cross-border digital services conceptThe European Commission recently launched two complementary consultations that would expand its competition enforcement powers and establish regulations for digital markets. The commission intends to close perceived gaps in its statutory powers to curb gatekeepers in digital markets.

The proposed new powers build on the commission’s investigations in the digital sector where the commission claimed that market characteristics, such as high entry barriers, network, and scale effect, can make a “dominant position,” once acquired, difficult to contest.

Among the questions posed by the commission is whether the new authority should be limited to the digital sector and/or to dominant companies or whether it should also target other sectors with entrenched market positions based on exclusive use of data or IP rights, such as the pharmaceuticals and automotive sectors.

The proposed rules would be a substantial expansion of the commission’s investigative powers and could potentially lead to imposing significant prohibitions or even divestitures without a violation of existing competition laws. The proposed rules and options are controversial. Some may suggest that certain options do not go far enough whereas others say the rules are a burdensome overreach that risks stifling competition and innovation.

A key question is how this set of tools to come will fit into the international order. Digital markets are cross-border by nature and many other countries are also considering or have proposed new regulation.

Companies must submit comments on the roadmaps by 30 June 2020 and the consultations by 8 September 2020.

A formal proposal for the new Digital Services Act is expected to be adopted by the end of 2020. These proposals will then need to go through the legislative process, including the European Parliament and the Council.

Further details can be found in our insight on this topic.