On June 2, 2020, the Commission published two inception impact assessments[1] and two public consultations which address two new policy initiatives: (1) a new market investigation tool (“new competition tool”);[2] and (2) a regulatory instrument that would ex ante govern large online platforms that act as gatekeepers with significant network effects in the European Union’s internal market.[3] These initiatives are part of the Commission’s wider efforts to modernize EU competition law in an era of digitalization. Stakeholders are invited to submit their comments up until September 8, 2020[4] and the impact assessments are expected to be submitted to the Regulatory Scrutiny Board of the Commission and be finalized in the fourth quarter of 2020.
“New Competition Tool”
The new competition tool would give the Commission the ability to initiate market investigations and impose remedies in markets with “structural competition problems,” which the Commission believes cannot be addressed as effectively, or at all, under the EU’s existing competition rules. The examples noted by the Commission include monopolization strategies by companies that have market power short of a dominant position, or dominant companies’ attempts to leverage market power in multiple adjacent markets.
It is foreseen that the proposed tool will be used where competitive harm: (i) is about to occur (addressing the conduct of companies that may restrict competition in tipping markets with network and scale effects, lack of multi-homing,[5] and lock-in effects); or (ii) has already occurred (addressing oligopolistic markets with an increased risk for tacit collusion or systemic market failures regardless of the conduct of a particular firm).
The impact assessment explores four types of enforcement tools:
- Two of these to be applied only to dominant companies (tools based on a prior finding of dominance), in any industry (Option 1) or only in specific sectors including certain “digital or digitally-enabled markets” as identified by recent reports on competition policy[6] (Option 2).
- The two remaining enforcement options would be applicable to any company in the market, regardless of their dominance (tools based on the structure of the market) in any industry (Option 3) or, similar to the Option 2 tool, only in specific sectors (Option 4).
| Targeted Companies Industry Coverage | ||
|
Tool based on a prior finding of dominance — Applies to dominant companies |
Applicable across all industries (Option 1) | Restricted to certain sectors more prone to dominance or identified by reports on competition policy (e.g., “digital or digitally-enabled markets”) (Option 2) |
|
Tool based on the structure of the market — Applies to any market player, even in the absence of dominance |
Applicable across all industries (Option 3) | Restricted to certain sectors with high barriers to entry and fears of competitor foreclosure (e.g., digital sector) (Option 4) |
All four options would give the Commission the power to impose behavioral or even structural remedies without imposing fines and without finding an infringement, which means a reduced, if not eliminated, risk of follow-on damages actions (which can be brought following a Commission infringement decision under the current enforcement framework). In practice this may mean the Commission would be subject to a lower standard of proof when imposing remedies in cases brought under this new regime than when brought under existing competition rules. The proposed changes seemingly draw inspiration from the U.K. market investigation tool, which allows the U.K. regulator to conduct in-depth inquiries into markets to remedy harm due to structural market failures. While competition agencies in Greece, Romania, and several other Member States may also impose remedies following market investigations, the Commission’s proposed framework would afford the Commission much broader enforcement prerogatives. Executive Vice-President Vestager warned that this could lead to far-reaching interventions, such as a duty “to make data available to others, for instance. As a last resort, it could even mean breaking up companies, to protect competition.”[7]
New regulation for large online platforms acting as “gatekeepers”
The Commission also proposes to impose new rules on large online “gatekeeper” platforms concerning: self-preferencing; access to data; algorithmic transparency; and other practices that the Commission views as restricting competition in digital markets.[8] This initiative forms part of the Commission’s wider public consultation regarding the adoption of the Digital Services Act,[9] a package announced by President von der Leyen in her political guidelines[10] and in the Commission’s strategy to “shape Europe’s digital future.”[11] The Commission’s proposal stems from the position that to create a “level playing field,” these platforms need to be held to a different standard than small and medium enterprises.[12]
The Commission explores three policy options that are presented as both alternative and complementary to each other:
- Amend the Platform-to-Business Regulation,[13] to impose additional rules: against self- preferencing, on data access policies, and on unfair contractual These rules would apply to online intermediation services that currently fall within the scope of the Platform-to-Business Regulation.[14] Due to come into effect on July 12, 2020, this Regulation will require online platforms and search engines for business users to comply with certain transparency requirements, including the obligation to disclose the ranking methodology behind search results.
