How Europe can take the lead in setting new rules for gatekeeping platforms

 |   Casper Klynge, Vice President of European Government Affairs and Rima Alaily, Vice President and Deputy General Counsel for Competition Law

If there were any doubts left about the integral role of online platforms in all our lives, COVID-19 has done away with them. People turned to technology to help maintain work, education, healthcare and even entertainment services during the pandemic. Yet at the same time, our increasing digital reliance is also resurfacing a host of complex questions that now urgently need addressing.

The rapid pace of digital transformation creates new challenges for existing competition rules. Platforms with strong economies of scale, powerful network effects, zero price services, and limited multi-homing can  act as mighty gatekeepers that affect our economies and competition. Smart devices, cloud-based services and applications all generate vast amounts of data, often concentrated in the hands of a small number of companies. Devising new rules for online platforms in Europe that address these challenges and make digital platforms fit for Europe is vital to ensure competition and innovation in digital markets to the benefit of societies, citizens and consumers.

At Microsoft we agree that technology companies need to take greater responsibility for how their solutions and services are deployed and used, and we support the development of new rules and new tools that will more effectively reign in large gatekeeper platforms and tackle structural competition problems in the marketplace. We share the European Commission’s objective of updating EU competition rules and tools to the digital age to create a level playing field for businesses to invest, innovate and grow.

We commend the Commission’s efforts to bring all stakeholders together through its consultations for the European Digital Services Act (DSA) and the New Competition Tool (NCT) and appreciate the opportunity to contribute to this important debate. As part of our response to these consultations, we are sharing our thoughts on platform business models, criteria for gatekeepers, and competition concerns that should be addressed through regulation. We also offer some ideas about substantive and procedural safeguards to ensure a robust investigatory and enforcement mechanism.

Our responses to the DSA and NCT consultations include the following suggestions:

  • Determining whether platforms qualify as a gatekeeper should involve a two-pronged test to assess the level of market power protected by significant barriers to entry, such as network effects and economies of scale or scope, and the ability to control access to a unique set of platform users or participants.
  • Combining broad level principles that set forth the objectives of the regulation and the types of illicit behaviors with specific backlisted practices by platform type will ensure consistency while enabling greater predictability and relevancy.
  • Creating a specific EU regulatory body for the enforcement of ex-ante regulation that builds on the Commission’s experience in dealing with digital markets and that has strong mechanisms for coordination with relevant sectoral regulators and national competition authorities.
  • Requiring the identification of plausible and suitable remedies at an early stage of any investigation under the NCT will ensure that the significant costs of a market investigation is justified.
  • Instituting strong procedural safeguards, including rights of defense and judicial review, to counterbalance the remedial powers with which the NCT is endowed will ensure the efficiency and objectivity of the investigatory process.

European competition policy has an established global reputation for being clear, coherent and consistent, taking a technocratic, non-political approach and encompassing robust procedural safeguards. In order to stay abreast of the times, it must address new and legitimate concerns that arise in the digital economy and beyond.

There are many important questions raised in the DSA and NCT consultations (see our detailed responses to the DSA here and NCT here). We believe that resolving these issues is essential to ensure fair and open European markets that can stand up to the challenges of the digital age and allow society and consumers to reap the full benefits of the digital economy. We are grateful for the opportunity to contribute and look forward to engaging further on these highly relevant topics. Our hope is that Europe can once again take the lead in setting new guardrails and creating new tools to ensure fair and responsible digital platforms. Let’s help make Europe fit for the Digital Age by making Tech Fit for Europe.