France and the Netherlands signal support for EU body to clip the wings of big tech

The French and Dutch governments have signalled support for EU rules that can proactively intervene against so-called gatekeepers, aka “structuring platforms” or “large digital platforms with significant network effects acting as gatekeepers” — or, more colloquially, ‘big tech’.

They have also called for a single European body with enforcement powers over such platforms — and the ability to audit their algorithms.

Pre-emptive action should intervene prior to the stage where damage becomes irreversible,” French digital minister, Cederic O, and Mona Keijzer, the secretary of state for economic affairs for the Netherlands, write in a joint position paper where they also argue that: “Intervention is justified when the asymmetric bargaining power of structuring platforms leads to negative consequences.”

The two ministers went further in accompanying remarks to the press, with the Financial Times reporting that their support for intervention against big tech’s market muscle includes keeping the option of breaking up companies “on the table” — although their stated preference is for rules that prevent such an “ultimate” step being necessary.

A spokeswoman for France’s O also told us: “The position of the Minister is that breaking up such actors is an option that should be on the table, if need be.”

The intervention by two high profile EU Member States comes as the European Commission is working on a major package of pan-EU legislation to update the bloc’s ecommerce rules — including devising a new regime of ex ante rules for so-called ‘gatekeeper’ platforms. 

In recent months press reports have suggested EU lawmakers are considering forcing such platforms to share data with smaller rivals and/or limiting how they can make use of data — such as via strict purpose limitation.

They are also reportedly considering rules to ban self-preferencing and apply conditions on bundling, as well as requiring annual audits of ad metrics and reporting practices.

Although the package remains at the draft stage for now, with the Commission saying only that it’s committed to introduce the Digital Services Act (DSA) by the end of this year.

Commission lawmakers are also eyeing expanded powers for competition regulators to proactively tackle the network effects that can apply in digital markets — and have, in recent weeks, been consulting on a new competition tool for this purpose. 

The French-Dutch intervention thus sends a strong signal of support to the Commission for regulating big tech — and a warning shot against watering down policy measures.

Competition chief and Commission EVP, Margrethe Vestager, who is one of the key lawmakers drafting the DSA, has previously cautioned against breaking up tech giants as a solution to competitive imbalances in digital markets — calling instead for a finer grained regulatory framework which regulates their access to data.

Such an approach would be akin to a structural separation, without the huge legal challenge involved in actually breaking up businesses, is the thinking.

The French-Dutch position paper reflects back many of the ideas the Commission is actively considering, per recent press leaks. So it may be intended to send a message that key Member States are on the same page.

The paper advocates for intervention to apply to platforms that have “considerable market power” in at least one market, while warning against imposing “unnecessary obligations” to platforms without any gatekeeper position.

It also suggests a “platform-by-platform approach” by regulators to determine whether or not a platform is a gatekeeper or not, noting: “It is important to stress that classical methods of market definition cannot always be used effectively in digital markets.”

Platform-specific factors such as the characteristics of the service and the behaviour of users should factor into the analysis of whether it holds a structural position, they also suggest — before again hitting a cautious note and urging that “a right balance” be struck between a platform-specific analysis and “the need for a reasonable level a legal certainty”.

Interventions should also be ‘case-by-case, flexible and proportionate’ in their view — with the pair suggesting regulatory authorities be empowered to “impose tailor-made remedies to a structuring platform”.

“Proportionate intervention is needed to preserve the benefits of platforms whilst enhancing competition. Too heavy-handed an intervention would hamper innovation,” they warn.

They also voice support for gatekeepers to be subject to a set of “principle-based obligations and prohibited practices” — and recent press reports have also suggested EU lawmakers are considering a laundry list of obligations and conditions on gatekeepers.

“The full set of behavioural obligations could be widened to the whole ecosystem of the platform to tackle the risks stemming from its gatekeeper position on a number of neighbouring markets (leveraging). Also, it could be adjusted over time, in light of the evolution of the business environment. The measures could be either eased or tightened depending on the actual evolution of these conditions,” they further suggest.

Among the “possible behavioral measures” listed in the position paper are beefing up the right to portability (which EU users’ already enjoy under the GDPR); rules to ensure fair contracts (and unfair contract clauses have already attracted EU antitrust enforcement action in the case of, for example, Google Android); a ban on what they describe as “disruptive” self-preferencing; and a stop on platforms yanking third party access (e.g. to APIs or data) — “without objective justification” (the EU has already agreed on some fairness and transparency rules for general ecommerce).

The position paper also voices support for access obligations — such as obligations to share data; provide interoperability; and/or proactively offer alternatives to users — as a potential intervention to ensure market openness, while cautioning of the need to properly investigate ‘pros and cons’ before such enforcement.

On sanctions for infringements, the French and Dutch ministers urge “significant enough” penalties that platforms are effectively deterred from breaking rules, i.e. rather than being able to factor them in as a line of business cost (as now).

The level of these fines or other sanctions should be significant enough to ensure the effectiveness of the rules at stake by deterring the platform from breaking them. The requirement of an efficient and deterrent mechanism of sanctions is all the more important here since any breach of the rules would be likely to induce serious and irreversible harm,” they write. 

On enforcement, the paper calls for a single “European body” outfitted with “proper tools” — including “broad investigation, audit and monitoring powers, and the ability to audit algorithms” — to be entrusted with enforcing the new regulations. 

That would mark a step-change from the EU’s data protection framework (GDPR), where responsibility for enforcement is decentralized to a patchwork of under-resourced local/national data protection agencies. Critics maintain the pace of GDPR enforcement in complex, cross-border cases against big tech is too slow to be effective. A two-year review of the regulation by the Commission this summer also found a general lack of uniformly vigorous enforcement.

That stands as a warning signal to EU lawmakers shaping the next generation of digital regulations that very careful attention needs to be paid to ensuring effective enforcement.

This report was updated with additional comment