Private enforcement and the Digital Markets Act

The Google Cases made Margrethe Vestager and her team at the European Commission heroes in the fight against the insolences of Big Tech. And rightly so: The Directorate General for Competition deserves the praise for taking on some of the most powerful companies in the world, for chartering new territory and for persisting in the still on-going uphill battle for the regulation of Big Tech. But they had great helpers – even more than that: instigators – that sent them on the mission.

This contribution serves as a memorial to these actors – which is all the more necessary since they were forgotten in the Digital Markets Act (DMA). For the DMA to function properly – that is, to dismantle overwhelming private power – enforcement capacities of private actors should be strengthened at the outset: Competitors and customers should be integrated into the enforcement system as complainants, informants and litigants. Without explicit rules on this form of “private enforcement” the high ambitions of the DMA are likely to remain unfulfilled. The digital giants will not tumble because of government intervention but because of innovative competitors and stronger customers that can rely on the framework set by governments. Private power needs to be cured with private empowerment. This should, ideally, be reflected in the procedural rules.

How it all started

To find out who the masterminds behind the landmark Google Shopping decision of the European Commission were, you need to turn to paragraph 39 of that 755-paragraph-long decision:

“On 3 November 2009, Infederation Ltd. (“Foundem”) lodged a complaint against Google with the Commission. […] On 22 January 2010, pursuant to Article 12 of Regulation (EC) No 1/2003, the Bundeskartellamt (Germany) exchanged information with the Commission on a complaint against Google lodged by Ciao GmbH (“Ciao”). […] On 2 February 2010, eJustice.fr (“eJustice”) lodged a complaint against Google with the Commission.“

It goes on like this for several pages. If you, well, google Foundem today, you find a dead former price comparison portal and much information about its battle for life, turned into an antitrust fight. Foundem and the other companies that followed suit got the Commission going. They called for help in 2009 and 2010, yet it took the Commission until 2017 to reach a decision (that is under review by the courts). That is quite a while in digital times. However, without the first-hand information from market players, there may not have been any Google case at all.

Antitrust cases strongly rely on the information provided by market actors. From my own days as a case officer in the Bundeskartellamt, the German competition watchdog, I remember the dependence on market actors: You sift through the large number of complaints to detect infringements in the first place; and once you have opened a case you are completely dependent on information provided by experts in the respective trade – usually customers and competitors of the undertaking under investigation.

The Commission wants to do it alone

The draft DMA contains very few words on the role of private parties in taming the gatekeepers. In Art. 19, undertakings are subjected to requests for information. In Art. 20, the Commission is empowered to interview persons who may contribute to the investigations (if these persons consent). That is it – a very basic involvement of third parties.

This restraint towards private enforcement and the participation of competitors or customers in DMA proceedings is a mistake: The Commission will not be able to deal with gatekeeper regulation alone.

The “Friends of an Effective Digital Markets Act” – the governments of France, Germany and the Netherlands – came to the same conclusion in their May 2021 non-paper. They did not only ask for better involvement of national agencies and the Member States, but explicitly favour “private enforcement of the gatekeeper obligations.” In a joint paper from June 2021, the national competition agencies also mentioned the important role and deterrent effect of private enforcement.

The DMA in its current version ignores the role of private parties for setting the framework for fair and contestable markets. Private enforcement is not mentioned. The enforcement regime, as it stands, relies on automatic compliance by the gatekeepers and on monitoring and enforcement by the Commission. That is a confident expectation: Will some of the most powerful undertakings in the world really subject themselves automatically to obligations set in the DMA? Will the Commission detect problems that may arise from a different understanding of the words – or blatant non-compliance?

The role of private parties

The role of private market actors in administrative proceedings is usually threefold: Firstly, they solve the information deficit of the agency. Secondly, they initiate, drive and control proceedings through their formal participation. Thirdly, they monitor compliance after proceedings and claim damages in case of loss. There is a fourth function that I will turn to later.

The first three, mentioned here, are functions of private actors that are established in traditional competition law. I am hesitant to praise competition law proceedings as a model for the involvement of private parties, however, as it is still very burdensome for private actors to get involved in EU competition cases.

Complainants have a weak position in Commission proceedings. They may complain, but there are no time limits for the Commission to react, no duty to take up a case, and the Court’s practice in dealing with complaints that got a formal rejection decision from the Commission gives enormous leeway to the Commission. Access to information, the possibility to have a hearing, the right to complain and the right to claim damages – yes, these exist, and third parties certainly have an impact on competition proceedings, but their role remains weak.

In competition law, all these rights, although weak, were established, developed and spelt out as rules of procedure, rules for damages, rights to complain etcetera, in hard-fought court battles or in Commission guidelines. They are achievements built over years. However, this “acquis” is not directly applicable to the DMA. With the draft law as it stands, the fight begins anew.

The DMA is not a piece of competition law legislation (at least that is what the Commission claims, and while many of my colleagues wish to see the DMA in the realm of traditional antitrust, I side with the Commission here). The whole enforcement apparatus, developed for the enforcement of Art. 101 and 102 TFEU, is thus not applicable in DMA cases. In effect, the Commission ventures into a new field of direct application of EU rules by an EU administrator to undertakings without a similar set of accompanying laws and standards or best practices. (Just consult the legislation pages on the DG COMP website to get an impression of the body of law that nowadays serves to implement two provisions in the TFEU.) I doubt that DMA enforcement can do without this.

The pros of private enforcement

But is gatekeeper regulation a matter for private enforcement at all?

