Ref. Ares(2020)7497740 - 10/12/2020
EUROPEAN COMMISSION
Regulatory Scrutiny Board
Brussels,
RSB
Opinion
Title: Impact assessment / Digital Markets Act
Overall 2nd opinion: POSITIVE WITH RESERVATIONS
(A) Policy context
Many digital markets see a strong concentration trend towards a few players. Some large
online platforms have emerged as gatekeepers of the digital economy sectors. They control
a significant portion of transactions between consumers and businesses. This can make it
difficult for existing or new market operators to compete. This can translate into higher
prices for consumers or lower prices for producers, lower quality, or less choice and
innovation. Existing EU competition rules do not seem to provide the most effective and
efficient way to tackle some of these existing or emerging market failures.
This initiative is part of the Commission’s overall digital strategy announced in its
Communication ‘Shaping Europe's digital future’. Its aim is to tackle existing and
emerging market failures through regulatory measures and through a market investigation
regime.
(B) Summary of findings
The Board notes that the report has been substantially redrafted. It now integrates
the problem description and policy options into a single approach.
However, the report still contains significant shortcomings:
(1) The report does not fully justify the selection of the core platform services to be
covered by the initiative.
(2) The report does not sufficiently define some of the measures included under the
different policy options. The scoring of options is not always clear.
(C) What to improve
(1) The report should make clearer how the problem drivers may lead to the identified
negative outcomes. It should consider the negative consequences of curtailing the size
advantages following from network economies and economies of scale for consumers. It
should better distinguish problems relating to size advantages from the monopolisation of
data and the imposition of market rules like exclusive dealings. The report should better
justify the identification and selection of the core platform services. It should present
evidence of what determines persistent misuse of gatekeepers’ power vis-à-vis dependent
business users and customers. It should more convincingly demonstrate for each of the
selected core platform services that the identified weak contestability has negative effects
in terms of higher mark-ups, lower quality of service, or reduced innovation. The report
should better justify why other platform services, such as content streaming providers,
would not meet the selection criteria.
(3) The report should better define and justify the measures covered under the options. It
should demonstrate why the proposed set of cumulative quantitative thresholds (under the
‘non-dynamic’ and ‘semi-flexible’ options) can be considered as a robust and reliable
trigger across all selected core platform services for the (quasi-automatic) designation of
gatekeepers and the imposition of obligations. It should better explain why a market
investigation is not deemed necessary or proportionate in these situations.
(4) From a future proofing perspective, the report should explain why the possibility of
updating the list of core platform services following a market investigation was discarded
for the ‘semi-flexible’option, while maintained as a key element for the ‘fully flexible’
option. As regards the ‘fully flexible’ option, it is not clear why certain beneficial guidance
elements (including indicative quantitative thresholds), which could have provided further
legal clarity, have not been considered in the design of this option.
(5) The report should clarify the distinction between the ‘semi-flexible’ and ‘fully
flexible’ options in terms of the obligations that can be added following a market
investigation. It should also explain, where the market investigation powers and process
deviate from the envisaged model and rules under Regulation 1/2003.
(6) The report should improve the comparison of options in terms of effectiveness and
benefits (including in summary table 5) given that the ‘fully flexible’ option seems to score
best in minimising false negatives/positives and future proofing. The report should clarify
the relative weight given to the different assessment criteria (e.g. legal certainty vs.
flexibility vs. speed). It should better substantiate the assumption that the ‘fully flexible’
option would lead to a higher number of large platforms being covered, and why the
decisions taken under this option would be ‘arbitrary’ (given that they would be based on
market investigation).
(7) The report should better explain the limitations of the methodology used. When
presenting evidence the report should differentiate more clearly between cases which are
still being investigated or pending and the established case law.
The Board notes the estimated costs and benefits of the preferred options in this initiative,
as summarised in the attached quantification tables.
(D) Conclusion
The DG may proceed with the initiative.
The DG must revise the report in accordance with the Board’s findings before
launching the interservice consultation.
Full title
Digital Market Act
Reference number
PLAN/2020/7913; PLAN/2020/7452
Submitted to RSB on
6 December 2020
Date of RSB meeting
Written procedure
ANNEX: QUANTIFICATION TABLES EXTRACTED FROM THE DRAFT IMPACT
ASSESSMENT REPORT
The following tables contain information on the costs and benefits of the initiative on which
the Board has given its opinion, as presented above.
If the draft report has been revised in line with the Board’s recommendations, the content of
these tables may be different from those in the final version of the impact assessment report,
as published by the Commission.
