Private Enforcement for the DSA/DGA/DMA Package
Competition Law Lessons and Beyond
1. Public Enforcement Powers Under the D-Package
Akin to other pieces of regulatory legislation, and more than some of them, the package consisting of the Digital Markets Act (DMA), the Digital Services Act (DSA), and the Data Governance Act (DGA) (“D-Package”) is about empowering authorities vis-à-vis puissant private market players. This purpose calls for state enforcement (often also called “public enforcement”) powers. Indeed, the D-Package contains a number of public enforcement mechanisms, such as the EU Commission’s investigation, sanctioning, and monitoring competencies under Art. 18 et seq. DMA; the powers of the Members States’ “competent authorities” to ensure compliance with the DGA per its Art. 13; or the system of interlocking measures by Digital Service Coordinators and the Commission according to Art. 38 et seq., Art. 50 et seq. DSA.
2. Shortcomings of Public Enforcement
However, experiences inter alia with state enforcement of competition law caution against too exclusive a reliance on state enforcement: Watchdog resources are limited, and the administrative selection of enforcement priorities may be impaired by the fact that it is not driven by the genuine competitive interests of a market participant. State enforcement of competition law in a multi-layer system of Member State and Union-level agencies and courts can be quite slow and badly synced. The already vivid discussion on how to coordinate the competencies of national competition authorities and the EU Commission under the DMA (see, e.g., the ECN’s joint paper on the matter), as well as a glance at the stark contrast between enforcement approaches in the DMA (Commission-focused) and the DSA (Member State-focused, but with the possibility for the Commission to step in), forebode rather more than less difficulties under the D-Package. On a more fundamental level, increasing state enforcement powers may induce an adverse impact on citizens’ rights and freedoms. This risk is, arguably, higher in some domains of the D-Package (e.g. removal of content from online platforms pursuant to the DSA; comprehensive, real-time access to personal and non-personal data under the DMA) than in many a traditional competition law focus.
3. The Rise of Private Enforcement
These and further aspects have caused support for, and of late a steadily increasing relevance of, private enforcement (PE) in EU competition law. Its core element are lawsuits in which companies or individuals harmed by anti-competitive practices seek redress. Where, for instance, customers bought a product at prices inflated by a cartel between producers, they could seek compensation of their damages consisting of (mainly) the delta between the prices actually paid and the hypothetical prices in an undistorted competitive environment. Such lawsuits are brought before civil courts, at the initiative and – initially, subject to later compensation – the cost of the respective claimant. They require, thus, no direct involvement of competition agencies, even though they very frequently rely on findings of infringement made in public enforcement proceedings. Certain developments outside the EU, especially in the US, have kindled fears that PE could be abused, for instance by pressurizing purported infringers into making unjustified settlement payments to avoid the nuisance, bad publicity and costs that even dubious PE litigation may cause. However, such fears have, so far and overall, not materialized in the EU. Elements of its legal framework, preventive in that respect (e.g. loser pays principle for litigation costs, no punitive damages), would loom large in D-Package enforcement as well. At the same time, PE of competition law has made progress – not least through the EU Damages Directive (2014/104/EU) – in solving intricate issues any PE regime faces, such as the principle of full redress, though without overcompensation; quantification of damages and passing-on defense; distribution of liability within a group of perpetrators; access to evidence; the binding effect of state enforcement decisions; and a coherent limitations regime.
PE can make an important contribution to realizing the D-Package’s goals (cf. 5. below). Although some of the present approaches to these issues in competition law PE are certainly debatable, the Package should draw on competition law experiences in setting up a PE regime, but it should also try to further improve PE mechanisms beyond the state reached in traditional competition law.
4. Unsatisfactory Rules on PE in the D-Package
Alas, in their present state, the D-Package drafts contain little to this effect. They neither comprise stand-alone provisions on PE nor explicit references allowing for the application of PE legislation outside the Package (such as the Damages Directive). On the contrary, certain language which rather accentuates that the Package is distinct from competition law (such as Art. 9(2) DGA or the exclusive reliance on Art. 114 TFEU as the DMA’s legal basis) is fueling a vivid debate on whether competition law’s PE mechanisms – and, for that matter, to which extent competition law provisions as a whole – are applicable at all in the realm of the Package (see, e.g., the contributions by Basedow, Leistner, Podszun et al.).
5. Ways Forward
To remedy this uncertainty, the EU Commission must at least complement the Package Acts with a reference to the Damages Directive that permits the Package to plug, mutatis mutandis, into competition law PE.
A – very worthwhile – attempt to improve D-Package PE beyond a mere, unspecific transplant from competition law would, however, require more than that. Among other elements, it should include:
- Fostering PE routes complementary to those under competition law, in particular contract and unfair competition law (cf. also Basedow, Leistner, though with a more critical view on such additional routes). This implies the availability of a broad range of remedies beyond damages, such as (preliminary) injunctions, contract adaptation, disgorgement of profits, data-specific remedies, but also checks on the abusive enforcement of such remedies. However, legal prongs other than competition law lack, as yet, Union-wide PE harmonization in the style of the Damages Directive. Furthermore, the (sometimes piece-meal) principles developed for the interaction between competition, unfair competition and contract law PE regimes in the realm of traditional competition law cannot necessarily be transplanted to D-Package scenarios without alterations. In consequence, such a multi-prong PE approach must include further guidance, especially to Member State courts which ought not be left to their conjecture. A structured framework for the exchange of practice experiences between these courts would enhance the coordinative effect of such guidance.
