The DMA and EU competition law: complementing or cannibalizing enforcement?

DMA, digital markets, online platforms, competition law

The proposal of the DMA signals a significant change with respect to the application and enforcement of EU competition policy to online platforms. Despite the clear synergy between the two frameworks, the European Commission insists that the DMA is introduced with the idea of complementing, rather than replacing, the enforcement of EU competition law in the case of online platforms. This is even explicitly mentioned in the proposal itself. Despite having this goal clearly sketched out, the application of the DMA in practice may not always complement competition law enforcement optimally; particularly in the case of private enforcement of EU competition law, as will be discussed in this post.

Complementing enforcement of EU competition law

When it comes to the application of EU competition to online platforms, the DMA can be said to offer an overall attractive framework. Instead of curbing the undesirable commercial practices of online platforms through competition law remedies in an ex-post manner, the DMA would allow the European Commission to achieve similar results through the ex-ante obligations included in the DMA. This possibility is particularly attractive in the context of business practices that would otherwise have to be brought under art. 102 TFEU. Proceedings under the latter framework would involve establishing dominance and performing an effects-based analysis, which is cumbersome in general and even more so in the context of interrelated multisided markets.

In this respect, the DMA will indeed complement the enforcement of EU competition law, however, mainly with respect to public enforcement. If implemented, the DMA would offer a workaround for the challenging aspects of art. 102 TFEU cases dealing with platforms. Although the current version of the proposal includes a limited number of obligations that do not mirror all the types of abuse identified under art. 102 TFEU, it is not unthinkable that future updates of the DMA (as made possible by art. 10) will further expand such scope. Consequently, one may expect that DMA will complement public enforcement even more over time. This may be so much so that the enforcement of the DMA by the Commission could gradually replace the need for initiating art. 102 TFEU cases (in parallel). If the DMA will indeed function as envisaged and indeed increase contestability in the context of the digital market, it would certainly be a welcome development. Nevertheless, a shift towards the enforcement of DMA as an alternative rather than complementary route may have a quasi-cannibalization effect in the case of private enforcement.

Cannibalizing the enforcement of EU competition law

Online platforms that will be designated as gatekeepers by the Commission under the scope of the DMA will be required to comply with the obligations included in art. 5 and 6 of the DMA. These obligations, according to the Commission, concern undesirable practices which have proven in the past to harm competition. Accordingly, following such logic, one may argue that a gatekeeper platform that must comply with art. 5 and/ or 6 of the DMA could sometimes be considered to infringe art. 102 TFEU, at least in prima facie form, if the same platform could be considered dominant under this provision. A closer reading of these provisions reveals in essence multiple variations of tying (or bundling) scenarios. Accordingly, in this context, a platform that must comply with art. 5/6 of the DMA can be said to fulfill the key formalistic criteria that would need to be proven in some art. 102 TFEU cases. From the public enforcement perspective, either avenue, ideally, leads to a similar result, thus making the procedural and substantive ‘short cuts’ offered by the DMA very attractive and more sensible to pursue. By contrast, from the perspective of private enforcement of EU competition law, the choice of the European Commission to pursue one of the two avenues may produce significantly different consequences for obtaining compensation for the eventual harm caused by platforms with significant market power.

Pursuing an art. 102 TFEU case against a dominant gatekeeper platform opens the door to follow-on damages claims facilitated through the Damages Directive throughout the entire EU if a finding of abuse is made. Having a finding of abuse under art. 102 TFEU by the Commission would allow private claimants to rely on such findings in their own claim. This means that the entire complex of events that resulted in the harm for the claimants is substantiated. What then remains is for the claimant to prove is the harm it experienced and make the causality link between the abuse and its harm in accordance with national procedural law. Although winning such a follow-on procedure is not evident, it is certainly a step up from pursuing a similar case on a standalone basis.

