Inês Neves (Lecturer at the Faculty of Law, University of Porto | Researcher at CIJ - Centre for Legal Research | Member of the Jean Monnet Module team DigEUCit - A Digital Europe for Citizens. Constitutional and policymaking challenges) and Luísa Amaro de Matos (LL.M. in European Legal Studies – College of Europe, Bruges)

▪           

On 6 September 2023, the European Commission (‘EC’) designated a first set of six gatekeepers in relation to 22 core platform services(‘CPS’)[1]. These undertakings must ensure compliance with the positive and negative obligations set out in the Digital Markets Act (‘DMA’)[2] by March 2024.[3]

Meanwhile, the DMA is already having an impact, with Facebook and Instagram, for instance, offering European users ‘the choice’ to pay a monthly subscription to use their social networks without any advertising (ads).[4]

On 17 November 2023, the Court of Justice of the European Union (‘CJEU’) confirmed that Apple, Bytedance and Meta had brought actions challenging the designation of (some of) their core platform services,[5] namely Titktok as regards Bytedance (T-1077/23); Facebook Marketplace and Messenger concerning Meta (T-1078/23), and App Store and iMessage for Apple (Cases T-1079/23 & T-1080/23).

As expected, the success rate of the Digital Markets Act in ensuring fair and contestable markets in the digital sector will rely heavily on its enforcement rather than its text or written content. The DMA is and will be much more than a Regulation. It is a ‘framework’ that must be read in the light of complementary legislation and material acts. In this respect, the DMA’s enforcement will also build up the DMA as a ‘regulatory framework’ for digital markets, with uncertainties being resolved through specification,[6] implementing provisions,[7] guidelines,[8] standardisation,[9] and delegated acts.[10]

It is accurate that the DMA intends to be self-enforcing with little room for blind spots. It is true that the DMA’s much more straightforward approach, which offers minimal opportunities for flexibility, is aimed at addressing some of the shortcomings of competition law rules. This is evident from the DMA’s provisions which i) deny undertakings the opportunity to present efficiency and objective justification arguments for restricted or mandatory behaviours,[11] ii) limit opportunities for dialogue and specification,[12] and iii) allow for suspension and exemption only in exceptional circumstances.[13] However, as a legal instrument, the DMA can only be read against the ‘normative force of facts’. Appeals by some designated gatekeepers may well work against speed[14].

It is clear that to be effective, particularly in changing behaviour, a ‘top-down’ approach must be understood and accepted as justified and proportionate. It is crucial to acknowledge the revolutionary change in paradigm that the DMA brings, forth with increasing demands for legitimacy.[15] A participatory momentum is necessary for its accomplishment. In conclusion, while effectiveness, speed, and legal certainty are all desirable outcomes, it is essential to incorporate a bottom-up approach to prevent a flawed Regulation.

In this post, we examine a few developments that have emerged following the implementation of the Digital Markets Act, with a view to identifying possible future trends. Specifically, we consider the dialogue and compromise that must be ensured between the ius strictum of an ex ante regulatory approach, with little room for adaptation or justification, and the need to ensure fairness on a case-by-case basis, while also avoiding a confrontational approach.

Why is it important to strengthen democracy in the DMA? How can the European Commission foster an enforcement model founded on democracy? To what extent can ongoing court proceedings demonstrate the value of the importance of a participatory approach based on multi-stakeholder engagement?

Beyond Regulation (EU) 2022/1925: the DMA as a composite whole

Regulation (EU) 2022/1925 commonly referred to as the Digital Markets Act applies since May 2023. Its main objective is to ensure contestable and fair markets in the digital sector, where undertakings with considerable economic power providing a core platform service are present.[16] The European Commission is the sole authority empowered to enforce the DMA and its provisions.[17] Regarding the specific obligations (do’s and don’ts) outlined in Articles 5 to 7 of the DMA, the principle of ‘compliance by design’[18] allows gatekeepers to have some leverage on the ‘how’ of compliance.[19]

The DMA, however, goes far beyond its text. We believe it is better understood as a ‘framework law’, the completeness of which depends on further constituent moments, be they delegated and implementing acts, be they particular enforcement decisions by the European Commission.