For a German competition lawyer, that is a no-brainer: Yes! We are nurtured with ordoliberal superfood from day one, before getting a Hayek diet, which means that we believe that the spontaneous market order is mirrored by a private law society (as Franz Böhm once famously described it in ORDO). Where private actors can establish a market order (with the help of courts), they do not need to rely on state interventionism.

Apart from a sentimental belief in such concepts, economists would argue with the efficiency and the effectiveness of private actors’ involvement: They have superior market knowledge, they jump at the pressing issues, they are able to reduce bureaucratic costs. The Court of Justice repeatedly pointed at the effectiveness of European law to justify private enforcement. Deterrence and compensation are strengthened if private sheriffs are around.

In European legal doctrine, the private pillar of market regulation is well-established. Readers of Verfassungsblog do not need a reminder of Van Gend & Loos, but the wording of the Court of Justice is so inspiring, still today, that it justifies the quote:

“…the Community constitutes a new legal order of international law for the benefit of which the states have limited their sovereign rights, albeit within limited fields, and the subjects of which comprise not only Member States but also their nationals. Independently of the legislation of the Member States, Community law therefore not only imposes obligations on individuals but is also intended to confer upon them rights which become part of their legal heritage.”

Regulating gatekeepers serves the public interest by securing welfare and democracy. It also serves the individual rights of (now dead) companies such as Foundem or Ciao and consumers. The rights conferred upon users, in turn, will become part of a new “digital legal heritage”.

The Commission would ease its own enforcement burden and would give due recognition to market participants if it revised the chapter on enforcement by including, in particular, an article on the handling of complaints and incoming information. For Foundem and the like, time limits would have been vital. Complainants report that at present, in competition proceedings, it is not just unclear whether the Commission will pick up a case, but also when. The whole idea of the DMA, meanwhile, is to speed up enforcement. Nevertheless, the DMA leaves it up to the Commission when to start enforcement action. Streamlining these internal procedures with the help of third parties would probably solve many of the problems associated with enforcement. Therefore, third parties should be included as parties to the proceedings with a formal standing, including access to file and the right to appeal. The Commission should also clarify that damages claims are possible as so-called follow-on claims, to the effect that private litigants can base their claims on Commission findings that are binding for courts.

Getting a right right

The statement from Van Gend & Loos seems to suggest that private enforcement is automatically possible, once directly applicable and very concrete obligations are set. The authors of the DMA probably took it as a given. In its Q&As on the DMA, for example, the Commission states that infringements of DMA obligations may result in damages actions in national courts for the companies affected.

Two caveats: Firstly, damages are just one part of private involvement, and a late one, as damages are usually the final element of an enforcement action. Litigation on damages may come years after the infringement, often too late for companies that are severely battered. The other aspects of involvement are not covered.

Secondly, the problems with damages claims in competition law show what it takes to get an individual right right: The devil is in the details. Despite of serious efforts of the European Court of Justice in the landmark cases of Courage and Manfredi, and a whole set of rules in the 2014 Damages Directive, actually getting compensation for victims of cartels is still very hard. Without precedents, patience and supportive legislation there is little hope to succeed.

Decentralise enforcement

There is a fourth aspect of private enforcement that I wish to add: Private parties should be able to claim injunctive relief or prohibition orders against infringements by gatekeepers. This would mean that enforcement could become independent from the European Commission. An alternative path to enforce the obligations of the DMA would open up.

At present, the DMA reads as if it was the exclusive privilege of the Commission to run enforcement actions against gatekeepers. It is unclear whether a national court would even accept an application for prohibiting the violation of a DMA obligation from a private party. Would a competitor like Foundem be able to turn to the Düsseldorf District Court and ask for an injunction against Google’s self-preferencing, based on Art. 6 (1) (d) DMA? Van Gend & Loos or Courage may point to that direction. The Commission, however, does not seem to envisage this. At least, it does not mention this possibility and does not take any precautions for this case (as it did for competition law in Regulation 1/2003, where it offers coordination mechanisms for decentralised enforcement).

If there is no alternative to public enforcement by a Commission unit, I have twofold fears:

First, the Commission may easily be overburdened with the workload of gatekeeper regulation. Imagine, the 80 or so Commission staff who must deal with 18 obligations for 5 to 10 gatekeepers with several core platform services each. These corporate groups will be able to mobilise the best legal and economic advice. Imagine just a couple of these cases going to the European Court. In addition, the Commission may wish to run an update of the DMA according to its draft Art. 10. What will be left of enforcement after three years (apart from heavily-stressed Commission officials)?

A second fear is that the political agenda may change. What if a successor of Margrethe Vestager is less keen on taming the tech titans? What if priorities within the Commission shift? Who keeps up enforcement? Private actors seeking injunctions in court and national competition agencies could step in.

Evolutionary gatekeeper regulation

The price to be paid for more actors being involved in enforcement is fragmentation (something that does not go down too well with Art. 114 TFEU, admittedly). This may be cured by channelling private enforcement to specialised European panels, instead of national courts, as Philip Marsden and I suggested last year. “Fragmentation” may even be an opportunity: Private enforcement as an equal second pillar to Commission enforcement opens up a field for regulatory evolution in a decentralised network. This is exactly what we need when venturing into new territories – competition for the best solution.

Foundem, Ciao, and the others that started all this made one mistake: They trusted public enforcement by the European Commission, which took too long. Had they relied on the power of private enforcement, taking Google to court, the case would have been resolved much quicker. The mistake to rely too heavily on public enforcement should not be repeated.