OVERVIEW OF BENEFITS FOR THE PREFERRED OPTION
I. Overview of Benefits – Preferred Option 2
Description
Amount
Comments
Internal market
EUR 92.8 billion
It is expected that here will be a substantial decrease in internal
fragmentation (see
market fragmentation, as EU Member States will not need to
also Annex 5.5 on
introduce national legislations. The effect of market contestability on
cost of non-Europe)
the internal single market is proxied by an increase in online cross-
border trade and the indirect/spill-over effect in terms of
employment, economic growth, innovation and consumer surplus
(see below). If we assume that by preserving the internal market in
the platform space cross-border trade projections by 2025 could be
maintained, this would lead to EUR 92.8 billion.1
Impact on
EUR 12 billion - Input-output micro-econometric modelling: Higher investment in
economic growth
EUR 23 billion
R&D in the ICT sector in EU27 leads to an overall increase in the
EU27 income between 0.09% to 0.17% of 2014 EU GDP, this is
between EUR 12 billion and EUR 23 billion.
Both impacts on growth and employment (below) are very
conservative estimates because they result exclusively from an
increase in R&D investment. However, market contestability and
more fair competition are expected to produce important spillover
effects that result in higher innovation, increase in market size,
increase of entrepreneurship within and beyond the platform
economy and growth in other traditional sectors. Online cross-border
trade is expected to be highly impacted by this virtuous dynamic.
Therefore, this estimation is not taking into account further rounds of
direct and indirect effects with positive loops in the long-term.
1 Cross-border e-commerce in Europe was worth EUR 143 billion in 2019, with 59% of this market being
generated by online marketplaces. This is projected to increase to 65% in 2025 (Ecommerce News Europe
(2020)).
I. Overview of Benefits – Preferred Option 2
Description
Amount
Comments
Employment
600 000 jobs
The preferred option would either preserve the current level of
preserved
employment in the sector or lead to its increase2 thanks to the
(conservative
increase in R&D spending (input-output microeconomic modelling)
scenario) – b/n
136,387 and 294,236
jobs created
(optimistic scenario)
Innovation
EUR 221 billion and Financial resources that could be invested in R&D are diverted to
EUR 323 billion
mergers and acquisitions (M&A), which results in higher market
over 10 years
concentration instead of improvements in the quality and quantity of
products and services for consumers. This pattern of innovation
dedicated to competing 'for the market' has a detrimental effect on
consumer choice and surplus.
In addition, the positive impact on innovation stemming from higher
market contestability is not limited only to diversion of money from
M&A to R&D. Other expected indirect effects include an increase in
entrepreneurship and creation of new products and solutions meeting
consumers' needs rather than focused on exploiting a gatekeeping
position. This may have a multiplicative effect increasing the size of
the European single market, and hence, GDP and online cross-border
trade (see other impacts in this table).
Investment in R&D EUR 12 billion–
Higher investment in R&D in the ICT sector in EU27 leads to an
EUR 23 billion
overall increase in the EU27 income between 0.09% to 0.17% of
2014 EU GDP,3 i.e. between EUR 12 billion and EUR 23 billion
(input-output modelling).
2 The data used in the input-output modelling come from three sources: (a) The 2014 world input-output table
(WIOT) publicly available from the World Input-Output Database (WIOD, www.wiod.org), (b)
Employment (number of persons engaged) and compensation of employees obtained from the Socio-
Economic Accounts (SEAs) of WIOD, and (c) private R&D investments in information and communication
(and its subitems represented by NACE Rev.2’s Section J’s divisions and/or groups), which were
downloaded from Eurostat (rd_e_fundgerd).www.wiod.org), (b) Employment (number of persons engaged)
and compensation of employees obtained from the Socio-Economic Accounts (SEAs) of WIOD, and (c)
private R&D investments in information and communication (and its subitems represented by NACE
Rev.2’s Section J’s divisions and/or groups), which were downloaded from Eurostat
(rd_e_fundgerd).www.wiod.org), (b) Employment (number of persons engaged) and compensation of
employees obtained from the Socio-Economic Accounts (SEAs) of WIOD, and (c) private R&D investments
in information and communication (and its subitems represented by NACE Rev.2’s Section J’s divisions
and/or groups), which were downloaded from Eurostat (rd_e_fundgerd).www.wiod.org), (b) Employment
(number of persons engaged) and compensation of employees obtained from the Socio-Economic Accounts
(SEAs) of WIOD, and (c) private R&D investments in information and communication (and its subitems
represented by NACE Rev.2’s Section J’s divisions and/or groups), which were downloaded from Eurostat
(rd_e_fundgerd).
