Yesterday Germany's second chamber of parliament approved new domestic legislation on digital gatekeepers, and the act was published and entered into force today.
These rules overlap to a large extent with what the European Commission has proposed for the EU's Digital Markets Act. However, the EU initiative is at the very beginning of a legislative journey and it may well take another two years or more to lead to a binding regulation.
In the meantime, Germany will start to apply its domestic rules. They are similar, but not exactly the same: Where the EU mainly relies on presumptions to identify gatekeepers, Germany uses a non-exhaustive list of softer indicators to flesh out what is meant by the definition. Where the EU deliberately limits its proposal to what will likely be a small number of large global digital players, these are also the main targets for Germany, but the domestic wording is broader and not even limited to the digital economy. There is much common ground in what is prohibited for gatekeepers between the two rulebooks but the details are not all the same. And whereas the Commission insists on compliance systems and audits for gatekeepers, Germany takes a more traditional approach that is limited to conduct prohibitions. Sanctions and remedies also differ, even though the hefty fines that sanction competition law infringements are part of both toolkits.
So are we heading towards legislative fragmentation? Will Germany and other Member States complement the Digital Markets Act in a way that complicates compliance on global markets by the application of diverging national rules on top of the DMA?
The DMA proposal identifies the risk of such fragmentation. Its first article may appear to give comfort and states that Member States must not impose further obligations on gatekeepers. But there is a carefully drafted exception for national competition laws insofar as they are applied to undertakings other than gatekeepers or impose additional obligations. And Recitals 9 and 10 of the draft DMA make perfectly clear that, in the Commission's mind, competition rules like the ones that Germany is now introducing can be applied in addition to the DMA.
This may be the price to pay to secure the Member State votes that will be needed for the DMA to come into force. But it also means that national rules can apply in addition to the DMA if they are diverging sufficiently. Strangely, this mechanism creates a built in incentive for Member States to diverge if they intend to legislate in this space. Despite the Commission’s intent to centralise, digital gatekeepers may still face a rather complex patchwork of EU and national legislation, with a potential downside for the availability of digital services across the EU.
Different national legislation within the EU may lead to increased fragmentation and compliance cost for large market players.