At the beginning of November 2020, PubAffairs Bruxelles organised an evening of discussion on the upcoming Digital Services Act package and how to regulate large platforms acting as gatekeepers with the distinguished speakers Mr Werner Stengg, Cabinet Member, EVP Margrethe Vestager, European Commission, Ms Stéphanie Yon-Courtin MEP (Renew/FR), ECON Vice-Chair and IMCO Member, European Parliament, Mr Robert Dehm, Digital Policy and Telecommunication Counsellor, German Presidency of the Council of the European Union, Mr Carel Maske, Director, Competition, Microsoft and Mr Fadhel Lakhoua, Director, EU and Economics, Regulatory Affairs, Orange.
The debate was moderated by Philippe Defraigne, Director, Cullen International.
The moderator opened the discussion by contextualising the subject matter of the debate, as current proposals on online platform regulation touches upon a variety of topics and legislative initiatives, such as disinformation, the revision of the E-Commerce Directive, the Digital Services Act (DSA), the Data Governance Act or the review of the Platform-to-Business Regulation. However, the moderator clarified that the focus of the discussion would be kept on the Digital Markets Act (DMA), with special regard to large platforms acting as “gatekeepers”, which the European Commission should release at the beginning of December 2020.
Philippe Defraigne started by enquiring about the reasons behind the European Commission’s plan to regulate large online platforms acting as gatekeepers, despite the fact that the EU executive body is already able to file lawsuits against any company which is found not being compliant with European competition standards.
Mr Werner Stengg began his speech by remarking that the different matters mentioned by the moderator are indeed interrelated and stated that the Digital Services Act (DSA) is interlinked with the Digital Markets Act (DMA), as well as with the Data Governance Act and the EU agenda on disinformation. He continued by explaining that Europe, as the rest of the world, is currently in a phase of digital transformation and that this process would require that legislation regarding the digital domain is considered in its entirety. The speaker carried on by affirming that the European Commission adopted a horizontal approach to several policy domains, such as artificial intelligence (AI), data and large online platforms, by balancing the opportunities provided by the digital transition and the inherent risks of this crucial shift. Mr Stengg subsequently highlighted that technology is a fundamental enabler of the Commission’s agenda, and more so in the context of the Recovery Plan, as the digital and green transitions are the two cornerstones of the programme set out with the appointment of Commission President Ursula von der Leyen. The speaker also explained how digital technologies and innovations have been able to increase Europe’s resilience due to their high relevance for businesses, governments and citizens alike in coping with the effects of the Corona Crisis. Mr Stengg added that the efficiency gains necessary for the economic processes needed to fulfil the environmental transition can be accomplished only if all actors concerned exploit to their full potential the benefits of digital technologies.
Moving on from this consideration, the speaker elaborated further on the matters at stake by referring to the example of the EU agenda on disinformation. While disinformation as such will not be regulated by the DSA, the transparency rules stemming from this new piece of legislation will create the preconditions for further policy measures, he said. The speaker subsequently pointed out different legislative initiatives that have been put forward by European institutions to cover different areas of the digital sector: he named AI and the question of data as domains approached from a trust and fundamental rights perspective, the Digital Single Market Act (DMA), which focuses on the question of market power, as well as the Platform-to-Business Regulation, which was aimed at enhancing fairness and transparency. Mr Stengg explained that these policy initiatives have proven insightful for EU institutions in order to understand the effectiveness of policy instruments to address the questions emerging from the digital transformation. Drawing conclusions from this statement, Mr Stengg emphasised that competition policy is of utmost importance and a necessity. Nonetheless it needs to be complemented by other actions in order to regulate the digital realm in an effective manner.
