Oxera’s analysis of proposed amendments to the Digital Markets Act by the European Parliament and the European Council finds that while many of the changes could provide benefits for some businesses, they often overlook the negative impact on end-users.
In early 2022, the European Commission (‘the Commission’), European Parliament (‘Parliament’) and European Council (‘the Council’) will enter into trilogue negotiations around the Digital Markets Act (‘DMA’). This final stage of the EU legislative process will draw together the Commission’s original DMA proposal (published on 15 December 2020), the Council’s General Approach (adopted on 26 November 2021) and Parliament’s compromise text (adopted on 15 December 2021).
Ahead of this, the Computer & Communications Industry Association asked Oxera to review the three texts and assess the possible unintended consequences of the amendments for consumers. Our review focused on four key areas: (i) data separation; (ii) product and services integration; (iii) interoperability and interconnection; and (iv) business model choice.
We found that while some of the amendments by Parliament and the Council could improve the balance of the proposed obligations, others risked worsening outcomes for consumers over the long term.
- Parliament’s amendments to recital 46 make an unrealistic demand of platforms by requiring that ‘less personalised’ alternative to be of the same quality as the personalised service, resulting in all users receiving the ‘less personalised alternative’.
- Parliament’s amendments to the scope of Article 6.1(d) and restriction on product integrations in recital 48 would hamper product improvement and reliability while worsening the ‘out-of-the-box’ experience for users.
- Parliament’s extension to the scope of Article 6.1(c) and Article 6.1(f)—to include access to more platform functions for third parties—would raise governance risks that degrade the overall consumer experience.
- Parliament’s amendments to recital 49, requiring all services to be commercially viable on a standalone basis, would undermine cross-subsidisation by platforms and could inhibit innovation and the uptake of new features.
- Parliament mandating free interoperability in Article 6.1(f) would reduce the ability of innovators to share in the value of their innovations, meaning fewer features and functionalities for consumers.
Moreover, applying these restrictions to every gatekeeper platform—as a ‘one-size-fits-all’ solution—would undermine many platform business models, forcing changes that could lead to increased prices for both businesses and consumers.
Well-designed regulation should first identify the market failure that it is trying to fix, and then test whether the proposed intervention is likely to produce better or worse outcomes. This is particularly important when the practices being regulated could lead to positive consumer outcomes as well as negative ones, which our previous research identified is the case with regards to the DMA.
We propose six key principles that should guide the final stages of the DMA legislative process. These include making provisions for safeguarding end-users, allowing platforms to offer consumers integrated products and services, the preservation of investment and innovation incentives, minimising governance risks, and avoiding one-size-fits-all approaches.
There are already signs of this approach within the DMA amendments. For example, amendments to Articles 5(a), 6.1(c) and 6.1(f) would add limitations to the obligations around data processing and interoperability, allowing platforms to better protect platform integrity, end-user data protection, and cyber security—benefitting consumers by enabling them to access innovative safety and security features. We recommend that policymakers take this final opportunity to adopt these kinds of beneficial provisions more widely throughout the DMA.
Gareth Shier, the expert who led the study, said:
The DMA should recognise that some obligations must be tailored to a platform’s specific economic context if they are to avoid inadvertently banning behaviours that benefit consumers. Going into the trilogue process, we recommend that policymakers adopt language that leaves room for authorities to take a holistic view of the market and tailor their interventions when enforcing the obligations.