Let us now consider on some of the ‘para-legislative’ events that have occurred thus far. To begin with, on 14 April 2023, the European Commission adopted the DMA’s first Implementing Regulation on detailed arrangements for the conduct of certain proceedings pursuant to the DMA.[20] It includes, inter alia, rules on the form, content and other aspects of notifications and submissions under Article 3 of the DMA.

The European Commission has then produced templates for powers of attorney,[21] the Compliance Report required under Article 11 of the DMA,[22] the obligation to inform of a concentration pursuant to Article 14 of the DMA,[23] and reasoned requests for i) a specification process (regulatory dialogue) in accordance with Article 8(3) of the DMA,[24] ii) a suspension in line with Article 9(1) of the DMA,[25] and iii) an exemption under Article 10(1) of the DMA.[26]

Furthermore, in addition to formal ‘specification’, the European Commission has also fostered effective dialogue through workshops and meetings with stakeholders regarding the basic concepts of the DMA. This has included discussions on the associated challenges and possible ways to ensure compliance with the obligations provided for therein.[27]

All these developments contribute toshaping the DMA as a major Regulation for digital markets and prove that its prima facie facies as a ‘legislator-driven’ piece of legislation is actually better captured by an ‘enforcer-driven’ type of legal act. This shift has several consequences.

Indeed, as non-legal acts undergo juridification, the requirements of legitimacy and validity that pertain to legal acts or to the act of ‘legislating’ should also apply to the former, as they contribute to shaping the DMA as it will actually be applied. In other words, if the DMA is intended to represent “the expression of the will of those that must obey it, which is the very foundation of its legitimacy as an indisputable edict”,[28] ‘subordination to the rule of law’ is only a part of a larger equation, where both the legislator and the enforcer should seek legitimation. The DMA requires democracy as a shield and a sword.

Participatory democracy in the DMA: why it matters and how it can be achieved

The action of the European Union (‘EU’) is based on democracy as a value[29] and a precondition of legitimacy. Therefore, democratic legitimacy is an acceptability condition that should oversee the relationship between the administration and the administered, or the government and the governed.

While Article 10(1) of the Treaty on European Union (‘TEU’) outlines the Union’s commitment to representative democracy, Article 10(3) explicitly establishes that “Every citizen shall have the right to participate in the democratic life of the Union. Decisions shall be taken as openly and as closely as possible to the citizen.” Furthermore, Article 11 TEU obliges EU institutions to guarantee citizens’ involvement, dialogue, and initiative. The mandate requires institutions to enable citizens and representative associations to make known their views (no. 1), while maintaining open, transparent and regular communication channels with representative associations and civil society (no. 2). Additionally, the Commission must undertake broad consultations to ensure coherence and transparency in the European Union’s actions (no. 3).[30]

While representative democracy has proven superior due to challenges around participation and deliberation, the traditional “symptom of a general feeling of suspicion on the part of citizens towards those in power” and the formers’ advantages with regard both to acceptability, belonging and accountability and monitoring of the exercise of the powers vested in the EU institutions,[31] justify a refreshed approach.

In complex domains, it is significant that the inputs of all the affected parties foster well-informed, holistic and unbiased decisions. In this regard, it is valuable to supplement representative democracy with participatory democracy instruments, “the objective of which is to encourage the participation of citizens in the democratic process and to promote dialogue between citizens and the EU institutions”.[32]

Although participation and deliberation can be challenging to implement,[33] they must be effective to ensure that citizens, including companies (legal persons) subject to decisions affecting their interests, are actively involved in EU law development. This participation must go beyond a mere right on paper.

Bodies responsible for ‘rule-making procedures’, in which choices between different political and social interests are crucial, must possess the necessary expertise to fulfil their conferred political responsibility.[34] Although the ‘scientific legitimacy’ of the European Commission is undisputed, it is insufficient to exercise public authority or ensure democratic legitimacy.[35] In order for decisions – be they legal, regulatory or ‘practical’ – to gain credibility,[36] acceptability, and consensus among citizens, they must be grounded on a fair and well-informed process.

This is particularly important if we recall the key features of the DMA. While acknowledging the freedom of businesses to determine the ‘how’ of complying with their obligations, and while this provides some adaptability in the context of a one-size-fits-all approach, it contrasts with the fact that gatekeepers are not allowed to raise an efficiency defence to justify conduct prohibited by the DMA, nor (except in some cases) to deny the proportionality or feasibility of conduct imposed on them.