In this connection, Mr Stengg explained that, while competition policy alone is not able to keep pace with the rapid developments in the digital sector, further regulatory frameworks had to be created. The speaker subsequently shared the opinion that platforms acting as gatekeepers have reached such a level of influence that the classical definition of market cannot be applied anymore to a great extent. Indeed, large platforms have become a handful of entities upon which the vast majority of actors rely to reach out to the wider public. He also explained that gatekeeping platforms are increasingly competing among themselves in the share of market and data they have access to and that the European Commission is aiming at creating a level playing field in order to give other players, with special regard to start-up and k-labs, a fair chance to offer online goods and services and to give European consumers the power to decide who the winners are in the given market.
The moderator introduced Ms Stéphanie Yon-Courtin and asked the MEP about the position of the European Parliament regarding gatekeeping platforms.
Ms Stéphanie Yon-Courtin MEP began her reply by referring to the 2019 Annual Report on Competition Policy of which she was rapporteur for the European Parliament. In this report, she explained, the Parliament called for an ex ante regulation of large platforms in order to adopt rules related to the challenges these very entities create. The MEP continued by stating that, besides the update and the better implementation of the existing antitrust policies, the European Parliament has emphasised the need for additional regulations to ensure that competition rules are fit for purpose. With 521 votes in favour and 41 against, the report obtained broad support throughout political groups, she added, and she continued by expressing her satisfaction over the efforts the European Commission has displayed, based on the recommendations of the European Parliament as well. She then agreed with Mr Stengg’s assessment of the anti-competitive behaviour large platforms show against smaller companies and stressed how these practises limit the users’ freedom of choice. Ms Yon-Courtin MEP also analysed how close the position of the Annual Report on Competition Policy is on the matter of ex ante regulations of platforms to the own-initiative report with recommendations to the Commission on the Digital Services Act of the IMCO Committee. This observation reveals the consistent position of the European Parliament on the matter, whilst the Revision of the E-Commerce Directive and the Regulation on illegal content were much more controversial, she added.
At the time of the resolution on the Digital Services Act, the MEP continued, the distinction between DSA and DMA was not made clear, in her opinion, while she highlighted that the respective reports of the JURI, IMCO and LIBE Committees were more focused on the regulation of online content and the liability regimes for platforms. The speaker also expressed her regret over to the fact that the ECON Committee, which is responsible for competition policy, was not involved in this initiative. She consequently called for a leading role of this Committee in the future concerning the matters tackled in the DSA, with special regard to the definition, the set of criteria and the obligations stemming from the ex ante regulation proposed, as well as regarding the policy framework of the new competition tool. The MEP followed up on this statement by referring to a recent announcement of the Regulatory Scrutiny Board which expressed concern regarding the DSA that may delay the legislative process. With EVP Vestager’s support and the commitments of the German Presidency of the European Union to act on the questions stemming from the digital transformation, the MEP pointed out that there is an institutional consensus to foster further action. She continued by calling for a timely implementation of the DSA as a blueprint to keep up with the rapid evolution of digital markets and to set solid standards for a sector which is crucial for Europe’s jobs and growth creation. Additionally, the speaker referred to the state of play of the same subject matters in the United States that left Europe as the frontrunner in digital regulation globally and concluded her remarks by commending DG COMP for having taken on a leadership role.
Philippe Defraigne introduced Mr Robert Dehm and asked him about the dynamics at the level of the European Council regarding the Commission’s proposal on the DSA.
Mr Robert Dehm began his reply by highlighting that the timeline of the DSA legislation adoption has still some way to go and by remarking that the information relevant to the policy process should be conducted patiently and accurately, rather than swiftly. He subsequently remarked that the finalisation of the EU Council’s position would only be possible in response to a finalised proposal. However, with regard to the debate at a Council level, he stated that there is widespread agreement on the necessity for regulation in response to the gatekeeping power of large platforms. The speaker also referred to the public consultation conducted by the European Commission, which has confirmed a similar orientation. Moving on with his remarks, Mr Dehm stated that the difficulties in finding an agreement within the Council would depend on the details and different policy options that will be eventually proposed. He exemplified his statement by mentioning the controversial question of introducing a blacklist of anti-competitive practises in order to regulate the question stemming from the DSA.
