This morning I was pleased to give evidence to the European Parliament’s culture and education committee (CULT) rapporteur in a hearing on the Digital Markets Act. It was a very well-structured and transparent stakeholder dialogue, and I hope the Parliament will continue this format long after Covid. Here is an extended version of my notes:
The DMA proposal is a long-overdue starting point to make the EU’s digital markets fair and contestable.
Many digital markets show extreme returns to scale (very low marginal costs, and positive feedback loops on quality) and scope (it’s easy for services to use consumer data and relationships to move into adjacent markets), which incentivises the evolution of mega-corporations, via organic growth and acquisitions. The DMA introduces up-front regulation to constrain the very largest gatekeeper platforms in core services such as search, social media and video-sharing, to enable genuine competition on the merits.
The DMA is relevant to multiple aspects of CULT’s mandate, including:
- dissemination of culture
- cultural and linguistic diversity
- audiovisual policy, information and media policy
- the cultural and educational aspects of the information society
This is due to the overwhelming dominance of gatekeeper companies in audiovisual discovery and distribution (search, social media, and video-sharing), underlying infrastructure (social media and cloud computing), and funding (adtech, and the vast consumer data profiles enabling targeted ads). Just last night, we saw reports Amazon is in talks to acquire MGM, the film studio behind the James Bond franchise, for about $9bn.
As the UK Competition and Markets Authority concluded after a year-long market study: “Weak competition in search and social media leads to reduced innovation and choice and to consumers giving up more data than they would like. Weak competition in digital advertising increases the prices of goods and services across the economy and undermines the ability of newspapers and others to produce valuable content, to the detriment of broader society” (p.5).
Without the DMA’s regulations, there would be an ever-decreasing chance of genuine competition to the gatekeepers, from Europe and meeting the needs of European societies — including broadcasters, public service media, and educational institutions — plus a lack of diverse solutions to content moderation, and continuing problems stemming from business models focused on user attention, such as disinformation.
Briefly, I would recommend the Culture committee supports the Commission proposal in its current form as a set of clear obligations for gatekeepers, and avoids lobbying attempts to make obligations contingent on economic “effects” that would mainly be an opportunity for gatekeepers to argue through the courts against any further action for another decade.
The DMA offers a number of opportunities to reinforce media pluralism in the EU, and as recital 10 states:
This Regulation pursues an objective that is complementary to, but different from that of protecting undistorted competition on any given market, as defined in competition-law terms, which is to ensure that markets where gatekeepers are present are and remain contestable and fair, independently from the actual, likely or presumed effects of the conduct of a given gatekeeper covered by this Regulation on competition on a given market.
Contestability can lead to decentralisation and a plurality of players. There is no way to realise contestability without plurality. And in this case a plurality of actors often means a plurality of models, choices, and thus also content, depending on the platform.
I also recommend the committee extends the interoperability obligation in Art. 6(1)(f) to cover core as well as ancillary services. We have extensive evidence EU markets in social media, instant messaging, and other core services are already firmly “tipped” towards monopoly — which is a core underlying issue for European media companies. Interoperability requirements are a key mechanism already used in the regulation of other important industries highly dependent on “network effects”, such as telecommunications (the European Electronic Communications Code) and banking (the second Payment Services Directive).
In parallel, the committee could consider adding a requirement in Art. 29 of the Digital Services Act enabling users to choose recommender systems from third party providers, less focused on click-bait, disinformation, and otherwise provocative/“engaging” content.
Finally, I suggest the committee consider adding a DMA provision on “fairness by design”, such as manipulative user interfaces and default settings. Gatekeepers are are able to influence the choice of users for content, “consent”, and alternative services, such as search engines. They should be required to enable a genuine user choice, at any time.
Otherwise we will see more of the current unfair gatekeeper behaviour, with heavy nudges to gain user “consent”, and platforms favouring their own content and services, such as Android favouring Google Search. It takes over 15 clicks for an Android user to change search engines across a device. And Android’s search engine choice screen presented in the EU, as a result of enforcement action by DG Competition, is only shown once when Android is installed.
The UK’s Competition and Markets Authority, in its extensive market study, suggested a requirement for this type of “fairness by design”, as well as interoperability requirements for social media.