What Is a Digital Gatekeeper? Which Platforms Should Be Captured by the EC Proposal for a Digital Market Act?

Abstract

In the past couple of years, several reports have concluded that a small number of large digital platforms act as gatekeepers in that they are necessary gateways between business users and their prospective customers. This allows these platforms to take advantage of the dependency of these business users on their services by imposing unfair trading terms. Since this issue may not be adequately addressed to competition law, this has led the European Commission to propose a Digital Market Act (DMA).

This paper focuses on the question of which digital platforms should be subject to ex ante regulation and, thus, to the obligations contained in DMA proposal. The methodology used to designate gatekeepers cannot be divorced from the issue(s) that ex ante regulation seeks to address as otherwise the DMA might end up regulating the wrong set of companies. The DMA Proposal designates as “gatekeepers” providers of core platforms services (CPS) that satisfy three cumulative qualitative criteria. These criteria are presumed to be satisfied when the CPS provider in question meets size-related quantitative thresholds. The DMA includes a mechanism allowing CPS providers that satisfy these quantitative thresholds to escape designation. Nevertheless, the paper shows that there is a risk that this process may capture platforms that, while they satisfy the quantitative thresholds due to their size, do not act as gatekeepers.

In this context, the paper makes some suggestions as to how the designation process could be improved to ensure that it exclusively targets platforms that are necessary gateways between business users and their prospective customers, hence creating dependency. The paper recommends a greater reliance on the concept of multi-homing, which has been extensively explored in the economic literature. In particular, multi-homing on both sides of a platform could be used as a safe harbour.

Keywords: Platforms, gatekeepers, ex ante regulation, competition, multi-homing

JEL Classification: D40, K20, L41, L51