- Having “third-party beneficial data intermediaries” (including data sharing service providers in the sense of the DGA), which act in the interest of data subjects and (professional) data recipients under the Package, and assist PE claimants in their ventures. Such intermediaries could contribute, in particular, the expert knowledge on D-Package matters they will likely acquire, but they may also actively intervene in PE proceedings. In a similar vein, regulation should require addressees of obligations under the D-Package, in particular DMA Gatekeepers and “very large online platforms” in the sense of the DSA, to contribute to a workable PE regime, for example, by way of transparency obligations or support of PE actions against third-party offenders using such platforms/Gatekeeper services.
- Moving from a PE function that largely consists in follow-on actions (as is today’s reality in competition law) to a more equal, reciprocal role of state enforcement and PE as the first mover approach whose results instruct the respective other enforcement prong. Arguably, only the addition of substantial stand-alone, first mover PE would fully realize the decentralized Package enforcement via PE. First mover PE may even serve as a valuable filter indicating to watchdogs where to hunt and providing them with helpful information in form of evidence from PE litigation. As said before, market participants may, from their first-hand experience, know better than state agencies about particularly severe infringements and particularly valuable information for proving them. The proposals made heretofore could further this goal, but also additional elements, including early-on remedies besides damages; rules on burden of proof and information access, which reduce dependence on competition watchdog files for substantiating PE claims; support by intermediaries; reasonable limitation periods; mechanisms which help to overcome claimants’ rational apathy, such as the bundled enforcement of individual claims by a third party agent; the creation of specialized alternative dispute resolution bodies (cf. also Podszun et al.). Alternative dispute resolution mechanisms could be particularly well-suited to generate a cross-jurisdictional impact necessary to effectively police digital players acting on a global scale.
- Shielding safe harbours under the Package against PE “surges” – measures duly taken in the fulfilment of Package obligations, or the exercise of Package rights, must, in the main, not generate PE liability. This caveat could, for instance, apply to the provision and reception of data pursuant to Art. 6 (g)-(j) DMA, with regard to an alleged anti-competitive information exchange; to measures aiming at the prevention of unlawful data access or transfer pursuant to Art. 11(5), (7) DGA with regard to an alleged obstruction of competing or dependent undertakings; to mere conduit, caching or hosting activities exempted from liability under Arts. 4-6 DSA with regard to violations of civil, (unfair) competition, or other prongs of law such activities may allegedly constitute.
- Using as a PE opportunity the fact that Gatekeepers (and other key digital market players) are powerful rule-makers for their digital environments. Of course, it must be ensured that Gatekeeper rules align with the goals of state (law) and society, ultimately performing a role subsidiary to them. Subject to this condition, however, Gatekeeper-set rules can support PE, especially when it comes to harm afflicted by one user of Gatekeeper services to another. Where, for instance, the terms and conditions in Gatekeepers’ contracts implement appropriate conduct and transparency obligations on their users and business partners, they can serve as workable PE grounds besides state law.
- Conceptualizing, on the doctrinal level, a legal framework that coherently incorporates the aforesaid components of a workable PE regime. This challenging task likely requires a combination of selective references to the Damages Directive and other pieces of legislature, substantial guidance for Member State courts (including inter-court dialogue), and genuine, explicit PE provisions in the D-Package. Provisions in the Acts of the D-Package should, inter alia, specify the obligations whose violation gives rise to a broader or narrower set of PE remedies. For damage claims to result from the violation of one of the D-Package’s extensive anti-circumvention rules (e.g. Art. 11 DMA), for instance, the fulfilment of qualifying requirements, such as a perpetrator’s intent, seems appropriate at least in the early stages of D-Package enforcement. Furthermore, the D-Package itself offers the preferable place for addressing alternative dispute resolution mechanisms keyed to its particularities.
6. PE and Power
The difficulties of developing PE into a vivid, though well-ordered component of the D-Package are yet another symptom for the lack of a sufficiently robust, harmonized legal framework for such private legal action in Europe. At the same time, improving this aspect of the Package offers the serendipitous chance of a catalytic effect for PE in Europe. This includes PE’s potential to contribute to the checks and balances on economic and political power: By engaging in rule enforcement, individuals and companies help to confine key market players’ (unlawful use of) economic power. And by taking such enforcement in their own hands, they counterbalance a tendency for state agencies to become the sole decision makers on when and how to sanction what they consider undue conduct. Balancing state as well as corporate power looms particularly large in the digital realm as its technologies – and potentially the control market players or the state exercise through them – increasingly permeate all parts of life and society. All in all, D-Package PE presents an opportunity we should not miss.
The Max Planck Institute for Innovation and Competition is committed to fundamental legal and economic research on processes of innovation and competition and their regulation. As an independent research institution, the Institute provides evidence-based research results to academia, policymakers, the private sector as well as the general public.
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