Chillin'Competition

[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.