Home The Role of the State Antitrust and Competition The Eight Features Defining Emergent Competition Policy for the Digital Era

The Eight Features Defining Emergent Competition Policy for the Digital Era

0
Stephanie Kim/ProMarket

Drawing on new research, Oles Andriychuk identifies eight defining features of the European Union’s and United Kingdom’s new laws to regulate competition in digital markets that transform how we understand competition policy.


The adoption of the Digital Markets Act in the European Union and the discussions shaping the legislative process on the Digital Markets, Competition and Consumers Act in the United Kingdom indicate the emergence of a unique type of competition enforcement. The two pieces of legislation will prescribe new rules in digital markets to prevent anticompetitive harms from occurring (ex-ante) rather than seek to evaluate and punish their empirical harms to consumers, workers, and suppliers after they have already occurred (ex-post). Institutionally, the same actors who enforce the current competition laws will enforce the new ex-ante quasi-competition rules: the Commission (DG COMP & DG CONNECT) in the EU and the Competition and Markets Authority (CMA) (Digital Markets Unit) in the U.K. Intellectually, the same “epistemic community” of competition lawyers and economists will be primarily involved with the interpretation, analysis, enforcement, and litigation of the two acts. Conceptually, though, we anticipate new objectives to emerge from these digital competition rules as well as new mechanics for enforcement. These objectives and mechanics that define the new model of ex-ante digital competition laws can be bucketed into the following eight systemic features:

1) Asymmetric approach: At a basic level, the asymmetricity of the laws is present in how they only subject to interventionist regulation a handful of digital market gatekeepers (in the EU) and undertakings with strategic market status (in U.K), such as Meta, Google, or Amazon. However, the asymmetricity also covers the substance of the rules themselves to provide regulators future flexibility in their enforcement policies. These rules are intentionally designed to be open-ended, “susceptible of being further specified,” and full of broad all-inclusive—for many, idiosyncratic—adjectives, such as “fair,” “contestable,” “transparent,” “open,” and “non-discriminatory.” Enforcers can interpret the implications of these adjectives narrowly or broadly at their discretion. The asymmetric enforcement of the rules is not a bug, but a distinctive characteristic of the new approach. The reason for this is that the gatekeepers/undertakings are neither infringers nor wrongdoers. Unlike the ex-post modality, which aims to bring an infringement to an end, thereby restoring competition in the markets, the intervention in the new ex-ante digital markets regime aims at “creating,” “tailoring,” and “shaping” competition. This system does not aim to restore but to trigger competition, and it does not aim to enforce the rules at their maximum (refuting the ex-post logic “the more infringements are identified, dealt with, or prevented the better it is for the competitive markets”) but to enforce them smartly, selectively, and asymmetrically. Obligations in this modality are rather the regulatory toolbox: the means, rather than the ends.

2) Enforcement by forbearance: The asymmetry granted to competition enforcers is not designed to enable the enforcement of all DMA/DMCCA obligations in their totality. This would paralyze the markets outright. Instead, this asymmetry is designed to enable speedy enforcement of those identified challenges/market failures which, in view of the enforcer, merit priority. This clearly implies an opportunity (inevitability) of turning a blind eye on many (indeed most) instances of non-compliance and selecting only those necessary for pursuing broader goals of shaping competition in digital markets. This explains why the problem of “understaffing” is not as urgent as it would be for the comprehensive (the more the better) type of enforcement.

3) Outside-the-box thinking: Enforcement by forbearance in turn triggers another systemic feature of the new enforcement regime: the outside of the box thinking. Unlike its ex-post counterpart, the new type of ex-ante digital markets enforcement is a non-axiomatic affair. There is no textbook economic answer to the issues addressed by the enforcers. The decisions are much more discretionary, selective, and non-formulaic. This requires a very different type of enforcement and enforcers. For even if much of the senior staff at the EU and U.K. competition authorities were already observing a more discretionary and political attitude toward enforcement, many of the case handlers have followed a more strictly fact-and-rules-based approach to their investigations into anticompetitive harms based on prevailing economic and legal axioms. The question emerges if the Commission/CMA are sufficiently staffed at all levels of seniority with members capable of engaging in such non-formulaic strategic policymaking.

4) “Depressurization” of competition policy: While it is legitimate and reasonable to believe in an axiomatic, formulaic reasoning based on neoclassical economics and established case-law as far as ex-post enforcement concerns, such a perception is inconceivable with regard to the enforcement of the new ex-ante rules. The government’s clarification of ex-ante antitrust rules and analysis remains mandatory, but these rules are no longer axiomatic and must take into consideration broader societal interests, including sustainability or industrial policy. The latter, at least in the vocabulary of the Fourth Industrial Revolution, perceives digital markets as fundamental to the success of the national economy. Competition law is no longer bottled up in its own policy arena but released to directly interact with other areas of social and national interest.

