Late April, the European Commission released its first statutory review of the Digital Markets Act (DMA). It is a significant document for a few reasons. First, because it is the first official look at how the EU’s hallmark digital regulation, one it has marketed as the competition-boosting tool since 2020, has performed in reality. Second, since the EU’s regulatory innovations tend to seep into other jurisdictions, this formal review provides a useful analytical benchmark for those still mulling over a DMA-like approach themselves.
India is not immune to the so-called “Brussels Effect” and we have our own ex ante digital regulation in the legislative pipeline. The Draft Digital Competition Bill (DCB), after a brief pause, has been reanimated. The Ministry of Corporate Affairs (MCA) has commissioned a new market study to re-examine the DCB. In this context, the DMA’s performance should, ideally, yield useful insights for the way India proceeds with the DCB.
So, what did the DMA review find? In a nutshell, the European Commission’s self-assessment is that the DMA is working fine and “remains fit for purpose and does not need to be revised.” But, once you dig deeper, this self-declared passing grade appears to rest on little by way of hard evidence of increased consumer welfare. Not much on the file actually supports the broad welfare claims that accompanied the DMA’s introduction. Rather, the review primarily focuses on what “gatekeepers” have been compelled to do rather than on what European consumers and businesses have demonstrably gained. This rather modest approach towards evidence is in sharp contrast to the EC’s own arguments prior to introducing the DMA in the first place. For example, the European Commission’s (EC’s) 2020 impact assessment estimated that the DMA could help generate a consumer surplus on the order of €13 billion. The review would have been a good time to see how that projection had fared, and yet this cost-benefit exercise is skipped altogether. In fact, there are substantial body of third-party findings which suggest that the exact opposite may be happening, with the DMA being a substantial net drain on the EU’s economy. The review would have been a good time for the EC to counter such claims with its own data assessments, and yet curiously it did not choose to do so.Another promise of the DMA was that it would boost the EU digital startup ecosystem, and yet the review doesn’t make any serious attempts at testing whether this manifested in the actual markets. This omission is even more egregious as several third-party reports suggest that the DMA has, in fact, hurt the EU startup ecosystem by drying out venture capital.
There is no serious attempt to measure direct consumer welfare qualitatively either, e..g. whether users prefer the post-DMA digital user experiences or would rather go back to the days before. Now, again, there are third-party survey which do attempt to track this consumer sentiment and their findings aren’t flattering to the DMA.
The metrics the Commission does produce are almost exclusively process-based, e.g., the number of “choice-screens” deployed, the number of “consent-flows” redesigned, the number of interoperability requests from third party developers, cross-platform data portability requests, etc. But these are evidence of compliance, and not increased market competition or consumer welfare. Further, it is not the case that these practices don’t carry any risks of harm either. Their potentially negative consequences are also well documented, whether it is “consent fatigue”, increased user-vulnerability, or concerns of degraded user privacy.
This whole exercise provides cold comfort to jurisdictions still in thrall to the Brussels-Effect. The EC has failed to provide the necessary evidentiary scaffolding to support the weight of its pro-DMA claims. Other jurisdictions and their own plans for ex ante digital regulations (such as India and the DCB) need to assess the merits of such an approach on their own, since the European example currently lacks the evidence to recommend it.
(Views are personal)