- Grant powers to a dedicated EU regulatory body (not specified in the proposal) to collect information from large online “gatekeeper” platforms with a view to gaining insight into the impact of their business practices on users and consumers.
- Adopt a new regulatory framework that would restrict certain “unfair trading practices” concerning self-preferencing, algorithmic transparency, and online advertising services. These rules are proposed to target a limited set of “gatekeeper” platforms that would be defined by reference to their network effects, the size of their user base, and/or the ability to leverage data across markets. This option would also differ from the other two in that it would grant powers to impose tailored remedies such as access to non-personal data, portability of personal data portability, and interoperability.
The initiative does not specify a number of details, such as the types of unfair contractual provisions that supposedly raise concerns, the definition of a “gatekeeper,” nor the scope of the new rules on self-preferencing, algorithmic transparency, and online advertising services. Much of this detail will likely depend on the feedback submitted to the Commission.
[1] An inception impact assessment sets out the Commission’s plans for new policy initiatives.
[2] Commission Inception Impact Assessment, “Single markets – new tools to combat emerging risks to fair competition” (the “New Competition Tool Inception Impact Assessment”), available at: www.ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12416-New-competition-tool.
[3] Commission Inception Impact Assessment, “Digital Services Act package: ex ante regulatory instrument of very large online platforms acting as gatekeepers” (the “Gatekeeper Inception Impact Assessment”), available at: www.ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12418-Digital-Services-Act- package-ex-ante-regulatory-instrument-of-very-large-online-platforms-acting-as-gatekeepers.
[4] Stakeholders may submit comments via the links listed in footnotes 18 and 19.
[5] Multi-homing occurs when customers join and use several platforms to buy goods or services. This feature is used as a relevant criterion for assessing competition in two-sided markets.
[6] The telecommunications, pharmaceutical, and agro-chemical sectors may be covered by this option. See European Commission, “Report on competition policy 2018,” July 15, 2019, available at: www.ec.europa.eu/competition/publications/annual_report/2018/part1_en.pdf and European Commission, “Competition Policy for the Digital Era,” Final Report of April 5, 2019, available at: www.ec.europa.eu/competition/publications/reports/kd0419345enn.pdf.
[7] Speech by Commissioner Vestager, Competition in a Digital Age: Changing Enforcement for Changing Times, Speech to ASCOLA Annual Conference, June 26, 2020.
[8] The Commission considers online platforms to be characterized by network effects and the ability to facilitate interactions between users, and to collect and use data about such transactions. According to the Commission, these platforms cover a range of activities (e.g., online marketplaces, social media, search engines, creative content outlets, app stores, and price comparison websites).
[9] The Digital Services Act package aims to strengthen user protection and facilitate competition in the EEA through further rules and obligations for digital platforms.
[10] Ursula von der Leyen, “A Union that strives for more: My agenda for Europe,” November 9, 2019, available at: www.ec.europa.eu/info/sites/info/files/political- guidelines-next-commission_en_0.pdf.
[11] Commission Communication, “Shaping Europe’s Digital Future,” February 19, 2020, available at: www.ec.europa.eu/info/sites/info/files/communication- shaping-europes-digital-future-feb2020_en_4.pdf.
[12] Gatekeeper Inception Impact Assessment, p.2 and 5. In a recent speech, Executive Vice-President Vestager also expressed that smaller platforms would not be caught by the gatekeeper rules. See Margrethe Vestager, Competition in a Digital Age: Changing Enforcement for Changing Times, Speech to ASCOLA Annual Conference, June 26, 2020, available at: https://ec.europa.eu/commission/commissioners/2019-2024/vestager/announcements/competition-digital-age- changing-enforcement-changing-times_en.
[13] Regulation (EU) No 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services, available at: www.eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32019R1150.
[14] Regulation (EU) No 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services, available at: www.eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019R1150&from=EN.