Consultation on the First Review of the Digital Markets Act

Abstract

The EU’s Digital Markets Act (DMA) imposes mandates and restrictions on business practices by “gatekeeper” digital platforms with the goal of promoting fairness, market contestability, and consumer benefits. Some firms may find markets more contestable due to platform mandates on interoperability and prohibitions against practices such as self-preferencing. However, the mandates also raise costs and reduce market contestability for others, while degrading many consumer benefits of platforms. 

Within a year of enforcement, negative effects are evident: user fragmentation across platforms, degraded user experience, higher search costs, reduced security and privacy features, and reduced trust in platforms. These negative effects disproportionately harm smaller firms that rely on platforms to access new users and markets.
In addition, contrary to the European Commission’s stated objectives, the DMA has created higher costs, greater uncertainty, and the potential for arbitrary penalties, since regulators have not provided clear guidance on what constitutes compliance.

These harmful impacts, combined with the dynamic nature of digital competition and innovation, make ex-ante rules and blanket prohibitions poorly suited for regulating digital markets. The ambiguous or potentially procompetitive effects of these practices should instead be evaluated case by case under a rule-of-reason framework through ex-post competition enforcement. Additionally, by failing to analyze competitive dynamics or shares within specific geographic or product markets, the DMA’s arbitrary “gatekeeper” definition unfairly discriminates against American platforms while exempting comparable or even more dominant European competitors. It therefore functions as a protectionist non-tariff trade barrier.

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