Commission to contract €600,000 study on gatekeeping power of digital platforms

European Commission Vice-President in charge of 'Europe fit for the Digital Age', Margrethe Vestager gives a press conference on the EU's Industrial Strategy, the SME strategy, the Single Market Barriers Report and the Enforcement Action Plan for the Single Market at the European Council, in Brussels, Belgium, 10 March 2020. [EPA-EFE/STEPHANIE LECOCQ]

The European Commission is to contract a study on the gatekeeping, or market-dominating, power of digital platforms in a bid to gather evidence which could feed into the upcoming Digital Services Act, documents seen by EURACTIV reveal.

A call for tenders document, detailing an upper limit of €600,000 for the study, states that the report should include “robust data and insights as regards issues linked with significant network effects [and] gatekeeping power.”

The study should also provide “assistance in support of the assessment of different options” for how the Commission could redress the competitive disparities between dominant digital platforms and new market entrants, in an economy characterised by “strong winner takes all effects,” the document states.

The difficulty for new entrants to gain momentum in the digital economy has resulted in a market in which ‘Platforms with Significant Network Effects acting as Gatekeepers’ are able to “act as private regulators setting the rules of the game on the markets they control, which are critical markets for a very large number of users and SMEs and are central to the digital economy,” the Commission states.

More broadly, the report should contain a number of case studies which focus on six fields in the online platform economy, including self-preferencing in terms of dual roles for online platforms; data access; the locking into digital identity services for users; interoperability of services; employing data holdings in other markets; information asymmetries in data gathering that could result in ‘high switching costs’ for the users of certain social media platforms and search engines.

Digital Services Act & ‘New Competition Tool’

The document notes that ongoing international policy reflections to safeguard competition in digital markets, “point to the need to consider an ex-ante regulatory framework to complement competition rules,” highlighting the upcoming Digital Services Act (DSA) package as a means of doing so.

The Commission recalls the objective of the DSA to “regulate online platform markets with strong network effects, with the goal of securing the contestability of such markets as well as improved regulatory oversight,” could addressing some of the imbalances at play in the digital platform economy.

Along this axis, the European Commission’s Vice-President for Digital, Margrethe Vestager, told MEPs in Parliament’s Internal Market Committee last week that as part of the DSA, due to be presented by the Commission before the end of the year, “a new competition tool” could be introduced which would aim to “prevent the tipping of markets.”

Market tipping refers to the situation where one company obtains high monopoly profits and market share, creating an anti-competitive environment for other firms.

“It’s not only in digital, but it’s more obvious in digital markets that a market can tip,” Vestager said. “And here, I think it’s very important that we are able to prevent this from happening because now we have seen what a world we live in, when we have digital gatekeepers in a number of markets.”

“We need tools to help us when things cannot be effectively addressed by one on one or one on two. And also to make sure that we do not get into a situation where the markets cannot be contested anymore.”

[Editing by Zoran Radosavljevic]

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