3 The most recent available input-output matrix is for 2014, yet the matrix does not change significantly across
time.
I. Overview of Benefits – Preferred Option 2
Description
Amount
Comments
Competition
Fall in HHI index
It is expected that competition will improve substantially due among
0.25 (user shares)
other to a substantial decrease in barriers to entry. Conservative
and 0.11 (revenue
estimate is no increase in the HHI Index, while upper bound means a
shares)
fall in HHI index on for the user shares by 0.25 points and 0.11 for
the revenue shares.
Online cross-border EUR 450 billion to
Assuming the internal market fragmentation is fully addressed, the
trade
EUR 1.76 trillion
online cross-border trade would increase between EUR 450 billion to
after 10 years
EUR 1.76 trillion after 10 years.
Although it is hard to forecast with precision the increase in online
cross-border trade, the impacts have been proxied by similar trends
in offline cross-border trade resulting from market integration.
The opportunity costs estimated here are very conservative as the
assumed trends were linear and conservative growth rates. The fast
change in the platform economy and interlinks with the rest of the
economy suggests that online cross-border trade could see an
important exponential growth if enhanced by market contestability,
fair competition and virtuous patterns of innovation.
Consumer surplus
EUR 13 billion
The higher level of competition may result in lower prices as
companies could decrease spending on advertising and lower costs;
such savings could be passed onto consumers (especially where
(price) competition increases). Consumer surplus of EUR 13 billion
is based on the assumption that competitive asymmetry between
gatekeepers and alternative platforms would be addressed (see
Annex 4).
COST COMPARISON FOR THE DIFFERENT OPTIONS
2. Cost comparison
Option 1
Option 2
Option 3
Cost
Cost
Cost
Cost
Carrier
Cost qualification
Cost qualification
qualification
quantification
quantification
quantification
European
Regulatory costs of
Annual costs:
In addition to costs
Annual costs:
In addition to costs
Annual costs:
Commission implementation,
between €6.4m
identified under Option
€16.7m.
identified under Option €18.2m
supervision,
(sub-option A)
1, further data requests,
2, further costs would
information
and €10.5m
implementation,
This is based on 80
be incurred in similar
This is based on 90
gathering.
(sub-option B).
assessment and
FTEs under both
tasks in relation to other FTEs (€11.7m).
enforcement/supervision sub-options
digital services,
Associated burden
This is based on
costs are to be foreseen. (€10.3m).
including
Additional costs
is estimated based
30 FTEs in case
implementation,
(i.e. around €6.5m)
on experience from
of sub-option A
Further implementation
Additional costs
assessment,
are necessary in
other sectors where
(with a cost of
costs would stem from
(i.e. around €6.4m)
enforcement/supervision relation to the
regulation requires
€3.9m) and 50
the regulator specifying
are necessary in
costs, and assessments support of experts,
the preparation of
FTEs in case of
the obligations imposed
relation to the
of fairness.
provision of
guidelines,
sub-option B
to a given gatekeeper.
support of experts,
training,
designation of
(with a cost of
provision of
development of
actors with market
€6.5m).
Further assessment costs training,
required IT
power and
would stem from the
development of
systems,
enforcement of
Additional costs
need to conduct market
required IT
expenditure with
conditions aimed at
(between €2.5m
investigations to
systems,
missions and
supporting
and €4m) are
designate gatekeepers
expenditure with
organisation of
contestability and
necessary in
and assess new
missions and
meetings.
avoiding
relation to the
practices.
organisation of
foreclosure, i.e.
support of
meetings.
telecoms regulation experts,
and competition
provision of
law.
training,
development of
It is assumed that
required IT
_________________________________
This opinion concerns a draft impact assessment which may differ from the final version.