This rigidity (as to ‘whether’ to comply), especially when contrasted with a degree of uncertainty (as to ‘how’ to ensure compliance), makes acceptability particularly important. Since there is room for manoeuvre, it is important that it is used as a counterweight to the ius strictum approach. In other words, it is important that the construction process of the DMA (beyond the text of the Regulation) is based on a solid foundation: democracy, especially in its dimension of participation and, above all, deliberation.

Would this be a panacea for the current legal disputes? Probably not, but if the DMA is to change behaviour or prevent the features of digital markets from being abused or explored by gatekeepers against business and end users, it will only achieve this if it is recognised as legitimate.

And for that to happen, it is important that i) gatekeepers acknowledge the DMA as a proportionate framework through which the enforcer seeks to secure a set of fundamental rights and public values which, in a fair balance exercise, are worthy of protection and justify the stripping away of some of the key features of their freedom to conduct a business, and ii) business and end users, as well as other third parties understand this new ‘framework of government’ as one which is not only for their benefit but also designed with their participation.

While the DMA is attentive to participation, it is based on a model of ‘bilateral communication’,[37] in which gatekeepers, business and end users and third parties only engage in a dialogue with the Commission, for example through the possibility to ‘comment’ on draft papers or measures. This is, however, an insufficient model compared to a multi-stakeholder approach, where the holders of conflicting rights and colliding interests can exchange their views and concerns, so that a fragmented segmented and antagonistic vision of the society of digital markets is replaced by a compromise that is at least considered ‘acceptable’ for all.

The enforcer’s discretion: a magic wand in the realm of democracy and legitimacy

As the European Commission has already demonstrated, it is possible to colour the DMA with multi-stakeholder engagement as a guiding principle, thus ensuring democracy as a fundamental value of the DMA-building process through enforcement.

Would it be better to amend the DMA so that it includes participation ‘by default’? So that multilateralism replaces bilateralism, or that dialogue becomes mandatory for the Commission? We think so, as this would ensure legal certainty and avoid blind faith in a Commission that might be pressured to prioritise speed over guarantees. In addition, formal internalisation would ensure that multi-stakeholder participation follows a fundamental rights-compliant framework where effective participation is ensured, both in terms of ‘who’ participates and ‘how’.

However, in its current formulation or architecture, it is important to think about solutions ‘de iure constituto’. And the fact that the European Commission is the sole enforcer with particular discretion may prove important in this respect.

The discretionary power of the European Commission is not a foreign body to the DMA. On the contrary, it is present in several aspects of the Regulation. First, the Commission has discretion as to whether and when to engage in a specification procedure to determine whether the measures that that gatekeeper intends to implement or has implemented to ensure compliance with Articles 6 and 7 are effective in achieving the objective of the relevant obligation in the specific circumstances of the gatekeeper.[38] Second, as the sole enforcer of the DMA, the Commission also has full discretion to initiate proceedings to investigate non-compliance.[39] Third, it also has the discretion to issue guidelines under Article 47.[40] Finally, Article 27(2) emphasises that the Commission has full discretion to act on information received from third parties, including business users, competitors or end users of the designated core platform services, as well as their representatives, regarding any practice or behaviour of gatekeepers falling within the scope of the DMA.

Of course, this is a limited discretion, as the European Commission has to respect the principles of equal treatment, proportionality, and good administration,[41] and above all the negative and positive dimensions of fundamental rights.

It is important to point out the multidimensionality of fundamental rights in order to avoid seeing the Commission’s discretion only as a threat. It is true that, depending on how it is used, it can block the already minimal escape valves that the DMA provides for dialogue and participation. But it can also be the ’way out’ of the apparent rigidity of the Regulation.

Of course, if the European Commission is able to overcome this particular shortcoming of the DMA, and if we assume that this is a good way to go, because it strengthens democracy and legitimacy, it will only be able to deliver on its promises if a number of requirements are met in terms of openness as to who participates, transparency as to what the results or outcomes of such multi-stakeholder forums are, and guarantees in the course of the process.

