10 key themes
Digital Regulation – Contagion of New Rules
IN BRIEF
Antitrust regulators are set to become the next “digital disruptors” as the much-debated EU DMA enters into force. What were once considered “novel” antitrust theories of harm have now been codified into law, shifting companies’ focus toward compliance preparation and the role of the DMA as a blueprint for global lawmakers seeking to update their own statute books.
A new regulated industry
Enforcement by antitrust authorities in the digital sector has focused in recent years on substantiating “novel” theories of harm within the boundaries of the antitrust legal framework, requiring agencies to assess and prove dominance and anticompetitive effects – and to engage with companies’ efficiency arguments and remedy solutions. Such analysis has been – and continues to be – the key battleground between companies and antitrust authorities, including before the EU courts.
The DMA (along with other new regulations such as the parallel Digital Services Act) entering into force in the EU, and being replicated in other regions across the world, aims to reset the existing system of checks and balances by codifying these novel concepts into mandatory prescriptions for application to a wide variety of digital platforms – both now and in the future – and across fundamentally different business models. The result is a complex set of uncertain antitrust and regulatory rules that businesses will need to navigate quickly to ensure their (and others’) compliance.
Europe at the epicenter
The EU continues to be the trailblazer when it comes to digital regulation. The final text of the DMA entered into force in November and companies that meet the criteria for gatekeeper designation have until July 2023 to notify the EC and begin the path to DMA compliance, required by March 2024. The coming year will be formative for the DMA as the EC increasingly defines what that “compliance” will need to look like, with a hope for greater guidance in the form of consultative workshops/discussions and guidance papers.
At the member state level, antitrust authorities are tooling up to support the EC. The Dutch, French and German competition authorities have already tabled legislation that will allow them to take up their role in investigating possible noncompliance with the DMA, addressing what is perceived to be a resource gap at the EC level. The German FCO – having already designated a number of digital platforms as having “paramount significance across markets” under updated legislation that came into force prior to the DMA being enacted – can also be expected to increase its enforcement agenda against large technology firms. The interplay between the DMA and national regimes seeking to tackle similar types of conduct is also expected to unfold over the coming months.
In the UK, it is anticipated that the DMU, which sits within the CMA, will be empowered by legislation to enforce a new regulatory regime by October 2023. While the regime overseen by the DMU can be expected to take some inspiration from early learnings of the DMA, it will differ in material respects. In particular, the DMU is likely to take a more qualitative approach to designating companies as having “strategic market significance” (SMS) and will likely seek to impose a tailored code of conduct for each SMS-designated company. Pending its new DMU powers, the CMA has been actively progressing a number of antitrust enforcement investigations, market studies and settlements in the technology space, while also calling for broader antitrust and merger control reforms.
Other countries joining the fray
While Europe has so far gone the furthest, a number of other countries are set to introduce their own new digital regulation regimes.
In the United States, the American Innovation and Choice Online Act (AICOA) has received narrow bipartisan support in the House of Representatives and now awaits consideration by the Senate. The AICOA would impose obligations similar to those of the DMA on large online platforms. The Senate is also considering the Open App Markets Act (OAMA), which would outlaw app marketplaces from self-preferencing their own products and services. While the two acts are stuck in legislative deadlock, US authorities are attempting to utilize existing powers to increase enforcement in the digital sector. In November 2022, the FTC updated its policy on enforcement of Section 5 of the FTC Act – which prohibits “unfair methods of competition” – to include several wide-ranging definitions of harm that will cover unilateral conduct by digital platforms.
Across Asia, there continues to be some focus on standards of transparency and fairness between platforms and their users, with new legislation incoming in Korea and Thailand similar to legislation already introduced in Japan. Both Australia and India appear to be taking more direct inspiration from the DMU and DMA, with the ACCC considering mandatory codes of conduct for certain platforms to protect and promote competition and the Indian competition authority pursuing ex ante regulation, which will see certain platforms designated as gatekeepers and subject to additional obligations.
Authorities in Asia should not be overlooked, as they could draw much stricter lines than we would see in the United States or Europe, often addressing what they consider to be national issues. For example, Japan was one of the first countries globally to introduce legislation directly targeting large digital platforms and is considering emboldening its legislative arsenal with further ex ante rules governing digital ecosystems. Unlike in many other countries, these are managed by the Ministry of Economy, Trade and Industry, outside the competition law regime, more as ‘industry regulations’ similar to those for energy, telecom and financial services.
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Kaori Yamada |
The world wide web of regulation
The recent avalanche of digital regulation across the globe draws heavily from existing legal frameworks, particularly competition, privacy and consumer protection laws. The DMA contains obligations relating to the use of personal data that relate to the EU’s General Data Protection Regulation rules, while the UK government’s proposed powers for the DMU include a focus on delivering enhanced consumer choice and transparency.
The net result is an increasingly complex web of regulations that companies acting in the digital world will need to navigate. Doing so requires a broad and detailed understanding of the technical applications and policy objectives behind the full range of applicable regulation. Along with contending with an array of (often overlapping) regulators, companies will need to factor in the increasingly large appetite for the enforcement of digital regulation by private litigants.
Although wide ranging, the Digital Markets Act is just the first of many disruptors in the digital regulatory landscape. Both the Digital Services Act and the Data Act will have ramifications for the content on digital platforms and the data that must be made available to users and competitors. In-house legal functions across competition, consumer protection and privacy will need to work more closely together to ensure compliance across all regimes and to identify the ‘right’ answer.
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Christoph Werkmeister |
The scope for parallel investigations into similar conduct under different legal and regulatory regimes will lead to additional challenges for businesses. This also risks making the task of effective enforcement a more difficult one as regulators and courts strive for a consistent application of principles across different legislative measures and different territories while avoiding double jeopardy.
Looking ahead in 2023
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Antitrust-only advice is no longer enough. In the digital sector, antitrust advice alone may lead to the wrong answer or an incomplete picture. Instead, companies will need to take a holistic approach to antitrust, privacy and regulation, with new regulation set to become the lowest common denominator.
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An understanding of regulatory priorities is key. A close understanding of regulatory priorities and their continuing evolution will be key to navigating the complex web of new regulation and its interplay with existing laws – and this is only exacerbated by the many untested procedural and substantive questions that are likely to arise going forward.
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Be vigilant of unexpected regimes. Companies will need to keep abreast of developments as the regulatory contagion spreads. Avoiding gatekeeper designation in one jurisdiction will not necessarily avoid it in another – and as enforcement priorities and legislative changes take place in the United States and APAC, companies will need to assess whether they could be brought into the spotlight.
With thanks to Martin Dickson, Elizabeth Giordano, Aaron Green and Rikki Haria for their contributions to this theme.
10 key themes
- Introduction
- 01. The Changing Face of Antitrust
- 02. Is Merger Control Fit for Purpose – Evolution or Revolution?
- 03. Foreign Direct Investment – Record Year for Prohibitions and New Developments
- 04. Financial Investors – In The Regulatory Spotlight
- 05. Collaboration and Licensing – New Risks and Opportunities
- 06. A Vertical Revival – Expanding The Enforcement Toolkit
- 07. A New Age For Investigations – Prepare for Agencies to Come Knocking
- 08. Digital Regulation – Contagion of New Rules
- 09. Mass Claims and Antitrust Litigation
- 10. Trade and Subsidy Control
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