Commission européenne, B-1049 Bruxel es - Belgium. Office: BERL 08/010. E-mail: xxxxxxxxxxxxxxxxxxxxxxxxx@xx.xxxxxx.xx
2. Cost comparison
Option 1
Option 2
Option 3
Cost
Cost
Cost
Cost
Carrier
Cost qualification
Cost qualification
qualification
quantification
quantification
quantification
the Commission
systems,
would engage in
expenditure with
preparing and
missions and
processing
organisation of
information
meetings.
requests as well as
the preparation of
guidelines,
designation of
gatekeepers and
enforcement of the
obligations
National
Responses to
Annual costs:
In addition to costs
Annual costs: €6m
In addition to Option 2, Annual costs:
authorities
consultations held
€4.3m based on
under Option 1, Option
based on 3.5 FTE
Option 3 would not
€6m based on 3.5
by the EU regulator 2.5 FTE for 27
2 would imply costs for
for 27 Member
imply any additional
FTE for 27
to integrate national Member States
national regulators to
States
costs for national
Member States
expertise before
study Commission’s
regulators.
taking a decision
proposed draft decisions
(e.g. on guidelines
on further tailoring of
non-compliance,
obligations.
fines).
Gatekeepers Compliance costs
Annual costs:
Similar compliance
Annual costs:
Similar compliance
Annual costs:
incurred in order
between €9.87m
costs per platform as per between €21.15m
costs per platform as per around €35.25m
to prepare for
and €21.15m for
Option 1.
and €28.2m for a
Option 1.
based on 25
compliance with
a total number of
total number of
gatekeepers.
rules, set
gatekeepers in
On the one hand, the
gatekeepers in
On the one hand, the
compliance
scope between 7
possibility of a dialogue
scope between 15
possibility of a dialogue
officers, and
(under sub-
would reduce the
(under sub-option
would reduce the
respond to requests
option A) and 15 compliance costs. On
A) and 20 (under
compliance costs. On
for information.
(under sub-
the other hand, the need
sub-option B)
the other hand, the need
option B)
to reply to request for
to reply to request for
Number of
information in the
information in the
information
context of market
context of market
8
2. Cost comparison
Option 1
Option 2
Option 3
Cost
Cost
Cost
Cost
Carrier
Cost qualification
Cost qualification
qualification
quantification
quantification
quantification
requests would
investigations would
investigations would
depend on the
imply some extra costs.
imply some extra costs.
complexity of the
case. Estimate
assumes that 20
FTEs are involved
in data gathering,
monitoring and
enforcement
activities per
gatekeeper
platform.
This scenario does
not consider
possible synergies
with already
existing internal
organisation/service
for complying with
other legislation,
e.g. service
ensuring COMP
law compliance.
Competitors, Monitoring of
Net additional
Monitoring new forms
Net additional
Monitoring new digital
Net additional
start-ups,
unfair conduct as
resource
of unfair practices
resource
markets would create
resource
business
well as new rules’
requirements
would create additional
requirements likely additional costs for
requirements
users
implementation and likely to be very
costs for market players
to be very limited
market players as
likely to be very
supervision of
limited
as compared with
compared with Option 1.
limited
compliance would
Option 1. However, in
However, in order to
imply some burden
order to ensure
ensure proportionality
in the form of e.g.
proportionality
information requests
responses to
information requests
would take into
9
2. Cost comparison
Option 1
Option 2
Option 3
Cost
Cost
Cost
Cost
Carrier
Cost qualification
Cost qualification
qualification
quantification
quantification
quantification
information
would take into
consideration the size of
requests.
consideration the size of
the enterprise to which
However, in order
the enterprise to which
they are sent.
to ensure
they are sent.
proportionality
The resources devoted to
information
The resources devoted
these requests might be
requests would take
to these requests might
counteracted by
into consideration
be counteracted by
reductions in legal
the size of the
reductions in legal
resource required to
enterprise to which
resource required to
address unfair contractual
they are sent.
address unfair
conditions, with a
contractual conditions,
substantial portion of the
The resources
with a substantial
burden previously taken
devoted to these
portion of the burden
by small firms in this area
requests might be
previously taken by
now addressed through
counteracted by
small firms in this area
tailored action at EU
reductions in legal
now addressed through
level.
resource required to
tailored action at EU
address unfair
level.
contractual
conditions, with a
substantial portion
of the burden
previously taken by
small firms in this
area now addressed
through tailored
action at EU level.
Consumers
Responses to public
Additional information
Additional information
consultations -
gathering from
gathering from
questions targeting
consumers may be
consumers may be
consumers would
needed to inform
needed to inform about
be less complex and
specification/tailoring of
other digital services.
10
2. Cost comparison
Option 1
Option 2
Option 3
Cost
Cost
Cost
Cost
Carrier
Cost qualification
Cost qualification
qualification
quantification
quantification
quantification
shorter. Possibly
remedies.
Higher search costs
higher search costs
Higher search costs
Total costs:
EUR 20.57m –
EUR 43.85m –
EUR 59.45m
35.95m
50.9m
11
12
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