Tuesday 14 September 2021

Euractiv - Frederik Claessens - The end of the “Wild West” :
how the Digital Markets Act will transform digital services

Euractiv - Frederik Claessens - The end of the “Wild West” : how the Digital Markets Act will transform  digital services

The pandemic has benefited Big Tech and the market value of these companies is now at a significantly high level. However, an international move towards regulation of these giants is currently underway; in Europe, with the Digital Markets Act (DMA), the United States and China. The European Commission is planning to create specific obligations for platforms that are "too big to care about legitimate concerns around their role" as mentioned by the European Commissioner for the Internal Market Thierry Breton.

While the Digital Services Act (DSA) will drive digital services forward, the DMA raises the issue of competition in the digital sector and promises to reshuffle the deck in digital markets that have become oligopolistic. From a consumer and user perspective, this second part of the Digital Services Package could bring even more change than the DSA.

Identifying  the internet gatekeeper”

This legislation seeks to address the negative consequences arising from platforms acting as digital “gatekeepers”. The DMA's challenge is to define the size at which a platform can be considered to be a web gatekeeper.

For the time being, the Commission has retained quantitative and qualitative criteria. Deciding  which platform is "systemic" is a complex and eminently political exercise. This preliminary questioning is so strategic that all the players are trying to influence the definition.

Even If the question is far from being answered, everyone expects the Big Five (Google, Apple, Facebook, Amazon and Microsoft) to be targeted.

What the consumer can expect

The will to put an end to anti-competitive practices by the biggest platforms is the main direction of the regulation and the example of closed ecosystems where the dominant player favors its own services will be a main topic. What will be forbidden for example is the practice once adopted by Google of putting its "Google Travel" reservation system at the top of the results on its search engine.  In the same way, the question of anti-competitive practices arises for Amazon, which is both a sales platform for third-party companies and a direct competitor with its own products.

There is every reason to believe that platforms that adopt this type of practice will gradually put an end to certain procedures in order to avoid the sanctions provided for by the DMA. This evolution reflects a paradigm shift in competition policy: from control which is only capable of identifying distortions of competition, to regulations that aim to prevent the creation of these distortions in the first place.

Encouraging the emergence of abundant ecosystems

In the end, the issue is not so much about weakening these companies, an objective that would go against the very idea of competition, but rather to encourage the emergence of new players within a more open digital ecosystem. In concrete terms, the DMA will force gatekeepers to open access to their services (interoperability), to transmit end-user data to companies (data sharing) and ultimately allow third-party companies to enter into contracts and pursue business relationships outside of the systemic platforms.

From the point of view of SMEs, it is easy to understand this web gatekeeper logic: a seller on Amazon knows less about his customer than Amazon does because the platform captures the data but does not transmit it. As the pandemic has proved the urgent need for digitalization, small businesses are turning to systemic platforms for all marketing activities. This is due to the fact that today's consumers are using a small number of digital services and they are almost always those provided by the largest tech companies.

The application of the DMA and its obligations (such as additional transparency) should bring more diversity to the digital markets. Despite its scope, the regulation will not directly end the dominance of systemic platforms because they have been able to create coherent ecosystems that put the customer experience at the center of the value proposition. Nevertheless, the measures proposed by the European Commission will allow the emergence of new alternatives for consumers. If the DSA enables us to question our relationship with digital services, there is no doubt that the DMA will question our collective dependence on digital giants.

Frederik Claessens, e-Commerce Director

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