Microsoft supports new rules for gatekeepers

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

EU flags at the European Commission Berlaymont building. Guillaume Périgois/UNSPLASH

Increasingly, businesses today, whether they are software developers, content creators, advertisers, retailers, or others, depend on a handful of large platforms to reach their customers. Those platforms, operating as gatekeepers, intermediate their customer relationships and set the rules of the marketplace, determining which businesses and innovations succeed and on what terms. And, in some instances, their success is undermining fundamental pillars of our society, politics, and democracy. As many have recognized, competition law alone is insufficient to address these concerns. We support efforts by the European Union to adopt uniform, forward-looking regulation to ensure that these gatekeepers operate fairly and do not undermine the ability of others to compete. To this end, we believe that the proposed Digital Markets Act (DMA) is an important step forward. It requires large tech platforms, including Microsoft, to do more and work together to make “Tech Fit 4 Europe”.

Our point of view is informed in part from our experience. For almost 20 years, Microsoft Windows along with several other popular Microsoft products have been effectively regulated, the result of various competition law-related court orders, undertakings, and voluntary principles. As a result, today, Windows is an open platform; developers are free to access and distribute their applications for Windows using whatever channel or mechanism they wish. And the interfaces used by Microsoft’s own software products to interoperate with Windows are open, documented, and available to others. With these restrictions and obligations in place, industry veterans and new entrants alike understood that they had complete access to Windows to build their applications and that they could distribute those applications without impediment through installation on new computers and through other channels. Indeed, the ecosystem enabled by Windows has flourished and allowed many of the leading digital platforms and online services of today – e.g., Google, Facebook, Amazon, Twitter, Spotify, Booking.com, Airbnb, Valve, Steam, and Salesforce – to get a foothold, connect with users, and grow unimpeded.

Moreover, at times, our own efforts to reach end users, innovate and compete, has been blocked or undermined by the business practices of certain gatekeepers. For example, we and others have raised concerns about the policies for app stores on the most popular mobile operating systems that unfairly burden app developers and exclude innovative apps. And more recently we have highlighted the impact of lack of competition in online search engines. Accordingly, we understand first-hand the critical role open platforms play in fostering technical innovation and competition as well as driving our economies forward by creating opportunities for content creators, retailers, and the other businesses that depend on them.

By establishing a regulatory framework that complements – but does not replace – competition law enforcement, the DMA proposal is poised to address the unique challenges presented by gatekeepers. And its self-executing design promises to deliver rapid results with immediate benefits to the business users that are dependent on gatekeepers to reach end users. We expect that some of our products and services, such as Windows, will be in scope of the DMA. But we understand that ultimately this will benefit the broader ecosystem and provide more opportunity for all participants, including ourselves.

We are mindful, however, that the DMA is the first of its kind. No government has yet undertaken to comprehensively regulate under a single scheme such a wide variety of digital platforms, each of which offer different services, under different business models, and using different technologies. Therefore, to fulfil its promise, the regulation and its enforcement should focus on the one characteristic that all these platforms share and is inadequately addressed by current law: their unique intermediation role. This focus gives the DMA coherence and purpose. Reaching beyond will undermine clarity, create confusion, and reduce the ability of the European Commission to target its resources and attention to the core concerns driving the DMA.

With this in mind, we have offered in our formal response to the DMA proposal the following recommendations::

Focus on Intermediation

We tend to use the term “platform” indiscriminately in everyday language to refer to a broad variety of technologies. However, not all “platforms” are or can be gatekeepers; many are simply services that businesses use to run and operate. For example, businesses may use cloud computing services (the public cloud) to host their website, build an expense app for their employees, track customer information, or analyze sales data. But those services do not intermediate the relationship between businesses and their end users. The DMA should be clear that such services are not in scope.

Enable the Establishment of Safe Harbors

The DMA relies on a uniform set of quantitative criteria – e.g., 45 million monthly active users (MAU) – to identify gatekeepers. Although this approach is simple and straightforward, it obscures important differences between platform services; 45 million MAU may be significant for an operating system but insignificant for a social network or online search engine. To that end, we believe that the Commission should be empowered to define “safe harbors” that can enable it to quickly identify and eliminate those platforms that may meet the quantitative criteria but clearly and plainly are not an important gateway for business users to reach end users.

Enhance Clarity Through Regulatory Dialogue

Each of the obligations in the DMA arise from a specific context but often apply to all gatekeepers and all platform services, notwithstanding the important differences between them. This will undoubtedly lead to confusion and undermine the ability of firms to comply. In some instances, it may lead to nonsensical outcomes. For example, the prohibition against sharing end user data between platform services makes sense for those services that directly monetize that data by selling advertising based on it. But it will undermine quality and innovation for those platform services that only use that data to deliver better security protections and a consistent user experience across them. Accordingly, the DMA could improve compliance by requiring the Commission to identify – at the point of designation as a gatekeeper – those obligations with which a platform must comply. And, thereafter, the DMA should provide processes, procedures, and sufficient staffing to support ongoing robust engagement and dialogue between the Commission and gatekeepers regarding implementation of the obligations. Doing so will speed execution and compliance as conditions and technologies change, strengthening the DMA, and making it truly future proof.

Better Address Online Search Engines

The DMA has taken a bold step in requiring gatekeepers in search to make available the query and click data entered by end users. Indeed, search has long been impervious to competition; Google Search has persistently and continuously captured most of the market. Making such data available will enable competitors – like Bing, DuckDuckGo, Ecosia, and others – to improve the relevance and quality of their search results. But to make the market fully contestable, the DMA should take two additional steps: (1) It should prevent gatekeepers in search from using their complementary control over the most popular services used by advertisers to buy and manage campaigns on search engines to favor their own offering. Such advertising services need to provide equivalent support and interoperate with competing search engines. (2) It should prevent gatekeepers in search from locking up default settings, particularly on mobile devices. If challengers cannot get a shot at reaching advertisers and end users, the market will not be contestable.

We are grateful for the opportunity to provide these recommendations and look forward to the continuing dialogue.

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