Competition in digital markets: comparing the approach across Europe

The new digital markets competition regime in the UK, which applies to firms with ‘strategic market status’, will come into force on 1 January 2025 under the Digital Markets, Competition and Consumers (DMCC) Act 2024. This follows a global trend as similar rules have already been enacted in the EU, Germany and Japan, and proposals are under discussion in the US, Korea, Brazil, Australia and India (see more here).

For the European market, firms will need to navigate three regimes: the DMCC in the UK, the Digital Markets Act (DMA) in the EU and Section 19a of the Act Against Restraints of Competition (ARC) in Germany, as well as national implementations of the DMA which sometimes introduce additional obligations (as in France under the SREN law). The regimes have much in common, both in the firms that they target and the types of issues and conduct that they seek to address. However, there are also notable differences in approach. 

Which firms do the rules apply to?

Each of the regimes in Europe has its own set of requirements for identifying the firms which will face additional obligations. However, the scope of the regimes is similar in that they seek to identify only the largest firms in digital markets. Indeed, thus far we have seen significant overlap between those designated under the European and German regimes (Alphabet, Amazon, Apple, Meta and Microsoft), and it is expected that these firms will also be the initial focus of the CMA in the UK. 

Whilst there is overlap across the regimes, there are also differences: 

• Investigations will be carried out to identify which firms will be designated under the UK and German regimes. In contrast, the DMA in the EU seeks to identify ‘gatekeeper’ firms which are subject to the new rules from the outset based on certain quantitative thresholds (although there remains scope for argument and further investigation as those thresholds only provide a presumption of gatekeeper status). As well as the firms noted above, Booking and ByteDance have also been designated as gatekeepers in the EU. 

• Firms cannot be designated under the UK regime unless they meet a minimum turnover threshold which means that smaller firms will have certainty that the UK rules will not apply to them. The German regime doesn’t include any turnover thresholds, and the turnover thresholds under the EU regime only provide a presumption of a firm’s status which can be rebutted by other factors. We may therefore see firms designated under the EU or German regime which cannot be caught by the UK rules (at least for as long as the firm’s turnover remains under the UK turnover threshold). 

• Each regime introduces a different framework to assess issues of market power which may lead to differences in practice. For example, whereas the CMA has sought to emphasise the distinction between the framework for assessing ‘strategic market status’ and that of dominance under the usual competition rules, the German regime lists market dominance as one of the relevant factors to be considered in the assessment of whether firms are ‘undertakings with paramount significance across markets’ (UPSCAM). The Federal Cartel Office has made clear that dominance is not a mandatory requirement but, if it is established, it would carry significant weight. 

• In contrast to the EU and UK regime, the German rules do not designate firms in respect of a particular ‘digital activity’ or ‘core platform service’ but instead the activities of the firm overall. This means that obligations and prohibitions under the German rules may apply to any services or products of the designated firms. This gives the German rules the potential for much boarder scope than the EU and UK rules which can only apply to services related to the designated activities in certain circumstances. For example, the UK rules only allow for obligations to be imposed on non-designated activities where there are bundling or leveraging concerns linked to the designated activity.  

Which obligations apply to firms once designated?

Whereas the EU takes a ‘one size fits all’ approach which sees a defined set of obligations imposed on gatekeeper firms at the outset, the German rules seek to take a more targeted approach with separate proceedings carried out to identify which prohibitions should be imposed on each designated firm based on an exhaustive list of possible obligations. The UK regime is even more flexible, allowing the CMA to impose tailored conduct requirements on each designated firm designed with reference to the extensive and broadly drafted list of permitted types. This difference in approach has seen the EU regime develop more quickly although it will lack the flexibility to address issues in a more tailored way.   

The types of conduct which are the focus of each regime are largely the same, for example both the European and German regimes address issues of self-preferencing and the aggregation and processing of competitive data, which are also expected to be a focus of the UK regime when the first codes of conduct are brought into force next year. As noted above, the UK regime is broad and so we may also see it deal with other types of conduct. For example, the UK rules provide for the possibility of conduct requirements based on the principles of transparency and open choices, which have a consumer protection focus that is not found under the German regime. The EU rules have a similar objective with a focus on ‘fairness’ as well as market ‘contestability’.  

The potential for overlap between regimes has given rise to much discussion. It remains to be seen whether firms will seek to comply with each of the regimes in the same way, meaning that conduct across Europe would be in line with the most restrictive rules, or whether compliance may differ in the UK compared to Germany and/or the rest of Europe.

The issue of overlap is somewhat different for the EU and German regimes given that both apply in the German market. The German Federal Court of Justice has found that a gatekeeper designation under the European rules does not preclude a designation under the German regime too (FCJ, decision 23. April 2024 - KVB 56/22). However, the regimes are expected to be complementary as the Federal Court of Justice has noted that the German regime can apply to gatekeeper services not covered by the EU rules or where the German rules impose broader prohibitions. For example, the German FCO has sought to take a consistent approach with the European rules in its decision relating to Google’s data processing terms (in particular combination of user data from different sources) and stipulates that the commitments under the German regime will not apply to core platform services insofar and so long as they are subject to DMA obligations.

Enforcement of the German and EU regimes is already gathering pace with proceedings well under way against the major tech players in those markets. This provides a glimpse into what we can expect for the UK regime as it comes into force next year; the CMA is expecting to designate and put in place codes of conduct for three or four firms in the first year.  It remains to be seen the extent to which we will see divergence between the regimes and the way in which firms operate under these different rules.