The moderator followed up on this statement by asking for Microsoft’s and Orange’s motives for engaging in the discussion around regulating gatekeeping platforms and enquiring on the criteria that should determine the legal status of platforms as gatekeepers.
Mr Fadhel Lakhoua opened his statement by emphasising the importance of platform regulation for Orange as stakeholder and partner of large platforms’ ecosystems. He suggested that it is crucial that gatekeeping platforms act in a fair manner, especially when they hold a position in the market that allows them to gain valuable advantages. The speaker elaborated on his stance by calling for fairness, adaptation of competition, innovation promotion and the creation of a stable level playing field. To this end, Orange proposed an adaption of the current competition legislation in its contribution to the Commission’s consultation, particularly when it comes to the definition of markets. Mr Lakhoua continued by advocating for a list of prohibited practises to be the focus of an ex ante regulation and highlighted Orange position that case-by-case and tailored remedies, which would offer a wider space for resolving issues, should constitute targeted interventions complementing competition law. Mr Lakhoua then called for a proportionate reaction to current questions arising from gatekeeping platforms without creating spillover effects to other platforms or market participants.
With respect to the scope of activities that should be covered by the DSA, the speaker mentioned operating systems, market places, app stores, cloud services and online advertising. He also warned against the ability of gatekeepers to reach out to other markets, such as the Internet of Things (IoT) or AI-based products. The speaker subsequently formulated the position of Orange around three main criteria for platforms to be regulated as gatekeepers under the upcoming DSA: the evaluation of the role of unavoidable trading partners, the definition of direct and indirect effects through the control of a large user database and the question of the critical scale, which is not reasonably possible to replicate or challenge. According to Mr Lakhoua, further criteria that should be considered would be the quantitative user base, the question of multi-sided markets, the proportion of single homing clients and national indicators. The speaker concluded that this list of indicators offers enough flexibility to make a future-proof assessment of large platforms.
Turning to Ms Yon-Courtin, Philippe Defraigne asked the MEP to react to the questions that had emerged during the first part of the discussion.
The ex-ante regulation on gatekeeping platforms is not a tool for tackling specific companies, Ms Yon-Courtin MEP said, but rather a tool to stimulate the digital single market by ensuring fair competition. She clarified that the DSA has been perceived as an “anti-platform”, targeted regulation. For this reason, the DSA should be endowed with a well-defined scope aiming at preserving innovation and guaranteeing a degree of flexibility for possible future developments. She carried on by stating that, in the coming years, companies falling under the DSA scope may experience a change and other actors may emerge. If this were to occur, the MEP continued, it would mean that Europe’s innovation processes are back on track.
She then elaborated on her remarks by emphasising that an excessively detailed scope would make the regulation difficult to adapt to changing circumstances in the future. She subsequently emphasised that the European Commission is also working on a list of economic criteria, such as network effects, economies of scale and the preponderant power of platforms over the general users. Online platforms should not become an unavoidable gateway for the users to access goods, services and content, the MEP explained, and added that conglomerate functions enable platforms to deploy significant leverage effects beyond their original business sectors. She pointed at further indicators, such as the holding of significant market and audience shares, the massive possession of strategic data of relevance for competitive gains and major financial strength or stock market value as questions to be taken into consideration, as well.
The MEP also reiterated the reference to the Annual Report on Competition Policy which calls for the definition of economically objective criteria that will create a limited and accurate scope with the capacity to evolve according to market developments. Indeed, too broad a scope would jeopardize innovation, Ms Yon-Courtin MEP explained, and she concluded her statement with a call for a differentiated approach towards platforms that explicitly target gatekeeping functions.
