. To do that, common rules for the EU’s digital markets are introduced. However, action by Brussels needs to effectively coordinate with national competition authorities (NCAs) and there is a risk that will not be the case.
Do not throw away the expertise of national competition authorities (NCAs)
An important debate is required on the precise role these NCAs will play in the new framework. Given their experience, NCAs may understand competition cases better than a single centralized institution like the European Commission.
It is of course evident that the European Commission will be at the centre of the new digital regulatory framework, and its role will be more than to only provide a ‘common denominator’. In fact, the purpose of the proposed regulations precisely is to harmonize national legislation, in order to prevent the fragmentation of the digital market.
However, in order to deliver a successful strategy, to avoid conflicts between EU Member States and the European Commission, the best strategy is to conceive NCAs as the ‘executive arms’ of the new digital regulation, particularly when national players are affected. In this way, the knowledge and experience of national regulators can be put to best use.
Moreover, the European Commission has limited human and financial resources that may not be enough to go after all potential abuses: relying on NCAs’ staff and knowledge is also a matter of pragmatism.
NCAs can play an important role during the transition period and possibly after, in cooperation with DG Competition, exploiting their experience of having regulated tech companies for years. NCAs are likely to be more agile than the European Commission, at least until a proper Digital Single Market actually emerges in the EU.
An ineffective preventive regulatory approach is being prepared
The Digital Markets Acts (DMA) intends to regulate the market power of large online platforms ex-ante – preventively. It is however far from obvious that this kind of ex ante regulation will solve existing competition distortions.
Because of this, it is necessary to be careful about granting the European Commission as the single central competition authority more powers than the mere responsibility to coordinate national competition authorities (NCAs). It should not receive new powers to supervise directly large platforms or gatekeepers.
NCAs are much closer to on the ground reality when it comes to information gathering and enforcement. In practical terms, in order to promote the single digital market, the creation of an alliance of national and European authorities should be the best alternative, putting regulators at the heart of the new single market.
This does not require the EU or member states to introduce new legislations – as some have already done or as some are considering. In fact, digital abuses can and should be dealt with through traditional antitrust enforcement as well as merger control, rather than providing the EU or NCAs with “super-powers” specific to digital markets.
The scale of the “relevant market” should determine whether something is the EU’s business
The scale of the relevant market should determine which regulator is competent. If the market is national, it should be the business of NCAs, who would then coordinate with DG Competition.
However, if the relevant market extends to more than a single country, the European Commission should be responsible, while making use of the best practices of each national regulator, in a coordinated manner. The ultimate decision should then however still be up to the network of regulators that are involved.
As I have also argued in a new Epicenter briefing, to strengthen effective coordination among national competition authorities (NCAs) at the European level is likely to deliver more benefits than costs. Their experience, developed over the years, extends to economic behaviour, social impact, and economic policy effects. Many – if not all – have been working closely with each other and with the Commission anyway. To make use of this legacy and experience serves as a better base for more effective antitrust enforcement in digital markets than arbitrary and self-referential powers.
Proposals to reform of EU competition rules risk granting excessive powers to the European Commission
Finally, there is the issue of reform of the regulatory framework covering EU competition policy. Of course, this should be adapted to the new digital reality, but it was designed taking into account the economic and legal interactions of consumers, companies, providers, and regulators, and a lot of that remains the same.
What is necessary to reinforce are the following aspects:
- a) The criteria to define “market power” and in particular what constitutes the “relevant market” in the context of digital services
- b) How to identify market failures or abuses
- c) The method to calculate supply, demand, and prices in relevant digital markets
Antitrust enforcement in the EU is still regulated by norms dating back to almost 20 years ago – in particular Regulation 1/2003. Here, potential improvements include sector-specific inquiries, more efficient use of temporary interim measures and employing structural solutions in the context of an ex-ante and an ex-post intervention.
Some tools could be strengthened, allow some “ex-ante control” by gatekeepers, particularly when it comes to data protection and accessibility by third parties. Here, particular circumstances may justify enabling the European Commission to impose specific measures on Member States.
However, certain proposals to update EU competition regulations go way too far. This is the case for the so-called “New Competition Tool” (NCT), “to address some structural competitions problems identified by the Commission which cannot be tackled or addressed in the most effective manner on the basis of the current competition rules.”
This new provision would enable European Competition Commissioner Margrethe Vestager (picture) with almost discretionary powers to intervene “ex ante” against digital champions. Most of the time, to intervene is not necessary, while it however introduces confusion, uncertainty and bureaucracy both for regulators and for market actors.
This particular innovation also offers little or no advantage to national competition authorities (NCAs). Before coming up with proposals for new powers, the European Commission should focus on improving coordination among national competition authorities, something which can serve to underpin a solid digital regulatory framework.
