The digital economy continues to develop at a fast pace and online platforms and services continue to emerge and grow. Policy discussions have been triggered in relation to the question of whether the competition policy in the Netherlands and EU remains future-proof in light of safeguarding the competition in the digital economy, more specifically the ‘platform economy’ 1.
In 2018, the Dutch Authority for Consumers and Markets published an advisory report (‘Het Signaal’) in which it highlighted risks related to the continued digitalisation. This was followed by a Dutch Digitalisation Strategy published by the Dutch Ministry of Economic Affairs and Climate Policy, which mentioned the possibility of revising the legal instruments of governments, such as competition law. The public debate on this topic continued as Dutch members of parliament submitted several policy proposals to empower governments and the cabinet published discussion memoranda and position papers in 2019. This debate also continued on the EU level.
On 20 April 2020, Mona Keijzer, the State Secretary of the Dutch Ministry of Economic Affairs and Climate Policy published a letter to Parliament. This article provides a brief summary of the background on this debate and the Dutch policy commitments addressed in this letter.
Dutch policy commitments
In an earlier Letter to Parliament dated 17 May 2019, the Dutch State Secretary of the Ministry of Economic Affairs and Climate Policy stated that she advocates the adoption of ex-ante measures in the regulatory framework. She raised concerns about the dominant positions that large platforms can have, and their ability to act as gatekeepers on digital markets. Her assumption is that ex-ante measures are necessary in order to keep the platform economy contestable and to protect smaller businesses. Her Letter to Parliament of 20 April 2020 provides an update on this policy, and lays out her policy commitments in three main pillars:
Ex-ante measures for platforms with a gatekeeper position
The State Secretary describes that under the current EU and Dutch regulatory framework, market authorities only have the competence to intervene when a platform abuses its dominant position (‘ex-post’), which, according to her, does not fit in the dynamics of the fast developing digital- and platform economy. She argues that ex-post regulation is not able to address market deficiencies fast enough and that often the ‘damage is already done’. For example, dominant platforms are often able to foreclose smaller competitors or potential new entrants from the market and ex-post regulation is not able to repair this foreclosure. For this reason she proposes to create a new legal basis for an independent market authority, ideally the existing competition authority, to supervise the digital- and platform economy ex-ante and enable this authority to impose measures on platforms that act as a gatekeepers.
The State Secretary mentions the following possible measures:- the obligation for a platform to pro-actively offer its users the choice between the services of the platform and third party services.
- The obligation to share specific data to third parties. A comparison could be made to the essential facilities doctrine and obligations to supply the current ex-post regulation of the abuse of dominance.
- The obligation not to unjustly favour the platform’s own services. A comparison could be made to the ex-post measures imposed on Google in the Google Shopping case after the preferential treatment of its own Google Shopping services.
- The presence of strong network effects;
- The strengthening of the network effects by data collection;
- The presence of economies of scale and synergy advantages, resulting in foreclosure;
- Single-homing behaviour of users of the platform;
- The platform’s ability to use its competitive advantage obtained from one service to get a head start with new services;
- The ability to unilaterally impose conditions on other market parties.
The State Secretary also addresses the issue of interoperability in the digital- and –platform economy. The current Dutch Telecommunications Act already regulates the interoperability for traditional telecommunications services. The State Secretary describes that the new EU regulatory telecom framework, which still has to implemented in the Netherlands yet, creates the possibility for the Dutch Authority for Consumers and Markets to also impose interoperability-requirements on non-traditional communication service providers, such as Skype and WhatsApp (who offer number-independent communications services).
According to the State Secretary, interoperability issues could also arise with other services. In that case, the proposed gatekeeper instrument could be used to prevent the potential impediment to competition. For example, the authority could prohibit (ex-ante) to offer less interoperability to third party services than the platform’s own services.
Revision of competition law guidelines
The State Secretary calls on the European Commission to expand its competition law guidelines and to specifically address the application of competition law in the context of the digital- and platform economy. For example, the State Secretary urges the European Commission to provide further guidance on the assessment of data in the context of (national) merger control. She proposes that the guidelines on vertical horizontal mergers provide further guidance on the way that the impact of data should be assessed during merger control proceedings. This should guarantee a uniform application of merger control across the EU Members States. She also proposes that the European Commission provides more guidance on how data (especially collected through the offering of free services) influences the definition of relevant markets. Finally, the State Secretary urges the European Commission to provide more guidance on the opportunities that the instruments for ex-post enforcement of competition law already offers in dealing with the digital- and platform economy.New merger control thresholds
Under the current EU and Dutch merger control regulations, there is only an obligation to notify a proposed merger to the EU or Dutch competition authorities when certain turnover thresholds are met. According to the State Secretary, this results in the situation that numerous transactions do not have to be notified and thus escape the authority’s supervision, but do have a potential negative effect on competition. For example, well-established and powerful platforms often acquire small market parties, such as new innovative market entrants. There transactions do not have to be notified, due to low turnover, even though the potential turnover is much higher and the acquisition could have a significant negative effect on competition. The State Secretary suggests that the merger control thresholds should not only be based on turnover, but should also be related to the transaction value. This would better reflect the value of data and potential competition. According to the State Secretary, such new thresholds should in any case be introduced in EU merger control, as the most impactful transactions are often taking place at EU level.
A question that arises from these policy objectives is what kind of undertakings the State Secretary considers to be a platform. It is also questionable whether the described factors could be effectively used to determine whether a platform should qualify as a ‘gatekeeper’. One can also question whether ex-ante enforcement is necessary or the most effective solution, or that clearer guidelines of how the ex-post toolkit of instruments can be used in the digital economy would suffice. Intervening with activities in the market before they take place, always entails the possibility that the market would have corrected any distortions. In such a case the intervention was unnecessary and may even have caused unwanted collateral effects on the market. Forecasting market developments is generally more difficult than measuring the actual status, level of concentration and behaviour of market leaders in the market.
EU policy commitments
February 2020, the European Commission published a communication ‘Shaping Europe’s digital future’ that emphasizes the importance of a fair and competitive economy, and a frictionless (digital) Single Market. One of the EU’s key actions for the coming period is to carry out an evaluation and review of the fitness of EU competition rules in the digital age. In this “fitness” check, the European Commission is reflecting on the effectiveness of the way in which the current rules are applied, for example in relation to antitrust remedies, and also conducting an evaluation and review of the rules themselves to ensure that they meet today’s digital and environmental challenges 2.
The European Commission is also planning to launch a sector inquiry with a strong focus on these new and emerging markets that are shaping our economy and society. In this context, a proposal for a ‘Digital Services Act package’ is being prepared that aims to upgrade EU liability and safety rules for digital platforms, services and products, and to complete the Digital Single Market 3.
The European Commission has also committed to explore the possibilities of ex-ante measures in the Digital Services Act. It is expected that the European Commission will publish more information, and likely a new legislative initiative, by the end of 2020.
For more information, please contact Martine de Koning and Martijn van Bemmel of the EU & Competition Law Team. Martine is also head of the Commercial and International Trade department.