5) Permanent regulatory dialogue: A greater, more comprehensive, engagement between competition authorities and other parts of the government is only one dimension of the regulatory dialogue. Clearly, the open-ended, all-inclusive rules are envisaged primarily for disciplining purposes. Because they are designed to be enforced selectively, the designated gatekeepers/undertakings are expected to approach the enforcers with queries as to what (and how, when, and why) should be done in each core platform service/digital activity to tick the compliance box and avoid investigation. Such communication should be meaningful, and the existence of strong punitive rules, various anticircumvention provisions, and high penalties for non-compliance serve primarily the disciplining role. However, the new policy is not about fines and not about deterrence. It is about compliance. The mechanism of compliance is established via the continuous, permanent regulatory dialogue with most of the triggers placed at the disposal of the enforcers, not gatekeepers/undertakings.

6) Autonomy from user stakeholders: Another important dimension of the regulatory dialogue is the interaction of the enforcer with business users. However, this interaction—and the Commission was very keen on this for the right reasons—should never be compulsory. Each gatekeeper/undertaking by definition serves thousands of business users. Some are happy, others are not. There is no universal, “scientific” answer as to which conduct is right or wrong, and if the enforcer will spend the lion’s share of its time on scrutinizing complaints and submissions by third parties with legitimate interest, it will not be using this time for shaping competition in digital markets. The enforcer should keep their door open to the third parties with legitimate interests, and many of them indeed have contributed to shaping this new regulatory philosophy. However, the enforcers should not be under the duty to respond to every particular interest to each business user (e.g., why a specific obligation is underenforced).

7) Learning by doing: The new modality of the non-axiomatic enforcement envisages a smart, experimental, sandbox type of learning and the efficacious application of the rules by doing. There are no textbook solutions for the problems in digital markets which the enforcers are confronted with. These textbooks will be written by them, and there is no other way to calibrate the optimal functioning of the mechanism but by the experimental approach to the new pro-competition regime for digital markets.

8) Minimized due process: The final specificity of the new ex-ante enforcement is that because it is not based on cold-and-objective scientifically measurable facts, the enforcers do not need the draconian investigatory competencies which are indispensable for discovering evidence in the ex-post antitrust enforcement. As such, the role of due process is diminished. Requirements for due process have been among the main obstacles for enforcers for speedy and efficient investigations and trials, as defendants are equipped with very powerful strategies of converting these procedural formalities into their trump card, helping them win cases and generally making the enforcers more risk averse. Neither these investigative powers to overcome due process obstacles nor high fines are necessary for the new type of ex-ante enforcement. The obligations are open-ended and all-inclusive, and establishing the instance of non-compliance requires much less skill and proof. Softer investigatory powers and lower fines—if this would lead to the proportionate lowering of the due process requirements—would suit the enforcers best. This, however, has not yet materialized in either the DMA nor DMCCA, endangering the functionality of the system in the long-run.

The purpose of this article has been to offer a typology and further scrutiny of the ex-ante digital competition rules in the EU and U.K. based on the identification of eight features of the new enforcement philosophy.

Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.

Previous articleWhat Is the Role of Economics in Merger Review?
Next articleHenry Simons And The Libertarian Night Watchman As Tax Collector
Oles Andriychuk is a professor at Newcastle University Law School, where he serves as the PGT LLM degree program director. He is the director of the Digital Markets Research Hub (YouTube handle @digital.markets), co-PI, with professor Rupprecht Podszun, of SCiDA (Shaping Competition in the Digital Age: principles, tools and institutions of digital regulation in the UK, Germany and the EU), a member of the North East Law Review editorial board, and a member of the Market and Competition Law Review scientific board. He serves as an external examiner at Edinburgh Law School and UCL Faculty of Laws. He was the 2023 guest editor of the CLASF Competition Law Review and is the editor for the volume dedicated to professor Giuliano Amato, “Antitrust and the Bounds of Power – 25 Years On.” Oles' work on competition in digital markets is most comprehensively formulated in his 2022 paper for the Modern Law Review, “Between Microeconomics and Geopolitics: On the Reasonable Application of Competition Law.” His ideas about the nature and the functioning of economic, political, and cultural incarnations of the phenomenon of competitive process and their role in shaping liberal democracy are systematized in his 2017 monograph, "The Normative Foundations of European Competition Law: Assessing the Goals of Antitrust through the Lens of Legal Philosophy.”

Exit mobile version