January 2021 Preliminary Comments on the EU Digital Markets Act
Facebook recognises that the nature of competition and the markets our company
operates in has rapidly evolved and that requires a new approach built on sound principles.
The Digital Markets Act (DMA) proposal is a significant change in the way in which
regulatory processes are managed and regulatory remedies are applied. This requires
very careful scrutiny to ensure the proposal wil get the balance right, not least because it
is likely to set the standard for all future regulatory measures, regardless of sector.
Facebook has been working for a number of years in trying to develop ways in which our
company can facilitate a more open ecosystem, such as through user-initiated data
portability. There is value in ensuring ecosystems remain open and competitive as
opposed to imposing heavy restrictions on businesses that have the main purpose of
restricting innovation and reducing consumer welfare.
As a general rule, Facebook is convinced that automatic, self-executing rules that are
applicable to all companies and irrespective of the market realities in which they operate
wil lead to unintended, disproportionate, and damaging consequences. More nuance and
regard to companies’ ability to continue providing their users with useful and innovative
products should be given due consideration in upcoming discussions. Facebook strongly
believes it is possible to build a robust and future-oriented DMA. It will depend on the
regulation’s ability to address legitimate concerns while not reducing the ability and
incentive of companies to experiment, innovate, and react swiftly to new user demands.
Remedies that wil make it harder for a gatekeeper company to run its business in the most
efficient manner by no means automatically translate into greater market contestability and
Facebook looks forward to continuing the dialogue with policymakers and stakeholders.
This contribution represents Facebook’s preliminary comments on a few elements of the
DMA that wil evolve further over time. Gatekeeper designation
For the most part, Facebook is unlikely to be a fringe case in designating gatekeeper
companies. Nonetheless, any gatekeeper designation and the process around it should
be transparent, rebuttable and consistent with legal norms. Article 3 gives a lot of leeway
in the designation process. Whilst Article 3(2) presents quantitative criteria for the
gatekeeper designation, Article 3(6) specifies that the Commission can identify
gatekeepers even if these criteria are not met (see below). Further, Article 3(4) refers to
specific “circumstances in which the relevant core platform service operates” which may
prevent the designation as gatekeeper even though the criteria in Article 3(2) are met.
Equal y, the proposal fails to define the criteria for a removal of such gatekeeper status.
Article 4 merely refers to a “substantial change in any of the facts on which the decision
was based”. These provisions will require further clarification.
As mentioned, the Commission also reserves the right to impose gatekeeper status as
part of a market investigation, even in lieu of said gatekeeper achieving the quantitative
thresholds. This includes the power of determining whether the gatekeeper is enjoying an
entrenched and durable position in its operations or whether it is foreseeable that it wil
enjoy such a position. If the latter, the Commission reserves the right to pick and choose
the obligations to impose on such gatekeeper companies amongst a more limited subset
of obligations (Article 15(4)). Taken as a whole, this gives the Commission far-reaching
oversight and intervention powers. There is a need for greater clarification of which
evidentiary thresholds the Commission wil have to meet when designating gatekeepers
on the basis of qualitative criteria. It wil be essential to establish effective ‘guard rails’ to
ensure companies can rely on a predictable regulatory environment
Lastly, the identification and delimitation of each core platform service provided by a
gatekeeper wil have to be thoroughly thought through, especially with respect to services
providing integrated, multi-feature services. Given the far-reaching obligations
gatekeepers will have to abide by with respect to each of their core platform services, the
precise identification and delimitation of those services wil matter greatly with respect to
the value proposition companies wil be able to offer to their users. It wil be paramount to
avoid unintended consequences in this area and to provide greater clarification on how to
define a service. List of self-executing obligations for gatekeeper companies
Facebook remains sceptical about the value of self-executing rules, including prohibition
lists, as contained in Article 5. The companies that are expected to fall in scope of the
DMA are incredibly varied in the way they operate. The speed of innovation is also not
going to slow down in the technology sector. Facebook believes that this raises a valid
question about the suitability of an one-size-fits-all approach that such rules would bring.
To put it another way, a necessary assumption for the application of self-executing
prohibition and obligation lists is that the European Commission has ‘got it right’ with
respect to al companies fal ing in scope and wil continue to be able to preempt the market
and innovation into the future.