Mr Dehm took the floor by making a case for the necessity of clear and specific rules for the business models of the respective companies. Prohibitions and obligations need to be clearly understandable, while the regulating authority should individually assess the situation on the market the company is active in, he specified. With reference to the statement of Ms Yon-Courtin MEP, this procedure would require a more flexible scope, the speaker confirmed. Mr Dehm then suggested that, even if a company were not to fulfil all relevant criteria, the context on the market should allow for conclusions on a platform’s gatekeeping function. The combination of objective criteria and the flexibility to assess case-by-case would create a functioning scope for identifying gatekeeping platforms, the speaker concluded.
In response to the other speakers’ statements, Mr Stengg went into detail about the function of the Regulatory Scrutiny Board. He stressed the fact that the Board does not judge a legislative proposal in itself, but assesses the possible impacts of a new policy initiative from a methodological point of view. This function, however, has no effect on the date of publication of a proposal, but it is rather a judgement on the quality of the proposal. Moving on from this consideration, the speaker elaborated on the criteria that should be used to define gatekeeping platforms. He first mentioned the different activities conducted by the relevant platforms, based on economic analysis of their respective markets and relevant network effects. The criteria themselves should offer legal certainty as much as flexibility and relevance, he added, and he went into detail by suggesting that the aspect of legal certainty would require more quantitative than qualitative criteria, even though the latter are harder to determine. To conclude, the speaker explained that the scope should be narrow for directly applicable cases and wide in terms of future market investigation. He concluded his remarks by stating that a gatekeeper is a platform that “holds the key to a substantial part of the market” and leaves no alternative in that very market, which becomes therefore incontestable.
The moderator followed up on these considerations by raising the question of which remedies should apply once the relevant platforms are identified as gatekeepers and further inquired about the nature and function of blacklists.
Mr Lakhoua first advocated for Orange’s proposal of establishing a list of forbidden practises as the core tool of the ex ante component of the DSA. This list should include self-preferencing, positioning of default settings, preinstallation of apps, priority placements as well as discriminatory actions present in some of the platform components. With regard to case-by-case assessments, the speaker highlighted the need for targeted measures as extension of competition enforcement, rather than interventions based on an ex ante approach with predefined remedies. For this purpose, neutrality between operating systems, open APIs, open source and other data-related practises should be carefully assessed, he concluded.
Mr Stengg began his reply by calling for the right balance when it comes to setting up a blacklist. Indeed, the prohibition of practises should not cause negative side effects, he explained. By referencing the example of the controversy around self-preferencing in the Platform-to-Business Regulation, the speaker highlighted the importance of putting those practises into context. Indeed, every business tries to generate as much economic output as possible, which makes self-preferencing an implicit business practise. The difficult decision to take in that regard is when these practises reach a disproportionate level, he added, and he explained that it must be determined by the scope and by whether a company has reached an extent of market power that justifies a limitation of self-preferencing. Blacklists for prohibited practises, as well as whitelists of obligations, have to be carefully composed, the speaker summarised. Moving on from this consideration, Mr Stengg explained that the market investigation tool is meant as a part of the DSA Regulation. It will be a tool for adaptation to new market conditions and for the assessment of whether a market is still contestable by competitors of a major platform. With regard to the matter of enforcement, the speaker highlighted that, even though there is no decision yet, the implementation and enforcement of possible blacklists requires central enforcement.
Ms Yon-Courtin MEP took the floor by agreeing with some of the foregoing speakers on the need for interlinking the scope of a gatekeeping definition with the criteria of a blacklist. Before defining specific prohibited practises, it would be important to refocus on the aims of the DSA, the MEP explained. In fact, she continued, the new bill is meant to guarantee market access for innovative companies, on the one hand, and to enable the freedom of choice for users/consumers, on the other hand. She subsequently drew attention to the diversity of digital markets. While ex ante rules for companies of the telecommunication sector could be clearly formulated, as they follow the same business model, the diversity of businesses and services on the digital market makes the setup of common rules challenging. To this end, she called for a reasonable selection of categories for blacklists and consequently listed relevant indicators, such as the imposition of restraints on business users, the preferential treatment of products and services, the impediments to interoperability, excessive data extraction, processing and leveraging, as well as unfair terms and conditions. Nonetheless, the speaker pointed out that other criteria should be applied according to the market context and she called therefore to hold onto case-by-case assessments as well.
