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Digital Markets Act Impact Assessment Support Study Executive Summary and Synthesis Report

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Digital Markets Act Impact Assessment Support Study Executive Summary and Synthesis Report Digital Markets Act Impact Assessment support study Executive Summary and Synthesis Report Internal identification Contract number: VIGIE 2020/630 Written by December 2020 Authors: Joe Sunderland (ICF), Facundo Herrera (ICF), Sofia Esteves (ICF), Ilsa Godlovitch (WIK- Consult), Lukas Wiewiorra (WIK-Consult), Peter Kroon (WIK-Consult), Serpil Tas (WIK-Consult), Alexandre de Streel (University of Namur), Janne Kalliala (Cullen International), Javier Huerta Bravo (Cullen International), Winston Maxwell (Telecom Paristech), Andrea Renda (CEPS) VIGIE number: 2020/630 EUROPEAN COMMISSION Directorate-General for Communications Networks, Content and Technology Directorate F - Digital Single Market Unit F2 – E-commerce and platforms Contact: [email protected] European Commission B-1049 Brussels EUROPEAN COMMISSION Digital Markets Act - Impact Assessment support study Executive Summary and Synthesis Report Directorate-General for Communications Networks, Content and Technology December , 2020 EN EUROPE DIRECT is a service to help you find answers to your questions about the European Union Freephone number (*): 00 800 6 7 8 9 10 11 (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you) LEGAL NOTICE This document has been prepared for the European Commission however it reflects the views only of the authors, and the European Commission is not liable for any consequence stemming from the reuse of this publication. The Commission does not guarantee the accuracy of the data included in this study. More information on the European Union is available on the Internet (http://www.europa.eu). PDF ISBN: 978-92-76-27450-6 Doi: 10.2759/791349 Catalogue number: KK-06-20-190-EN-N Manuscript completed in 12/2020 The European Commission is not liable for any consequence stemming from the reuse of this publication. Luxembourg: Publications Office of the European Union,2020 © European Union, 2020 The reuse policy of European Commission documents is implemented by the Commission Decision 2011/833/EU of 12 December 2011 on the reuse of Commission documents (OJ L 330, 14.12.2011, p. 39). Except otherwise noted, the reuse of this document is authorised under a Creative Commons Attribution 4.0 International (CC-BY 4.0) licence (https://creativecommons.org/licenses/by/4.0/). This means that reuse is allowed provided appropriate credit is given and any changes are indicated. For any use or reproduction of elements that are not owned by the European Union, permission may need to be sought directly from the respective rightholders. Digital Markets Act - Impact Assessment support study Abstract The digitisation of services has driven widespread innovation, increased competition and consumer benefits. However, digitisation has also been associated with the ability of certain players to act as gatekeepers, with the power to impose unfair terms on dependent businesses to limit the scope for dynamic new entry. Available evidence suggests that existing measures are insufficient to address these problems, and that Europe would benefit from the introduction of EU-wide legislation to apply ex ante regulatory obligations on gatekeeper platforms. The impact of this measure could be maximised by combining clear requirements in the legislation with the ability to apply more tailored solutions in cases where it is not possible to make the designation of gatekeepers or design of associated obligations entirely self-executing. Such measures would best be applied by the European Commission with the support of a network of experts from national administrations. Unlocking the full potential of the platform economy could increase EU27 GDP by between EUR 43.7 and EUR 174.5 billion from 2019 to 2029, while a more diverse pool of innovation could create between 136,387 and 294,236 new jobs. Action to tackle gatekeeper power could also increase consumer surplus by around EUR 13 billion per year. 5 Digital Markets Act - Impact Assessment support study TABLE OF CONTENTS Abstract .............................................................................................................................................. 5 Executive summary ............................................................................................................................ 7 1. Introduction ................................................................................................................................. 8 a. Political and legal context....................................................................................................... 8 b. Objectives and scope of the Impact Assessment .................................................................. 9 c. Methodology and approach to the Impact Assessment ....................................................... 10 2. Analysis of the issues ................................................................................................................ 11 a. What is the problem and why is it a problem? ..................................................................... 11 b. Why should the EU Act? ...................................................................................................... 18 c. What should be achieved? ................................................................................................... 18 d. Who should fall within the scope of the measures? ............................................................. 19 e. What are the options to achieve the objectives? ................................................................. 19 f. How do the options compare? ............................................................................................. 21 g. What are the socioeconomic and environmental impacts of the preferred option compared with the status quo? ...................................................................................................................... 29 3. Conclusions ............................................................................................................................... 31 6 Digital Markets Act - Impact Assessment support study Executive summary Digital platforms are playing an increasingly important role in the economy and society, and have made significant contributions to the growth of the European economy and to the strengthening of the internal market. The digital economy was estimated in 2019 to account for between 4.5-15.5% of global GDP,1 and nearly one quarter of online trade is cross- border.2 The digitisation of services has been associated with widespread innovation, increased competition and consumer benefits. However, digitisation has also been associated with the ability of certain players to act as gatekeepers, controlling access to the information that end- users see and the services they receive and controlling the functionality, positioning, terms and conditions available to businesses depending on those platforms. There is widespread and compelling evidence from competition cases, as well as from case studies conducted for this study and feedback from stakeholders, that certain platforms have become vital gateways for business users and end-users, and that platforms which act as gatekeepers can impose unfair conditions on the businesses and application providers which depend on them, as well as engaging in practices which could ultimately exclude potential competitors from the market. The power wielded by large gatekeeper platforms in turn risks concentrating R&D expenditure and undermining innovation and disruptive entry, as well as limiting the choice and variety of services available to end-users, and potentially increasing prices. Moreover, in the absence of action at EU level, action may be taken in different ways by Member States, risking the fragmentation of the single market and increased costs and frictions for platforms business users seeking to do business cross-border. Available evidence suggests that existing measures are insufficient to address these problems, and that Europe would benefit from the introduction of EU-wide legislation which would apply ex ante regulatory obligations on platforms which have the ability to act as gatekeepers. The impact of this measure could be maximised by combining clear requirements directly in the legislation with the ability to conduct a case by case analysis and apply more flexible and tailored measures in cases where it is not possible to make the designation of gatekeepers or design of associated obligations entirely self-executing. The European Commission is best-placed to act as the regulatory body in applying and enforcing these measures, supported by a network of experts from national administrations. Evidence suggests that unlocking the full potential of the platform economy could increase EU27 GDP by between EUR 43.7 and EUR 174.5 billion from 2019 to 2029. Increased R&D resulting from a more diverse pool of innovation could create between 136,387 and 294,236 new jobs. Moreover, if prices reduce inter alia as a result of increased competition and lower commission charges, estimates based on JRC calculations suggest that consumers could gain around EUR 13 billion per year. 1 Value depends on definition – see https://unctad.org/en/PublicationsLibrary/der2019_overview_en.pdf 2 https://ecommercenews.eu/cross-border-ecommerce-europe-worth-e143-billion/ 7 Digital Markets Act - Impact Assessment support study 1. Introduction a. Political and legal context Digital platforms facilitate interactions by digital
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