Prohibition lists are a very ‘expensive’ remedy as they lack any nuance and should hence
be reserved for overarching principles such as transparency, accountability, and
universally valuable inputs to businesses to improve market contestability (such as data
sharing). A more flexible and targeted approach is far more efficient and wil minimise
unintended consequences. Such an approach would be more future proof and better
equipped to preserve efficiencies that bring consumer benefits and competition. List of obligations that may require further specifications
The purpose of Article 6 needs careful consideration. It is stil unclear as to whether the
right balance between the immediate imposition of remedies vs. the ability to apply fit for
purpose, case-by-case remedies has been achieved. This could be clarified through a
clearer and more participatory Article 7 and Article 8. Overall, it seems that the approach
proposed under Article 6 is a more desirable approach than self-executing obligations as
it enables regulated companies to request guidance on the applicability of these provisions
to their specific business models through the Article 7 process. If value is to be given to
‘participatory regulation’ as a model, it should be further expanded and be the basis for
the establishment of regulatory obligations in Article 6. Greater need for flexibility
As mentioned above, broadly applicable lists of prohibitions and obligations are not the
most appropriate tool for a very diverse set of companies, products and consumers. Those
companies run a whole range of different business models with different revenue models
and different customers, they operate in very different environments. We believe there are
better models of regulation that can be designed that would fulfil the purpose of the
regulation and offer better regulatory outcomes in terms of protecting innovation and
consumer welfare and favouring more growth and investment in EU markets.
Currently, there is no objective justification or efficiency defence which would exempt a
particular firm from a specified measure. These safeguards play an important role under
competition law, meaning the regulator must clearly weigh the anti-competitive effects of
a given practice with its pro-competitive effects. The DMA should draw inspiration from
this approach to make sure companies are not unnecessarily prevented from innovating
and thereby providing more competition in markets.
Facebook also considers the threshold for suspension requests contained in Article 8 sets
a very high bar for companies to challenge Article 5 and Article 6 obligations, and it is
unclear how economic viability risks could be objectively evidenced or measured. Interplay with other pieces of regulation & national competition law
It wil be important to bear in mind that the DMA wil not operate in a vacuum but wil
interact with other, potentially overlapping, pieces of legislation. The most obvious one is
competition law enforcement which wil remain the most appropriate tool for dealing with
abuses of market power. It is a tool that has effectively worked for decades, including in
digital markets. Notably, the DMA aims to introduce investigative and enforcement
measures that are comparable, and some cases go further, than those found under
competition law. The DMA could also raise questions about its interplay with other
regulations such as the very recent platform-to-business Regulation (P2B) as well as
existing data protection and telecommunications laws. These regulatory interplays wil
require careful consideration to ensure consistency across the various laws and
Furthermore, the importance of pan-EU coherence cannot be overstated. The DMA is a
complex piece of regulation that wil require companies to undertake careful balancing and
compliance exercises. But at the same time it is also an harmonization measure based on
Article 114 of the TFEU. Against this background, the ability to apply additional national
competition rules needs to be critically assessed, not least because those rules might well
seek to impose obligations on gatekeeper companies that deviate from those in the DMA. Further considerations
. In Article 9 the Commission lays out a series of exemptions (public morality,
public health, and public security) that seem broad and vague. It may be worth considering
if these are the right list of exemptions or if others should apply also, including those that
would protect gatekeepers from bad actors who could try to take advantage of some
obligations to siphon off value for themselves without contributing meaningfully to - or even
decreasing - consumer value.
. Article 10 gives the Commission the right to update the list of
regulatory remedies at their discretion via implementing acts. It is particularly difficult for
businesses to plan and invest if the regulation was to remain in a constant state of flux.
Hence, those powers should be exercised with care and be subject to appropriate
safeguards such as the requirement to take decisions based on sufficient evidence and
with sufficient participation of the ‘gatekeeper’. Obligation to inform about concentrations.
There now seems to be an overlap with current
EU merger procedures by creating an “obligation to inform about concentrations” in Article
12, which in fact goes further current EU merger procedures. The purpose of such a
procedure seems unclear and it would be prudent to see how this can be streamlined
within the Commission given the current procedures and enforcement practices already in
place. Regulatory capacity
. The burden the DMA wil set up for the new regulator should not be
underestimated. The regulator wil have to oversee a substantial amount of often complex
obligations applicable across a variety of gatekeeper companies’ core services.
Appropriate resourcing wil be crucial in ensuring the smooth functioning of the regulation’s
key provisions. Final comments
Facebook takes the concerns that the DMA is intended to solve extremely seriously.
Facebook ful y supports the goal of a competitive digital environment and has already
taken measures to that effect. While it is appropriate to address persistent concerns with
regulation, it needs to make sure that it does not ‘overshoot’. Just like consumers benefit
from a more competitive environment, they equal y benefit from experimentation,
innovation, and often considerable risk-taking on the part of companies. Facebook
considers itself as being one of the best in class when measured against those
parameters. This has driven Facebook’s success which at its core is about the continuous
ability to create value for both consumers and business users. Our company created this
value in an environment that allowed for fairly fast product experimentation and innovation.
The more regulation wil move companies into an ‘innovation by permission’ environment,
the more it wil dampen these positive dynamics. Hence, the key wil be to find the right
balance between achieving the objectives of the DMA with as little negative side effects
and unintended consequences as possible.
Facebook looks forward to engaging with EU stakeholders and to sharing its experience
and views on how this balance could be best achieved.