CER: No pain, no gain? The Digital Markets Act
11 January 2022
The Digital Markets Act (DMA) is a single set of rules for the largest digital platforms, intended to help improve competition in the EU. The rules will force big tech firms to change the way they operate, to promote more open markets.
- EU law-makers – the European
Commission, member-states and Parliament – will finalise the DMA in the
coming months. Negotiations will focus on the Parliament’s desire for
the DMA to regulate fewer large platforms, but to impose more onerous
restrictions on those which are regulated.
- Critics of the DMA argue that it will reduce innovation and make services worse for consumers.
- The
DMA can enhance innovation – but only if law-makers keep its focus on
each big tech firm’s core platforms (for example, Google’s search
engine) where their dominance is most enduring. To promote innovation,
EU member-states should be cautious about the Parliament’s desire for
increased restrictions on big tech’s newer services.
- The DMA
could make some online services worse for consumers in the short term.
But a degree of short-term consumer inconvenience may be needed to
promote greater competition. Greater competition will serve consumers
better in the long run – for example, by giving them more choices and
speeding up innovation.
- EU law-makers need to be pragmatic. If
the DMA annoys users too much – or worse, causes new security
vulnerabilities – it could lose credibility. The Commission therefore
needs the power to exempt big tech firms from the rules in some cases.
Without this type of safeguard, the DMA may become unpopular before it
has the chance to succeed.
At
the end of 2021, the European Parliament agreed on its preferred
version of the Digital Markets Act (DMA), a set of rules intended to
improve competition online. The DMA will shortly be followed by the
Digital Services Act (DSA), which aims to make tech platforms
responsible for tackling illegal and harmful content online. The DMA and
DSA together form key parts of the EU’s plans to tame the power of big
tech platforms in Europe.
The EU law-making institutions – the
Commission, the Council of Ministers representing member-states, and the
Parliament – will negotiate the final form of the DMA in the coming
months. France took over the presidency of the Council of Ministers on
January 1st 2022 and wants the DMA finalised rapidly, before the French
presidential election in April. This is achievable: there are few areas
of fundamental disagreement between law-makers. Broadly, compared with
member-states and the Commission, Parliament wants the DMA to regulate
fewer platforms; to set stricter rules on the platforms which are
regulated; and to impose harsher penalties on platforms which do not
follow the rules.
The DMA has many critics. Among them are several
of the world’s largest tech companies – Amazon, Apple, Alphabet (which
owns Google) and Meta (formerly Facebook) – whose core platforms, along
with those of Microsoft, will be regulated by the DMA. These companies’
main concerns include that the DMA will reduce innovation in the long
term and that it will worsen services in the short term.1
This policy brief explains the DMA’s approach to improving competition
and then assesses these two concerns. It concludes that they have
partial merit. However, these criticisms can still be addressed when the
law-making institutions finalise the DMA. The EU institutions should
keep the DMA targeted – the rules for those firms should focus on
unlocking competitive bottlenecks, and allow some pragmatic exceptions.
If they can manage this, then the benefits of the DMA should outweigh
its shortcomings.
How the DMA will work, and what it will achieve
Digital
platforms allow businesses to find and connect with vast numbers of
consumers. In doing so, they have created new business opportunities for
app developers, retailers, advertisers and others. They have increased
competition in many markets, where previously only very large businesses
could compete.
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