In particular, in addition to transparency (to avoid regulatory capture or biased decisions), it is important to bear in mind that, given the complex and technical nature of the assessments, ‘formal participants’ will only be substantially involved if they are given the opportunity to understand the matter, which may require the participation of experts, not only to assist the Commission[42], but also to provide an independent point of view that can bridge the gap between gatekeepers and the conflicting rights of business and end users. Finally, procedural safeguards, data protection and the protection of business secrets and other confidential information will be of paramount importance.

Democracy, participation and involvement won’t be a cure-all, of course. But they must be present in whatever goes ‘beyond’ the text of the DMA.

---

[1] European Commission, “Digital Markets Act: Commission designates six gatekeepers”, Press Release, 6 September 2023. Available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_23_4328. See also: https://competition-cases.ec.europa.eu/latest-updates/InstrumentDMA.

[2] Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act), Official Journal L 265, 12/10/2022. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32022R1925.

[3] Article 3(10), Digital Markets Act.

[4] Meta, “Facebook and Instagram to Offer Subscription for No Ads in Europe”, 30 October 2023. Available at: https://about.fb.com/news/2023/10/facebook-and-instagram-to-offer-subscription-for-no-ads-in-europe/. On the ambivalence of consent and how ‘pay-or-consent options’ affect competition dynamics, see Alba Ribera Martínez, “Op-Ed: “The Ambivalence of Rejecting and Granting Consent: Ad-F(r)ee Digital Services”, EU Law Live, 16 October 2023. Available at: https://eulawlive.com/op-ed-the-ambivalence-of-rejecting-and-granting-consent-ad-free-digital-services-by-alba-ribera-martinez/# and Christophe Carugati, “The ‘pay-or-consent’ challenge for platform regulators”, Bruegel, 6 November 2023. Available at: https://www.bruegel.org/analysis/pay-or-consent-challenge-platform-regulators.

[5] European Union Court of Justice @EUCourtPress, 17 November 2023. Available at: https://twitter.com/EUCourtPress/status/1725462545190858894.

[6] Article 8, Digital Markets Act.

[7] Article 46, Digital Markets Act.

[8] Article 47, Digital Markets Act.

[9] Article 48, Digital Markets Act.

[10] Article 49, Digital Markets Act.

[11] Recital 23, Digital Markets Act.

[12] Recital 65 and Article 8, Digital Markets Act.

[13] Articles 9 and 10, Digital Markets Act.

[14] Even if actions brought before the Court of Justice of the European Union do not have suspensory effect (Article 278 TFEU), they still cause some entropy, in particular for the Commission as sole enforcer.

[15] Pierre Larouche and Alexandre de Streel, “The European Digital Markets Act: A Revolution Grounded on Traditions”, Journal of European Competition Law & Practice, 12:7 (2021): 542–560, DOI: https://doi.org/10.1093/jeclap/lpab066.

[16] Articles 1 and 3, Digital Markets Act. See also Recitals 3, 24 and 70. While medium-sized, small or micro enterprises can also be qualified as ‘gatekeepers’, the EU legislator is primarily concerned with large undertakings.

[17] Recital 91 and Chapter V, Digital Markets Act.

[18] Recital 65, Digital Markets Act.

[19] See Christophe Carugati, “Compliance principles for the Digital Markets Act”, Bruegel Policy Brief, 16 November 2023. Available at: https://www.bruegel.org/policy-brief/compliance-principles-digital-markets-act#footnote1_wcz4gcs.

[20] Commission Implementing Regulation (EU) 2023/814 of 14 April 2023 on detailed arrangements for the conduct of certain proceedings by the Commission pursuant to Regulation (EU) 2022/1925 of the European Parliament and of the Council, Official Journal L 102, 17/04/2023. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R0814.

[21] Available here: https://digital-markets-act.ec.europa.eu/system/files/2023-09/power_of_attorney_template.pdf.

[22] This template specifies the minimum information that gatekeepers should provide in the Compliance Report. Available at: https://digital-markets-act.ec.europa.eu/system/files/2023-10/Article%2011%20DMA%20-%20Compliance%20Report%20Template%20Form.pdf.