Enforcing compliance with the DMA will, however, likely lead to a different outcome as far as private claimants go. If the Commission will use the DMA also for priority-setting purposes, it is highly unlikely that it will pursue a parallel art. 102 TFEU case with respect to a dominant gatekeeper platform that adjusts its practices to comply with the DMA. In a way, this would resemble the situation where the Commission resolves a potential abuse case through a commitment decision, but without indicating specific concern about the business practices of the concerned platform. Consequently, in such cases, eventual damages claims would have to be done on a stand-alone basis with no additional evidence to rely on, thereby calling into question the extent to which the DMA complements the effective enforcement of EU competition law.

Although private enforcement of competition traditionally was perceived to be of secondary importance to public enforcement, EU courts have stressed that both are needed for the purpose of effectiveness. In this regard, private enforcement does not only bring another layer of deterrence to the table but also serves a compensatory purpose. While this combination remains true in all cases in the sphere of competition law it is particularly significant in the case of online platforms; especially when considering the case of dominant gatekeeper platforms. Such platforms would not only be dominant under art. 102 TFEU but also comply with the numerical benchmarks of art. 3 of the DMA, namely serving at least 45 million consumers and 10.000 business customers in the EU; all of which constitute potential claimants in the context of private enforcement of EU competition law. Relying on the DMA as an alternative route for enforcement in such cases would then perhaps benefit (some of) the goals of public enforcement of EU competition law but at the same time miss out on the added value that private enforcement can have. Looking at the immense scope of recent claims in the Netherlands against platforms, this potential shortcoming should not be underestimated.

This would be different in the case of online platforms that meet the thresholds of the DMA, however, do not possess sufficient (relative) market power in order to be considered dominant under art. 102 TFEU. In such cases, the private enforcement route would not be possible at all thus enforcement via the DMA would not influence the position of potential private claimants, certainly not in a negative way, and thereby surely complementing the enforcement of EU competition law.

The question is then how to combine the enforcement of the DMA and of EU competition law in an optimal way when dealing with dominant gatekeeper platforms.

Potential solutions

The most straightforward approach would be the parallel application of both art. 102 TFEU and the DMA. The enforcement of the DMA would then enable a (relatively) swift tool for putting an end to the undesired behavior by the concerned online platform. The enforcement of art. 102 TFEU in parallel would then ensure that the potential abuse of dominance does not go unpunished which would make such behavior profitable and at the same time improve the chances of private claimants to be compensated for the harm they may have experienced. At the same time, it can be argued that pursuing public enforcement through both avenues may be overly burdensome on the Commission and would undermine the various efficiencies that the DMA intends to achieve. In order for parallel enforcement to be feasible, it is likely that the Commission would require more capacity or that the enforcement of the DMA would have to be done by a separate dedicated authority. To some extent, there may even be some potential role for NCA’s to pick up on such cases provided that there is some well-established coordination across jurisdictions to avoid conflicting outcomes.

An alternative option to the parallel application would be to add more legal and economic analysis to the enforcement process of the DMA in such cases, which can then be given some evidentiary value in the content of private enforcement claims. Such additional material should be primarily focused on the legal hurdles that such claimants will face in the course of the proceedings, namely the finding of dominance and the abuse thereof. On the matter of dominance, when a platform is designated as a gatekeeper under the DMA additional reasoning could be provided with regard to the likelihood that such entity may also be dominant or at least possess significant market power in one or more markets where it is active. In the case of the behavior, the Commission could, for example, add that the respective online platform must comply with the obligations of art. 5 and/ or 6 of the DMA not only because it is a gatekeeper platform but also because its current behavior has a detrimental effect on competition in the concerned market(s). Here it is worth noting, that the value of enforcement decisions of the DMA will not only depend on how the Commission formulated them but also on the weight that national courts are willing to give them in the course of proceedings, similar to the case of commitment decisions.

Final thoughts

As the DMA is still in the process of entering into force it is hard to tell how enforcement will eventually take form. Nevertheless, the ability of the DMA to complement EU competition law enforcement is not a given fact; the optimal combination of the two frameworks will require some tweaking at both the national and the EU level. Time will tell how this will evolve. It is however clear that national authorities and particularly courts will certainly have to work with the DMA as well.

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Daniel Mandrescu

Blog editor

Ph.D. Fellow, Europa Institute, Leiden University

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