European Commission launches public consultations on digital policy

On 2 June 2020, the European Commission launched two connected public consultations on digital policy: one relating to ex-ante rules (the Digital Services Act) and another relating to ex-post antitrust enforcement by the European Commission (the New Competition Tool, NCT). These two public consultations are launched in parallel as the European Commission aims to ensure that the resulting legislation is complementary (which is in line with the decision to have one Commissioner, Mrs. Margrethe Vestager, for both competition policy and digital policy).

The Digital Services Act

The Digital Services Act concerns a package of future legislation aimed to tackle various issues regarding digital services such as the role and obligations of online intermediaries, user safety, a more effective governance and enforcement system, the gatekeeper power of digital platforms as well as other issues. For more information on this, please refer to our article of 8 June 2020 on our website.

The New Competition Tool (NCT)

The NCT is aimed at allowing the European Commission to address structural competition problems in a timely and effective manner. This NCT would be the European Commission's response to perceived enforcement gaps throughout its enforcement experience. It is the current culmination of an ongoing debate following the Commission's investigations into Google and Amazon, the European Commission's report 'Competition Policy for the digital era' of March 2019, the conference 'Shaping competition policy in the era of digitisation' hosted by the European Commission in January 2019, the various reports of national competition authorities (eg the UK report 'Unlocking digital competition' and the French/German report on big data).

This consultation on the NCT is not to be confused with the ongoing revision of the Vertical Block Exemption Regulation which is expected to cover more extensively the competition rules that apply to online sales and to online market places.

The NCT consultation concerns the subject of structural competition problems whereby participants are asked (i) to provide their views on which features/elements/scenarios would cause a structural competition problem or may be a result thereof, (ii) to what extent this applies to digital markets and (iii) whether the European Commission should be able to intervene and how. More specifically, participants are asked about their views in relation to the following situations:

• a company with market power (not necessarily dominance) extending that market power to a related market;
• monopolisation as a result of a market player rapidly acquiring market shares due to its capacity to put competitors at an unfair disadvantage;
• highly concentrated oligopolies in which the few market players can align their market behaviour.
• the widespread use of price algorithms;
• gatekeeper scenarios where customers predominantly use one service provider / platform which then determines the market dynamics; and
• tipping or 'winner takes most' markets whereby the market leader gets a disproportionate advantage in capturing remaining customers.

The NCT would be intended to deal with structural competition problems which cannot be effectively addressed by the existing competition rules.  This could apply across any market where such a structural concern arises, although it is anticipated that many of the targets will be digital markets.

In addition, participants are asked to express their views on whether (i) there is a need for a NCT that would allow for the prevention of issues and early intervention and (ii) if so, which measures the European Commission should be allowed to take/impose. The European Commission envisages in this respect a tool by which the European Commission would act as a regulator and not as a prosecutor (as opposed to its current role in competition law). More specifically, the European Commission envisages a tool which would allow it to impose behavioural and where appropriate, structural remedies without the finding of an infringement or the imposition of fines.

If adopted, the NCT would significantly increase the Commission's powers and enable it to address structural market inefficiencies or failures, even at an early stage.

This consultation is addressed to stakeholders from the public and private sector, including competition authorities and government bodies, academia, as well as legal and economic practitioners and responses need to be submitted by 8 September 2020 at the latest.