A monster in the making?

The European Union’s Digital Markets Act is advancing – at slow pace – through the intricate legislative process of the European Union but behind this process there is an epic battle for the control of the revenue streams in the digital economy.

This battle has very little to do with the European consumers and a lot to do with the conflicting interests of the digital platforms, on one side, and the industries riding on these platforms, on the other side.

The Digital Markets Act is European Union’s response to its failure to breed competition and innovation on its home turf, so that technology companies which benefited of more fertile conditions in USA and elsewhere are taking an increasingly large part of the pie from the revenues of the digital economy.

The attempt to impose a straight-jacket to these companies is very, very unlikely to foster more competition and it is very possibly that the contrary will be achieved.

The problem with the Digital Market Act is that it is not the result of a throughout and objective analysis of why the European companies are so weak in the digital realm or on the potential substantial effects on the consumers, but the result of many years and many efforts of lobbying in Brussels.

The public debate is full of fancy but vague concepts such as ”gatekeepers”, ”killer acquisitions” or ”antitrust failure”, which aims to replace the necessary analysis and which, repeated enough in the media, put pressure on politicians to arbitrate the rent seeking race to the advantage of, mostly, legacy European industries, essentially those in the media and technology area.

This lobby does not seems to want to have a level-playing field but rather intends to have the referee enter the playing field on behalf of one of the teams.

At the current stage the Digital Markets Act is a monster in the making, with effects difficult to foresee on the competitive process and on consumers but overall things do not look good for most market players. The proposed legislation even falls short of some legal standards, with provisions such as giving the European Commission the possibility to ban the gatekeepers from acquisitions for a definite period of time.

European legislators must understand that in the technology industries innovations is almost always incremental and dispersed, so that no one holds the entire wisdom to advance its technology into the future. The situation of the patents in the mobile communications, where a single device encapsulates hundreds of distinct innovations, each with its own patent, is well-known, albeit not unique.

In this ambit, the current shape of the Digital Markets Act looks like a monster in the making. I hope wisdom shall eventually prevail and the European Union shall not enter into an Ice Age of innovation as a result of this legislation.

I invite anyone who would like to contribute to this topic to write either his/her comments to this post or a full guest contribution on stateofcompetition.eu.

Disclosure: I do not receive any form of consideration or advantage from any of the companies or other entities involved or interested in the digital economy and its regulation.