Regarding the question of remedies, Ms Yon-Courtin MEP shared her opinion that the existing measures under competition law are not implemented to a satisfactory extent and that future remedies should be tailored and tested beforehand in order to be effective. She then called for the promotion of a participatory anti-competition approach, which aims for cooperation between the responsible authorities, the given gatekeeper and the competitors disadvantaged by the gatekeeping practice. Additionally, the MEP suggested effective remedies for both competition enforcement and ex ante regulations to be enabled by a mechanism that allows revoking remedies that are dysfunctional. Moreover, regulations on platforms have to be as innovative as digital platforms themselves, she added.
The speaker consequently went into detail about different behavioural remedies such as market access obligations, obligations to proactively offer alternatives to the consumer, safeguarding interoperability and data sharing obligations, as well as the preservation of innovation. Ms Yon-Courtin MEP proposed structural remedies to be taken into consideration in order to leave the scope of action to the regulator, while raising some doubts concerning enforcement. The best regulation is just as good as the resources for its enforcement allow it to be, the MEP concluded.
Determining which indicators should be on a blacklist is difficult without knowing the scope of the assessment in advance, Mr Dehm affirmed. Furthermore, he described how excessively extensive blacklists would prevent new platforms and start-ups from innovating, due to bureaucratic hurdles or too restrictive regulations. The speaker also stated that, even though the criteria for blacklists and the remedies mentioned by the other speakers were sufficient, they would be subject to negotiation between the Parliament and the Council to put them into the right context. He moved on from this consideration by warning against having high expectations with regard to the authority that would be responsible for the enforcement of the incoming platform-related regulations. Mr Dehm finalised his remarks by asserting that the EU would have to cooperate with the national authorities on the assessment and enforcement of the new measures for regulating gatekeeping platforms.
Mr Lakhoua began by agreeing with Mr Dehm’s proposal for a cooperative approach between the EU and the Member States and pointed in the direction of DG COMP regarding the matter of case-by-case assessments. He further stressed the need for bearing the human component of the issue in mind. In fact, he stated that the analysis of data requires a high expertise and skilled staff, such as data scientists. He concluded his statement by highlighting that human resources should be the core of the European Commission’s efforts for the Digital Single Market, besides AI and the overall digital ecosystem.
Ms Yon-Courtin MEP emphasised that, regardless of how the institutional setting will be shaped, it should be possible to apply effective sanctions against gatekeeping platforms in case of infringement. She added that appropriate tools for investigation should be given to the competent regulating authority, namely monitoring capacities and audit functions that include the assessment of algorithms. Even though DG COMP would be the most experienced part of the EU administration for this role, the MEP also shared her doubts about the sufficiency of means from a financial and human resources point of view. Indeed, the enforcement of the ex ante regulations will require data scientists, engineers, behavioural economists and more resources to collect and analyse key data, while DG COMP is already facing problems in facilitating the monitoring of current remedies, Ms Yon-Courtin MEP clarified. She consequently proposed the setup of a European task force to serve as intermediary between the DGs COMP, CONNECT and GROW on the one hand, and the national authorities on the other hand. The National Competition Authorities (NCA) and the network between those authorities are crucial for providing the necessary data to the European Commission, the MEP added. She highlighted that leaving the enforcement of these regulations to national authorities alone is not a sufficient option, as it would create loopholes in the regulatory framework. Moving on with her remarks, Ms Yon-Courtin MEP explained that platform regulation touches, besides competition, upon consumer protection, digital sovereignty, telecommunication, industrial policy, data protection and international cooperation and requires therefore an interconnection of all networks acting in these sectors. As these networks are capable of detecting market failures, they should share best practises, the speaker proposed, and she concluded her statement by calling on all relevant stakeholders to cooperate on data exchange in order to achieve a harmonised European approach.
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