Yunsieg Kim (University of Missouri at Columbia - University of Missouri School of Law) has posted The Digital Markets Act and the Illusion of 'Future-Proof' Tech Regulation on SSRN. Here is the abstract:
On July 5, 2022, the European Parliament passed the Digital Markets Act (DMA), intended to curb anticompetitive behavior and other unfair practices by platforms such as Apple and Google. For example, Apple’s App Store is currently the only means of distributing apps for iOS. Apple has been accused of exploiting such gatekeeping powers to engage in self-preferencing—such as ranking Apple apps above third-party apps in the Apple App Store’s most-popular-apps charts.
Whereas conventional antitrust law targets conduct that harms efficiency, like price-fixing, the DMA prohibits acts deemed to be “unfair” independent of whether they affect efficiency. For example, a gatekeeper “shall not treat more favo[]rably[] in ranking . . . products offered by the gatekeeper itself than similar services or products of a third party” and “shall apply transparent, fair and non-discriminatory conditions to such ranking,” “independent from the actual . . . effects of the conduct of a given gatekeeper . . . on competition.” European authorities also stress their goal of “future-proofing” the DMA. To that end, the European Commission can “supplement” the DMA’s various provisions, including the self-preferencing ban, without legislative amendment.
This Article argues that the DMA would be ineffective, counterproductive, and unnecessary for restraining gatekeepers’ app stores from self-preferencing. The DMA would be ineffective because, even if gatekeepers use only “transparent, fair and non-discriminatory” criteria to rank apps, facially neutral criteria such as revenue and the number of users can be manipulated to produce biased rankings. For example, an app ranked first for revenue ranks fifty-third for user numbers, and such criteria can be weighted to create any number of rankings favoring certain apps. If gatekeepers resist complying with the requirement to use only neutral criteria to rank apps, it would be difficult for regulators to force compliance by micromanaging ranking criteria because they can number in the hundreds, are guarded secrets, and are well-suited for trade secret protection.
The DMA would also be counterproductive to consumer welfare because it would enable arbitrary punishments of platforms and distort how app developers compete. Article 13 prohibits any activity that the Commission in its sole discretion deems to be a circumvention of the DMA, regardless of the act involved. The effectively unrestricted scope of Article 13 would undermine gatekeepers’ inclination and ability to operate in the internal market. As to distorting competition, the DMA’s self-preferencing ban does not appear to allow exceptions, even when a gatekeeper’s app is actually superior to the competition. Finally, existing law is already capable of restraining app stores from self-preferencing, without the DMA’s byzantine obligations and impracticable future-proofing scheme. I argue that competition from third-party app stores can deter gatekeepers from biased ranking practices, and that existing law can force a gatekeeper to compete by establishing a claim of anticompetitive tying involving the gatekeeper’s operating system and its app store.
