The European Commission’s proposal for a new competition tool in the digital age
On 2 June 2020, the European Commission (Commission) launched a public consultation on the need for a possible new EU competition tool through the use of remedies to address evolving structural competition issues in areas such as digital markets.
What does EU (and Irish) competition law address?
EU (and Irish) competition law prohibit anti-competitive agreements between companies and the abuse by a company of a dominant position. The Commission investigates and enforces EU competition law across the EU. The Competition and Consumer Protection Commission (CCPC) investigates and enforces both EU and Irish competition in Ireland.
Why is the Commission looking at a new EU competition tool?
The Commission's experience with enforcing the EU competition rules in digital and other markets has led it to identify certain structural competition problems that the current EU competition law rules appear unable to tackle or effectively address. In that regard, the Commission has been looking at the role of competition policy and whether changes to the current EU competition law framework are needed to preserve the competitiveness of markets.
What would be the objective of the new EU competition tool?
The new EU competition tool would be intended to enable the Commission to address gaps in the current EU competition rules and to intervene against structural competition problems.
What would the new EU competition tool look like?
The new EU competition tool would allow the Commission, after establishing a structural competition problem through a market investigation, to impose behavioural and possibly structural remedies across markets in a timely and effective manner. There would be no finding of an infringement of EU competition law, nor would any fines be imposed on the companies which are the subject of the investigation. There are various characteristics which such a new competition tool might have (i.e. dominance-based or market structure-based features).
What sort of structural issues would the new EU competition tool be designed to address?
The Commission has so far identified structural competition issues which can arise in a range of different scenarios and which would be relevant to the new EU competition tool.
- Structural issues for competition: Market characteristics (e.g. network effects) coupled with the conduct of companies operating in those markets can create a risk to competition. For example, risks to competition can arise through the creation of powerful market players with an entrenched market and/or gatekeeper position. Other scenarios include strategies by non-dominant companies to monopolise a market through anti-competitive means.
- A structural lack of competition: Certain market structures do not deliver competitive outcomes (i.e. a structural market failure) even without companies acting anti-competitively. Markets may display systemic failures due to certain structural features, such as (i) high market shares, (ii) barriers to entry, (iii) consumers being locked-into companies or (iv) lack of access to data/ data accumulation. Market structures can also increase the risk of tacit collusion, including markets with greater transparency due to algorithm-based technologies.
What is the context to the proposal for a new EU competition tool by the Commission?
Part of the context to the proposal for a new EU competition tool by the Commission is the digitalisation of society and the economy. Whilst digitalisation has brought numerous benefits, the Commission considers that some platforms have become gatekeepers for digital and non-digital products and services. Underlying this are market characteristics such as material economies of scale and scope, network effects, zero pricing and data dependency. In addition, the Commission considers there to be market dynamics favouring sudden and material decreases in competition (also described as ‘tipping’) as well as ‘winner-takes-most’ scenarios.
Would this new EU competition tool operate outside the current EU competition law system?
No. Any new EU competition tool would be part of sector-specific EU regulation and the existing EU competition law tools currently available to the Commission (as well as to the national competition authorities of the Member States (such as the CCPC)). It would also be complementary to the Commission's parallel impact assessment on platform-specific ex ante regulation, which is part of the proposed Digital Services Act (which is looking at possible measures to ensure that markets characterised by large platforms with significant network effects acting as gate-keepers, remain fair and competitive). As part of the EU Digital Strategy, the Commission has announced a Digital Services Act package to strengthen the internal market for digital services and foster innovation and competitiveness of the EU online environment.
Does the CCPC have any equivalent competition tools under Irish competition law?
No. The CCPC cannot make any finding of anti-competitive conduct, it cannot impose any remedies and cannot fine any company for breach of EU or Irish competition law (though this may change depending on the way in which ECN+ is implemented in Ireland).
However, the there is one mechanism available to the Irish Courts under Section 14(7) of the Competition Act 2002 (as amended) (Competition Act). This involves the Court finding that a company has abused a dominant position in breach of either EU or Irish competition law and the Court may then either (a) require the company to discontinue the abuse, or (b) require the company to adopt measures to cease the dominant position or adjust that dominant position (including measures consisting of the sale of assets of the company). This potentially controversial provision under the Competition Act has yet to be used by the Irish Courts.
What are the next steps regarding the new EU competition tool (both at the EU level and at the Irish level)?
The Commission is consulting the public and private sector, including competition authorities and government bodies. Interested parties are invited to submit their views on the Commission's inception impact assessment by 30 June 2020 and to respond to the open public consultation by 8 September 2020 on the new competition tool and its potential characteristics.
Subject to the outcome of the current assessment, a legislative proposal regarding the new competition tool is scheduled for later in 2020 (with possibly a Regulation in Q1 2021). In particular, the Commission is seeking views on whether such a competition tool should only address issues arising from conduct by dominant companies or wherever a wider structural risk for competition hinders the operation of the EU internal market. Other issues include whether the new competition tool should be limited to particular sectors (e.g. digital markets or other sectors prone to entrenched dominance or entry barriers).
The Irish Department of Business, Enterprise and Innovation (i.e. the Government department with responsibility for competition policy in Ireland) is also seeking the views of interested parties by 24 July 2020 on the Commission’s proposals.
The proposal for an EU competition tool (and including the Digital Services Act) are part of the Commission's extensive proposals to shape the future operation of digital markets across the EU. For the UK, this is one new area that Brexit will exclude (even if the UK Government and the Competition and Markets Authority will watch with interest). The debate on the shape of the Commission's proposals for a new competition tool (as well as the Digital Services Act) promises to beg numerous questions (such as its necessity, scope and reach) and to be generally very lively.
For more information on this topic please contact Alan McCarthy, Partner or any member of A&L Goodbody's EU, Competition & Procurement team.
Date published: 8 June 2020