Ex ante regulation of digital platforms? The European Commission's new approach to competition in the digital world

The European Commission launched an initiative aimed at ensuring a fair trading environment, and increasing the innovation potential and capacity across the online platform ecosystems in the EU. The initiative is part of what the Commission describes as a “holistic and comprehensive approach to ensure fair and undistorted competition in an increasingly digital and global world”. The approach encompasses three pillars:

• the continued enforcement of existing competition rules;
• a (possible) ex ante regulation of digital platforms; and
• a (possible) new competition tool to tackle structural competition problems (this initiative will be conducted in parallel to the initiative regarding digital platforms, see our article here).

Background

A Commission’s impact assessment paper argues that the parameters for future innovations, consumer choice and competition are increasingly determined by a small number of large online platforms benefiting from significant network effects and acting as gatekeepers. The Commission concludes that this may harm competition, because:

• traditional businesses are increasingly dependent on these platforms. Their dependency leads to an imbalance in bargaining power;
• innovative firms and start-ups find it difficult to bring innovative solutions to consumers when competing with large online platform ecosystems. This bears the risk of reduced competition and ultimately reduced consumer choice;
• large platforms collect data from their activity allowing them to comparatively easily enter adjacent markets with new services by using the collected data. This may increase the risk of these adjacent markets also tipping in favour of these platforms ultimately to the detriment of consumer choice.

Suggested policy options

Against this background, the Commission suggests three different options aimed at ensuring that the online platform ecosystems controlled by large online platforms remain fair and contestable, in particular in situations where such platforms may act as gatekeepers. These policy options are not mutually exclusive, i.e. they could be alternatives and/or complements:

• Review of the horizontal framework set in the Platform-to-Business Regulation (2019/1150) with a view to add certain targeted horizontally applicable additional provisions addressing the aforementioned issues;
• Adoption of a horizontal framework empowering a dedicated regulatory body at the EU level to collect information from large online platforms acting as gatekeepers. This is aimed at gathering insights into business practices and their impact on users and consumers;
• Adoption of a new and flexible ex ante regulatory framework for large online platforms acting as gatekeepers, which will prohibit or restrict certain unfair trading practices (so-called blacklisted practices), and adopt tailor-made remedies on a case-by-case basis where necessary and justified.

What are your options to get involved?

There are, no doubt, interesting questions and complex issues surrounding this initiative, for example, whether the current competition law framework might actually be sufficient to tackle the challenges raised by platforms, and whether a new regulation is necessary. The Commission now consults stakeholders from public and private sectors. You can submit comments regarding the Commission’s inception impact assessment until 30 June 2020 and contribute to the public consultation until 8 September 2020. The EC has also published a roadmap towards a proposal for a regulation in the fourth quarter of 2020 which can be found here.