The Digital Markets Act: European Precautionary Antitrust

June 10, 2021

 

KEY TAKEAWAYS

  • The Digital Markets Act (DMA) arbitrarily distinguishes digital from non-digital markets, even though digital distribution is just one of many ways firms reach end users. It should assess competition comprehensively instead of discriminating.
  • The DMA’s nebulous concept of a digital “gatekeeper” entrenches large digital firms and discourages them from innovating to compete, and it creates a threshold effect for small and mid-sized firms, because it deters successful expansion.
  • This represents a paradigm shift from ex post antitrust enforcement toward ex ante regulatory compliance—albeit for a narrowly selected set of companies—and a seminal victory for the precautionary principle over innovation.
  • By distorting innovation incentives instead of enhancing them, the DMA’s model of “precautionary antitrust” threatens the vitality, dynamism, and competitive fairness of Europe’s economy to the detriment of consumers and firms of all sizes.
  • Given its fundamental flaws, the DMA can only be improved at the margins. The first steps should be leveling the playing field with reforms that apply to all firms, not just “digital” markets, and eliminating the nebulous “gatekeeper” concept.
  • Authorities in charge of market-investigation rules need to be separated from antitrust enforcers; they need guidance and capacity for evidence-based fact-finding; and they should analyze competition issues dynamically, focusing on the long term.