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Archive for September 5th, 2022

The DMA – Procedural Afterthoughts

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In a recent post I argued that “procedure and rights of defence should not be afterthoughts, for they are what make public enforcement sound, effective and legitimate”. That is a point worth emphasizing again, now in relation to the DMA.

The DMA gets rid of the constraints flowing from competition law as regards substance, but it largely mimics competition procedure, largely transplanting rules from Regulation 1/2003, only with higher sanctions and more discretion for the Commission. This means that procedural constraints, rights of defence and fundamental rights will be, at the very least, as relevant under the DMA as they are under competition law.

The Commission, of course, understands this and is fully committed to respecting fundamental rights (see e.g. page 11 of its legislative proposal). The DMA itself makes clear that “the rights of defence of the gatekeeper, undertaking or association of undertakings concerned shall be fully respected in any proceedings”.

But while this general statement is welcome, I fear that procedural issues may have been somewhat of an afterthought in the process leading up to the DMA’s final text. After all, the aim was to get rid of constraints, not about putting them in place (as D. Geradin has noted, “some of the companies supporting a strong DMA (because they are business users or rivals of large tech firms’ services) were quite effective in setting the agenda and shaping the DMA as it was negotiated“). On top of that, since procedural rules will be developed in a future implementing regulation, there may have been an assumption that someone will eventually think more in detail about those. That someone may not have an easy task; have you tried counting the number of different types of Commission decisions envisaged by the DMA?

The DMA will raise plenty of procedural challenges for enforcers, and at various stages. Gatekeepers may perhaps decide not to raise them (my sense is that companies are focused on ensuring compliance), but some of these issues will inevitably arise, perhaps via third parties. The following are only a sample:

— At the stage of designation, for example: how will the Commission interpret the rule (in recital 23 and Art.3(5)) that a gatekeeper designation can only be rebutted by reference to the quantitative thresholds in Art. 3(2)? This means that gatekeeper designations will ultimately be based on the qualitative criteria in Art. 3(1), but that companies will not be able to exercise their rights of defence directly in relation to those. So the Commission could rely on qualitative factor to designate gatekeepers not subject to the presumption, but companies could not rely on those same factors to rebut the presumption. Query: is this compatible with companies’ rights of defence?

What procedural rights will third parties enjoy? Unlike competition law, the DMA is not so much about protecting consumers, but competitors/ third parties. It is not about market power, but about the importance of gatekeepers for third parties relying on them. Our experience under competition law shows that third parties play an important and active role at all stages of the procedure, perhaps particularly in relation to remedies. As noted above, third parties appear to have played a pivotal role in shaping the DMA, and they will no doubt make great efforts to have an impact on its enforcement; it would be important to establish a clear procedural framework for them too.

— As regards access to the file, will gatekeepers have access to all materials in the Commission’s file, including potentially exculpatory evidence, or only to those on which eventual decisions will be based (as one could arguably infer from the latest amendments to recital 88)? Will the file include non-confidential versions of all relevant documents and minutes of all contacts held with third parties as per the CJEU’s Intel and the GC’s Qualcomm Judgments?

— I am not sure that the indicative deadlines set in the final DMA text (e.g. 12 months to run full non-compliance investigations or 2 months for market investigations) may be realistic if parties (and third parties?) are to enjoy meaningful procedural rights. The anxiety about moving fast could perhaps create the temptation to take shortcuts. And since the DMA is partly born out of frustration with the length of the competition procedures, we should be particularly cautious about expediency. To give you just an example, Art. 30(4) DMA, provides that “delay caused to the proceedings” may be a relevant factor for the purposes of calculating fines (!). It would be important to clarify that exercising one’s rights of defence cannot be equated with causing undue delays.

— How will the Commission specify the obligations in Article 6? What criteria will it use to ensure equal treatment? What procedure will it use so that other affected gatekeepers might make their views known? It is easy for commentators to say that obligations should be specified on the basis of business models (typically in favour of one’s clients and to the detriment of their competitors), but it is much harder for enforcers to do this without interfering in competition between different business models.

— How will the Commission ensure the proportionality of remedies? Under the competition system and the Alrosa case law the Commission was able to accept commitments going beyond its preliminary concerns. Under the DMA, where commitments are only envisaged for systematic non-compliance proceedings, ensuring proportionality by reference to the alleged infringement and the gatekeeper’s fundamental rights will be of even greater importance (some of the recent commitments proposed by Amazon would arguably not have been attainable under the DMA). In addition, the Canal + Judgment also made clear that assessing the proportionality of remedies should take into consideration their impact on third parties’ contractual rights, and there is no reason why things would be different under the DMA.

These are only a few issues, but I can think of many others regarding, for example, transmission of evidence, the use of evidence previously gathered by the Commission under Arts. 101 and 102, the question of whether the Commission will hold oral hearings, the role of the hearing officer, the interaction with the competition rules and with other regulatory regimes and sanctions, etc.

For the DMA’s implementation to work well, the Commission will not only need additional resources, but also a sound system of procedural rules. In my view, these need to reflect the principle that the greater the discretion enjoyed by the authority, the greater the need to take procedure seriously. It is important for everyone to understand that procedural safeguards are not there to protect gatekeepers, but to uphold the rule of law in a democratic society. It is mainly on that front that the EU should lead the way.

In the brave new DMA world, in sum, we may not discuss anymore about market power, competition on the merits, effects or efficiencies, etc. but there remain fascinating issues to explore for anyone interested in the law.


[Disclosure: I work for companies likely to be designated as gatekeepers, including for some directly targeted by the DMA. The views expressed in this post are strictly my own and have not been requested, nor paid for, by any clients. At the time of publication, I have not discussed this post with any of my clients].

Written by Alfonso Lamadrid

5 September 2022 at 10:00 am

Posted in Uncategorized