Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

The DMA and private enforcement – Yes but with moderation! (by Makis Komninos)

with 2 comments

[Chillin’Competition is publishing a series of posts featuring the views of various experts and stakeholders in relation to the European Commission’s proposal for a Digital Markets Act. We have received several contributions and will also be inviting some experts to ensure a plurality of informed views from a variety of perspectives. For our previous posts on the DMA see here (by Pablo), here (by me), here (by Cani Fernández, originally published in JECLAP), here (by Tim Lamb, Facebook) and here by Agustín Reyna (BEUC). Today we are happy to publish the thoughts of our friend Makis Komninos (White & Case).

I am grateful to my friends Alfonso and Pablo for giving me the space to address a topic that has not received much attention in the discussion around the Digital Markets Act (DMA) Proposal. Is there space for private enforcement? And if yes, is this a good or a bad thing? And what would be the optimal solution that safeguards the consistency and effectiveness of the DMA enforcement system? I have just finished a paper on these questions, which will appear in the Liber Amicorum of one of my long-time friends and mentors, Professor Eleanor Fox, to be published by Concurrences.  

In my view there is no doubt that the DMA will give rise to private enforcement. The fact that it says nothing about private enforcement and the role of national courts is not material. It will take the form of a Regulation and Regulations are directly applicable. Of course, its provisions must be sufficiently precise and unconditionalto create rights for individuals (and thus have horizontal direct effect). The provisions of Articles 5 and 6 will satisfy that test. As I explain in my paper, there is no difference between Article 5 and Article 6. The “specification” process for Article 6 does not affect the nature of its rules but only relates to effective compliance measures that are necessary. In other words, the rules of Article 6 are complete and apply, irrespective of a possible “regulatory dialogue” between the Commission and the gatekeeper and a possible “specification” decision.

So, as the DMA Proposal currently stands, private enforcement will be a reality. Apart from adjudicating on claims for damages or other types of relief, national courts would also be competent to grant permanent or interim injunctions and order the gatekeepers to take specific measures of a negative or positive nature. The problem is, however, that such national decisions will inevitably result in a considerable degree of fragmentation within the Union. There will be full decentralisation to the level of countless national courts of a generalist nature, which will be deciding on countless cases, leading to countless “mini-regulations” (with inter partes effects) within the EU. I am not sure people have actually realised that. Such disintegration and fragmentation within the internal market will be distractive and will entail increased compliance costs, since, instead of interacting with 1 centralised enforcer (or even with 1 + 27 enforcers, if national authorities were to be given certain competencies), gatekeepers will need to defend their business practices before an infinite number of courts. The DMA Proposal and its Impact Assessment Report spent pages to highlight the risks that a fully decentralised (to the NCAs) system of enforcement would bring and defended the choice of centralisation at the EU level. Yet, if a risk of fragmentation exists with 27 specialist administrative authorities, surely the risk is much higher with potentially thousands of generalist courts having full decisional powers on Articles 5 and 6.

For these reasons, I believe that the EU legislator should introduce certain proportionate limitations on private enforcement of the DMA rules or a “rule of precedence” for public enforcement. Private enforcement should only be allowed in its “follow-on” form. But public enforcement should have precedence and private enforcement should not be allowed in its “stand-alone” form, i.e. before the Commission has had the chance to declare the infringement of a DMA rule by a gatekeeper and has also possibly ordered specific remedies. Such a rule could be re-examined by the legislator at an appropriate time, e.g. in 10 years’ time, after the Commission and the EU Courts have had a chance to build up a body of precedent. In fact, EU competition law can offer some guidance: although direct effect was recognised in 1974, it took 40 years of case law (1962-2004) for the EU legislator to opt for a full decentralisation of the application of the rules (of Article 101(3) TFEU), with the introduction of Regulation 1/2003. It also took 10 more years for the EU legislator to introduce specific measures aimed at enhancing private antitrust enforcement in Europe, with the Damages Directive. If that was the case with EU competition law, a fortiori a degree of prudence is called for in the case of the novel regime of the DMA.

Can such a limitation would be possible and defendable from an EU law point of view? Yes. Τhe DMA is not primary law. Since it is the product of secondary EU legislation (a Regulation), it is open to EU legislation to introduce limitations on competence and on the direct effect of the legal rules it contains. I explain this further in my paper.

For the avoidance of doubt, I have always been a strong proponent of private enforcement and my 2008 monograph is proof of that. I was also the first commentator who argued 20 years ago that the Courage v Crehan ruling of the Court of Justice was something new – not many EU lawyers back then were ready to acknowledge the EU law basis of the right to damages. So my proposal is not due to any dislike of private enforcement. All I am saying is: let’s make sure that public enforcement of the DMA takes precedence for as long as the DMA is in its infancy and that private enforcement is possible only after the Commission has had the chance to take a decision. From the point of view of EU law, such a solution would be fully appropriate and proportionate. It would ensure the effective and consistent enforcement of the DMA in the Union, while avoiding fragmentation, and would also further the undertakings’ legal certainty.

Written by Alfonso Lamadrid

2 September 2021 at 10:45 am

Posted in Uncategorized

2 Responses

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  1. I understand why you fear fragmentation in the application of the DMA, but I’m a bit puzzled by the absence of any and all references to the preliminary reference procedure. Wouldn’t that help to ensure uniformity in the application and interpretation of the DMA (as it has done for general EU law for a couple of decades)? I’m not saying it is perfect, but the complete omission of Art. 267 TFEU in this contribution is odd. Your paper confines itself to simply stating that ‘The above risks cannot be brushed aside simply by counting on the role of the Court of Justice and of the preliminary reference proceeding’, but it provides – at least in my quick reading – no reasoning to substantiate this opinion. To my mind, the development of EU law in general contains plenty examples of EU law developing without prior centralised guidance (by the Commission or anyone else), with the free movement provisions as a prime example.

    Hans

    2 September 2021 at 12:15 pm

  2. Makis, I am surprised by your stance. Very surprised. It is practically impossible to prohibit or limit private parties addressing the courts in the Member States and the concern of fragmentation is definitely overblown. The cure for fragmentation is in the preliminary reference mechanism and fragmentation would exist whether the new rules invoked directly in front of the court are old or new (it is my understanding that you basically consider DMA rules to be too new to be properly assimilated by the stakeholders and by the courts). Although you are right to say that platforms operating across the internal market may be subject to different remedies in different Member States, which would be burdensome, platforms are able, from a technical standpoint, to comply with a national court decision only with respect to undertakings and consumers located within its jurisdictional reach. At a later stage, these decisions may be analysed and their effect expanded or not to the entire platform, under the competences provided to the European Commission by articles 3 and 7 of the DMA, thus eliminating the fragmentation. It would be a brilliant use of the private actions to make strides into the application of the DMA before the public enforcement Leviathan has an opportunity to do so.

    Dr. Valentin Mircea

    18 September 2021 at 4:09 pm


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