Abstract
The Digital Markets Act (DMA) and its counterpart, the Digital Services Act (DSA), form the cornerstone of the European Commission’s efforts to regulate the rapidly evolving digital landscape. While the DMA specifically targets major tech companies labeled as “gatekeepers,” its implementation has sparked debates and critiques regarding its approach to competition regulation. This article examines the legal complexities and potential judicial review avenues within the DMA, focusing on areas such as Core Platform Services (CPS) application, end user definitions, primacy issues, and competition enforcement. By exploring these key areas, the article underscores the importance of vigilant judicial oversight to ensure fairness, coherence, and accountability in digital market regulation within the European Union and beyond.
Digital Markets Act (DMA) Background
As the development of digital services and digital markets has accelerated in the past decade, there has been a clear winner. With a stronghold over masses of public and personal data, the tech titans (think Alphabet, Amazon, Apple) rule the markets. In response to these companies’ dominance, the EU drafted two joint pieces of legislation—the Digital Services Act (DSA) and the Digital Markets Act (DMA)—passed in late 2022. While the former addresses the current environment of data privacy and consumer protection, the latter, which I will examine in this article, addresses competition between tech firms and market regulation. Both pieces serve as the bedrock of the European Commission’s digital agenda with the goal of “Shaping Europe’s Digital Future”—spearheaded by former President of the European Commission Jean-Claude Juncker and his current successor Ursula Von der Leyen.
In providing a framework for market regulation, the DMA labels the predominant big tech companies as “gatekeepers.” The following six “gatekeepers”—Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft—are selected based on their size in the internal market (the single market being the European Economic Area), the number of consumers on designated “core platform services (CPS)” (e.g., Chrome is listed as a browser core platform service for Alphabet, TikTok is listed as a social network core platform service for ByteDance), and meeting the second criterion in each of the past consecutive three years.
These firms must abide by a range of obligations pertaining to general services, labeled in Article 5, and self-preferencing, labeled in Article 6. Some obligations include allowing end users to easily uninstall preinstalled apps like the App Store for Apple, banning the usage of data of end users when gatekeepers compete with them on their own platforms like WhatsApp and Meta. The consequences for non-compliance could lead to a penalty of up to 10% of a company’s total worldwide annual turnover and up to 20% in the case of repeated infringements. As of now, the Commission has not launched formal investigations into the aforementioned “gatekeepers,” via the DMA. However, it is not something that can be ruled out given the Commission has already launched a formal investigation against one of the “gatekeepers,” ByteDance, through the DSA for risk management on 19 February. While the DMA and the EU’s digital agenda serve as a bastion for fair regulation and market activity, they are not without their criticisms.
Legal Tenants
There have been many criticisms of the DMA on political and economic grounds. For instance, concerns include the DMA positioning itself particularly against U.S. interest and business. The principal concerns include the overregulation of open markets, excessive fines untethered to actual damages, discriminatory thresholds against U.S. companies (to which 5 out of the 6 “gatekeepers” are American), and the adverse effect of enabling Chinese and Russian growth without stimulating European growth.
Although these broader criticisms have some merit, I will primarily focus on the legal weaknesses of the DMA. While the DMA’s aim is to foster fair competition and curb potential monopolistic practices, several legal ambiguities and potential judicial review avenues merit attention. With clarification, the DMA could avoid excessively scrutinizing competitive environments and belittling consumers and Member States in the EU through the following: (1) primacy issues in enforcement and compliance and (2) core platform services definitions.
Primacy Issues in Enforcement and Compliance
The DMA’s centralized approach to market regulation raises concerns regarding its relationship with national laws and enforcement mechanisms. By nullifying national anti-trust laws in favor of supranational oversight, the legislation risks creating inconsistencies and market fragmentation. This tension between national and EU-level regulations, exemplified by GDPR enforcement, underscores the need for judicial review to reconcile conflicting legal frameworks and prevent adverse consequences for market dynamics and consumer protection. Additionally, the potential activation of interim methods for national investigations under Art. 38(a)(1) of the DMA highlights the complexity of navigating jurisdictional boundaries, necessitating judicial scrutiny to uphold legal coherence and regulatory efficacy.
From the implementation of the DMA, there could exist judicial review focusing on the legal basis of the new rules (that being Article 114 of the Treaty for the Functioning of the European Union [TFEU]) or on the designation of measures outlined in the law. The issue that may arise, however, through the judicial review is that there may be excessive reliance on “Commission deference,” whereby the General Court would give significant weight to the European Commission. That said, overreliance on the Commission may lead to unpredictability in the application of EU law, particularly in far-reaching pieces of legislation such as the DMA. This raises questions on rule of law if there exists an excessive level of deference. The impartiality and independence of the Courts should be scrutinized. This may not come as a surprise, however, because the standard of proof will be novel for procedural measures given the novelty of obligations in the DMA.
Core Platform Services (CPS) Definitions
One area ripe for judicial review concerns the DMA’s treatment of Core Platform Services (CPS) and the associated roles of gatekeepers. The legislation acknowledges the dual role of gatekeepers as outlined in Arts. 46 and 47 of the Preamble. However, it does not explicitly address scenarios where gatekeepers offer multiple CPSs, potentially leading to discriminatory practices. For instance, gatekeepers offering both video sharing and social networking services may inadvertently subject themselves to disproportionate scrutiny, exacerbating the punitive measures for non-compliance. Due to the lack of precedence in these labeled gatekeepers and the novelty of regulation for the CPS, it leaves considerable leeway for the Commission to target corporations when deemed fitting. This lack of clarity raises questions about the fairness and effectiveness of enforcement measures and could prompt judicial intervention to ensure equitable treatment under the law.
Another potential area for judicial scrutiny lies in the definition of end users under the DMA, particularly concerning the distinction between active end users and business users. The ambiguity surrounding this differentiation, as articulated in Art. 3(2)(b), has real-world implications, as evidenced by the Zalando case within the Digital Services Act (DSA). The European Commission’s classification of Zalando, a prominent online retailer, alongside tech giants like Alphabet and Meta, underscores the complexities of defining end users within evolving digital ecosystems. Such discrepancies could trigger legal challenges, particularly when assessing compliance and regulatory obligations for entities operating hybrid business models. Judicial review may be necessary to clarify and standardize end-user definitions to ensure consistency and fairness across diverse digital platforms.
In summary, the DMA’s legal complexities and potential ramifications necessitate vigilant judicial oversight to safeguard the principles of fairness, coherence, and accountability in digital market regulation within the European Union and beyond. Without such, the Commission has virtually all control in reviewing the standards that they made, putting into question the fair process of the rule of law.
ConclusionsThe Digital Markets Act (DMA) has faced criticism, with perceptions of its “big is bad” structural approach aiming to bolster smaller European competitors. While heralded for its forward-looking dynamics in competition law, the DMA trumps competition law precedents in the light of a lack of US or international criteria so far. In essence, Brussels could once again dictate competition law as it did with data protections via the General Data Protection Regulation. As the US, China, and other major players forge their own regulatory paths, it is imperative to scrutinize the DMA’s grounds and application to prevent unjust persecution of big tech and cultivate a level playing field for both current gatekeepers and future entrants. Central to the DMA is its reliance on company size and economic potential, emphasizing the need for clear guidelines to mitigate legal loopholes that could jeopardize the political and economic interests of the EU and other tech-subsidizing states. Moving forward, a balanced approach is essential to navigate the complexities of digital market regulation while fostering innovation and competition within a global context.