Enforcement of the DMA and other legal rules has come under increased scrutiny when US companies are challenged. Monika Schnitzer and Rupprecht Podszun make a simple call: Enforce the law. In this piece, the two professors and government advisers also argue for an independent EU enforcement agency.
The senators were furious: „My concern is that we don’t end up having bad policies imposed on us as Europeans try to protect themselves against competition when they’ve lost competitive edge based on their policies”, one said. The other wrote that the US would explore the “most effective US response” if Europeans did not play fair with US companies. This was in 2001, and the case in point was the GE-Honeywell merger.
Admittedly, the irate US senators of 2001 were different from those of today. They wrote letters, not tweets, and their language was what we would now call polite. But it was still an attack on EU merger enforcement. The then European Commissioner Mario Monti kept his cool. He replied that the concerns were completely unfounded – and the Commission blocked the merger. “Recent attempts to politicize the Commission’s review process are consequently entirely misplaced,” said Monti.
Big Tech’s new demands
So we have been here before. 24 years later, the US president signed an executive order calling for a review of Europe’s landmark tech regulations, the Digital Markets Act (DMA) and the Digital Services Act (DSA). Enforcement of tougher tech and traditional competition rules is met with threats of retaliation from Washington. It is a demand made by Mark Zuckerberg of Meta on the Joe Rogan podcast: the US government should defend big tech companies against further fines in the EU. (We had assumed that “masculine energy” might mean taking up the fight on the basis of competition on the merits – rather than seeking the President’s help).
The European Commission is right to pursue cases against Big Tech with vigour. From an economic perspective, competition is a proven driver of innovation and efficiency. To back down would be to the detriment of the economy and consumers. The DMA and DSA have not yet shown their full potential, but they are a worthy approach to making the digital sphere fairer. It would be a shambles to abandon them now by giving in at the first sign of resistance. Until recently, there was a transatlantic – if not global – consensus that some rules were needed to rein in the excesses of power associated with the tech oligarchs.
From a strategic point of view, showing strength seems to be the right way to deal with the new geopolitical tensions. Submitting to the schoolyard bully has never helped anyone. But what if the US administration decides to retaliate? What if the EU’s car industry is hit with even higher tariffs in exchange for a fine against Meta? Could the enforcement action become part of a poker game when a dealmaker in the White House wants to play?
More independence
We would not even be discussing the issue if the US were to ask for an independent court’s decision to be overturned (although even this cannot be taken for granted). Yet, the US president may think that he can put pressure on the Commission, because even when it enforces the rules, it acts as a political body (not an independent legal authority). And indeed, the fact that the Commission decides as a political body, unlike the national competition authorities, is an issue for reform. In the ECNplus Directive, the EU obliges its member states to ensure that national competition agencies can decide cases free from political influence. According to the recitals, there should be no doubt at all as to whether the agencies decide impartially and independently of their governments. We should also hold the Commission to this maxim. Its powers to directly apply European law have been broadened to such an extent that it is time to create an independent EU enforcement authority.
For the time being, we strongly advise the Commission not to use competition law, the DMA or the DSA as a bargaining chip. It has protected itself well with its 2023 Anti-Coercion Instrument: Tariffs versus tariffs is the political game to be played. It would be wrong to bring clear legal obligations and rules into this game.
Firm on principle
It is instructive to note the difference with the 2001 GE/Honeywell case: Then, the US senators based their concerns on (unfounded) suspicions of unfair treatment. They feared that the rule of law might not be respected in Europe. Everyone was on the same page – in favour of a fair chance for all (not cronyism or protectionism), and adherence to legal standards (not political interference in business). The disagreements were on the details, not the principles.
Today, the EU Commission must stand firm on principle. It must not sacrifice on the negotiating table what used to be called important “Western values”: Free competition. The rule of law. Both are fundamental to democracy. The European Commission and the Court of Justice have defended them in recent years when member states have gone astray. Now the rule of law is being challenged on a global scale. Even those who fear losing profits in the short term must understand that we could lose everything in the long term if we sell out our principles. That is not a deal to be made.
Monika Schnitzer is Professor of Economics at Ludwig Maximilian University in Munich and Chair of the German Council of Economic Experts (Sachverständigenrat). (Photo: Sachverständigenrat Wirtschaft)
Rupprecht Podszun is Professor of Competition Law at Heinrich Heine University Düsseldorf and a member of the German Monopolies Commission (Monopolkommission). He is a Principal Investigator in the SCiDA project.
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