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Making the Digital Markets Act Fit for the Digital Age

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Just like all the children returning to school, the tech industry is feeling optimism mixed with a bit of anxiousness about the year ahead.  

EU lawmakers are drafting a raft of important new regulations which will impact Europe’s digitising economy for decades to come. One of these proposals is the Digital Markets Act (DMA), expected to be adopted in the next term. Thousands of amendments were proposed to this regulation before the summer, many of which have been the result of MEPs trying to outdo each other on how tough they can be on ‘Big Tech’. But after the initial posturing, the hard work now starts on drafting legislation that actually works in practise: a DMA that supports the EU’s ambitions to be fit for the digital age. 

Brussels has crafted bold plans to regulate the relationship between technology platforms and their business users. The power of lawmakers to make sweeping changes to the way technology markets work is top of mind for tech companies and investors. But some of the rules are complex, technical and far-reaching, with compliance deadlines that may not be workable in practice.

For the new rules to work as intended, companies will need to be able to meet their obligations. This means realistic deadlines to comply with and due regard for the effects of other overlapping EU rules and regulations. Safeguards need to be in place to ensure that these additional ex-ante rules do not freeze the development of the core platform services upon which so many European businesses rely. For Brussels to set the pace for tech regulation around the world will require a cool head, and a thoughtful approach. To be fit for the digital age, the DMA needs to be as dynamic and flexible as the sector it will regulate.

The draft rules were presented by the European Commission in December 2020, and more than half a year has passed in which lawmakers have competed to dial up the heat on the tech sector. Instead of improving the initial draft with better tailored obligations and appropriate flexibility, some lawmakers have proposed to stretch obligations and shorten timelines for companies to comply. 

Some of the thousands of penned amendments are alarming, not because they are bold or will require some companies to make major changes to their technological infrastructure, but because they are unworkable, or counterproductive, ultimately harming consumers. At the same time, the ink is barely dry on the platform-to-business regulation that shared many of the same objectives as the DMA, and is only now really being enforced. Now is not the time to argue over the intent of certain legislators, but to roll up our sleeves and help turn the ambition of fair and contestable markets into a workable set of rules. That will require a spirit of cooperation and an open mind from all parties around the table.

In the autumn, key European Parliament committees will consider and vote on amendments, which will be critical in setting the direction of the final text. This process will mean sifting through a mind-boggling volume of amendments. Not all of the amendments will make it into the final legislation, and lawmakers need to keep their eye on the ball, picking out those that will make a real positive difference, and for this they’ll need to listen to what others have to say about the relative merits and shortcomings of the various proposals for amendments.

Doing a thorough job now will pay dividends later. Proposals that don’t work in practice tend to be weeded out in any event, and Brussels is littered with examples of drawn-out haggling over badly drafted text. If the law is to come into force quickly, which is one common goal, unnecessary political bartering must be kept to a minimum.

But there are longer-term risks with pushing through regulatory proposals that haven’t been properly vetted. Ambitious but ambiguous wording is a common source of both under- and over-enforcement, which is in no-one’s interest. Good law rests on solid principles. “Big is bad” doesn’t cut it, and it’s not enough to kick the can down the road either. Making the EU’s Court of Justice responsible for fixing such an important piece of legislation would leave citizens and the many companies that rely on core platform services in limbo, potentially freezing the development of these core platform services in the meantime. Coming to a common understanding of the intended interpretation and actual effects of the provisions will be key.  

The best way to reach a good result now is to stress-test the DMA, and make sure that the political ambitions set out by EU legislators are translated into a workable, practical and lawful set of rules. There’s a lot at stake, and a lot to get right. The tech sector is ready to play its part to help make the DMA fit for the digital age.

European Union

DisCo is dedicated to examining technology and policy at a global scale.  Developments in the European Union play a considerable role in shaping both European and global technology markets.  EU regulations related to copyright, competition, privacy, innovation, and trade all affect the international development of technology and tech markets.