[23] This template contains the minimum information that gatekeepers are required to provide when submitting information to the Commission. Available at: https://digital-markets-act.ec.europa.eu/system/files/2023-07/Article%2014%20DMA%20Template%20%28information%20on%20transactions%29%20-%2013-07-2023.pdf.

[24] This template specifies the information required by the Commission to assess a request to engage in the procedure. Available at: https://digital-markets-act.ec.europa.eu/system/files/2023-10/Article%208%283%29%20DMA%20Template%20%28request%20for%20specification%20dialogue%29_1.pdf.

[25] This template sets out the information required by the Commission to assess a reasoned request submitted by a gatekeeper under Article 9 of the DMA. Available at: https://digital-markets-act.ec.europa.eu/system/files/2023-10/Article%209%20DMA%20Template%20%28suspension%20request%29.pdf.

[26] This template sets out the information required by the Commission to assess a reasoned request submitted by a gatekeeper under Article 10 of the DMA. Available at: https://digital-markets-act.ec.europa.eu/system/files/2023-10/Article%2010%20DMA%20Template%20%28exemption%20request%29.pdf.

[27] In particular, workshops were organised covering the DMA’s ban on self-preferencing (5 December 2022) – available at: https://digital-markets-act.ec.europa.eu/events/dma-workshop-applying-dmas-ban-self-preferencing-how-do-it-practice-2022-12-05_en –; interoperability between messaging services (27 February 2023) – available at: https://digital-markets-act.ec.europa.eu/events/dma-workshop-dma-and-interoperability-between-messaging-services-2023-02-27_en –; app store related provisions (6 March 2023) – available at: https://digital-markets-act.ec.europa.eu/events/dma-and-app-store-related-provisions-2023-03-06_en –, and data-related obligations (5 May 2023) – available at: https://digital-markets-act.ec.europa.eu/events/dma-and-data-related-obligations-2023-05-05_en.

[28] Opinion of Advocate General Cruz Villalón of 16 May 2013, Council of the European Union v Access Info Europe, case C-280/11 P, EU:C:2013:325, paragraph 64.

[29] Article 2, Treaty on European Union.

[30] Opinion of Advocate General Bobek of 29 July 2019, Puppinck and Others v European Commission, case C-418/18 P EU:C:2019:640, paragraph 51.

[31] Opinion of Advocate General Poiares Maduro of 18 July 2007, Kingdom of Sweden v Commission of the European Communities and Others, case C-64/05 P, EU:C:2007:433 paragraph 41.

[32] Judgement of 19 December 2019, Puppinck and Others v European Commission, case C-418/18 P, EU:C:2019:1113, paragraphs 64 and 65. See also Opinion of Advocate General Bobek of 29 July 2019, Puppinck and Others v European Commission, case C-418/18 P, EU:C:2019:640, paragraph 69, and Judgment of 12 September 2017, Anagnostakis v Commission, C‑589/15 P, EU:C:2017:663, paragraph 24. See, to that effect, Judgment of 4 September 2018, ClientEarth v Commission, C‑57/16 P, EU:C:2018:660, paragraph 84 and the case‑law cited.

[33] Opinion of Advocate General Mengozzi, Anagnostakis v European Commission, 7 March 2017, case C-589/15 P, EU:C:2017:175, paragraph 2.

[34] Opinion of Advocate General Trstenjak, Audiolux and Others, 30 June 2009, case C-101/08,  EU:C:2009:410, paragraph 108.

[35] Judgement Pfizer Animal Health SA v Council of the European Union, 11 September 2002, case T-13/99, EU:T:2002:209, paragraph 201.

[36] Judgement French Republic v European Parliament, 2 October 2018, case C-73/17, EU:C:2018:787, paragraph 35.

[37] Recitals 65, 68, 75, 89 and 98, and Articles 8(6), 18(5) and (6), 19(2), 27, 29(4) and 46(3), Digital Markets Act.

[38] Recital 65 and Article 8(3), Digital Markets Act.

[39] Recital 91, Digital Markets Act.

[40] See also Recital 95, Digital Markets Act.

[41] Recital 65 and Article 8(3), Digital Markets Act.

[42] See, among others, Recitals 85 and 98, and Articles 23(3)(4), 26(2), 36(4), 46(1)(g), Digital Markets Act.

Picture credits: by picjumbo.com on Pexels.com.